UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    Form 6-K

       REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 OR 15d-16
                   UNDER THE SECURITIES EXCHANGE ACT OF 1934

For the month of April, 2005

Commission File Number: 001-15248


                              VEOLIA ENVIRONNEMENT
             (Exact name of registrant as specified in its charter)


                              36-38, avenue Kleber
                               75116 Paris, France
                     (Address of principal executive office)


Indicate by check mark whether the registrant files or will file annual reports
under cover Form 20-F or Form 40-F.

                             Form 20-F X Form 40-F

Indicate by check mark if the registrant is submitting the Form 6-K in paper as
permitted by Regulation S-T Rule 101(b)(1)):____

Indicate by check mark if the registrant is submitting the Form 6-K in paper as
permitted by Regulation S-T Rule 101(b)(7)):____

Indicate by check mark whether the registrant by furnishing the information
contained in this Form is also thereby furnishing the information to the
Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.

                                 Yes     No X


If "Yes" is marked, indicate below the file number assigned to the registrant in
connection with Rule 12g3-2(b): 82-________.

<PAGE>

         Included herein is a free translation into English of our document de
reference (the "Reference Document"), filed by us with the French Autorite des
marches financiers on April 5, 2005 under number D. 05-351, and provided solely
for the convenience of English speaking readers. This document does not include
our unconsolidated financial statements, the auditors' report on the
unconsolidated financial statements, nor the annexes to the French version of
the Reference Document. Our Annual Report on Form 20-F, when filed, will contain
substantially all of the information set forth in the Reference Document and
certain additional information not included therein. We are required to file the
Annual Report on Form 20-F with the U.S. Securities and Exchange Commission by
no later than June 30, 2005.

         We make some forward-looking statements in the Reference Document. When
we use the words "aim(s)," "expect(s)," "feel(s)," "will," "may," "believe(s),"
"anticipate(s)" and similar expressions in the Reference Document, we are
intending to identify those statements as forward-looking. Forward-looking
statements are subject to risks and uncertainties that could cause actual
results to differ materially from those projected. You should not place undue
reliance on these forward-looking statements, which speak only as of the date of
the Reference Document. In particular, from time to time in the Reference
Document we state our expectations in terms of revenue to be generated under new
contracts recently won or awarded or from new investments made and new assets or
operations acquired, though we may have not yet commenced operations under these
new contracts nor begun operating these new assets and operations at the time we
make these statements. These revenue estimates are based on our management's
current assumptions regarding future sales volumes and prices, which are subject
to a number of risks and uncertainties that may cause actual sales volumes and
prices to differ materially from those projected. As a result, actual revenue
recorded under these new contracts or from these new investments, assets and
operations may differ materially from those set forth in the Reference Document.
Other than in connection with applicable securities laws, we undertake no
obligation to publish revised forward-looking statements to reflect events or
circumstances after the date of the Reference Document or to reflect the
occurrence of unanticipated events. We urge you to carefully review and consider
the various disclosures we make concerning the factors that may affect our
business, including the disclosures made in Paragraph 4.7 "Risk Factors" and
Chapter 5 "Assets--Financial Condition--Results".

         Unless otherwise indicated, information and statistics presented in the
Reference Document regarding market trends and our market share relative to our
competitors are based on our own research and various publicly available
sources.

<PAGE>

--------------------------------------------------------------------------------
This is a free translation into English of Veolia Environnement's document de
reference (the "Reference Document"), filed by Veolia Environnement with the
French Autorite des marches financiers on April 5, 2005 under number D. 05-351,
and is provided solely for the convenience of English speaking readers. This
document does not include the Company's statutory financial statements, the
auditors' report on the statutory financial statements, nor the annexes to the
French version of the Reference Document. Veolia Environnement's Annual Report
on Form 20-F, when filed, will contain substantially all of the information set
forth in this Reference Document and certain additional information not included
herein. Veolia Environnement is required to file the Annual Report on Form 20-F
with the U.S. Securities and Exchange Commission by no later than June 30, 2005.
--------------------------------------------------------------------------------



                              VEOLIA ENVIRONNEMENT



                               REFERENCE DOCUMENT
                                      2004




--------------------------------------------------------------------------------

                                       AMF
                                       ---

               This reference document was filed with the Autorite
                    des marches financiers on April 5, 2005,
                   pursuant to Articles 211-1 to 211-42 of its
                              general regulations.

                This reference document may be used in connection
             with a financing transaction if supplemented by a note
                d'operation approved by the Autorite des marches
                                   financiers.

<PAGE>

                               TABLE OF CONTENTS
                               -----------------


CHAPTER 1 PERSONS ASSUMING RESPONSIBILITY FOR THE REFERENCE DOCUMENT AND THE
FINANCIAL STATEMENTS AUDIT.....................................................1

   1.1     PERSONS ASSUMING RESPONSIBILITY FOR THE REFERENCE DOCUMENT..........1

   1.2     CERTIFICATION.......................................................1

   1.3     PERSONS ASSUMING RESPONSIBILITY FOR THE FINANCIAL STATEMENTS
           AUDIT...............................................................1

   1.4     REPORT OF STATUTORY AUDITORS ON THE REFERENCE DOCUMENT..............2

   1.5     PERSONS ASSUMING RESPONSIBILITY FOR THE INFORMATION
           CONTAINED IN THIS REFERENCE DOCUMENT................................4

   1.6     OTHER INFORMATION...................................................4

CHAPTER 2  INFORMATION CONCERNING THE TRANSACTION..............................5

CHAPTER 3  GENERAL INFORMATION CONCERNING THE COMPANY AND ITS
           SHARE CAPITAL.......................................................6

   3.1     GENERAL INFORMATION CONCERNING THE COMPANY..........................6

   3.2     GENERAL INFORMATION CONCERNING THE COMPANY'S SHARE CAPITAL.........14

   3.3     BREAKDOWN OF THE COMPANY'S SHARE CAPITAL AND VOTING RIGHTS.........23

   3.4     TRADING MARKET FOR THE COMPANY'S SHARES............................26

   3.5     DIVIDENDS PAID BY THE COMPANY......................................27

   3.6     RELATIONS BETWEEN THE COMPANY AND VIVENDI UNIVERSAL................28

   3.7     RELATIONSHIP BETWEEN THE COMPANY AND FOMENTO DE
           CONSTRUCCIONES Y CONTRATAS (FCC)...................................30

Chapter 4  INFORMATION RELATING TO VEOLIA ENVIRONNEMENT'S BUSINESS............31

   4.1     PRESENTATION OF VEOLIA ENVIRONNEMENT...............................31

   4.2     DEPENDENCE OF THE COMPANY..........................................80

   4.3     LITIGATION.........................................................80

   4.4     HUMAN RESOURCES....................................................83

   4.5     INVESTMENT POLICIES................................................94

   4.6     PRINCIPAL SUBSIDIARIES AND AFFILIATES..............................97

   4.7     RISK FACTORS.......................................................97

   4.8     ENVIRONMENTAL REGULATION, POLICIES AND COMPLIANCE.................105

CHAPTER 5  ASSETS--FINANCIAL CONDITION--RESULTS..............................115

   5.1     COMMENTS ON RESULTS...............................................115

   5.2     CONSOLIDATED FINANCIAL STATEMENTS.................................150

   5.3     STATUTORY FINANCIAL STATEMENTS....................................229

Chapter 6  CORPORATE GOVERNANCE..............................................230

   6.1     FUNCTIONING OF BOARD OF DIRECTORS, MANAGEMENT AND
           SUPERVISORY BODIES................................................230

   6.2     MEMBERS OF BOARD OF DIRECTORS, MANAGEMENT AND SUPERVISORY
           BODIES............................................................238

   6.3     DIRECTOR AND EXECUTIVE OFFICER COMPENSATION.......................246

   6.4     EMPLOYEE INTERESTS................................................251

Chapter 7  RECENT DEVELOPMENTS AND OUTLOOK...................................254

   7.1     RECENT DEVELOPMENTS...............................................254

   7.2     OUTLOOK...........................................................255

<PAGE>

                                   CHAPTER 1
           PERSONS ASSUMING RESPONSIBILITY FOR THE REFERENCE DOCUMENT
                       AND THE FINANCIAL STATEMENTS AUDIT

1.1      PERSONS ASSUMING RESPONSIBILITY FOR THE REFERENCE DOCUMENT

         Mr. Henri PROGLIO, Chairman and Chief Executive Officer of Veolia
         Environnement.

1.2      CERTIFICATION

         "To the best of our knowledge, all of the information in this reference
         document is true and accurate; this document contains all of the
         information necessary to enable investors to form an opinion as to the
         assets and liabilities, activities, financial position and financial
         results and future prospects of Veolia Environnement; this document
         does not omit any information that could make it misleading."


                      Chairman and Chief Executive Officer
                                  Henri PROGLIO

1.3      PERSONS ASSUMING RESPONSIBILITY FOR THE FINANCIAL STATEMENTS AUDIT

1.3.1    Lead Auditors

         o   SALUSTRO REYDEL
             A company represented by Messrs. Bernard CATTENOZ and Bertrand
             VIALATTE, located at 8, avenue Delcasse, 75378 Paris Cedex 08.
             Appointed on December 18, 1995, with a term that was renewed at
             the general shareholders' meeting held on April 27, 2001. The term
             was renewed for a period of 6 fiscal years, and will expire at the
             end of the general shareholders' meeting called to approve the
             financial statements for the fiscal year ended December 31, 2006.

         o   BARBIER FRINAULT & CIE ERNST & YOUNG
             A company represented by Messrs. Jean BOUQUOT and Patrick
             GOUNELLE, located at Tour Ernst & Young, Faubourg de l'Arche,
             92037 La Defense Cedex. Appointed on December 23, 1999 for a term
             of 6 fiscal years, which will expire at the end of the general
             shareholders' meeting called to approve the financial statements
             for the fiscal year ended December 31, 2004. The combined general
             shareholders' meeting to be held on May 12, 2005(1) will be asked
             to renew Barbier Frinault & Cie Ernst & Young's term for a period
             6 fiscal years, which will expire at the end of the general
             of shareholders' meeting called to approve the financial statements
             for the fiscal year ended December 31, 2010.

1.3.2    Deputy Auditors

         o   Mr. Hubert LUNEAU
             8, avenue Delcasse, 75008 Paris
             Appointed on December 18, 1995, with a term that was renewed at
             the general shareholders' meeting held on April 27, 2001. The term
             was renewed for a period of 6 fiscal years, and will expire at the
             end of the general shareholders' meeting called to approve the
             financial statements for the fiscal year ended December 31, 2006.

         ----------------
         1  Convened upon second notice.

         o   Mr. Maxime PETIET
             Tour Franklin, La Defense 8, 92042 Paris-La Defense Cedex
             Appointed on December 23, 1999 for a term of 6 fiscal years, which
             will expire at the end of the general shareholders' meeting to be
             held on May 12, 2005 called to approve the financial statements
             for the fiscal year ended December 31, 2004.

             The combined general shareholders' meeting to be held on May 12,
             2005 will be asked to appoint AUDITEX, located at Tour Ernst &
             Young, Faubourg de l'Arche, 92037 La Defense Cedex, as a deputy
             auditor for a period of 6 fiscal years, which will expire at the
             end of the general shareholders' meeting called to approve the
             financial statements for the fiscal year ended December 31, 2010.

1.4      REPORT OF STATUTORY AUDITORS ON THE REFERENCE DOCUMENT

         This is a free translation into English of the statutory auditors'
         report on the reference document issued in the French language and is
         provided solely for the convenience of English speaking readers. The
         statutory auditors' report includes information specifically required
         by French law in all audit reports, whether qualified or not. This
         report should be read in conjunction with, and construed in accordance
         with, French law and professional auditing standards applicable in
         France.

         As statutory auditors of Veolia Environnement and in accordance with
         article 211-5-2 of the AMF regulation, we have verified, in accordance
         with professional standards applied in France, the information relating
         to the financial position and historic financial statements contained
         in this reference document.

         This reference document is the responsibility of the President of the
         Board of Directors. It is our responsibility to report on the fairness
         of the information it contains with respect to the financial position
         and the financial statements.

         Our work, performed in accordance with professional standards applied
         in France, consisted in assessing the fairness of the information with
         respect to the financial position and the financial statements and in
         verifying their consistency with the audited financial statements. We
         also read the other financial information contained in the reference
         document in order to identify any significant inconsistencies with the
         information related to the financial position and financial statements
         and to bring to your attention any manifest errors we noted based on
         our general understanding of the company gained through our position as
         statutory auditors.

         The forecasted information presented herein corresponds to management
         objectives, rather than isolated forecasted data resulting from a
         structured preparation process.

         The annual statutory financial statements, prepared by the Management
         Board for the year ended December 31, 2002, and by the Board of
         Directors for the years ended 2003 and 2004, were audited by us in
         accordance with professional standards applied in France, and certified
         without qualification.

         The consolidated financial statements for the years ended December 31,
         2002, 2003 and 2004 were audited by us in accordance with professional
         standards applied in France, and certified without qualification.
         However, we draw your attention to the change in accounting principles
         described in Note 2 "Summary of significant accounting policies" to the
         consolidated financial statements, regarding the consolidation of
         certain entities as required by the provisions of CRC Regulation 04-03
         of May 4, 2004.

         In the Specific Check section of our Report on the consolidated
         financial statements for the year ended December 31, 2004, we drew your
         attention to the paragraphs 5.1.3.9 and 5.1.3.10 of the management
         report regarding the group's transition to International Financial
         Reporting Standards - IFRS.

         Regarding pro forma information presented in the reference document, we
         remind you that this information is intended to show the effect of the
         achievement any given operation or event - as if it occurred prior to
         its real or reasonably forecast occurrence - on accounting and
         historical financial information. This information does not compulsory
         represent the position situation or the performances that would have
         been noted if the operation or event had happened prior to its real or
         reasonably forecast occurrence.

         Based on our procedures, we have nothing to report with respect to the
         fairness of the information on the financial position and the financial
         statements presented in this reference document.


         French original signed in Paris and La Defense, on April 5, 2005 by the
          Statutory Auditors.



                     SALUSTRO REYDEL                  BARBIER FRINAULT & Cie
                                                           ERNST & YOUNG

           Bernard CATTENOZ Bertrand VIALATTE      Jean BOUQUOT Patrick GOUNELLE


Moreover, the reference document includes:

o    The Statutory Auditors' reports on the annual financial statements(2) and
     the consolidated financial statements (page 227 of this reference document)
     for the fiscal year ended December 31, 2004 including the justification of
     the assessments of the Statutory Auditors in accordance with the
     requirements of article L.225-235 of the French Commercial Code (Code de
     commerce);

o    The Statutory Auditors' report(3) 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 Veolia Environnement,
     describing the internal control procedures relating to the preparation and
     processing of financial and accounting information.

----------------------
2 Available in the French version of the reference document (page 208)

3 Available in the French version of the reference document (annexe 2, page 26
  of annexes)

<PAGE>

1.5      PERSONS ASSUMING RESPONSIBILITY FOR THE INFORMATION CONTAINED IN THIS
         REFERENCE DOCUMENT

         Mr. Jerome CONTAMINE
         Senior Executive Vice President
         Telephone: 01.71.75.01.54

         Ms. Nathalie PINON
         Director of Investor Relations
         Telephone: 01.71.75.01.67

         Mr. Pierre-Francois RIOLACCI
         Director of Control and Synergies
         Telephone: 01.71.75.01.58

         Mr. Philippe SURJOUS
         Director of Finance
         Telephone: 01.71.75.01.59

         Address:  36/38, avenue Kleber, 75116 Paris (registered office).

         Internet Sites:

         o   www.veoliaenvironnement.com, for general information concerning
             Veolia Environnement;

         o   www.veoliaenvironnement-finance.com, for financial information
             concerning Veolia Environnement;

         o   www.actionnaires.veoliaenvironnement.com, for direct access to
             the general information section of Veolia Environnement's website
             that is designed for individual shareholders.

1.6      OTHER INFORMATION

         Calendar of planned annual events in 2005:

         -   April: letter to shareholders

         -   First week of May: revenue figures for the first quarter of 2005

         -   May 12 at 3 p.m.: combined general shareholders' meeting, to be
             held at CNIT, Parvis de la Defense, 2 Place de la Defense, 92053
             Paris La Defense Cedex

         -   June: letter to shareholders (including a summary of the general
             shareholders' meeting and a detailed Shareholder's Guide)

         -   May 27: payment of dividends

         -   First week of August: revenue figures for the first half of 2005

         -   Mid-September: results and financial statements for the first
             half of 2005

         -   October: letter to shareholders

         -   First week of November: revenue figures for the first 9 months of
             2005

<PAGE>

                                   CHAPTER 2
                     INFORMATION CONCERNING THE TRANSACTION


         Not applicable.

<PAGE>

                                   CHAPTER 3
        GENERAL INFORMATION CONCERNING THE COMPANY AND ITS SHARE CAPITAL

3.1      GENERAL INFORMATION CONCERNING THE COMPANY

3.1.1    Company Name and Registered Office

         Since April 30, 2003, the name of the Company has been VEOLIA
         ENVIRONNEMENT. The Company's abbreviated name is VE.

         The Company's registered office is located at 36/38, avenue Kleber,
         75116 Paris.

3.1.2    Legal Form and Applicable Legislation

         Veolia Environnement (the "Company", "Veolia Environnement" or "VE") is
         a French societe anonyme a conseil d'administration subject to the
         provisions of Livre II of the French Commercial Code (Code de commerce)
         and to Decree n(degree) 67-236 of March 23, 1967.

3.1.3    Date of Formation and Term

         The Company was formed on November 24, 1995, for a term of 99 years
         beginning on the date of its license in the Registre du commerce et des
         societes, i.e., for a term lasting until December 18, 2094.

3.1.4    Corporate Purpose

         The Company's corporate purpose, directly or indirectly, in France and
         in all other countries, is:

         o   the conduct of service activities relating to the environment on
             behalf of private, professional or public customers, specifically
             in the areas of water, wastewater treatment, energy,
             transportation and waste management;

         o   the acquisition and exercise of all patents, licenses, trademarks
             and designs relating directly or indirectly to the Company's
             operations;

         o   the acquisition of interests (whether in the form of shares,
             bonds or other securities) in existing or future companies,
             through subscription, purchase, contribution, exchange or any
             other means, together with the ability to subsequently transfer
             such interests; and

         o   generally, the entering into of all commercial, industrial,
             financial, real estate or other transactions relating directly or
             indirectly to the above-mentioned corporate purposes, and, in
             particular, the ability to issue any guarantee, first-demand
             guarantee, surety or other security in favor of any group,
             undertaking or company in which the Company holds an interest in
             connection with its activities, as well as the ability for the
             Company to finance or refinance any of its activities.

3.1.5    Commercial Registry

         The Company is licensed in the Registre du commerce et des societes
         under number 403 210 032 RCS Paris.

         The Company's APE code is 741J.

3.1.6    Legal Documents Available for Viewing

         The Company's articles of association (statuts) as well as the minutes
         of general shareholders' meetings, the statutory auditors' reports and
         all other corporate documents may be viewed at the Company's registered
         office at 36/38, avenue Kleber, 75116 Paris.

3.1.7    Fiscal Year

         The Company's fiscal year begins on January 1 and closes on December 31
         of each calendar year.

3.1.8    Allocation and Distribution of Profits

         Each share is entitled to an amount of profit in proportion to the
         percentage of share capital that such share represents.

         Distributable profit consists of the net profit for the year, less
         previous losses and the various deductions provided for by law, plus
         retained earnings from prior years.

         The general shareholders' meeting may decide to distribute sums
         withdrawn from reserves at its disposal, by expressly indicating the
         reserve categories from which withdrawals have been made.

         After approving the annual financial statements and declaring the
         existence of sums available for distribution (including distributable
         profits and the sums withdrawn from reserves as referred to above, if
         any), the general shareholders' meeting must resolve to distribute such
         sums, wholly or in part, to the shareholders as dividends, to allocate
         them to reserves, or to carry them forward as retained earnings.

         The general shareholders' meeting has the power to grant to the
         shareholders an option to receive all or part of the dividends, or
         advances on dividends, in the form of cash or scrip, in accordance with
         applicable law. Furthermore, the general shareholders' meeting may
         decide, for all or part of a dividend, advance on dividends,
         distribution of reserves or premium, or with respect to any capital
         decrease, that such distribution or capital decrease will be made in
         kind by delivery of assets of the Company.

         The board of directors has the power to distribute advances on
         dividends prior to the approval of the annual financial statements, in
         accordance with applicable law.

3.1.9    General Shareholders' Meetings

3.1.9.1  Convening Shareholders' Meetings

         General shareholders' meetings are convened and deliberations occur
         under conditions fixed by law. Meetings are held at the Company's
         registered office or at another location designated in the notice
         announcing the shareholders' meeting.

         Shareholder decisions are made as part of ordinary, extraordinary,
         special or combined shareholder meetings, depending on the nature of
         the decisions that shareholders are called upon to make.

3.1.9.2  Participation in Meetings

         Shareholders may attend general shareholders' meetings and participate
         in deliberations, either in person or by proxy.

         The right of shareholders to participate in ordinary or extraordinary
         general shareholders' meetings is subject to:

         o   for holders of shares held in registered form, the entry of the
             shareholder or the intermediary registered on its behalf in the
             Company's books, in accordance with applicable law;

         o   for holders of shares in bearer form, the receipt of an account
             certificate from the accredited intermediary with whom the holder
             has deposited his or her shares indicating that the bearer shares
             the holder owns will be unavailable until the date of the
             meeting.

         These formalities must be completed no later than 3:00 p.m. (Paris
         time) on the day prior to the date set for the shareholders' meeting.

         Shareholders who are unable to attend the shareholders' meeting in
         person may choose among one of the following voting methods:

         o   providing a written proxy to his or her spouse or to another
             shareholder;

         o   voting by mail; or

         o   sending a blank proxy to the Company, under the conditions fixed by
             applicable law.

         The methods for voting by proxy and by mail are established and made
         available to shareholders based on then applicable law. Shareholders
         may, under conditions fixed by law, submit their proxies and votes by
         mail either in paper form, or, subject to a decision by the board of
         directors published in the notice of shareholder's meeting, in
         electronic form in accordance with the procedures set forth in said
         notice.

         In instances where the board of directors has given prior notice to
         shareholders that they may participate in a meeting through
         videoconference or through other means which permit their
         identification under applicable law, shareholders who so participate
         shall be counted for purposes of calculating whether a quorum or a
         majority exists.

         Minutes of the meetings are prepared, and copies thereof are certified
         and delivered in accordance with applicable law.

3.1.9.3  Voting Rights

         Voting rights attached to shares are proportional to the percentage of
         share capital that such shares represent, and each share carries the
         right to cast one vote. There are no double voting rights.

         Voting rights attached to shares subject to usufruct are exercised by
         the usufructuary (usufruitier) in ordinary general shareholders'
         meetings and by the owner without usufruct (nu-proprietaire) in
         extraordinary general shareholders' meetings.

3.1.10   Identification of Shareholders

         When shares are fully paid up, they may be in registered or bearer
         form, at the discretion of the shareholder, subject to applicable laws
         and regulations and the articles of association (statuts) of the
         Company. Until the shares are fully paid up, they must be in registered
         form.

         Shares of the Company are entered in their owner's name or in the name
         of an approved intermediary in the Company's books, in accordance with
         applicable laws and regulations.

         When the domicile of the owner of the shares is not in French territory
         (within the meaning of Article 102 of the French Civil Code), any
         intermediary may be registered on behalf of such owner, in accordance
         with the provisions of Article L.228-1 of the French Commercial Code
         (Code de commerce).

         Further, the Company's articles of association (statuts) provide that
         the Company may seek to identify shareholders or other owners of
         Company securities that have the right, either immediately or in the
         future, to vote in meetings of shareholders, in accordance with the
         procedures set forth in Articles L.228-2 et seq. of the French
         Commercial Code (Code de commerce). Pursuant to these procedures, the
         Company conducted an analysis of its shareholder structure at September
         30, 2004.

         In the event that holders of securities or their intermediaries fail to
         provide information requested of them in accordance with Articles
         L.228-2 et seq. of the French Commercial Code (Code de commerce), the
         shares or other securities that are the subject of these requests may
         be deprived of voting rights and in certain circumstances of dividends
         until the obligations have been complied with.

3.1.11   Crossing Various Thresholds of Share Ownership

         The French Commercial Code (Code de commerce) provides that any
         individual or entity, acting alone or in concert with others, that
         becomes the owner, directly or indirectly, of more than 5%, 10%, 20%,
         one-third, 50% or two-thirds of the outstanding shares or voting rights
         of the Company, or that increases or decreases its shareholding or
         voting rights above or below any of those percentages, must notify the
         Company within 5 trading days of the date it crosses such thresholds of
         the number of shares and voting rights it holds. The individual or
         entity must also notify the Autorite des marches financiers ("AMF")
         within five trading days of the date it crosses these thresholds, which
         will make the information public.

         If any person fails to comply with the legal notification requirement,
         the shares that exceed the relevant threshold will be deprived of
         voting rights for all shareholders' meetings until the end of a
         two-year period following the date on which their owner complies with
         the notification requirements.

         In addition, the Company's articles of association (statuts) currently
         provide that any individual or entity, acting alone or in concert with
         others, must notify the Company by registered letter with
         acknowledgment of receipt within 15 days of acquiring or disposing of,
         directly or indirectly, 0.5% or any multiple of 0.5% of the Company's
         shares or voting rights. The notice must contain the name of the
         individual or entity, the name of the person(s) with whom it is acting
         in concert, as well as the total number of shares, voting rights and
         securities convertible into shares that such individual or entity
         holds, directly or indirectly, on its own or in concert with others.

         The combined general shareholders' meeting of May 12, 2005 will be
         asked to modify the current 0.5% threshold and raise it to 1% going
         forward.

         If any person fails to comply with this notification requirement, and
         provided that one or more shareholders holding at least 0.5% of the
         Company's share capital or voting rights so request (to be reflected in
         the minutes of the general shareholders' meeting), the shares that
         exceed the relevant threshold will be deprived of voting rights for all
         shareholders' meetings until the end of a two-year period following the
         date on which their owner complies with the notification requirements.

3.1.12   Simplified Organizational Chart of the VE Group

         The simplified organizational chart that follows reflects the principal
         operating companies that are held, directly or through intermediate
         holding companies, by VE (by percentage of share capital) as of
         December 31, 2004 (VE and its subsidiaries, together, referred to as
         the "Group" or "Group VE").

<PAGE>

  Simplified Organizational Chart of the Group's Principal Operating Companies

                               [Graphic Omitted]

<PAGE>

3.2      GENERAL INFORMATION CONCERNING THE COMPANY'S SHARE CAPITAL

3.2.1    Changes to Share Capital and the Voting Rights Attached to Shares

         Any modification of share capital or of the voting rights attached to
         shares is subject to applicable legal requirements; the Company's
         articles of association (statuts) do not provide for any specific
         additional requirements.

3.2.2    Repurchase of Shares by the Company

         At the general shareholders' meeting held on May 12, 2004, the
         Company's shareholders approved a share repurchase program that
         authorized the Company to purchase, sell and transfer its shares at any
         time (including during public tender offers) and by any means, on the
         market or over-the-counter, including through block trades, issuance of
         convertible securities and combinations of financial derivative
         instruments granting rights to the Company's shares by means of
         conversion, exchange, reimbursement, exercise of warrants or other
         instruments, in an amount of up to 10% of the Company's share capital.
         This program allows the Company to repurchase or sell shares in
         response to market conditions, or in particular for the purpose of (i)
         regulating market prices of the Company's shares through systematic
         interventions in the opposite direction to the market, (ii) awarding
         stock options to directors and employees of the Company and/or the
         Group, in accordance with Articles L.225-177 et seq. of the French
         Commercial Code (Code de commerce), (iii) awarding shares to employees
         or, in certain instances, to executive directors, in accordance with
         applicable law (in particular Articles L.443-1 et seq. of the French
         Labor Code (Code du travail), (iv) financing external growth through
         exchange offers, share-based acquisitions or otherwise, (v) delivering
         shares to third parties upon exercise of options, warrants,
         exchangeable bonds or other instruments granting rights to the
         Company's shares, or (vi) optimizing the Company's asset and financial
         management, pursuant to which the Company may keep, sell, generally
         transfer or cancel in whole or in part its repurchased shares.

         The general shareholders' meeting of May 12, 2004 set the maximum
         repurchase price under the share repurchase program at (euro)1 billion,
         and granted the Board of Directors or its delegate all powers necessary
         to implement the program, in particular the power to set the terms and
         conditions of repurchases, place orders on a stock exchange, sign all
         transfer or sale orders, conclude all agreements or option contracts,
         and complete all other required formalities.

         An information memorandum (note d'information) relating to the share
         repurchase program approved by the general shareholders' meeting of May
         12, 2004 received the approval (visa) of the AMF (n(degree) 04-278,
         dated April 14, 2004).

         The table below presents a summary of the transactions effected by the
         Company in its own shares under the share repurchase program, from May
         13, 2004(4) to March 1, 2005.

--------------------------------------------------------------------------------

 Percentage of share capital held by the
 Company at March 1, 2005:                                 3.98%

 Number of shares cancelled during the past 24 months:     0

 Number of treasury shares held at March 1, 2005:          16,183,548

 Accounting value (not including provisions) of the
      treasury shares at March 1, 2005:                    (euro)459,301,729

 Market value of the treasury shares at March 1, 2005(5):  (euro)430,644,212

--------------------------------------------------------------------------------

---------------
4 Day following the date on which the share repurchase program was authorized.

5 On the basis of the closing price on March 1, 2005, i.e. 26.61 euros.

<PAGE>

         Under the share repurchase program approved by the general
         shareholders' meeting of May 12, 2004 and up until March 1, 2005,
         shares were traded as follows by the Company:

<TABLE>
-----------------------------------------------------------------------------------------------------------------
                      Total Gross Flow                         Positions Open at March 1, 2005

-----------------------------------------------------------------------------------------------------------------
<S>              <C>             <C>            <C>          <C>      <C>      <C>             <C>        <C>
                  Purchases       Sales/       Positions open for purchase         Positions open for sale
                                 Transfers
-----------------------------------------------------------------------------------------------------------------
Number of         8,199,908       873,722       Calls     Puts     Purchases   Calls sold      Puts     Sales
shares                                        purchased    sold     in the                  purchased   in the
                                                                    future                               future
-----------------------------------------------------------------------------------------------------------------
Average                                           0          0         0       1,500,000*       0          0
Maximum
Maturity
-----------------------------------------------------------------------------------------------------------------
Average Price       23.96          24.40
per Transaction
(in euros)
-----------------------------------------------------------------------------------------------------------------
Average                                           -          -         -         21.30          -          -
Exercise Price
(in euros)
-----------------------------------------------------------------------------------------------------------------
Amounts          196,439,854    21,320,631
(in euros)
-----------------------------------------------------------------------------------------------------------------
</TABLE>

*    These call options have maturities that fall between September 3, 2007 and
     October 19, 2007 (cf. below).


         The purchases, sales and transfers indicated above were undertaken in
         order to achieve the following principal objectives of the share
         repurchase program authorized by the May 12, 2004 shareholders'
         meeting:

         o   the purchase and sale shares as a function of market conditions ;
             in particular, the Company repurchased 8,128,440 shares from
             Vivendi Universal at a price of 23.97 euros per share, pursuant
             to the terms of a sale agreement entered into on December 8, 2004
             with Vivendi Universal and finalized on December 29, 2004;

         o   a share capital increase reserved for Group employees, which the
             Company conducted on December 6, 2004. In connection with the
             implementation of the "secured" portion of such share capital
             increase, the Company sold a total of 1.5 million share purchase
             options (calls) to Calyon, the arranging bank for the share
             capital increase, on September 1, 2004, September 2, 2004 and
             September 17, 2004. These options may be exercised between
             September 3, 2007 and October 19, 2007. Each option carries the
             right to acquire one VE share, at a price of 21.30 euros per
             share; and

         o   the financing of external growth. In connection with an
             acquisition by a subsidiary, the Company paid out 516,899
             treasury shares pursuant to a contract dated December 15, 2004
             which came into force on December 16, 2004. The value of the
             treasury shares was determined on the basis of the closing price
             of a VE share on the Premier marche(6) of Euronext Paris
             ("Euronext") the day before the effective date (December 16,
             2004) of the transaction.

         ------------------

         6 Which became the Eurolist of Euronext Paris February 21, 2005.

<PAGE>

         At March 1, 2005, Veolia Environnement held a total of 16,183,548 of
         its own shares, which represented 3.98% of its share capital. None of
         Veolia Environnement's subsidiaries held any shares, directly or
         indirectly, as of such date. Of this total:

         o   770,000 shares resulting from stabilizing transactions effected
             prior to December 2002 are reserved for the stock option program
             implemented by the Company's management board at its June 23,
             2000 meeting. Options issued thereunder became exercisable
             beginning on June 24, 2003. No such options were exercised during
             the term of the Company's prior share repurchase program;

         o   4,230,619 shares resulting from stabilizing transactions effected
             prior to December 2002 were reclassified as "portfolio
             investments held as financial assets" on December 11, 2002 by the
             Company's management board;

         o   3,054,489 shares acquired from Vivendi Universal in December 2002
             were reserved for transactions involving Group employees on
             December 11, 2002 by the Company's management board; and

             8,128,440 shares acquired from Vivendi Universal in connection
             with the shareholder restructuring conducted in December 2004 were
             reserved for stock option or other share programs on behalf of
             employees. Any shares not used for such purpose may also be
             cancelled.

         All shares repurchased in connection with stabilizing transactions
         effected after December 2002 were resold from time to time in order to
         reduce the total number of such shares to zero.

         The authorization for the share repurchase program described above will
         expire at the latest on November 12, 2005, subject to the adoption of
         the ninth resolution described below.

         The ninth resolution that is expected to be adopted by the general
         shareholders' meeting of May 12, 2005 contemplates the implementation
         of a new share repurchase program under the conditions described below.

         The authorization is designed to allow the Company to trade in its own
         shares for the purpose of (i) implementing stock option plans in
         accordance with Articles L.225-177 et seq. of the French Commercial
         Code (Code de commerce), (ii) awarding shares to employees in
         connection with a company savings plan established in accordance with
         applicable law (in particular Articles L.443-1 et seq. of the French
         Labor Code (Code du travail)), (iii) awarding free shares in accordance
         with Articles L.225-197-1 et seq. of the French Commercial Code (Code
         de commerce), (iv) delivering shares upon exercise of debt instruments
         granting rights to such shares, in accordance with stock exchange
         regulations, (v) retaining and later distributing shares to finance
         potential external growth, whether in exchange or as payment, (vi) for
         purposes of enhancing the secondary market or liquidity in respect of
         Veolia Environnement shares through an investment services provider, in
         connection with a liquidity contract signed with such provider
         conforming to compliance procedures recognized by the AMF, (vii) the
         completion of purchases, sales or transfers by any means by an
         investment services provider, in particular off-market transactions,
         and (viii) canceling all or a portion of repurchased shares (subject to
         the adoption by the extraordinary general shareholders' meeting of May
         12, 2005 of the 18th resolution).

         Share repurchases would be subject to the following conditions: (i) the
         number of shares that the Company is allowed to purchase over the
         course of the share repurchase program may not exceed 10% of share
         capital, or approximately 40,642,198 shares as of December 31, 2004,
         and (ii) the number of shares that the Company may hold at any given
         moment may not exceed 10% of share capital.

         The maximum repurchase price under the program would be (euro)37(7) per
         share (or the corresponding amount in any other currency). The Company
         may only make payments for share repurchases up to an aggregate amount
         of (euro)1 billion under the program. The shareholders' authorization
         for this program would expire at the latest on November 12, 2006, which
         is 18 months after the date of the shareholders' meeting asked to
         approve the program. This authorization would replace with immediate
         effect the prior authorization granted by the general shareholders'
         meeting of May 12, 2004, which is described above.

         The shareholders' meeting would grant the Board of Directors or its
         delegate broad powers to implement the program and set the terms and
         conditions of any repurchases.

         As of the date of filing of this reference document, the note
         d'information relating to this new share repurchase program had been
         submitted for approval (visa) to the AMF.

3.2.3    Share Capital as of December 31, 2004

         Number of shares issued:  406,421,983

         Nominal value per share:  5 euros

         Nominal value of total shares issued:  2,032,109,915 euros, fully paid

3.2.4    Share Capital Authorized But Not Issued

3.2.4.1  OCEANE

         On April 26, 1999, the Company issued 10,516,606 bonds ("OCEANEs") for
         an aggregate principal amount of 2,850,000,226 euros (par value 271
         euros per OCEANE), which were convertible and/or exchangeable at any
         time into new or existing shares of Vivendi Universal or of the Company
         upon the initial public offering of its shares (on the day thereof). A
         prospectus relating to this issuance received the approval of the COB
         (now the AMF) under n(degree) 99-390 dated April 14, 1999. At the time
         of its initial public offering in 2000, the Company decided to convert
         the OCEANEs into new shares of the Company, at a rate of 10.213 new
         shares per OCEANE, which represented a share capital increase of
         714,709,238 euros. The OCEANEs not converted, i.e. 5,331,058 OCEANEs,
         were repayable in January 2005 or exchangeable for shares of Vivendi
         Universal.

         On January 3, 2005, the Company redeemed 5,330,827 outstanding OCEANEs
         at par value plus an additional non-conversion premium of (euro)17 per
         OCEANE, representing (euro)288 per OCEANE, for an aggregate redemption
         price of (euro)1,568,379,191 including fees and coupon payment, and 231
         OCEANEs were exchanged into 725 shares of Vivendi Universal.

3.2.4.2  Other Securities(8)

         o   Status of shareholder authorizations adopted by the combined
             general shareholders' meeting of May 12, 2004:

------------------

7   The maximum purchase price (or the corresponding amount in any other
    currency) applies only to share repurchases decided on after the annual
    general shareholders' meeting held on May 12, 2005, and not to future
    transactions entered into pursuant to an authorization granted by a prior
    shareholders' meeting that provide for acquisitions of shares after the date
    of the shareholders' meeting held on May 12, 2005.

8   Includes only those shareholder authorizations that continue to be in force
    as of the date of filing of this reference document.

<PAGE>

<TABLE>
-----------------------------------------------------------------------------------------------------------------
   Securities concerned       Term of the      Maximum issuance                                  Total use of
                             authorization          amount             Maximum amount of        authorization
                              and date of       (in billions of     share capital increase     (in millions of
                               expiration           euros)          (in billions of euros)          euros)
-----------------------------------------------------------------------------------------------------------------
<S>                           <C>              <C>                    <C>                      <C>
                               26 months
Bonds and similar            July 12, 2006             7                       -                      -
instruments*
-----------------------------------------------------------------------------------------------------------------

Share capital increase
through incorporation of       26 months
reserves**                   July 12, 2006           0.37                    0.37                     --
-----------------------------------------------------------------------------------------------------------------
Issuances without
preferential subscription
rights

Share capital increase         26 months               1                       1                      --
through use of various       July 12, 2006     (issuance of new         For all various
securities**                                        shares)         securities that may be
                                                                    issued (such amount to
                                                    and/or          be added to the amount
                                                                     above and the amount
                                                     4***                   below)
                                               (maximum nominal
                                              value of securities
                                               convertible into
                                                 shares of the
                                              Company that may be
                                                    issued)

                                              Within the limit of
                                               the total cap on
                                                 share capital
                                                 increases, as
                                               indicated in the
                                                  next column
-----------------------------------------------------------------------------------------------------------------
Issuances with
preferential subscription
rights

Share capital increase         26 months               1                       1                      --
through use of various       July 12, 2006     (issuance of new         For all various
securities**                                        shares)         securities that may be
                                                                    issued (such amount to
                                                    and/or            be added to the two
                                                                        amounts above)
                                                     4***
                                               (maximum nominal
                                              value of securities
                                               convertible into
                                                 shares of the
                                              Company that may be
                                                    issued)

                                              Within the limit of
                                               the total cap on
                                                 share capital
                                                 increases, as
                                               indicated in the
                                                  next column
-----------------------------------------------------------------------------------------------------------------
</TABLE>
    *    This authorization will be voided, as necessary and in application of
         the provisions of ordinance no. 2004-604 dated June 24, 2004, by the
         10th resolution proposed for adoption at the combined general
         shareholders' meeting of May 12, 2005. In the event this 10th
         resolution is adopted, the Board of Directors' meeting of March 29,
         2005 has delegated to its chairman and chief executive officer the
         power to authorize future bond issuances.

    **   This authorization will be voided and replaced by the authorization
         proposed for adoption at the combined general shareholders' meeting of
         May 12, 2005. See "Authorizations Proposed for Adoption at the Combined
         General Shareholders' Meeting of May 12, 2005" below.

    ***  The secondary share capital increases that may be effected through
         primary issuance of securities convertible into shares are subject to
         the total cap on share capital increases which has been set at 1
         billion euros.

<TABLE>
-----------------------------------------------------------------------------------------------------------------
        Securities concerned                 Term of the             Maximum amount            Total use of
                                       authorization and date    (in billions of euros)        authorization
                                            of expiration                                 (in millions of euros)
-----------------------------------------------------------------------------------------------------------------
<S>                                       <C>                       <C>                     <C>
 Issuances reserved for employees*
                                                                  1.5% of share capital
                                                                  on the date the board
           Stock options                      26 months           of directors decides
                                            July 12, 2006            on the issuance              16.708
-----------------------------------------------------------------------------------------------------------------
 Issuances reserved for employees*            26 months                   0.06                     6.757
                                            July 12, 2006
-----------------------------------------------------------------------------------------------------------------
     Share Repurchase Program*                18 months                     1                     0.196**
                                            November 2005                  or
                                                                  10% of share capital
-----------------------------------------------------------------------------------------------------------------
</TABLE>
    *    This authorization will be voided and replaced by the authorization
         proposed for adoption at the general shareholders' meeting of May 12,
         2005. See "Authorizations Proposed for Adoption at the Combined General
         Shareholders' Meeting of May 12, 2005" below.

    **   Total amount of acquisitions of VE shares occurring prior to March 1,
         2005 in connection with the share repurchase program authorized by the
         combined general shareholders' meeting of May 12, 2004.


               o    Authorizations Proposed for Adoption at the Combined General
                    Shareholders' Meeting of May 12, 2005


<TABLE>
-----------------------------------------------------------------------------------------------------------------

     Securities concerned       Term of the authorization and date    Maximum nominal amount of share capital
                                    of expiration increase                     (in billions of euros)
-----------------------------------------------------------------------------------------------------------------
<S>                             <C>                                   <C>
Share capital increase                      26 months                                   0.37
through incorporation of                  July 12, 2007               (such amount subject to the total global
premiums, reserves, profits                                            cap on share capital increases of 2.7)
or other items
-----------------------------------------------------------------------------------------------------------------
Issuances with preferential                                                              1*
subscription rights                         26 months                 (such amount subject to the total global
                                          July 12, 2007                cap on share capital increases of 2.7)
Share capital increase
through use of various
securities

-----------------------------------------------------------------------------------------------------------------
Issuances without                                                                        1*
preferential subscription                   26 months                 (such amount subject to the total global
rights                                    July 12, 2007                cap on share capital increases of 2.7)

Share capital increase
through use of various
securities

-----------------------------------------------------------------------------------------------------------------
Issuances reserved for                                                                 0.02**
employees                                   26 months                 (such amount subject to the total global
                                          July 12, 2007                cap on share capital increases of 2.7)
Stock options
-----------------------------------------------------------------------------------------------------------------
Issuances reserved for                                                                 0.015
employees                                   26 months                 (such amount subject to the total global
                                          July 12, 2007                cap on share capital increases of 2.7)
Members of savings plans
-----------------------------------------------------------------------------------------------------------------
                                                                                       0.01**
Issuances reserved for                      14 months                 (such amount subject to the total global
employees                                 July 12, 2006                cap on share capital increases of 2.7)


Free award of new or existing
shares
-----------------------------------------------------------------------------------------------------------------
                                            18 months                                    1
Share Repurchase Program                  November 2006                       or 10% of share capital
-----------------------------------------------------------------------------------------------------------------
</TABLE>

   *   The authorization proposed for adoption at the combined general
       shareholders' meeting of May 12, 2005 would give the Board of Directors
       the ability to increase this share amount (over-allotment or "greenshoe"
       option) in connection with any share capital increase (with or without
       preferential subscription rights).

   ** Or 1% of share capital on the date of the Board of Directors' decision.

3.2.5    Other Securities Convertible Into Shares

         In March 2001, Vivendi Universal issued (euro)1.8 billion principal
         amount of bonds due in 2006 that are exchangeable for existing shares
         of the Company held by Vivendi Universal. Each of the 32,352,941 bonds
         was initially exchangeable for 1 VE share (since increased to 1.0221 VE
         shares after adjustments). Between January 27, 2003 and February 17,
         2003, 31,858,608, or 98.47%, of the outstanding bonds were redeemed
         early. Accordingly, as of December 31, 2004, 494,323 bonds remained
         outstanding, which may be exchanged for a total of 505,247 of the
         Company's existing shares, representing approximately 0.12% of its
         share capital. Because the bonds are only exchangeable into already
         existing shares of the Company, any exchange would not alter the share
         capital of the Company.

         In December 2001, the Company distributed one free stock warrant for
         each of its 346,174,955 shares to persons who held the Company's shares
         on December 14, 2001 (COB visa n(degree) 01-1412 dated December 10,
         2001). Subject to adjustments, including those resulting from the
         Company's capital increase with preferential subscription rights
         conducted on August 2, 2002 (cf. ss.3.3.2 infra), each 7 warrants will
         entitle the holder to subscribe for 1.009 shares of the Company,
         nominal value 5 euros per share(9), at a subscription price of (euro)55
         per share. The warrants may be exercised at any time up to and
         including March 8, 2006. The warrants are listed on the Eurolist of
         Euronext (code Sicovam 64355). As of December 31, 2004, 99,526 warrants
         had been exercised, which resulted in the issuance of 14,218 new shares
         and a corresponding increase in share capital of (euro)71,090.

         As of December 31, 2004, the number of outstanding shares of the
         Company before exercise of outstanding warrants was 406,421,983 shares.
         At this date, if all of the outstanding warrants had been exercised,
         49,884,301 new shares would have been issued, representing a 12.27%
         ownership dilution.

3.2.6    Non-Equity Securities

         In June 2001, a Euro Medium Term Note (EMTN) program was established
         for up to an aggregate amount of (euro)4 billion; on June 26, 2002,
         this limit was raised to (euro)8 billion.

         The principal issuances under the EMTN program that were still
         outstanding as of the date of filing of this reference document were
         the following:

         o   An issuance of (euro)2 billion on June 27, 2001, bearing interest
             at a fixed rate of 5.875% and maturing on June 27, 2008;

--------------------

9    The reduction in the nominal value of VE's shares to 5 euros per share
     decided on April 30, 2003 did not have any impact on the number of shares
     that may be subscribed for through exercise of the warrants.

<PAGE>

         o   An issuance of (euro)500 million on November 8, 2001, bearing
             interest at a fixed rate of 4.75% and maturing on November 8,
             2005;

         o   An issuance of (euro)1 billion on February 1, 2002, bearing
             interest at a fixed rate of 5.875% and maturing on February 1,
             2012;

         o   An issuance of (euro)1 billion on May 28, 2003, bearing interest
             at a fixed rate of 4.875% and maturing on May 28, 2013;

         o   An issuance of (euro)750 million on May 28, 2003, bearing
             interest at a fixed rate of 5.875% and maturing on May 28, 2018;
             and

         o   An issuance of (euro)700 million on November 25, 2003, bearing
             interest at a fixed rate of 6.125% and maturing on November 25,
             2033.

         During 2004, the Company conducted only one bond issuance under the
         EMTN program in the amount of US$27 million, which bears interest at
         U.S. LIBOR and matures on March 4, 2009. Further, during the first half
         of 2004, the Company redeemed (euro)150 million of notes outstanding
         under the June 2001 issuance ((euro)2 billion maturing on June 27,
         2008) noted above.

         At December 31, 2004, EMTN debt amounted to 5,829.2 million euros, of
         which 5,329.2 million euros was set to mature in more than one year.

         Further, in 2003 the Company issued bonds totaling 404 million euros in
         a private placement in the United States in five separate tranches as
         follows:

         o   Tranche A, B and C, maturing on January 30, 2013, in principal
             amounts of (euro)33 million at a fixed rate of 5.84%, 7 million
             British pounds at a fixed rate of 6.22%, and US$147 million at a
             fixed rate of 5.78%, respectively;

         o   Tranche D, in a principal amount of US$125 million maturing on
             January 30, 2015, at a fixed rate of 6.02%; and

         o   Tranche E, in a principal amount of US$85 million maturing on
             January 30, 2018, at a fixed rate of 6.31%.

         At December 31, 2004, the value of this debt amounted to (euro)305
         million, all of which was set to mature in more than one year (see
         Chapter 5, note 16 to the consolidated financial statements).

         At December 31, 2004, the value of commercial paper (billets de
         tresorerie) issued by the Company amounted to (euro)1.057 billion.

3.2.7    Evolution in Share Capital as of December 31, 2004

<TABLE>
-----------------------------------------------------------------------------------------------------------------
<S>               <C>            <C>          <C>         <C>               <C>            <C>          <C>
                                              Nominal       Nominal
   Date of                       Number of    Value Per    Value of                         Total Share   Total
 Shareholders'    Transaction     Shares       Share     Share Capital      Issue Premium    Capital    Number of
    Meeting                       Issued       Issued      Increase           (in euros)    (in euros)    Shares
                                             (in euros)    (in euros)
-----------------------------------------------------------------------------------------------------------------

    11/24/95      Formation           2,500      15.24*    38,112.25*               -      38,112.25*       2,500
-----------------------------------------------------------------------------------------------------------------

     4/9/99       Conversion              0          15        37,500               -         37,500        2,500
                  of share
                  capital
                  into euros
-----------------------------------------------------------------------------------------------------------------

     4/9/99       Share             997,500          15    14,962,500               -     15,000,000    1,000,000
                  capital
                  increase
-----------------------------------------------------------------------------------------------------------------

    12/23/99      Contribution  653,685,522         4.5  2,931,084,849      3,970,754  2,946,084,849  654,685,522
                  of shares
                  and change
                  in nominal
                  value
-----------------------------------------------------------------------------------------------------------------

    5/26/00       Regrouping            n/a        13.5           n/a             n/a  2,946,084,844.5218,228,507
  (with effect
from 6/16/2000)
-----------------------------------------------------------------------------------------------------------------

   7/19/00**      Share         127,946,448        13.5  1,727,277,048            -  4,673,361,892.5  346,174,955
                  capital
                  increase
                  and
                  conversion
                  of OCEANEs
-----------------------------------------------------------------------------------------------------------------

    6/21/00       Exercise of           817        13.5      11,029.5        33,905.5  4,673,372,922  346,175,772
  (management     stock
 board meeting    warrants
   of 4/8/02)
-----------------------------------------------------------------------------------------------------------------

    6/21/00       Exercise of           782        13.5        10,557          32,453  4,673,383,479  346,176,554
  (management     stock
 board meeting    warrants
  of 6/24/02)
-----------------------------------------------------------------------------------------------------------------

    6/21/00       Exercise of        12,550        13.5       169,425         520,825  4,673,552,904  346,189,104
  (declared by    stock
the chairman of   warrants
 the management
board on 8/2/02)
-----------------------------------------------------------------------------------------------------------------

    4/25/02       Share          57,698,184        13.5   778,925,484     750,076,392  5,452,478,388  403,887,288
  (declared by    capital
the chairman of   increase
 the management
board on 8/2/02)
-----------------------------------------------------------------------------------------------------------------

    4/25/02       Share           1,183,158        13.5    15,972,633      15,381,054  5,468,451,021  405,070,446
  (declared by    capital
the chairman of   increase
 the management   (Group
    board on      Savings
   12/31/02)      Plan)
-----------------------------------------------------------------------------------------------------------------
    6/21/00       Exercise of            13        13.5         175.5           539.5  5,468,451,196.5405,070,459
(meeting of the   stock
   management     warrants
    board of
    3/24/03)
-----------------------------------------------------------------------------------------------------------------

    4/30/03       Share                 n/a           5           n/a 3,443,098,901.5 2,025,352,295  405,070,459
                  capital
                  decrease
                  (through
                  decrease in
                  nominal
                  value per
                  share)
-----------------------------------------------------------------------------------------------------------------

    6/21/00       Exercise of             9           5            45          448.06  2,025,352,340  405,070,468
  (declared by    stock
  the chairman    warrants
   and chief
   executive
   officer on
    6/30/03)
-----------------------------------------------------------------------------------------------------------------

    6/21/00       Exercise of            47           5           235        2,341.99  2,025,352,575  405,070,515
  (declared by    stock
  the chairman    warrants
   and chief
   executive
   officer on
    2/17/04)
-----------------------------------------------------------------------------------------------------------------

   5/12/2004      Share           1,351,468           5     6,757,340   18,528,626.28  2,032,109,915  406,421,983
  (declared by    capital
  the chairman    increase
   and chief      reserved
   executive      for
   officer on     employees
    12/6/04)      (Group
                  Savings
                  Plan)
-----------------------------------------------------------------------------------------------------------------
</TABLE>

*  Rounded after conversion of original amounts from francs into euros.
** Decision of the former management board.

n/a = not applicable

3.3      BREAKDOWN OF THE COMPANY'S SHARE CAPITAL AND VOTING RIGHTS

3.3.1    Shareholders of the Company as of December 31, 2004

         The table below shows the ownership of the Company's shares and voting
         rights at December 31, 2004 by shareholders known to the Company. To
         the best of the Company's knowledge, no person other than those listed
         below directly or indirectly held 5% or more of the Company's shares or
         voting rights as of December 31, 2004.

<TABLE>
--------------------------------------------------------------------------------------------------------------
               Shareholder               Number of shares     Percentage of      Number of       Percentage of
           (at December 31, 2004)                             share capital    voting rights     voting rights
--------------------------------------------------------------------------------------------------------------
<S>                                          <C>                    <C>          <C>                  <C>
Caisse des Depots et Consignations(1)        34,137,203             8.40%        34,137,203           8.75%
Groupe Societe Generale(2)                   26,708,356             6.57%        26,708,356           6.84%
Groupe Groupama(3)                           23,400,642             5.76%        23,400,642           6.00%
Vivendi Universal (4)                        21,523,527             5.30%        21,523,527           5.52%
EDF(5)                                       16,255,492             4.00%        16,255,492           4.17%
Veolia Environnement(6)                      16,183,548             3.98%                 -               -
Public and other investors                  268,213,215            65.99%       268,213,215          68.73%
--------------------------------------------------------------------------------------------------------------
Total                                       406,421,983              100%       390,238,435            100%
--------------------------------------------------------------------------------------------------------------
</TABLE>


1)   According to Caisse des Depots et Consignations' ("CDC") filing with French
     market authorities as of January 3, 2005 (AMF avis no. 205C0033 dated
     January 7, 2005). In its filing of April 23, 2003 with French market
     authorities (Euronext avis no. 2003-1290 dated May 5, 2003), CDC declared
     that it was acting as a medium-term institutional investor and that it
     retained the right to purchase additional shares based on market
     conditions, but that it did not intend to assume control of the Company.

2)   According to Societe Generale's filing with French market authorities as of
     January 4, 2005 (AMF avis no. 205C0032 dated January 7, 2005, which was
     updated by avis no. 205C0043 dated January 10, 2005).

3)   According to Groupama's filing with French market authorities as of
     December 30, 2004 (AMF avis no. 205C0030 dated January 7, 2005).

4)   According to Vivendi Universal's filing with French market authorities as
     of December 30, 2004 (AMF avis no. 205C0031 dated January 7, 2005).

5)   According to the register of the Company's registered shareholders
     (actionnaires au nominatif) as of December 31, 2004, which was prepared on
     the Company's behalf by Societe Generale on January 13, 2005. To the
     Company's knowledge, EDF's last share ownership filing with French market
     authorities occurred on December 30, 2002 (Euronext avis no. 2002-4424
     dated December 31, 2002), in which EDF declared that it held 16,155,492
     shares as of that date. EDF further declared in the November 24, 2002
     addendum to the June 24, 2002 contract described in Section 3.3.2 below
     that it would hold the shares as a financial investment, that it did not
     seek to influence the Company's management and that it would exercise its
     voting rights with the sole aim of enhancing the value of its investment.

6)   As set forth in the Company's monthly filing with French market authorities
     of transactions it has effected with respect to its own shares, filed on
     January 3, 2005 for the month of December 2004.

         Pursuant to the terms of an addendum dated November 24, 2002 to an
         agreement with investors dated June 24, 2002, as described in paragraph
         3.3.2 below, Vivendi Universal granted call options to certain
         investors that allowed them to acquire up to 82,486,072 shares of
         Veolia Environnement. These call options expired on December 23, 2004,
         as of which date none had been exercised.

         To the Company's knowledge, there are no shareholders' or other
         agreements existing between one or more shareholders, and there are no
         shareholders' or other agreements to which the Company or any
         significant non-listed Subsidiary is a party that could have material
         effect on the Company's share price, other than as set forth in
         paragraph 4.1.6.3 below and in Note 21 of the consolidated financial
         statements hereto, which include all material information relating to
         such agreements.

3.3.2    Changes In the Ownership of Share Capital During the Past Three Years

         The table below shows the principal changes in the ownership of the
         Company's share capital during the past three fiscal years.

<TABLE>
                   ----------------------------------------------------------------------------------------------

                     As of December 31, 2002(1)      As of December 31, 2003(2)       As of December 31, 2004(3)
-----------------------------------------------------------------------------------------------------------------
<S>                 <C>          <C>      <C>       <C>           <C>      <C>       <C>           <C>      <C>

                                          % of                             % of                           % of
  Shareholders      Number of    % of     voting    Number of    % of      voting    Number of    % of    voting
                      shares     capital  rights      shares     capital   rights      shares     capital  rights
----------------------------------------------------------------------------------------------------------------

Vivendi Universal   82,486,072   20.36%   20.83%    82,486,072    20.36%   20.83%    21,523,527    5.30%    5.52%
-----------------------------------------------------------------------------------------------------------------

Veolia              9,142,362     2.26%      -      9,195,942     2.27%       -      16,183,548    3.98%      -
Environnement
-----------------------------------------------------------------------------------------------------------------

Public and other   313,442,025   77.38%   79.17%   313,388,501    77.37%   79.17%   368,714,908   90.72%   94.48%
investors
-----------------------------------------------------------------------------------------------------------------

Total              405,070,459    100%     100%    405,070,515     100%     100%    406,421,983    100%      100%
-----------------------------------------------------------------------------------------------------------------
</TABLE>

(1)   As of December 31, 2002, French investors held approximately 72.5% of the
      Company's shares (and foreign investors the remaining 27.5%), the
      Company's directors and senior managers did not hold a material percentage
      of its shares and shareholders holding more than 5% of its share capital
      were Vivendi Universal, Caisse des Depots et Consignations, Groupama and
      Putnam Investment Management LLC/Putnam Advisory Company LLC (on behalf of
      its clients).

(2)   As of December 31, 2003, French investors held approximately 72.9% of the
      Company's shares (and foreign investors the remaining 27.1%), the
      Company's directors and senior managers did not hold a material percentage
      of its shares and shareholders holding more than 5% of its share capital
      were Vivendi Universal, Caisse des Depots et Consignations, Groupama and
      JPMorgan Chase Bank (on behalf of its clients).

(3)   As of December 31, 2004, French investors held approximately 70.55% of the
      Company's shares (and foreign investors the remaining 29.45%), the
      Company's directors and senior managers did not hold a material percentage
      of its shares and shareholders holding more than 5% of its share capital
      were those indicated in the table set forth under ss.3.3.1 above.

         o   From the time of the Company's formation until March 31, 1999,
             SNEGE, a wholly-owned subsidiary of Vivendi Universal, owned
             99.99% of its share capital. Between April 1 and April 9, 1999,
             Vivendi Universal acquired 100% of the Company's share capital at
             its nominal value.

         o   In July 2000, the Company's shares began trading on the Premier
             Marche of Euronext Paris, which became the Eurolist of Euronext
             on February 21, 2005, which reduced Vivendi Universal's equity
             participation in the Company from 100% to 72.3%.

         o   In December 2001, Vivendi Universal sold over-the-counter a block
             of the Company's shares representing 9.3% of the Company's total
             share capital.

         o   In July 2002, the Company conducted a share capital increase with
             preferential subscription rights. This capital increase was
             recorded on August 2, 2002. Pursuant to the terms of an agreement
             dated June 24, 2002, several financial investors including
             Caisses des Depots et Consignations, Groupama, BNP Paribas, AGF,
             Societe Generale, Dexia, Caisses d'Epargne, Credit Lyonnais and
             Natexis Banques Populaires (the "Group of Declared Investors" or
             "GID (1)"), acquired and exercised the preferential subscription
             rights granted to Vivendi Universal and subscribed for the
             remainder of shares not subscribed by the public. Following the
             transaction, the GID (1) held 9.4% of the Company's share
             capital.

         o   On November 24, 2002, Vivendi Universal, the Company, the GID (1)
             and a group of new investors including EDF, Caisse des Depots et
             Consignations, Groupama SA, AXA, Compagnie d'Investissement de
             Paris SAS, Eurazeo, Aurelec, Dexia Credit Local, Caisse Nationale
             des Caisses d'Epargne, Assurances Generales de France Holding,
             CNP-Assurances, Credit Agricole Indosuez (Suisse) SA (for its own
             account and the account of a client), CIC, Generali, Credit
             Lyonnais, Mederic Prevoyance and Wasserstein Family Trust LLC
             (the "New Investors"), signed an addendum to the June 24, 2002
             agreement(10) pursuant to which Vivendi Universal sold to the New
             Investors and to the Company a total of 82,486,072 of the
             Company's shares (of which 3,624,844 were sold to the Company,
             representing approximately 0.9% of its share capital at the time
             of sale) on December 24, 2002. The Company and the New Investors
             also received, for each share purchased, a call option that was
             exercisable at any time between December 24, 2002 inclusive and
             December 23, 2004 inclusive, entitling the holder thereof to
             purchase one of the Company's shares at a price of (euro)26.50
             per share. On the date that these call options expired, i.e.
             December 23, 2004, none had been exercised.

         o   On December 31, 2002, the Company recorded the completion of a
             share capital increase reserved for employees of the Company and
             the Group, which had been initiated on June 27, 2002. The shares
             were subscribed for by FCPE SEQUOIA acting as intermediary on
             behalf of beneficiaries. Following this transaction, 1,183,158
             new shares (nominal value 13.5 euros per share) were subscribed
             for at a price of 26.5 euros per share, causing share capital to
             increase by 15,972,633 euros and representing approximately 1.28%
             of the Company's existing share capital.

         o   On December 6, 2004, the Company recorded the completion of a
             share capital increase reserved for employees of the Company and
             the Group, which had been approved by the Board of Directors on
             September 16, 2004. The shares were subscribed for by several
             employee investment funds acting as intermediary on behalf of
             beneficiaries. Following this transaction, 1,351,468 new shares
             (nominal value 5 euros per share) were subscribed for at a price
             of 18.71 euros per share, causing share capital to increase by
             6,757,340 euros and representing approximately 0.33% of the
             Company's existing share capital.

         o   On December 8 and December 9, 2004, Vivendi Universal reduced its
             shareholding in Veolia Environnement by a total of 15% of share
             capital, reducing its interest from 20.36% of share capital to
             only 5.3%. Vivendi Universal reduced its holdings through (i) a
             private placement to investors involving 10% of share capital,
             (ii) a sale to Societe Generale involving 3% of share capital,
             and (iii) a sale to Veolia Environnement involving 2% of share
             capital, which closed on December 29, 2004.

3.3.3    Principal Legal Entities Controlling the Company

         As of the date of filing of this reference document, the Company's
         principal shareholders were Caisse des Depots et Consignations, Groupe
         Societe Generale, Groupe Groupama and Vivendi Universal, which held
         8.40%, 6.57%, 5.76% and 5.30% of the Company's share capital,
         respectively (cf. ss.3.3.1 supra).

--------------------

10   Clauses published by the Conseil des marches financiers on January 27, 2003
     under no. 203C0104.

<PAGE>

3.4      TRADING MARKET FOR THE COMPANY'S SHARES

         The Company's shares have been listed on the Eurolist of Euronext since
         July 20, 2000 under ISIN code FR 0000124141 - VIE, Reuters code VIE.PA,
         and Bloomberg code VIE.FP. VE shares are eligible for the Service de
         Reglement Differe (SDR). The Company's shares have been listed on The
         New York Stock Exchange in the form of American Depositary Shares
         ("ADSs") since October 5, 2001 under the symbol "VE".

         Since August 8, 2001, the Company's shares have been included in the
         CAC 40, a main index published by Euronext Paris.

         The tables below set forth, for the past 18 months, the sales prices
         and the trading volume of the Company's shares on the Eurolist of
         Euronext and on The New York Stock Exchange.

         o   Eurolist of Euronext:

<TABLE>
-----------------------------------------------------------------------------------------------------------------
                                            Price                                              Trading volume by
                                          (in euros)                       Trading volume by        capital
     Month  --------------------------------------------------------       number of shares     (in thousands of
                                                                                                      euros)
                          Average            High              Low
-----------------------------------------------------------------------------------------------------------------
                                                     2003(11)
-----------------------------------------------------------------------------------------------------------------
<S>                        <C>               <C>              <C>                  <C>                    <C>
September                  18.89             19.79            17.33                42,965,820             811,804
-----------------------------------------------------------------------------------------------------------------
October                    19.38             20.10            18.54                30,303,240             587,210
-----------------------------------------------------------------------------------------------------------------
November                   19.14             20.23            18.08                44,420,147             850,278
-----------------------------------------------------------------------------------------------------------------
December                   20.29             21.78            19.40                34,509,197             700,246
-----------------------------------------------------------------------------------------------------------------
                                                      2004
-----------------------------------------------------------------------------------------------------------------
January                    22.23             23.30            21.30                30,349,069             674,589
-----------------------------------------------------------------------------------------------------------------
February                   23.40             24.47            22.37                32,508,068             760,662
-----------------------------------------------------------------------------------------------------------------
March                      23.01             24.56            21.93                33,892,691             779,858
-----------------------------------------------------------------------------------------------------------------
April                      22.89             23.69            21.95                29,409,068             673,248
-----------------------------------------------------------------------------------------------------------------
May                        22.08             22.70            21.06                33,454,569             738,723
-----------------------------------------------------------------------------------------------------------------
June                       22.84             23.68            21.56                31,496,123             719,526
-----------------------------------------------------------------------------------------------------------------
July                       22.57             23.52            21.72                22,452,731             506,712
-----------------------------------------------------------------------------------------------------------------
August                     21.67             22.48            21.02                21,985,012             476,423
-----------------------------------------------------------------------------------------------------------------
September                  22.77             23.54            21.16                38,680,874             880,788
-----------------------------------------------------------------------------------------------------------------
October                    23.69             24.05            23.11                30,191,649             715,107
-----------------------------------------------------------------------------------------------------------------
November                   24.31             24.97            23.64                29,860,436             725,850
-----------------------------------------------------------------------------------------------------------------
December                   25.18             26.63            23.70                47,608,878           1,198,644
-----------------------------------------------------------------------------------------------------------------
                                                      2005
-----------------------------------------------------------------------------------------------------------------
January                    26.32             27.50            25.21                38,791,680           1,020,913
-----------------------------------------------------------------------------------------------------------------
February                   26.84             28.42            25.52                41,108,795           1,103,253
-----------------------------------------------------------------------------------------------------------------
</TABLE>

         Source: Euronext Paris

         o   New York Stock Exchange:

---------------------


11   Regarding trading volume by number of shares and by capital, a new
     definition was adopted by Euronext Paris in May 2003 in order to harmonize
     practices across Euronext's various local trading markets. For Euronext
     data provided before this date, trading volume included transactions
     conducted in the over-the-counter market. Since May 2003, market trading
     activity as defined by Euronext Paris includes transactions conducted on
     the NSC system, regulated off-market transactions and transactions
     involving option trading on Monep, but does not include transactions
     conducted in the over-the-counter market. Trading volumes after May 2003
     may therefore be lower than those recorded under Euronext Paris' former
     definition of market trading activity.

     The "average" price is determined by dividing the volume of capital
     exchanged by the number of shares exchanged. These figures are calculated
     by Euronext, using its definition of trading market activity.

<PAGE>


<TABLE>
-----------------------------------------------------------------------------------------------------------------
                                            Price                                              Trading volume by
                                        (in dollars)                      Trading volume by        capital
     Month  --------------------------------------------------------       number of shares     (in thousands of
                                                                                                     dollars)
                          Average            High              Low
-----------------------------------------------------------------------------------------------------------------
                                                      2003
-----------------------------------------------------------------------------------------------------------------
<S>                              <C>              <C>              <C>                <C>                   <C>
September                        21.18            23.19            19.95              246,493               5,222
-----------------------------------------------------------------------------------------------------------------
October                          22.81            23.55            21.81              122,089               2,785
-----------------------------------------------------------------------------------------------------------------
November                         22.12            23.95            20.65              254,608               5,631
-----------------------------------------------------------------------------------------------------------------
December                         25.57            27.45            23.40              608,000              15,546
-----------------------------------------------------------------------------------------------------------------
                                                      2004
-----------------------------------------------------------------------------------------------------------------
January                          27.97            29.38            27.01              235,800               6,596
-----------------------------------------------------------------------------------------------------------------
February                         29.52            31.25            28.03              340,600              10,054
-----------------------------------------------------------------------------------------------------------------
March                            28.39            30.40            26.79              297,500               8,445
-----------------------------------------------------------------------------------------------------------------
April                            27.37            28.55            26.39              213,000               5,830
-----------------------------------------------------------------------------------------------------------------
May                              26.62            27.63            25.05              251,500               6,696
-----------------------------------------------------------------------------------------------------------------
June                             27.88            28.77            26.40               94,900               2,646
-----------------------------------------------------------------------------------------------------------------
July                             27.82            29.07            26.25               67,000               1,864
-----------------------------------------------------------------------------------------------------------------
August                           26.57            27.07            25.65               69,100               1,836
-----------------------------------------------------------------------------------------------------------------
September                        27.78            28.90            25.76               83,400               2,317
-----------------------------------------------------------------------------------------------------------------
October                          29.65            30.50            28.95              142,200               4,216
-----------------------------------------------------------------------------------------------------------------
November                         31.61            32.21            30.70              116,700               3,689
-----------------------------------------------------------------------------------------------------------------
December                         33.90            36.45            31.80              325,200              11,025
-----------------------------------------------------------------------------------------------------------------
                                                      2005
-----------------------------------------------------------------------------------------------------------------
January                          34.71            36.46            33.07              201,200               6,984
-----------------------------------------------------------------------------------------------------------------
February                         35.18            36.16            33.71              134,300               4,725
-----------------------------------------------------------------------------------------------------------------
</TABLE>

         Source: Bank of New York

3.5      DIVIDENDS PAID BY THE COMPANY

3.5.1    Dividends per share during the last five fiscal years(12)


<TABLE>
    ------------------------------------------------------------------------------------------------
             (in euros)             1999        2000          2001         2002           2003
    ------------------------------------------------------------------------------------------------
<S>                                  <C>       <C>           <C>           <C>        <C>
      Gross Dividend Per Share       0         0.825         0.825         0.825      0.825/0.605*
    ------------------------------------------------------------------------------------------------
       Net Dividend Per Share        0          0.55          0.55         0.55           0.55
    ------------------------------------------------------------------------------------------------
      Tax Credit (Avoir fiscal)      0         0.275         0.275         0.275      0.275/0.055*
    ------------------------------------------------------------------------------------------------
      Amount of Paid Dividends       0      189,895,712   187,509,688   217,757,951   217,917,234
        (without tax credit)
    ------------------------------------------------------------------------------------------------
</TABLE>

    *    The amount of the tax credit is 0.275 euro per share for individual
         shareholders and non-individual shareholders benefiting from the
         "parent-subsidiary" (mere-fille) regime, and 0.055 euro per share for
         non-individual shareholders not benefiting from the "parent-subsidiary"
         regime.

         A dividend payment of (euro)0.68 per share in respect of the Company's
         406,421,983 outstanding shares carrying dividend rights as of January
         1, 2005 will be submitted for approval at the combined general
         shareholders' meeting of May 12, 2005. Individual shareholders will
         have the right to a 50% tax abatement with respect to such dividends,
         in accordance with the French Finance Law of 2004. Investors should
         note that the French Finance Law of 2004 has significantly modified the
         tax regime relating to dividends received on or after January 1, 2005.
         As a result, shareholders are encouraged to consult their tax adviser.

3.5.2    Dividend Policy

         The Board of Directors sets the Company's dividend policy, and in doing
         so may consider a number of factors, including the Company's financial
         performance and net income, as well as the dividends paid by other
         French and international companies in the sector. The Company cannot
         guarantee the amount of dividends that may be paid in respect of any
         fiscal year.

-----------------------

12   The Company was created in 1994, but has only been at the head of VE Group
     since 1999, as described in paragraph 4.1 below. Before this date, it did
     not distribute dividends.

<PAGE>

3.5.3    Period During Which Dividend Payments Must be Claimed

         Dividends on shares that are not claimed within five years of the date
         of declared payment revert to the French State.

3.6      RELATIONS BETWEEN THE COMPANY AND VIVENDI UNIVERSAL

         Share Capital of the Company

         Vivendi Universal formally created the Company in 1999 by grouping
         together the majority of its existing environment-related operations.
         Prior to July 2000, the Company was a wholly-owned subsidiary of
         Vivendi Universal. Following the Company's initial public offering on
         the Premier Marche of Euronext Paris in July 2000, Vivendi Universal
         held 72.3% of the Company's shares.

         In December 2001, Vivendi Universal sold a block of the Company's
         shares and thereby reduced its equity participation in the Company from
         72.3% to 63.05%.

         In June 2002 and December 2002, Vivendi Universal sold additional
         blocks of the Company's shares and thereby reduced its equity
         participation in the Company from 63.05% to 20.36%.

         Finally, in December 2004, Vivendi Universal further reduced its equity
         stake such that it held only 5.3% of the Company's share capital at the
         end of this period.

         Transfer of Participations and Interests

         In order to complete the separation of Vivendi Universal and the
         Company, the Company entered into a Master Agreement with Vivendi
         Universal dated December 20, 2002, as well as an ancillary cooperation
         agreement, pursuant to which both parties agreed to the transfer of
         various securities and interests historically held by Vivendi Universal
         in companies related to the Company's environmental management services
         business. As of December 31, 2004, Vivendi Universal had transferred
         substantially all of these interests to the Company.

         Financial Agreements

         The Company entered into a number of agreements with Vivendi Universal
         in connection with its formation and the initial public offering of its
         shares. These agreements established the financial relationship between
         Vivendi Universal and the Company. Following transactions that occurred
         during 2004, the following agreements remained between Vivendi
         Universal and the Company:

         o   Loan Agreement of June 19, 2000

         On June 19, 2000, the Company and Vivendi Universal entered into a loan
         agreement which was terminated pursuant to an agreement dated January
         13, 2003, except for provisions relating to the shareholder's account,
         which could be temporarily and automatically reactivated at any time
         that a holder of the Company's OCEANEs exercised its right to exchange
         its OCEANEs into shares of Vivendi Universal (cf. ss.3.2.4.1 supra).
         Upon maturity of the OCEANEs on January 3, 2005, 231 OCEANEs were
         exchanged for 725 shares of Vivendi Universal. As a result, the Company
         was required to reimburse Vivendi Universal a total amount of 62,601
         euros. Following this reimbursement, the June 19, 2000 loan agreement
         has been fully terminated.

         o   Guarantee Agreement

         In connection with the Company's assumption of control of Vivendi
         Universal's water and energy services operations, the Company replaced
         Vivendi Universal in 2000 as managing partner (associe commandite) of
         Vivendi Universal's water and energy services subsidiaries. As managing
         partner of these subsidiaries, the Company assumed Vivendi Universal's
         statutory obligations for the financial management of such
         subsidiaries' expenses in France related to the maintenance and
         replacement of equipment, in discharge of their contractual
         obligations.

         Under a guarantee agreement dated June 20, 2000, as modified on
         December 20, 2002, Vivendi Universal agreed to indemnify the Company
         for any loss that it suffered as a result of its having assumed such
         obligations, in instances where the Company's reimbursement of expenses
         associated with the maintenance or replacement of equipment exceeded
         the related contributions the Company received from such subsidiaries.
         On December 21, 2004, Vivendi Universal delegated its obligations under
         the guarantee agreement to Societe Generale in respect of the 2004
         fiscal year and onward, which the Company accepted. At the time of such
         delegation, the parties took note of the guarantee limits already in
         place, and set forth the maximum amounts that the Company could seek
         from Societe Generale under the guarantee agreement in respect of the
         2004 fiscal year and subsequent fiscal years. In 2004 value, the total
         maximum amount guaranteed by Societe Generale was (euro)207.26 million.
         The Company may draw on this guarantee annually in an amount of up to
         (euro)34.66 million per year (which amount shall increase by 4.5%
         annually). The last fiscal year in respect of which the Company may
         claim reimbursement under the guarantee agreement is 2011.

         o   Counter-Guarantee Agreement

         Prior to the Company's formation and the initial public offering of its
         shares, Vivendi Universal granted a variety of guarantees (for an
         initial amount of (euro)6 billion) to third parties on behalf of the
         Company's subsidiaries, generally in connection with those
         subsidiaries' attempts to obtain contracts, receipt of funds from bank
         financing and sales of assets (the "subsidiary guarantees"). The
         Company has entered into a counter-guarantee agreement dated June 20,
         2000, pursuant to which it will indemnify Vivendi Universal for any
         costs, losses or expenses it incurs in connection with the subsidiary
         guarantees. The Company is also required to use its best efforts to
         obtain the consent of beneficiaries of the subsidiary guarantees to the
         transfer of the subsidiary guarantees from Vivendi Universal to the
         Company or to the substitution of the Company for Vivendi Universal.

         Pursuant to the Master Agreement dated December 20, 2002, and in light
         of the transfer or expiration of certain of the guarantees initially
         covered by the June 20, 2000 protocol, the Company and Vivendi
         Universal have redefined both the list of subsidiary guarantees that
         will be transferred to, or otherwise counter-guaranteed by, the Company
         as well as the conditions under which Vivendi Universal can appeal the
         Company's counter-guarantee.

         As of December 31, 2004, the maximum aggregate amount that could become
         due under these subsidiary guarantees was approximately (euro)110.5
         million.

         Aguas Argentinas

         Pursuant to the December 20, 2002 Master Agreement, the Company and
         Vivendi Universal agreed that Vivendi Universal would definitively
         remain the owner of shares of Aguas Argentinas, an Argentinean company,
         which were listed among the interests that the Company was supposed to
         acquire pursuant to an annex to the June 20, 2000 counter-guarantee
         agreement. As a result, Vivendi Universal definitively waived the
         counter-guarantee relating to this interest given by the Company
         pursuant to the June 20, 2000 agreement. In exchange, the Company
         agreed to pay, subject to a cap of US$5 million, the first sums due
         under Vivendi Universal's guarantees in respect of Aguas Argentinas'
         financial commitments.

         As of December 31, 2004, the amount guaranteed by the Company was fully
         paid in the amount of US$5 million. Accordingly, the Company does not
         have any further commitments or obligations to Vivendi Universal with
         respect to the above transaction. However, the Company does benefit
         from a return to better fortune clause, pursuant to which it may be
         reimbursed for all or part of the US$5 million it has paid to Vivendi
         Universal in the event that Aguas Argentinas returns to profitability.

3.7      RELATIONSHIP BETWEEN THE COMPANY AND FOMENTO DE CONSTRUCCIONES Y
         CONTRATAS (FCC)

         Until September 15, 2004, the Company held a 49% interest in the
         holding company B 1998 SL, which itself holds 52.5% of the Spanish
         company FCC (amounting to a 25.7% indirect interest in FCC on the part
         of the Company).

         During 2003, certain disagreements relating to the strategic
         development of FCC arose between the Company and its 51% co-shareholder
         in B 1998 SL, Ms. Esther Koplowitz. In the fall of 2003, negotiations
         began for Ms. Koplowitz to repurchase the Company's indirect interest
         in FCC. A contract for sale was signed on July 28, 2004 and came into
         force on September 15, 2004, pursuant to which VE sold to Ms. Koplowitz
         its entire interest in the holding company B 1998 SL.

         This contract put an end to the shareholders' agreement of October 6,
         1998 between the Company and Ms. Koplowitz. The contract also ended a
         put option agreement, pursuant to which Ms. Koplowitz had the option,
         exercisable at any time through October 16, 2008, to require the
         Company to purchase her remaining 51% interest in FCC's holding company
         (see ss.4.1.4 and ss.5.1.1.3 below, as well as note 1 to the
         consolidated financial statements).

         This sale forms part of the Company's effort to refocus its activities
         on its historical environmental services business, which began in 2002.
         The Company and FCC have nevertheless retained their joint interests in
         the Spanish subsidiaries Proactiva Medio Ambiente(13) ("Proactiva") and
         FCC Connex Corporacion(14) (cf. ss.4.1.3.1 and 4.1.6.4 infra).

--------------------

13   Proactiva's shareholders have not entered into a shareholders' agreement.
     Accordingly, Proactiva's management is governed by its articles of
     association, which provide that shareholders have a preferential right to
     acquire any shares offered for sale by another shareholder.

14   Pursuant to a shareholders' agreement dated December 13, 2001, the
     shareholders of FCC Connex Corporacion (which are CGT, the transportation
     subsidiary of FCC, and Connex) are required to act in the company's best
     interest so as to avoid deadlock when strategic decisions are made. In the
     event of any deadlock, or in the event a shareholder fails to fulfill any
     of its obligations, the shareholders' agreement contains specific
     provisions relating to shareholder divestment. These provisions also apply
     in the event of a change in control of CGT or Connex. Under these
     provisions, Veolia Environnement or FCC, as the case may be, may require
     its partner to either repurchase the other's interest in the company or to
     sell its own interest, depending on the circumstances.

<PAGE>

                                   CHAPTER 4
             INFORMATION RELATING TO VEOLIA ENVIRONNEMENT'S BUSINESS


4.1      PRESENTATION OF VEOLIA ENVIRONNEMENT

4.1.1 - Historical Background

The Company traces its roots back to the creation of Compagnie Generale des Eaux
by Imperial decree on December 14, 1853. During the same year, Compagnie
Generale des Eaux won its first public service concession for the distribution
of water in the city of Lyon, France. Early on, it commenced developing its
municipal water distribution activities in France by obtaining concessions in
Nantes (1854), Nice (1864), Paris (1860) and its suburbs (1869).

In 1980, Compagnie Generale des Eaux reorganized its water activities by
regrouping all of its design, engineering and execution activities relating to
drinking water and wastewater treatment facilities under its subsidiary Omnium
de Traitement et de Valorisation (OTV). At the same time, Compagnie Generale des
Eaux expanded its business during the 1980s with the acquisition of Compagnie
Generale d'Entreprises Automobiles (CGEA, which would become Connex and Onyx)
and Compagnie Generale de Chauffe and Esys-Montenay (which would merge to become
Dalkia). It also began significant international expansion.

In 1998, Compagnie Generale des Eaux changed its name to Vivendi `and renamed
its main water subsidiary Compagnie Generale des Eaux.

In April 1999, in order to better distinguish the separate existence of its two
main businesses, communications and environmental services, Vivendi created
Vivendi Environnement to conduct all of its environmental management activities,
which are today conducted under the names Veolia Water (water), Onyx (waste
management), Dalkia (energy services) and Connex (transportation).

On July 20, 2000, Vivendi Environnement shares were listed on the Premier Marche
of Euronext Paris, which became the Eurolist of Euronext on February 21, 2005.

In August 2001, Vivendi Environnement shares were included in the CAC 40, the
main equity index published by Euronext Paris, and in October 2001 were listed
in the form of American Depositary Shares for trading on The New York Stock
Exchange.

During 2002, Vivendi, which had been renamed Vivendi Universal in 2000,
progressively decreased its stake in Vivendi Environnement, such that it held
only 20.4% of Vivendi Environnement's shares as of December 31, 2002, an
interest that was reduced to 5.3% in December 2004 (cf. ss.3.3.2 supra). In
April 2003, Vivendi Environnement changed its name to Veolia Environnement.

Since 2002, Veolia Environnement has been conducting a significant restructuring
in order to refocus on its core environmental services activities. This
restructuring was completed in 2004 with the sale of various U.S. subsidiaries
within its Water division conducting certain non-core activities, and with the
sale of Veolia Environnement's indirect interest in Fomento de Construcciones y
Contratas (FCC), a Spanish company whose activities include construction and
cement services, as well as other services related to the environment.

4.1.2 - General Description of Veolia Environnement

Veolia Environnement is a unique actor in the field of services related to the
environment(15), offering a comprehensive array of services. Veolia
Environnement has the expertise, for example, to supply treated water and to
recycle wastewater at a customer's facility, to collect, treat and recover waste
generated in the facility, and to supply heating and cooling services and
optimize industrial processes used in such facility, all in an integrated
service package designed to address the customer's unique circumstances.

Veolia Environnement's operations are conducted primarily through four
divisions, each of which specializes in a single business: Veolia Water (water),
Onyx (waste management), Dalkia (energy services) and Connex (transportation).
Through these divisions, Veolia Environnement currently provides water to
approximately 100 million people, treats more than 51.7 million tons of waste,
satisfies the energy requirements of hundreds of thousands of buildings for its
industrial, municipal and individual customers and transports nearly 2 billion
passengers per year. Veolia Environnement strives to offer services to clients
that span across its four divisions, which are either packaged in the form of a
single multiservices contract, or negotiated separately in the form of several
contracts.

The following table breaks down Veolia Environnement's consolidated revenue for
2004 by geographic market and division, after elimination of all inter-company
transactions.

2004 Revenues(16)

--------------------------------------------------------------------------------
(in millions of euro)  Water      Waste  Energy Services Transport   Total
--------------------------------------------------------------------------------
Europe                 8,086.3   4,368.8     4,951.1      3,064.6   20,470.7
--------------------------------------------------------------------------------
of which:              6,095.5   2,802.4     3,074.7      1,466.5   13,439.1

 France
--------------------------------------------------------------------------------
Other Europe           1,990.8   1,566.4     1,876.4      1,598.1   7,031.6
--------------------------------------------------------------------------------
Americas                568.1    1,325.6      47.9         276.7    2,218.2
--------------------------------------------------------------------------------
Rest of the World      1,150.4    525.6       36.5         271.7    1,984.4
--------------------------------------------------------------------------------
of which:               712.8     78.1        21.1          12.5     824.5

Africa-Middle East
--------------------------------------------------------------------------------
Asia-Pacific            437.7     447.5       15.4         259.2    1,159.9
--------------------------------------------------------------------------------
Total                  9,804.8   6,220.0     5,035.5      3,613.0   24,673.3
--------------------------------------------------------------------------------

4.1.3 - Strategy

4.1.3.1 - Veolia Environnement's Strategy

Veolia Environnement's strategy is to strengthen its position as a worldwide
provider of integrated environmental services, by capitalizing as fully as
possible on the growth potential of the environmental services market and by
improving margins, while at the same time fulfilling client needs and fostering
the durability of natural resources. This strategy relies on Veolia
Environnement's expertise regarding contractual models, its general know-how and
its competitive advantages.

---------------------

15   Unless otherwise indicated, information and statistics presented herein
     regarding market trends and Veolia Environnement's market share relative to
     its competitors are based on Veolia Environnement's own research and
     various publicly available sources.

16   On December 31, 2004, Veolia Environnement began applying the provisions of
     Article 23100 of CRC Regulation 99-02, which allows companies to report
     their share in the net income of businesses sold during the year on a
     separate line item of the income statement. These businesses are excluded
     from the new scope of consolidation and therefore no longer contribute to
     consolidated revenues for the fiscal year in which they were sold. For the
     2004 fiscal year, these businesses included FCC, Culligan and USFilter
     Corporation's equipment and short-term services businesses.

<PAGE>

One business: environmental services

Veolia Environnement is a worldwide provider of environmental services,
concentrating in four areas in particular: water, waste management,
transportation and energy services. Veolia Environnement has made a strategic
choice to concentrate only in these areas and to focus fully on its
environmental services business. For instance:

         o   since 2000, Veolia Environnement has decided not to be present in
             the primary energy production market, in order to focus more
             fully on providing services to clients that help to optimize
             their energy consumption;

         o   in 2004, Veolia Environnement finished disposing of its
             industrial assets in the water sector (mostly in the United
             States) relating to equipment production and the short-term
             service activities generated thereby;

         o   in 2004 as well, Veolia Environnement sold its minority interest
             in FCC, a Spanish company whose activities include construction
             and cement services, as well as other services related to the
             environment.

A long-term commitment

Veolia Environnement's strategy consists of capitalizing on its ability to
establish effective, long-term relationships with clients, an ability that
Veolia Environnement has demonstrated for more than 150 years with respect to
its water distribution contracts with public authorities, and over the past few
decades with respect to its other activities. In addition, Veolia Environnement
seeks to develop its presence in countries where conditions are favorable, and
to offer services adapted to the needs of non-public clients, in particular
industrial companies.

Public authorities seeking to improve the environment for citizens must be able
to rely on a partner that can develop a long-term presence in an area, who can
permanently improve the functioning, for example, of a water treatment or
production facility, a waste incineration or landfill facility, or an urban
heating network, or who can manage the public transport network of an area, with
the utmost concern for issues of security, cleanliness and the rights of
employees.

Long-term contracts adapted to the needs of each client

Veolia Environnement has developed a high level of expertise with respect to
managing contracts across its four divisions, which allows it to commit itself
to clients over the long-term. Veolia Environnement's main contracts last
anywhere from a few years to several decades; an example of the latter is the
50-year contract entered into with the municipality of Shanghai during 2002.
Over the past several years, Veolia Environnement has demonstrated its ability
to adapt contracts to a variety of constraints in countries around the world
involving a broad range of services.

Long-term contracts provide a measure of visibility both to clients and to
shareholders of Veolia Environnement. For clients, whether they be public
authorities or commercial or industrial companies, long-term contracts can also
provide efficiency gains by providing them with a real partner for the future.
Long-term contracts can lead to improvements in performance and productivity as
part of a strategy that integrates, in addition to local factors, technical,
labor and management considerations and, if necessary, financing of required
infrastructure or investments. Industrial and commercial companies that enter
into such long-term partnering relationships are able to focus their resources
on their core businesses by relying upon a specialized service provider. Veolia
Environnement's large range of skills and experience ideally positions it in the
market for outsourcing of environmental services. Further, Veolia Environnement
can adapt its contracts and its services to meet specific client needs.

Veolia Environnement therefore strives to provide its services under long-term
contracts, which can provide a recurring revenue flow to Veolia Environnement
over the course of several years. At the same, Veolia Environnement works to
improve the profitability of its contracts over time, through consistent efforts
aimed at optimizing operating performance.

Strong financing capability

Veolia Environnement knows how to partner with clients in order to help them
finance required infrastructure, investments and other work, made possible
through long-term contracts and optimized operating performance. Accordingly,
Veolia Environnement has the ability, in particular through forming new
partnerships and obtaining third-party financing, to help its clients realize
their more ambitious projects. Such projects typically would involve the water,
waste management and energy services sectors, and will often lead to a lasting
improvement in the environment. At the same time, Veolia Environnement has been
able over the past several years to successfully realize its strategy for
reducing net debt, despite this willingness to partner with clients for all of
their financing needs.

Continuous research efforts

Veolia Environnement's activities require substantial technical knowledge. The
mastery of water production and treatment, along with the mastery of waste
treatment and the development of increasingly efficient energy management, all
require specialized teams whose skills are constantly expanding. Veolia
Environnement has implemented a research program for all of its activities
pursuant to which high-level researchers are currently preparing for the Group's
future. These researchers are in direct contact with Veolia Environnement's
operating teams so that clients can benefit from the latest technological
developments (cf. ss.4.5.1 infra).

Strong presence of operating teams on the ground

In addition to tailoring its contract provisions to the specific needs of each
client, Veolia Environnement also tailors its services to each client on an
ongoing basis. Through call centers, Veolia Environnement's operating teams are
quickly informed of any required responses.

In crisis situations, Veolia Environnement's operating teams have consistently
shown their professionalism, commitment and solidarity, whether it be during the
floods in Prague in 2003 or during the aftermath of the tsunami that struck
southeast Asia on December 26, 2004 (cf. ss.4.8.2 infra).

In an original way then, Veolia Environnement combines the advantages of being a
world leader with the ability to develop a local foothold for each of its
operations.

Targeted international development

The needs of our planet in matters relating to the environment are significant.
Numerous countries suffer from poor water quality, uncontrolled pollution,
inefficient energy consumption and poor traffic conditions; accordingly, the
need for skills in these sectors is significant. The opening of countries in
Eastern Europe has amply demonstrated this. The opportunities for long-term
growth in Veolia Environnement's business are therefore extensive.

Within this context, Veolia Environnement's strategy is to actively, yet
carefully, develop its activities internationally. Veolia Environnement
currently conducts nearly half of its activity outside France. Considering the
growing needs in the area of environmental services, Veolia Environnement is in
a position to pursue international growth selectively, by focusing on areas of
strong economic development and countries where acceptance of Veolia
Environnement's business model and the ability to fulfill long-term contractual
commitments is most pronounced.

While pursuing growth in France and in Western Europe, Veolia Environnement also
seeks to develop its business:

         o   in the countries of Central and Eastern Europe, which are new
             entrants into the European Union;

         o   in certain targeted Asian countries, in particular China, where
             there is a significant need for services related to urban growth
             and compliance with environmental standards; and

         o   in large markets still mostly closed to management by
             environmental services companies like Veolia Environnement, such
             as the United States or Japan, whose medium-term potential is
             still important.

In 2000, Veolia Environnement also created Proactiva, a subsidiary held jointly
with FCC, in order to coordinate the development of Veolia Environnement's and
FCC's water and waste management activities in Latin America and the Caribbean
(cf. ss.3.7 supra).

Veolia Environnement's solid international presence accordingly allows it to
partner with its industrial clients around the world, while providing uniform
quality service.

Development in the industrial sector

Veolia Environnement has developed recognized expertise in the industrial
sector, and is capable of offering its industrial clients on five continents the
entire range of its environmental services in the areas of water, waste
management, energy services and transport. The complementarity of Veolia
Environnement's various services, a strong attribute, allows it to satisfy all
of its industrial clients' environmental needs. Veolia Environnement's three key
strengths with respect to its industrial client service offerings are:

         o   its ability to furnish the entire range of energy services
             necessary for the functioning of industrial processes, in
             particular energy fluids (steam, water, compressed air, etc.);

         o   its ability to control the environmental impact of liquid, solid
             and gaseous waste;

         o   its ability to accompany industrial clients around the world,
             thanks to its presence in nearly 80 countries and its experience in
             performing multiservice contracts.

Veolia Environnement currently views itself as the natural choice as privileged
partner of industrial clients for all of their environmental service needs.
Joining with industrial clients in their development, offering them innovative
outsourcing solutions and building mutually beneficial and environmentally sound
partnerships are at the heart of Veolia Environnement's ambitions for the
future.

Rigorous management adapted to business needs so as to protect shareholder
interests

A constant effort to improve the return on capital employed is a key factor in
ensuring the sustainability of Veolia Environnement's development strategy, as
well as the promotion of shareholder interests.

Structurally, Veolia Environnement's activities allow results and cash flows to
be estimated with some accuracy. Veolia Environnement may therefore enter into
contracts that call for it to finance certain investments. However, Veolia
Environnement's operating and financial teams undertake new projects
selectively, after having analyzed all of the risks involved. Further, these
teams attempt to use debt leverage effectively in order to optimize the return
on capital employed in the interest of shareholders.

The favoring of organic growth, the frequent search for financial partners to
help finance new developments and Veolia Environnement's strong market position
all help to contribute to realization of these objectives.

Focus on sustainable development

Sustainable development is part of the very nature of Veolia Environnement's
activities. It is for this reason that Veolia Environnement has made it a part
of its development strategy. Veolia Environnement partners with clients on a
long-term basis in order to satisfy fundamental population needs, through an
offering that seeks balanced development over the long-term.

Veolia Environnement has also attempted to impose this culture of responsibility
and solidarity on its corporate management structure, by favoring internal
mobility, enrichment of skills and recognition of professional accomplishments.

The constant pursuit of these values means that Veolia Environnement is
currently well-positioned to respond to the needs and expectations engendered by
the strengthening of environmental and health standards, as well as the
increased sensitivity of the public, elected officials and industrial companies
to environmental issues.

4.1.3.2 - Strategy by Division

Water

Through its specialized subsidiary Veolia Water, Veolia Environnement seeks to
continue to develop its water services throughout the world. While doing so, it
strives to ensure the safety of drinking water, the conservation of natural
resources and the protection of the environment.

The market for water services has the potential to grow worldwide, supported by
four factors in particular:

         o   population growth and higher urban density,

         o   the strengthening of environmental and sanitary norms and
             regulations,

         o   the growing acceptance of private sector operators as an
             alternative to public management, and

         o   the attempt by industrial clients to refocus on their core
             businesses.

Given this growth potential, Veolia Environnement will selectively pursue its
development in the water sector in order to optimize its use of resources, its
operating costs and its profitability. Further, Veolia Water's technical
expertise, research and development efforts and mobilization of local teams on
the ground, combined with the restructuring it recently conducted to focus on
its core activities, should all help enable it to take advantage of this
favorable market environment.

The success of Veolia Water's new commercial offers in France during 2004
(analysis of the softness of bathing water, new methods for recovering sludge
and non-collective wastewater treatment, etc.) also demonstrates Veolia Water's
ability to expand the scope of its services within the water sector.

Continued development, together with the maturing of larger contracts and gains
in productivity resulting from efficiency programs launched in 2003 (relating to
purchases, information systems and sharing of best practices) should help
support an improvement in the water division's operating income for 2005 and
beyond.

Waste Management

Through its specialized subsidiary Onyx, Veolia Environnement seeks to pursue
its development as one of the world leaders in the waste management sector. As
is the case with the Group's other businesses, the waste management sector is
showing signs of consistent and lasting demand, which has been reinforced by the
tightening of environmental rules and regulations coupled with increased public
demand in a number of countries. As a result, capable experts who can provide
services under cost-effective conditions and in accordance with environmental
regulations are becoming more highly sought after.

Within this favorable market environment in Europe, the United States and the
Asia-Pacific region, Veolia Environnement has the following priorities for its
waste management division:

         o   developing its waste treatment capabilities and widening its
             technological lead in waste treatment and recovery;

         o   strengthening the offering to industrial clients by capitalizing on
             its mastery of the entire waste management chain, while seeking to
             generate synergies with the Group's other operating divisions;

         o   increasing the profitability of its activities by renegotiating
             tariffs, maximizing productivity and reducing structural costs; and

         o   ensuring that all of its activities contribute to the development
             of high value-added services.

Energy Services

Through its specialized subsidiary Dalkia, Veolia Environnement seeks to become
the uncontested European leader in the energy services sector. In 2000, Veolia
Environnement entered into a strategic partnership in the energy services sector
with EDF, a European leader in the production, distribution and sale of
electricity, in order to be able to offer clients comprehensive energy services
at the best possible price.

The opportunities in the sector are significant, due in particular to the
opening of energy markets in Europe and the rapid development of countries in
Central and Eastern Europe.

Veolia Environnement's strategic priorities are focused in four main areas:

         o   deploying its service offerings in the deregulated energy markets
             of Europe;

         o   developing its activities in the area of large heating networks,
             particularly in France and the rest of Europe, as it has done so
             successfully over the past few years in Poland and the Czech
             Republic;

         o   developing its service offerings to industrial clients through the
             use of innovative technical solutions, often bringing together
             several of Veolia Environnement's skills in connection with an
             integrated service offering; and

         o   promoting its integrated outsourcing services to public clients as
             it has done in the commercial and industrial sectors, by combining
             optimized services for facilities management (heating,
             air-conditioning, utilities, electricity, lighting).

Finally, Veolia Environnement is also developing energy services in areas
outside of Europe, notably in Latin America, Asia and the United States, which
offer long-term opportunities for growth.

Transportation

Through its specialized subsidiary Connex, Veolia Environnement seeks to be the
leading European private operator of public transportation services in Europe.

Between 2000 and 2020, the proportion of the world population living in urban
areas is expected to increase from 50% to 60%, and urban transport needs are
expected to increase by 50% (source: International Association of Public
Transport). These demographic changes will likely increase concerns relating to
the environment and urban congestion, with public transportation services
constituting a foremost concern for the local authorities and inhabitants of
large cities. Accordingly, such changes should help to support Connex's future
development strategy.

The challenge for the Group in the transportation market is to carefully control
its development, by anticipating risks and identifying the priority areas for
growth. Veolia Environnement has therefore chosen to consolidate its presence in
France and the rest of Europe, by profiting from the opening of various European
markets to regulated competition.

In Europe, the markets in Germany, Spain, Italy and Central Europe in the area
of railway transport in particular appear promising, while France appears a
promising market as well in the longer term. North America and Australia are
also priority areas for growth, and Veolia Environnement is carefully
considering the market potential in China and Latin America, due to the
opportunities they may present for the transportation division. Finally, Connex
should be able to expand its rail freight transport activities in the wake of
European Union legislation that has authorized the opening of such markets.

4.1.4 - Major Developments in 2004(17)(18)

Refocusing of Veolia Environnement's Activities

During 2004, Veolia Environnement refocused its activities in order to
concentrate more fully on the development of outsourcing on behalf of public
authorities, as well as on the provision of services involving long-term
contracts with municipal or industrial clients.

Sale of U.S. Activities within the Water Division

On May 12, 2004, Veolia Environnement signed an agreement for the sale of
USFilter Corporation's equipment and short-term services businesses to Siemens,
for total consideration of US$1,015 million based on the amount of cash these
businesses were expected to hold at closing. After application of the
contractual price adjustment mechanisms(19), total consideration will amount to
US$975 million, based on the sold businesses' working capital requirements and
cash held on July 31, 2004, the date of closing, which occurred after approval
by the relevant anti-trust authorities.

On July 22, 2004, Veolia Environnement also announced the signing of an
agreement for the sale of its Culligan business to private equity firm Clayton
Dubilier & Rice, for total consideration of US$612 million in cash. The
transaction closed on September 30, 2004, following approval by regulatory
authorities and satisfaction of other customary closing conditions.

These sales represent the final step in the implementation of the strategic
refocusing of Veolia Environnement's water operations in North America, which
was originally announced in September 2003. Including the sale of Everpure in
late 2003 to Pentair and the sale of farmlands held by USFilter in California,
followed by the sale of USFilter's equipment and short-term services businesses
to Siemens and the sale of Culligan in 2004, the total proceeds generated from
these sales amount to approximately US$2 billion.

Sale of FCC

On July 28, 2004, Veolia Environnement signed an agreement to sell its 49% stake
in B 1998 S.L., the holding company that owns 52.5% of FCC, to a company
controlled by Ms. Esther Koplowitz. The transaction allowed Veolia Environnement
to reduce its net indebtedness by (euro)1.1 billion, and resulted in a total
cash payment to Veolia Environnement of (euro)916 million (before transaction
fees), including an exceptional dividend paid by B 1998 S.L. to Veolia
Environnement prior to the sale. The transaction, which closed on September 15,
2004, was subject to applicable Spanish anti-trust regulatory approvals. For
Veolia Environnement, the transaction was part of its strategy to refocus on its
core environmental services activities. Further, the transaction allowed Veolia
Environnement to strengthen its financial condition. At the same time, FCC will
be able to pursue its development in its three main areas of activity:
construction, cement and services (cf. ss.3.7 supra).

Continued Reduction by Vivendi Universal of its Shareholdings

In December 2004, Vivendi Universal reduced its holdings in the Company to 5.3%
of share capital (down from 20.36% prior to such time).

--------------------------

17   The major developments occurring between January 1, 2005 and the date of
     filing of this reference document are described in chapter 7 below.

18   Any financial guarantees given in connection with the contracts mentioned
     below have been given in connection with the Company's normal operating
     activities. No material commitments have been made with respect to these
     contracts other than as described in Note 21 to the consolidated financial
     statements attached hereto.

19   An agreement on the purchase price adjustment was signed with Siemens on
     March 2, 2005.

<PAGE>

Major Business Developments in 2004(20)

In 2004, Veolia Environnement won major new contracts that formed part of the
Group's strategy to focus on its environmental services business, representing a
continuation of efforts undertaken since 2000.

The evolution in Veolia Environnement's contract portfolio during 2004
reaffirmed the trends witnessed in prior years in both the municipal and
industrial markets. Accordingly, growth opportunities continue to present
themselves in Veolia Environnement's main geographical markets, driven by
accelerated urbanization and more stringent environmental regulations. Veolia
Environnement's comprehensive service offerings, which are focused in areas
where it believes it has a competitive advantage, increasingly necessitate a
higher level of technical expertise and involve the provision of higher
value-added services, both of which should help to relieve pricing pressure
despite the presence of other competitors in the market.

Pursuit of Targeted Geographical Development

Veolia Environnement pursued its targeted development in Asia, and particularly
China, during 2004. It entered into two important water contracts, one in
Guizhou province in southern China, and the other in Hohhot, the capital of
Inner Mongolia (cf. ss.4.1.6.1 infra). Veolia Environnement also strengthened
its presence in Germany (water), and in Central and Eastern Europe and the
United States (transportation and waste management) through the signing of
several important contracts.

The other major contracts won by Veolia Environnement in 2004 are described in
paragraph 4.1.6 below.

High Level of Contract Renewals and Extensions

Veolia Environnement renewed a substantial number of contracts that were due to
expire in 2004, reflecting the satisfaction and confidence of clients in Veolia
Environnement's abilities and business model, in particular its high quality of
services and technical expertise.

In the water division, for example, where contracts have come up for renewal
mainly in France due to the longer maturity of the remaining contract portfolio,
there has been a sustained level of contract renewal due to the confidence of
municipal clients in Veolia Environnement's abilities. In the rest of the world,
the expansions in the scope of services provided under a contract or the
extensions in contract length that Veolia Environnement has successfully
negotiated have also reaffirmed Veolia Environnement's choice of service
offerings and its business model.

Veolia Environnement Foundation

The Veolia Environnement Foundation (Fondation d'Entreprise Veolia
Environnement) was established in 2004. Its purpose is to organize the Group's
philanthropic initiatives, and its founding members are Veolia Environnement
itself along with its four divisions. The foundation has three main fields of
action for the promotion of: (1) "solidarity" (provision of support to
populations devastated by crisis or in need of development aid), (2) employment
(creation or consolidation of jobs in the service sector), and (3) environment
(support of research or educational initiatives in the area of the environment).
The foundation may act, depending on the circumstances, in partnership with
other humanitarian organizations like the Red Cross, with international
organizations or with non-governmental organizations. In 2004, the foundation
supported approximately 75 projects, including the construction of the Mother
and Child Hospital in Kabul, the refurbishment of basement corridors used by
sick children at the Armand Trousseau hospital in Paris, the establishment of
skills training programs to facilitate re-entry into the workforce and the
establishment of sports programs designed to foster social integration.

---------------------------

20   The dates indicated herein correspond to the date of announcement or
     signing of the relevant contract, or to the date on which operations began
     under the contract, depending on the circumstances.

<PAGE>

Veolia Environnement Campus

Veolia Environnement's former Urban Environment Institute was renamed the Veolia
Environnement Campus in January 2004. Established in 1994, the Veolia
Environnement Campus is the initial and continuing education center of Veolia
Environnement. It offers training to individuals by grouping together a training
and apprenticeship center, training staff from all four of Veolia
Environnement's divisions, a social observatory, partnerships with universities
and a new factual-based study program.

"Veolia Environnement 2005" Efficiency Plan

The Group announced an efficiency plan at the end of September 2003 called
"Veolia Environnement 2005", which the Group hopes will generate (euro)300
million in annual savings beginning in 2006. An operational pilot program has
been implemented and a project team reporting directly to the Group's chief
executive officer has been formed. The efficiency plan aims to generate savings
through improvements to the Group's operational processes, purchasing functions
and support functions, as well as through an optimized use of assets. The
efficiency plan extends to all Group subsidiaries so as to take advantage of all
possible synergies, in particular with respect to optimizing purchases,
structural costs and operating efficiency. Veolia Environnement also intends to
emphasize the sharing of best practices and the use of advanced technologies in
order to help achieve the goals of its efficiency plan. The efficiency plan is
being implemented according to schedule. Savings realized during 2004 amounted
to (euro)126 million, of which (euro)116 million was included in EBIT (as
defined below). Accordingly, Veolia Environnement continues to have an objective
of (euro)300 million in annual savings beginning in 2006.

4.1.5 - Market Overview

4.1.5.1 - The Market for Environmental Management Services

Traditionally, environmental management services, which include water treatment
and distribution, wastewater treatment and collection, waste treatment and
management, energy services (excluding the production, trading and sale of
electricity, other than production through co-generation) and transportation,
have been provided in an uncoordinated manner, each by a different entity.
Public authorities and industrial and commercial companies, moreover, have
typically met many of their own environmental needs without looking to private
firms that specialize in these areas. This situation has changed fundamentally
in recent years, however, as industrial and commercial companies have continued
to expand on a global scale and increasingly require environmental management
services providers with a global reach.

Veolia Environnement believes that demand for integrated, customized packages of
environmental management services is likely to grow around the world for the
following reasons:

         o   In a world that combines accelerated urbanization with demographic
             growth, major investments in environmental projects and services as
             well as effective management are needed to meet increasingly
             stringent environmental standards, provide growing urban
             populations with adequate environmental services and replace
             existing environmental infrastructure. In addition, there is also
             an increase in public demand for high-quality and reliable
             environmental products and services.

         o   Governments throughout the world face budgetary constraints and
             often lack the technical and operational skills of private sector
             firms to address environmental issues efficiently. As a result,
             public authorities are increasingly turning to the private sector
             to address their environmental needs.

         o   Public and private entities are increasingly attempting to simplify
             the administration of their complex operations by outsourcing a
             wide variety of responsibilities to a single partner. This tendency
             creates a business opportunity for companies capable of offering a
             broad range of environmental management services in an integrated
             fashion.

         o   Large private firms and public authorities increasingly recognize
             that a "one size fits all" approach will not meet their unique and
             changing needs. As a result, demand for customized environmental
             management services has grown.

         o   The increasingly multinational profile of many large industrial and
             commercial firms encourages them to outsource non-core activities
             to companies with similar geographic reach in order to simplify
             administration and ensure they receive consistent service at each
             of their facilities.

Veolia Environnement thinks that each of these trends, taken individually,
creates significant opportunities for companies with its expertise, and, taken
as a whole, they allow Veolia Environnement, in particular, to provide
innovative and integrated environmental management services in markets around
the world.

4.1.5.2 -  Clients

Veolia Environnement provides environmental management services to a wide range
of public authorities, industrial and commercial customers and individuals
around the world.

Public Authorities

Demand by public authorities has been influenced and strengthened by trends
relating to the search for efficiency gains and innovative solutions, the
rationalization of public purchases in pursuit of reduced costs, the
reorganization in France of several municipalities, and a heightened sensitivity
to environmental issues, including the management of water resources, air
pollution, mass transportation policies and energy consumption. These trends,
combined with a movement towards greater urbanization, are increasing the need
for essential environmental services.

Within this context, Veolia Environnement believes that the historical model of
"delegated public service management contracts", which leaves to public
authorities the role of defining, organizing and overseeing the services
provided to inhabitants, can be flexibly applied to satisfy the needs of each
client, resulting in a mutually beneficial relationship between the private
operator and public authority. Accordingly, Veolia Environnement believes that
it can adapt to the different needs and expectations of public authorities
around the world in order to assist them in (i) responding to the need for
heightened efficiency and productivity in the provision of public services in
order to control costs, (ii) accessing more sophisticated technical skills in
order to resolve complex environmental problems, and (iii) responding to the
demand for prompt and professional service expressed by end users.

In France in particular, Veolia Environnement intends to take advantage of a new
French ordonnance dated June 17, 2004 allowing for the creation of a new form of
partnership contract. The ordonnance allows public authorities to entrust
private operators (who may be associated with financial organizations) with the
entire responsibility for building and/or financing an installation and
operating the services related thereto, in exchange for compensation that is set
by the public authority as a function of performance (cf. ss.4.1.7.2 infra).

Industrial or Commercial Companies and Individuals

Veolia Environnement offers its industrial and commercial clients a large range
of services, which generally aim to achieve the following two main goals in
relation to the environment:

         o   furnishing clients with the services necessary for their industrial
             processes (vapor, industrial heating and cooling, processed water,
             demineralized water, compressed air, etc.) and optimizing their
             consumption thereof,

         o   reducing the impact of their industrial processes on the
             environment, which may include treating effluents, recycling and
             recovering waste, and maintaining durable and efficient waste
             elimination channels.

Veolia Environnement often partners with such clients over the long term, and
offers innovative solutions adapted to the needs of each industrial site.

Veolia Environnement believes that the further development of its industrial
client base will be a significant area of growth. In particular, multiservice
contracts entered into with industrial clients have assumed an increasingly
important role and are expected to continue to do so (cf. ss.4.1.6.5 infra).

Regarding services to individuals and meter-reading services, Veolia Water and
Dalkia offer household services in France through Proxiserve and Domeo, jointly
held subsidiaries that provide assistance and maintenance relating to water,
heating and gas services.

4.1.6 - Description of Veolia Environnement's Principal Businesses

4.1.6.1 - Water

Veolia Environnement, through its water division Veolia Water, the lead company
of which is Compagnie Generale des Eaux, is the world's leading provider of
water and wastewater services for public authorities and industrial companies.
Further, Veolia Water is the world leader in the design of technological
solutions and the construction of structures necessary to perform such services.

With approximately 67,800 employees around the world(21), Veolia Water serves
more than 100 million people around the world and operates more than 5,000
contracts. Veolia Water has a permanent presence in more than 60 countries,
principally in France for historical reasons, but also in the United Kingdom,
Germany, Italy, Belgium and the Netherlands. It is pursuing targeted growth in
Eastern Europe, where it has enjoyed commercial success in recent years, in
particular in the Czech Republic and Romania. Asia (China, South Korea and
Japan) also remains a long-term target for development following the win of
significant contracts in the region during the past two years.

With a portfolio of a more than 600 patents and a network of research centers in
France and abroad employing more than 300 engineers, Veolia Water has mastered
numerous technologies and tools within the water sector. As a result, Veolia
Water is able to offer highly skilled services in the areas of sanitary
protection, spillage reduction, productivity enhancement of water networks and
plants and resource preservation.

Combined with an extensive geographical presence and more than 150 years of
experience in the provision of services to public authorities and industrial
clients, Veolia Water's technical aptitude provides it with a unique advantage
in the water services market, which is growing increasingly competitive.

Increased demand within the water services market has been driven substantially
by clients seeking to optimize the management of their existing resources,
whether they be public authorities seeking to respond to the trend towards
urbanization or industrial clients. New solutions, such as desalination or
re-use of treated water, may also be called for depending on an individual
client's circumstances.

----------------------

21   As of December 31, 2004, including Proactiva's 1,633 employees who are
     active in water activities.

<PAGE>

The following table shows the consolidated revenue and operating income before
amortization and depreciation of goodwill and indefinite life intangible assets
and restructuring costs (EBIT) of Veolia Environnement's water operations in
each of the last three fiscal years, after elimination of all inter-company
transactions.

(in millions of euro)*     2004**     2003 (pro forma)***      2003       2002

    Revenue                  9,805                9,585       11,340      13,294
    --------
    EBIT                       831                  743          784       1,024
    --------

    *   Includes Veolia Environnement's share in the results of the water
        activities of Proactiva, Veolia Environnement's joint venture with FCC.
        Results of the water activities of Proactiva were 100% consolidated in
        2002, 2003 and the first half of 2004, and then 50% consolidated in the
        second half of 2004 following the sale of Veolia Environnement's
        interest in FCC. For purposes of the 2003 "pro forma" figures, results
        of the water activities of Proactiva were 50% consolidated.

    **  On December 31, 2004, Veolia Environnement began applying the provisions
        of Article 23100 of CRC Regulation 99-02, which allows companies to
        report their share in the net income of businesses sold during the year
        on a separate line item of the income statement. These businesses are
        excluded from the new scope of consolidation and therefore no longer
        contribute to consolidated revenues or EBIT for the fiscal year in which
        they were sold. For the 2004 fiscal year, these businesses included, in
        the water division, Culligan and USFilter Corporation's equipment and
        short-term services businesses.

    *** Pro forma figures exclude the results of North American assets sold in
        2003 and 2004 (i.e. Surface Preparation, Everpure, Culligan and
        USFilter's short-term equipment and short-term services activities) and
        FCC (leading Proactiva to be proportionally consolidated at 50%, in lieu
        of full consolidation).

Overview of Veolia Water

Veolia Water manages municipal drinking water and/or wastewater services on five
continents thanks to a geographical organization with a strong local presence.
Contracts with public authorities are typically long-term and range from 10 to
20 years in length, but may extend up to 50 years in certain circumstances.
These contracts take various forms, all adapted to the needs and goals of the
public authority, and may include outsourcing contracts, public-private
partnerships, concessions, BOT (Build, Operate & Transfer) contracts, DBO
(Design, Build & Operate) contracts and others (discussed further under
"Contracts" below). They are generally contracts that involve the operation,
design or construction of installations, with the public authority remaining the
owner of assets (except in the United Kingdom and Chile) and the head of water
policy. Further, recent legislative changes will allow Veolia Environnement to
integrate more elaborate mechanisms into its contracts to address increases in
value produced under the contract and the division thereof (e.g., productivity
gains, improvement in the level of services, etc.), which will directly benefit
the consumer as the end user of services. Veolia Water is often asked by public
authorities to manage relations with consumers, and has developed specific
services and information systems in order to do so.

In certain countries where public authorities wish to either implement new water
and wastewater treatment systems or improve the functioning of existing ones,
Veolia Water also offers feasibility studies and technical assistance, which may
include research plans, network modeling and financial analysis.

Veolia Water's outsourcing contracts with industrial and commercial customers
generally last from 3 to 10 years, although certain contracts have terms of up
to 20 years.

Relying on technologies designed and developed by Veolia Water Systems/OTV (a
subsidiary specializing in technological solutions) in responding to the
particular needs of the industrial market, Veolia Water not only designs and
completes customized projects for industrial clients but offers them
standardized solution kits as well. A large range of associated services, such
as after-sale service, operational assistance, expert consultation and training,
may also complement Veolia Water's offerings.

Service Contracts for Public Authority and Industrial Clients

The main focus of Veolia Environnement's water business is on water and
wastewater management services for public authorities and industrial clients.
Veolia Water provides integrated services that cover the entire water cycle,
from collection from natural sources, treatment, storage and distribution of
water, to collection, decontamination of wastewater and return to natural
resources. Veolia Water's activities include the design, construction,
management and operation of large-scale, customized drinking water plants,
wastewater decontamination and recycling plants, drinking water distribution
networks and wastewater collection networks. Veolia Water also provides services
to end users relating to water and wastewater treatment.

Veolia Water and its subsidiaries have provided outsourced water services to
public authorities in France and in the rest of the world for more than 150
years under long-term contracts adapted to local environments. Currently, Veolia
Water and its subsidiaries are attempting to capitalize on the worldwide trend
towards delegated management of municipal drinking water and wastewater
treatment services.

In France, Veolia Water operates in over 8,000 municipalities under the name
Generale des Eaux, supplying water to more than 26 million people and treating
wastewater generated by more than 17 million people.

Generale des Eaux continues to develop its service offerings for industrial
clients through its regional organization, and has accordingly developed a
presence in the United Kingdom, Germany and the Czech Republic, as well as a
presence in Asia and South Korea in particular. Veolia Water also contributes
within VE Industries (as discussed further below) to the development of common
service offerings of the Group, in particular in Europe.

Engineering and Technological Solutions for the Treatment of Water

Through Veolia Water Systems, Veolia Water is one of the world's leading
designers of technological solutions and of the construction of facilities
necessary to provide water services on behalf of public authorities and
industrial and commercial clients. Veolia Water treats groundwater, surface
water, brackish or sea water, wastewater and refined sludge. Thanks to the
combination of physical, chemical or biological treatments, Veolia Water
develops a complete range of differentiated solutions for the purification of
water or the reduction or elimination of impurities in effluents. Veolia Water's
recycle/re-use systems provide customers with the ability to circulate part or
all of their treated water back into plant processes, thereby reducing their
water usage, operating costs and environmental damage.

In addition, Veolia Water designs, assembles, manufactures, installs and
operates modular standardized and semi-standardized water and wastewater
equipment and systems designed to treat water for municipal and industrial uses.
A local technical assistance network is available at all times for the upkeep,
maintenance and after-sale service of these installations.

Through SADE, Veolia Water also designs, builds, renovates and recovers urban
and industrial potable water and wastewater networks and conducts related work
in France and around the world. SADE's services cover each stage of the water
cycle, from its collection to its release, and its public and industrial
customers benefit from SADE's experience in this domain.

Description of Activities in 2004
---------------------------------

Veolia Water achieved solid revenue growth during 2004, within a context in
which weather conditions returned to normal in Europe. It achieved this growth
despite the reduction in revenues resulting from the restructuring of its
activities in the United States (sale of equipment and short-term services
businesses, commercial services and services to individuals).

Business was helped by a high level of contract renewal in France, sustained
internal growth outside of France and new large projects in Asia. In 2004,
Veolia Water won and/or renewed contracts representing expected total cumulative
revenues of approximately 3.7 billion euros.

In France, public authorities continued the trend seen over the past few years
of outsourcing the management of public services to private operators.
Accordingly, the award of new outsourcing contracts to Veolia Water and
amendments to existing contracts so as to enlarge the scope of services provided
thereunder managed to compensate for any loss of revenue that occurred due to
public authorities' deciding not to renew contracts in favor of direct
management. In addition to the new contracts it won in 2004, Veolia Water
renewed more of its contracts due to expire in 2004 than it did in 2003 (based
on 2004 revenues), demonstrating the confidence of public authorities in Veolia
Water's services.

Contracts renewed in 2004 represent expected total cumulative revenues of more
than 730 million euros. Among the most important contracts renewed were those
involving the cities of Rennes and Chartres (France). At the same time, Veolia
Water lost 39 contracts (compared to 53 in 2003), representing approximately
0.15% of annual revenues from delegated public service management contracts in
France.

In the rest of Europe, growth was strong generally but especially so in Germany,
where at the end of 2004 Veolia Water acquired the water services company
Stadtwerke in Braunschweig (Lower Saxony), and otherwise pursued its development
on behalf of public authorities and industrial clients (either individually or
through multiservices contracts signed with VE Industries). In the Czech
Republic, Veolia Water signed a water management with Compagnie des Eaux de
Kladno-Melnik (Central Bohemia), as well as a contract with a public water
company in eastern Moravia involving the production and distribution of drinking
water and the collection and treatment of wastewater.

In the United States, Veolia Water renewed about ten municipal contracts. It
also won a contract that involves management of wastewater services for the
islands of St. Thomas and St. Croix, and a significant extension of its contract
with the city of Richmond in California.

In China, public authorities continued to award the Group delegated management
contracts to improve and operate their sites. The most important contracts
involved the cities of Hohhot, ZunYi and Weinan.

Finally, Veolia Water Systems' design and construction activity for new
installations made significant progress during 2004, notably in France, the
Netherlands and Russia. Further, in the area of construction and rehabilitation
of urban and industrial networks, Veolia Water Systems enjoyed strong
development, in particular in Romania and Hungary.

Principal Contracts

The following table shows the principal contracts signed or renewed in 2004 with
either public authorities or industrial or commercial companies(22).

---------------------------

22   Revenues expected under foreign contracts won during 2004 have been
     converted into euros at the rate of exchange prevailing on December 31,
     2004. Accordingly, these amounts may differ from the amounts announced in
     earlier press releases.

<PAGE>

<TABLE>

-----------------------------------------------------------------------------------------------------------
<S>                        <C>         <C>         <C>          <C>              <C>

   Public Authority       Month of    New          Duration      Estimated       Services to be Provided
          or              Signature   Contract    of Contract      Total
 Company and Location    of Contract  or Renewal                 Cumulative
        thereof                                                   Revenue

                                                                (in euros)
----------------------------------------------------------------------------------------------------------

France
----------------------------------------------------------------------------------------------------------

Public Authorities
----------------------------------------------------------------------------------------------------------

City of Rennes             January     Renewal     10 years     150 million    Production and distribution of
                                                                               water.
----------------------------------------------------------------------------------------------------------

City of Chartres          September    Renewal     10 years      85 million    Production and distribution of
                                                                               water and management of
                                                                               wastewater treatment services.
----------------------------------------------------------------------------------------------------------

SIAEP Tremblaye Claye       June       Renewal     12 years      47 million    Management of drinking water
Souilly                                                                        services.
----------------------------------------------------------------------------------------------------------

Europe

(outside France)
----------------------------------------------------------------------------------------------------------

Public Authorities
----------------------------------------------------------------------------------------------------------

V.A.K. Zlin (Czech          June         New       30 years     360 million    Production and distribution of
Republic)                                                                      drinking water, customer
                                                                               relations and wastewater
                                                                               collection and treatment on
                                                                               behalf of V.A.K.  Zlin, the public
                                                                               water authority for the eastern
                                                                               part of Moravia.
----------------------------------------------------------------------------------------------------------

Compagnie des Eaux de     November       New       20 years     600 million    Production and distribution of
Kladno-Melnik (Czech                                                           drinking water, customer
Republic)                                                                      relations and wastewater
                                                                               collection and treatment.
----------------------------------------------------------------------------------------------------------

Asia
----------------------------------------------------------------------------------------------------------

Public Authorities
----------------------------------------------------------------------------------------------------------

City of ZunYi (China)        May         New       35 years     210 million    Rehabilitation of ZunYi's two
                                                                               drinking  water  plants (600,000
                                                                               inhabitants), in the province of
                                                                               Guizhou.
----------------------------------------------------------------------------------------------------------

City of Hohhot (China)     October       New       30 years     600 million    Rehabilitation and operation of a
                                                                               drinking water production site,
                                                                               including a treatment plant and a
                                                                               well field.
----------------------------------------------------------------------------------------------------------

City of Weinan (China)     October       New       22 years     190 million    Rehabilitation and operation of a
                                                                               drinking water production site.
----------------------------------------------------------------------------------------------------------

North America
----------------------------------------------------------------------------------------------------------

Public Authorities
----------------------------------------------------------------------------------------------------------

Government of the U.S.      March        New       20 years      81 million    Management of wastewater services
Virgin Islands                                                                 for the islands of St.Thomas and
                                                                               St. Croix.
----------------------------------------------------------------------------------------------------------

City of Richmond           October       New       18 years      50 million    Operation and  reinforcement of
(California)                                                                   wastewater networks.
----------------------------------------------------------------------------------------------------------

</TABLE>

Acquisitions and Divestitures in 2004

In 2004, Veolia Water completed implementation of its policy adopted in 2000 to
refocus its operations on its core water businesses. In the United States,
Veolia Environnement completed the sale of its Culligan business to private
equity firm Clayton Dubilier & Rice for total consideration of US$612 million in
cash, as well as the sale of USFilter Corporation's equipment and short-term
services businesses to Siemens for US$1,015 million, before price adjustments
(cf. ss.4.1.4 supra). Veolia Water's divestments worldwide generated proceeds of
(euro)1.6 billion in 2004 ((euro)1.3 billion in the U.S.).

In addition, Veolia Water integrated 33 companies into its group in 2004, of
which 9 companies were located in France and 24 companies outside of France.
Veolia Water also divested 33 companies in 2004, in addition to the divestitures
previously mentioned (71 companies in the U.S.).

At the end of 2004, Veolia Water Systems finalized the acquisition of two
companies, Wabag (now known as Kruger Wabag) and Elga Berkefeld, which provide
technological water treatment solutions in Germany.

As of December 31, 2004, Veolia Water's group included 524 companies (compared
to 595 in 2003), of which 452 companies were fully consolidated, 65 companies
were proportionally consolidated and 7 companies were accounted for under the
equity method.

4.1.6.2 - Waste Management

Veolia Environnement, through its waste management subsidiary Onyx, is the
second largest operator in the world (in terms of revenue) in the area of waste
collection, recycling and treatment. Onyx is the only company that handles waste
in all its forms and at all stages of activity. For example, Onyx manages liquid
and solid waste and non-hazardous and hazardous waste (with the exception of
nuclear waste) from collection to energy recovery, on behalf of both public
authority and industrial clients.

With approximately 78,700 employees around the world(23), Onyx operates in 34
countries. Onyx has partnered with more than 348,000 industrial and commercial
clients(24) and serves nearly 50 million inhabitants on behalf of public
authorities.

During 2004, Onyx collected more than 32 million tons of waste and treated more
than 51 million tons of waste (of which 48.4 million tons were non-hazardous
household and industrial waste and 3.3 million tons were hazardous waste). As of
December 31, 2004, Onyx managed approximately 630 waste treatment units.

The duration of Onyx's waste management contracts usually depends upon the
nature of the services provided, applicable local regulations and the level of
capital expenditure required under the contract. Collection contracts usually
last from 1 to 5 years, while treatment contracts can range from 1 year (for
services provided on sites belonging to Onyx) to 30 years (for services
involving the financing, construction, installation and operation of new
infrastructure).

The following table shows the consolidated revenue and operating income before
amortization and depreciation of goodwill and indefinite life intangible assets
and restructuring costs (EBIT) of Veolia Environnement's waste management
operations in each of the last three fiscal years, after elimination of all
inter-company transactions.

         (in millions of euro)*     2004     2003 (pro forma)**    2003    2002

         Revenue                    6,220               5,909     5,971    6,139
         --------
         EBIT                         457                 383       380      385
         --------

    *   Includes Veolia Environnement's share in the results of the waste
        management activities of Proactiva, Veolia Environnement's joint venture
        with FCC. Results of the water activities of Proactiva were 100%
        consolidated in 2002, 2003 and the first half of 2004, and then 50%
        consolidated in the second half of 2004 following the sale of Veolia
        Environnement's interest in FCC. For purposes of the 2003 "pro forma"
        figures, results of the waste management activities of Proactiva were
        50% consolidated.

    **  Results of the waste management activities of Proactiva have been 50%
        consolidated for purposes of the 2003 "pro forma" figures, to reflect
        the sale of FCC during 2004 (leading Proactiva to be proportionally
        consolidated at 50%, in lieu of full consolidation). Actual 2003 figures
        reflect 100% consolidation of the waste management activities of
        Proactiva.

Overview of Waste Management
----------------------------

Onyx furnishes waste management and logistical services, which include waste
collection, waste treatment, cleaning of public spaces, offices and factories,
maintenance of production equipment, treatment of polluted soil, and management
of waste discharge at industrial sites.

In addition, Onyx conducts basic or more complex waste treatment operations in
order to reduce pollution and transform waste for the following uses:

         o   Onyx sorts and treats waste in order to create new primary
             materials, otherwise referred to as recycling or material recovery;

         o   Onyx transforms organic material into compost to be returned to the
             soil, otherwise referred to as composting or agronomic recovery;

---------------------------

23   As of December 31, 2004, including Proactiva's 6,993 employees who are
     active in waste management activities. Excluding Proactiva's employees and
     the employees of companies controlled jointly with other companies of the
     Group, the number of employees amounts to approximately 71,000 as of
     December 31, 2004.

24   The commercial figures provided in this section (in terms of number of
     clients, number of inhabitants served, tons of waste collected, etc.) do
     not take into account Proactiva's activities, unless otherwise indicated.

<PAGE>

         o   Onyx returns waste to the natural environment in the least damaging
             way possible, through landfilling or incineration;

         o   Onyx produces electricity or heat through landfilled or incinerated
             waste, otherwise referred to as waste-to-energy recovery.

The services referred to above fall into one of three large categories of
activity conducted by Onyx:

         o   waste management services and logistics for local authorities and
             industrial companies;

         o   sorting and recycling of materials; and

         o   waste recovery and treatment through composting, incineration and
             landfilling.

Waste Management Services and Logistics for Local Authorities and Industrial
Companies

Maintenance of Public Spaces and Urban Cleaning

Onyx provides urban cleaning services in a large number of cities throughout the
world, including London (U.K.), Paris (France), Alexandria (Egypt), Rabat
(Morocco), Singapore and Chennai (India). Onyx's services include mechanized
street cleaning and treatment of building facades.

Cleaning and Maintenance of Industrial Sites

Onyx provides cleaning services to its industrial and commercial clients'
installations, including cleaning of offices and maintenance of production
lines. In the commercial sector, Veolia Environnement provides these services in
train stations, subway networks, airports, museums and commercial centers.

In the industrial sector, cleaning services extend to food-processing plants,
heavy industry and high-tech sites, where Onyx offers specialized cleaning
services (high pressure or extreme high pressure cleaning). Onyx also offers
cryogenic cleaning, and reservoir cleaning at refineries and petro-chemical
sites in particular. Finally, Onyx has developed emergency services to treat
site contamination upon the occurrence of an accident or other incident.

Liquid Waste Management

Through its subsidiary SARP, Onyx provides liquid waste management services that
consist primarily of pumping and transporting sewer network liquids and oil
residues to treatment centers. Onyx can also provide services following
accidents and other incidents involving liquid waste.

Onyx has developed liquid waste management procedures that emphasize
environmental protection, such as the on-site collection, recycling and reuse of
water during the provision of its liquid waste management services. Used
chemicals, which are hazardous to the environment, are collected before
treatment and transferred to one of Onyx's subsidiaries that is specialized in
the management of hazardous waste.

Treatment of Polluted Soil

Land redevelopment and the expansion of residential or commercial areas may
occur in areas where the soil has been polluted through prior use. Onyx has
specific techniques for treating each site, which include treating polluted soil
and rehabilitating temporarily inactive industrial areas, cleaning up accidental
spills and restoring active industrial sites to be in compliance with applicable
environmental regulations.

Collection

In 2004, Onyx collected approximately 32.8 million tons of waste on behalf of
individuals, local authorities and commercial and industrial sites. More than 50
million people around the world benefited from Onyx's waste collection services
in 2004.

Onyx collects household waste through door-to-door pickup or through pickup at
designated drop-off sites, and collects commercial and non-hazardous industrial
waste. It maintains the cleanliness of green spaces and carries away "green"
waste, such as dead leaves and grasses.

Onyx also collects hazardous waste on behalf of its commercial and industrial
clients, including hospital waste, laboratory waste and oil residue (ships, gas
stations and drilling platforms). In 2004, Onyx collected approximately 1.7
million tons of hazardous waste.

Onyx offers related services to its commercial and industrial clients, such as
preliminary studies of future waste collection needs and waste tracking after
collection.

Transfer and Grouping of Waste

When waste is of the same type, it is transported either to transfer stations in
order to be carried in large capacity trucks, or to grouping centers where it is
separated by type and then sorted before being sent to an adapted treatment
center. Hazardous waste is usually transported to specialized physico-chemical
treatment centers, recycling units, special industrial waste incineration units
or landfills designed to receive inert hazardous waste.

Sorting and Recycling of Materials

Onyx treats waste with a view towards reintroducing such waste into the
industrial production cycle. Onyx's recycling activities generally involve the
selective collection of paper, cardboard, glass, plastic, wood and metal that
customers either separate into different containers or mingle with other
recyclable materials. As the use of separate containers has become more
widespread, selective collection services have become well developed.

Onyx received approximately 7 million tons of solid waste at its 219 sorting and
recycling units in 2004, of which 4.8 million tons were recovered, including 2
million tons of paper. Onyx also provides decomposition services for complex
waste products at specialized treatment centers, such as electric and electronic
products and fluorescent lamps. Onyx works in partnership with upstream
industrial customers and with Veolia Environnement's CREED research center in
order to develop new recycling activities. Onyx sells or distributes recycled
material to intermediaries or directly to industrial and commercial clients.

Onyx designs and develops recycling systems that enable its industrial and
commercial customers to optimize their production chains by reusing certain
waste by-products generated in the manufacturing process, thereby reducing waste
management costs.

Waste Recovery and Treatment through Composting, Incineration and Landfilling

In 2004, Onyx treated nearly 52 million tons of waste in its sorting and
recycling centers, composting units, hazardous waste treatment centers,
incineration units and landfills.

Composting and Recovery of Organic Material from Fermentable Waste

Onyx and Veolia Water work together to recover sludge from wastewater treatment
plants. In 2004, Onyx recovered almost 1.8 million tons of waste at its 97
composting units. 198,000 tons of urban and industrial sludge were reintegrated
by Onyx into the agricultural cycle through manure spreading.

Onyx's "Biodiv" service includes an adapted container offer for the frequent
collection and nearby composting treatment of organic waste produced by
industrial companies, while guaranteeing the complete traceability of waste from
its collection to its recovery in the form of high quality compost.

Waste-to-Energy and Incineration

Onyx treats approximately 9 million tons of non-hazardous solid waste
(consisting mainly of urban waste) per year at its 65 waste-to-energy recovery
and incineration plants. Energy is generated from the heat created by
incinerating waste at these plants. Onyx uses this energy to supply district
thermal networks or for sales to electricity providers. Waste-to-energy recovery
is often the favored treatment solution in areas of high population density
where there is insufficient space to construct landfills.

Landfilling and Energy Recovery from Waste

In 2004, Onyx treated approximately 30.3 million tons of non-hazardous waste in
147 landfills. Onyx has developed the expertise to treat waste through methods
that reduce emissions of liquid and gas pollutants. Onyx currently has 118
landfills that accept or have accepted biodegradable waste and that are equipped
to retrieve and treat biogas emissions from the anaerobic fermentation of waste,
of which 48 landfills have recovery systems to transform biogas emissions into
alternative energies.

Treatment of Hazardous Waste

In 2004, Onyx treated 3.3 million tons of hazardous waste, of which 901,000 tons
were incinerated in 18 incineration units for specialized industrial waste,
696,000 tons were landfilled in 8 class 1 landfills and 1.5 million tons were
treated in 46 units by physico-chemical or stabilization methods. The remaining
273,000 tons were treated in 28 specialized recycling centers.

The principal methods used for treating industrial hazardous waste are
incineration (for organic liquid waste, salt-water and sludge), solvent
recycling, waste stabilization followed by treatment in specially-designed
landfills, and physico-chemical treatment of inorganic liquid waste.

Through its specialized subsidiaries SARP Industries and Onyx Environmental
Services (in the United States), Onyx has a worldwide network of experts
enabling it to become one of today's world leaders in treating, recycling and
recovering hazardous waste.

Description of Activities in 2004
---------------------------------

Among the commercial developments marking the year 2004 were the following:

In France, Onyx inaugurated a new waste landfill at Espira-de-l'Agly in the
eastern Pyrenees. During the past 18 months, Onyx has created 14 million cubic
meters of landfilling capacity for household and related waste in France.
Further, Onyx unveiled "DIGITALE" in June, a new generation sorting facility
located in Rilleux-la-Pape (northern Lyon). Highly automated and mechanized,
this facility will allow 30,000 tons of selected waste to be treated per year.

In the United States, Onyx North America began operating under a contract that
involves the collection, management, transfer and treatment of household and
commercial waste in Pontiac, Michigan over a period of 20 years. In addition,
Onyx North America signed a 3-year contract (renewable for 2 years) that
involves the maintenance and cleaning of ten chemical and refining sites of
British Petroleum (BP) located in eight different U.S. states. This contract was
awarded just a few months after the win of a similar contract with BP in
Germany, and the signing of a contract for industrial cleaning in the United
Kingdom.

Onyx negotiated a 10-year extension of a contract for the operation, maintenance
and management of a waste-to-energy recovery facility in Miami-Dade County
(United States), currently the largest incineration facility with energy
recovery capability in the world. Onyx also negotiated a 5-year extension of an
integrated waste management contract with the city of Sheffield in the United
Kingdom.

Principal Contracts

The following table shows the principal contracts signed or renewed in 2004 with
either public authorities or industrial or commercial companies(25).

<TABLE>
----------------------------------------------------------------------------------------------------------------
<S>                     <C>           <C>               <C>             <C>             <C>
  Public Authority       Month of     New Contract or   Duration of     Estimated       Services to be Provided
         or             Signature         Renewal         Contract        Total
Company and Location   of Contract                                      Cumulative
       thereof                                                           Revenue

                                                                        (in euros)
----------------------------------------------------------------------------------------------------------------

France
----------------------------------------------------------------------------------------------------------------

Public Authorities
----------------------------------------------------------------------------------------------------------------

Espira-de-l'Agly           June       Commencement of     23 years     168 million    Commencement  in June 2004
                                        activities                                    of activities at a new
                                                                                      class 2 landfilling
                                                                                      facility in Espira-de-l'Agly
                                                                                      near Perpignan (100,000 tons
                                                                                      per year).
----------------------------------------------------------------------------------------------------------------

Chatuzange Le Goubet      March        Expansion of       17 years     204 million    Operation of a class 2
                                      activities and                                  landfilling facility in
                                       extension of                                   Chatuzange Le Goubet
                                       contract term                                  (200,000-220,000 tons per
                                                                                      year).
----------------------------------------------------------------------------------------------------------------

SYCTOM of Paris and        July             New           5 years       21 million    Operation  on behalf of the
its suburbs                                                                           SYCTOM  of  Paris  and  its
                                                                                      suburbs (89 districts,
                                                                                      5.5 million inhabitants)
                                                                                      of a new sorting center
                                                                                      for selective waste
                                                                                      situated in Nanterre,
                                                                                      Hauts-de-Seine (28,000 tons
                                                                                      in 2004).
----------------------------------------------------------------------------------------------------------------

Dunkerque (North)          July             New           11 years      50 million    Operation of an energy
                                                                                      recovery plant in
                                                                                      Dunkerque, which is
                                                                                      currently being constructed
                                                                                      (launch expected in 2007).
----------------------------------------------------------------------------------------------------------------

Sivom de la Rive        September         Renewal         5 years       25 million    Waste collection in
Droite                                                    (plus a                     Bordeaux (involving 11
                                                           2-year                     areas surrounding extension
                                                          extension                   Bordeaux).
                                                           option)
----------------------------------------------------------------------------------------------------------------
</TABLE>

----------------------

25   Revenues expected under foreign contracts won during 2004 have been
     converted into euros at the rate of exchange prevailing on December 31,
     2004. Accordingly, these amounts may differ from the amounts announced in
     earlier press releases.

<PAGE>

<TABLE>
----------------------------------------------------------------------------------------------------------------
<S>                      <C>              <C>             <C>           <C>            <C>

  Public Authority       Month of     New Contract or   Duration of     Estimated       Services to be Provided
         or             Signature         Renewal         Contract        Total
Company and Location   of Contract                                      Cumulative
       thereof                                                           Revenue

                                                                        (in euros)
----------------------------------------------------------------------------------------------------------------

La Rochelle              October          Renewal         8 years       32 million    Operation of an energy
                                                                                      recovery unit with a
                                                                                      capacity of 63 kt/year.
----------------------------------------------------------------------------------------------------------------

Companies
----------------------------------------------------------------------------------------------------------------

Plateforme du           September        Extension        3 years       18 million    Installation of "in situ"
Batiment                                                                              disposal bins for
                                                                                      collecting the  hazardous
                                                                                      and non-hazardous
                                                                                      industrial waste of 22
                                                                                      stores.
----------------------------------------------------------------------------------------------------------------

Europe

(outside France)
----------------------------------------------------------------------------------------------------------------

Public Authorities
----------------------------------------------------------------------------------------------------------------

City of Sheffield        October         Extension        5 years      525 million    Integrated waste
(United Kingdom)                                                                      management; collection,
                                                                                      recycling and operation of
                                                                                      existing energy  recovery
                                                                                      units, as  well as
                                                                                      construction of a new
                                                                                      energy recovery unit.
----------------------------------------------------------------------------------------------------------------

Companies
----------------------------------------------------------------------------------------------------------------
                         February
BP (Germany)            and August          New           5 years       46 million    Contracts involving
                                                                                      industrial maintenance and
                                                                                      (very high) pressurized
                                                                                      waste services and
                                                                                      management, at sites in
                                                                                      Cologne and Gelsenkirchen.
----------------------------------------------------------------------------------------------------------------

North America
----------------------------------------------------------------------------------------------------------------

Public Authorities
----------------------------------------------------------------------------------------------------------------

City of Pontiac            June             New           20 years     185 million    Collection and management
(United States)                                                                       of waste in voluntary
                                                                                      drop-off centers, transfer
                                                                                      and treatment of household
                                                                                      and commercial waste
                                                                                      in the city of Pontiac,
                                                                                      Michigan.
----------------------------------------------------------------------------------------------------------------

 Miami-Dade County        August          Renewal         10 years    1,085 million   Operation of a
(United States)                                          (plus four                   waste-to-energy recovery
                                                           5-year                     plant (3,000 tons per day).
                                                          renewal
                                                          options)
----------------------------------------------------------------------------------------------------------------

Companies
----------------------------------------------------------------------------------------------------------------

Intel (United           September         Renewal         5 years       50 million    Worldwide waste management
States, Ireland,                                                        total (of     contract, approximately
Israel and China)                                                        which 37     75% of which will involve
                                                                       million will   activities in the U.S.
                                                                      come from the
                                                                          U.S.)
----------------------------------------------------------------------------------------------------------------

Pfizer                   December      New + Renewal      3 years       66 million    Multi-site waste management
                                                                                      contract (involving Connecticut,
                                                                                      Michigan, Pennsylvania and
                                                                                      Puerto Rico).
----------------------------------------------------------------------------------------------------------------

BP (United States)         July             New           3 years       33 million    Maintenance and cleaning
                                                                                      of ten chemical and
                                                                                      refining sites of British
                                                                                      Petroleum (BP)located in
                                                                                      eight different U.S.
                                                                                      states.
----------------------------------------------------------------------------------------------------------------

Asia
----------------------------------------------------------------------------------------------------------------

Public Authorities
----------------------------------------------------------------------------------------------------------------

Sydney (Australia)       February           New           5 years       11 million    Collection and recycling
                                                          (plus a                     of household waste.
                                                           2-year
                                                          renewal
                                                          option)
----------------------------------------------------------------------------------------------------------------
</TABLE>

Acquisitions and Divestitures in 2004

In 2004, changes in Onyx's group of companies (acquisitions and divestitures)
were limited in number and impact, having no material effect on Onyx's
consolidation scope. In total, net changes in the scope of consolidation
accounted for less than 0.2% of Onyx's consolidated revenues.

4.1.6.3 - Energy Services

Dalkia, the energy services division of Veolia Environnement, is the leading
European provider of energy services to companies and municipalities. Dalkia
provides services relating to heating and cooling networks, thermal and
multi-technical systems, industrial utilities, installation and maintenance of
production equipment, integrated facilities management and street lighting. It
seeks to profit from opportunities relating to the opening of gas and
electricity markets in Europe, as well as from the increased preoccupation with
sustainable development. Dalkia becomes a partner to its clients, helping them
to optimize their energy purchases, improve the energy efficiency of their
installations (both in terms of cost and atmospheric emissions) and profit from
the trade in carbon dioxide emission licenses.

With approximately 43,300 employees around the world (as of December 31, 2004),
Dalkia has a permanent presence in nearly 38 countries, located principally in
France and the rest of Europe.

Dalkia is partly owned by Electricite de France (EDF), which holds 34% of its
share capital and with which Dalkia is developing joint international offerings
for international customers and eligible clients in France (i.e., those that
have the right to choose their electricity supplier freely, which currently
includes all professional entities). Dalkia's French operations are conducted
through Dalkia France, a wholly-owned subsidiary of Dalkia. Outside France,
Dalkia conducts its activities through Dalkia International, in which it holds a
76% interest and EDF holds the remaining 24%.

The following table shows the consolidated revenue and operating income before
amortization and depreciation of goodwill and indefinite life intangible assets
and restructuring costs (EBIT) of Veolia Environnement's energy services
operations in each of the last three fiscal years, after elimination of all
inter-company transactions.

         (in millions of euro)               2004         2003          2002

         Revenue                             5,036         4,654        4,571
         --------
         EBIT*                                 296           274          244
         --------

    *   EBIT represents operating income before amortization and depreciation of
        goodwill and indefinite life intangible assets and restructuring costs,
        which corresponds to "operating income" as defined by French Reglement
        CRC 99-02.

Overview of Energy Services
---------------------------

Dalkia's activity focuses on optimal energy management. Dalkia has progressively
established a range of activities linked to energy management, including heating
and cooling systems, thermal and multi-technical services, industrial utilities,
installation and maintenance of production equipment, integrated facilities
management and electrical services on public streets and roads.

Dalkia provides energy management services to public and private clients with
whom it has formed long-term partnerships. Dalkia's contracts to operate urban
heating systems are typically long-term, lasting up to 25 or 30 years, while its
contracts to operate thermal and multi-technical installations for public or
private clients may last up to 16 years. Contracts to provide industrial
utilities services generally have shorter terms (6 to 7 years on average), while
contracts in the facilities management sector generally last 3 to 5 years.

When possible, Dalkia offers its clients solutions utilizing renewable or
alternative energy sources such as geothermal energy, biomass (organic
material), heat recovered from household waste incineration, "process" heat
(heat produced by industrial processes) and thermal energy produced by
co-generation projects. A combination of energy sources may also be selected so
as to take advantage of the complementarity of each source.

Heating and Cooling Networks

Dalkia is one of Europe's leading operators of large "district" heating and
cooling networks. Dalkia currently manages 620 district heating and cooling
networks in the world, particularly in France, the United Kingdom, Italy,
Germany, Eastern and Central Europe and the Baltic states. Dalkia does not
ordinarily own the networks it operates. Rather, in most cases, public
authorities own the networks and delegate to Dalkia the responsibility of
managing, maintaining and repairing them. The networks operated by Dalkia
provide heating, sanitary hot water and air conditioning to a wide variety of
public and private facilities, including schools, health centers, office
buildings and residences.

Thermal and Multi-Technical Services

Thermal services consist of operating heating, sanitary hot water and air
conditioning systems to provide comfortable living and working environments, as
well as improving the operation of existing systems to optimize their
efficiency. Dalkia provides public, industrial and commercial customers with
integrated energy services, which include installation design, construction and
improvement, energy supply, installation management and maintenance. Dalkia
provides customers with a large range of technical services and manages
approximately 80,000 energy installations throughout the world.

Industrial Utilities, Installation and Maintenance of Production Equipment

Dalkia has become a leading provider of industrial utilities services in France
and the United Kingdom. It has thereby developed expertise regarding the
analysis of industrial processes, the enhancement of productivity and the
operation, maintenance and servicing of equipment. Industrial utilities services
generated 27.5% of Dalkia's revenue in 2004.

In addition, Dalkia continues to pursue activities in a number of promising
sectors, such as the maintenance of "white rooms" by Dalkia Technologies, a
subsidiary of Dalkia. It specializes in the design and operation of controlled
atmosphere rooms, and in electricity production through co-generation plants
outside winter periods when tariffs are regulated.

Integrated Facilities Management

Facilities management contracts integrate a range of services, from thermal,
electrical and mechanical equipment maintenance to logistics, into one global
service. As a result, the client can meet its need for different services
through one company. Dalkia provides facilities management services for its
industrial or commercial customers (such as Coeur Defense or Canal+) at
industrial, commercial, corporate office or health establishment sites.

Street Lighting Services

Citelum, a subsidiary of Dalkia, has acquired a worldwide reputation for the
management of urban street lighting, the regulation of urban traffic and the
lighting of monuments and other structures. In France, Citelum operates and
maintains the lighting for the Paris beltway. Citelum also manages lighting and
urban traffic for the city of Puebla in Mexico. During 2004 ("The year of China
in France"), Citelum provided lighting services for the Eiffel Tower in Paris
and the Forbidden City in Beijing.

Services to Individuals

Dalkia provides residential services to individuals through Proxiserve, a joint
subsidiary of Dalkia and Veolia Water, including maintenance of heating, air
conditioning and plumbing systems and meter-reading services.

Description of Activities in 2004

In 2004, Dalkia won contracts representing expected total cumulative revenues of
more than 2 billion euros, among which the principal contracts are:

In Italy, a contract for energy and fluid management on behalf of 34 hospitals
and other care facilities in Rome and its suburbs for a period of 8 years,
expected to generate total revenues of approximately 430 million euros during
the entire period.

In Hungary, a contract for the construction of a new co-generation unit and
provision of steam to Richter Gedeon Rt, the Hungarian leader in the
pharmaceutical industry. This contract is expected to generate total revenues of
approximately 80 million euros over a 6-year period.

In Sweden, a contract for the technical maintenance of all buildings (stations,
garages, other real estate) of Jernhusen, a company which manages the real
estate of Swedish railway companies. This contract is expected to generate total
revenues of approximately 25.5 million euros over a 5-year period.

Dalkia renewed approximately 80% of its contracts due to expire in 2004,
including a contract for the technical maintenance of infrastructure of the
Stockholm metro for a period of 4 years (estimated total revenue of
approximately (euro)3.5 million), and a contract for the global maintenance of a
part of SFR's radio sites in France for a period of 3 years (estimated total
revenue of approximately (euro)30 million). In addition, Dalkia won a 20-year
contract extension for the delegated management of urban heating networks in
Dubravka, a district of Bratislava in Slovakia (estimated total revenue of
approximately (euro)50 million).

Dalkia lost contracts representing approximately 1.9% of its consolidated
revenues. Among those not renewed were contracts with SMI Bourgogne and
Rousselot, a facilities management contract with Synthomer in the United Kingdom
and a contract ending upon the closing of Zuidpolder's building in Delft, the
Netherlands.

Principal Contracts

The following table shows the principal contracts signed or renewed in 2004 with
either public authorities or industrial or commercial companies(26).

<TABLE>
--------------------------------------------------------------------------------------------------------------
<S>                        <C>         <C>          <C>           <C>               <C>

   Public Authority       Month of    New         Duration of      Estimated         Services to be Provided
          or              Signature   Contract      Contract         Total
 Company and Location        of       or Renewal                  Cumulative
        thereof           Contract                                  Revenue
                            or of
                           Renewal                                 (in euros)
--------------------------------------------------------------------------------------------------------------

France
--------------------------------------------------------------------------------------------------------------

Public Authorities
--------------------------------------------------------------------------------------------------------------

CHU Nancy                  August      Renewal      10 years      31 million     Operation and management of
                                                                                 thermal installations and
                                                                                 climate engineering (P1, P2,
                                                                                 P3) with integration of a
                                                                                 co-generation unit (4 Mw).
--------------------------------------------------------------------------------------------------------------

City of Montlucon          October     Renewal      20 years      62 million     Delegated public service
                                                                                 management of the heating
                                                                                 networks of Fontbouillant, Bien
                                                                                 Assis and Ville-Gozet in
                                                                                 Montlucon (completion of a
                                                                                 co-generation unit, involving
                                                                                 renovation and return to
                                                                                 compliance with applicable
                                                                                 standards).
--------------------------------------------------------------------------------------------------------------

Lyon-Villeurbanne          October     Renewal      25 years      500 million    Concession of the heating and
                                                                                 cooling networks of
                                                                                 Lyon-Villeurbanne, third
                                                                                 largest heating network in
                                                                                 France.
--------------------------------------------------------------------------------------------------------------

Companies
--------------------------------------------------------------------------------------------------------------

Peugeot Citroen            January       New        10 years    46 million per   Production and distribution of
Automobiles SA           (effective                                  year        energy and fluid, electricity
                            date)                                                distribution, management
                                                                                 of specific technical
                                                                                 equipment and maintenance
                                                                                 of rail links.
--------------------------------------------------------------------------------------------------------------

Europe


(outside France)
--------------------------------------------------------------------------------------------------------------

Public Authorities
--------------------------------------------------------------------------------------------------------------

Stockholm (Sweden)          March      Renewal      4 years       3.5 million    Technical maintenance of the
                                                                                 infrastructure of the Stockholm
                                                                                 metro.
--------------------------------------------------------------------------------------------------------------
</TABLE>

----------------------------

26   Revenues expected under foreign contracts won during 2004 have been
     converted into euros at the rate of exchange prevailing on December 31,
     2004. Accordingly, these amounts may differ from the amounts announced in
     earlier press releases.

<PAGE>

<TABLE>
--------------------------------------------------------------------------------------------------------------
<S>                        <C>         <C>          <C>           <C>               <C>

   Public Authority       Month of    New         Duration of      Estimated         Services to be Provided
          or              Signature   Contract      Contract         Total
 Company and Location        of       or Renewal                  Cumulative
        thereof           Contract                                  Revenue
                            or of
                           Renewal                                 (in euros)
--------------------------------------------------------------------------------------------------------------

Prince Charles             January       New        25 years      20 million     Refurbishing of thermal
Hospital (United                                                                 installations  at Prince Charles
Kingdom)                                                                         Hospital in  Wales, including
                                                                                 the installation of a new steam
                                                                                 network and a new co-generation
                                                                                 unit (500 KW).
--------------------------------------------------------------------------------------------------------------

City of Druskininkai       October       New        30 years      110 million    Concession of the city's
(Lithuania)                                                                      heating network.
--------------------------------------------------------------------------------------------------------------

City of Brezno              March        New        20 years      50 million     Delegated management of the
(Slovakia)                                                                       city's heating network.
--------------------------------------------------------------------------------------------------------------

Lazio Region (Italy)       October       New        8 years       430 million    Contract for energy and fluid
                                                                                 management on behalf of  34
                                                                                 hospitals and  other  care
                                                                                 facilities in Rome and its
                                                                                 suburbs.
--------------------------------------------------------------------------------------------------------------

Companies
--------------------------------------------------------------------------------------------------------------

Jernhusen (Sweden)        February       New        5 years      25.5 million    Technical maintenance of  all
                                                                                 buildings (stations, garages,
                                                                                 other real estate) of
                                                                                 Jernhusen, a company which
                                                                                 manages the real estate of
                                                                                 Swedish  railway companies,
                                                                                 located on  approximately 20
                                                                                 sites in Stockholm, Goteborg,
                                                                                 Malmo and Orebro.
--------------------------------------------------------------------------------------------------------------

Richter Gedeon Rt           March        New        6 years       80 million     Construction  of a new
(Hungary)                                                                        co-generation unit and
                                                                                 provision of steam to
                                                                                 Richter Gedeon Rt, the
                                                                                 Hungarian leader in
                                                                                 pharmacy services,
                                                                                 for its Kobanya site in
                                                                                 Budapest.
--------------------------------------------------------------------------------------------------------------

Heinz (United Kingdom)     August        New        15 years      18 million     Energy management for Heinz's
                                                                                 most important European canning
                                                                                 unit located in Kitt
                                                                                 Green, near Manchester.
--------------------------------------------------------------------------------------------------------------
</TABLE>

Acquisitions and Divestitures in 2004

In the Czech Republic, Dalkia Morava and Ekoterm combined to form Dalkia Ceska
Republika in February 2004. In the United Kingdom, Dalkia created Sterience
Ltd., a company specialized in the provision of decontamination and
sterilization services relating to medical material. In March, Dalkia acquired
the heating and power station of Poznan (ZEP Poznan). In December, Citelium,
Dalkia's subsidiary, created its first company in China (based in Shanghai) in
partnership with the Oriental Pearl Group.

In total, over the course of 2004, Dalkia created or purchased 36 companies, and
sold, liquidated or merged 34 companies. As a result, as of December 31, 2004,
Dalkia held 365 consolidated companies, of which 165 were non-French.

4.1.6.4 - Transportation

Veolia Environnement, through its transportation division, Connex, is one of the
world's leading private operators of ground transportation. Connex operates road
and rail passenger transportation networks under contract with national,
regional and local transit authorities. Connex has been managing and operating
urban, regional and inter-regional road and rail networks and maritime transport
for more than a century, having won its first tramway concessions at the end of
the 19th century.

Connex estimates that the portion of the worldwide transportation market
presently open to competition stands at (euro)50 billion, and that the portion
not yet open to competition (thereby offering development potential) stands at
(euro)250 billion. The opening of transportation markets that has occurred over
the past several years has been particularly pronounced in Europe, but has
occurred on other continents as well.

Moreover, the worldwide trend of population movement towards urban areas
increases the need for collective transportation services, thereby strengthening
the market potential of areas that Connex seeks to service.

At the end of 2004, Connex had approximately 61,300 employees around the world.
It has a presence in nearly 25 countries, and conducts its activity mainly in
Europe. While continuing to strengthen its position in France, Connex benefits
from a strong presence outside of France as well, where it earns approximately
60% of its revenues. In 2004, Connex pursued development in Australia and North
America, as well as in Germany and certain other central European countries.
This has helped to offset the effects of the discontinuation of services in the
United Kingdom, which occurred during 2004.

Connex estimates that it provided transportation to nearly 2 billion travelers
in 2004, and that it managed contracts with approximately 5,000 public
authorities.

The following table shows the consolidated revenue and operating income before
amortization and depreciation of goodwill and indefinite life intangible assets
and restructuring costs (EBIT) of Veolia Environnement's transportation
operations in each of the last three fiscal years, after elimination of all
inter-company transactions.

         (in millions of euro)                2004         2003          2002

         Revenue                              3,613         3,673        3,422
         --------
         EBIT*                                  103            93          116
         --------

    *    EBIT represents operating income before amortization and depreciation
         of goodwill and indefinite life intangible assets and restructuring
         costs, which corresponds to "operating income" as defined by French
         Reglement CRC 99-02.

Overview of Transportation
--------------------------

Connex primarily operates road and rail passenger transportation networks under
contracts won through auction with various public authorities. The public
authorities with which Connex contracts generally own the heavy infrastructure
Connex uses and typically establish schedules, routes and fare structures for
the networks that Connex operates and manages. Connex primarily conducts its
business through outsourced management under conditions and structures that
differ from one country to another due to varying legal and regulatory
requirements. Each contract between a public authority and Connex outlines the
relations between the two parties, including payment to Connex and the risks to
be borne by each, and typically lasts for a set period. Because the fares Connex
charges passengers on its transportation networks are usually insufficient to
cover its costs, the public authority typically provides Connex with a payment
or other compensation for services rendered. Moreover, in the case of certain
contracts, Connex is paid a flat fee for its transportation services;
consequently, it does not bear the risks associated with lower receipts or
decreased passenger use (such contracts being referred to as "Public Market"
contracts in France). Connex's management contracts generally last from 2 to 12
years.

Connex's activities can be broken down into four principal categories: (i) city
transportation (urban, urban beltway and other supplementary transportation
services), (ii) intercity and regional transportation, (iii) passenger
information services, and (iv) industrial markets.

City Transportation

Connex operates a number of bus networks, suburban trains, tramways and metros
and provides customized services as well. Connex is either partially or fully
responsible for designing, planning and operating services, managing personnel,
inspecting vehicles and stations it uses in its networks (including obtaining
various permits), conducting marketing efforts and managing customer service.

In many urban areas, Connex provides interconnected bus, tramway, metro and
train transportation services through a ticketing system coordinated by the
principal transportation provider or transportation authority for a region.
Connex also offers special integrated transportation services within networks
managed by several different operators in an urban area, including the suburbs
of Paris, Rouen, Saint-Etienne, Stockholm, Sydney and Dusseldorf, among others.

Connex operates ferry-boat services to complement its bus services in various
urban areas. It does so in Toulon (France) and Goteborg (Sweden), for example.

Urban and Urban Beltway Transportation

In France, Connex operates the tramways, bus networks and light rail networks in
Rouen, Saint-Etienne, Nancy and Bordeaux. Connex is also the operator of the bus
networks in Nice, Toulon (where tramway infrastructure is currently being
installed as well) and 40 other French cities. Connex has a strong presence in
the Ile-de-France region, where it operates numerous bus lines. It is the main
private operator in the region, operating the networks of Melun, Rambouillet,
Argenteuil, St. Germain-en-Laye and Seine-Saint-Denis.

In Europe, Connex operates tramways and light rail networks in Gorlitz and
Berlin (Germany), Dublin (Ireland) and Norrkoping and Stockholm (Sweden). Connex
also operates the Stockholm metro, as well as bus lines in Scandinavia, Poland
(Warsaw and numerous other cities), the Netherlands, Denmark (Copenhagen), the
Czech Republic and Estonia.

Connex operates transportation services in several cities in Spain and Portugal
through FCC Connex Corporacion (cf. ss.3.7 supra), which is jointly-owned by
Connex and a subsidiary of FCC. Formed in 2002, FCC Connex Corporacion
consolidates certain of Veolia Environnement's and FCC's transportation
activities in Spain. Through this entity, Connex operates the Barcelona tramway
and, as of October 15, 2004, the urban network for the city of Pampelune.

In the United States, Connex provides bus transportation services principally in
the regions of Washington D.C., Baltimore and Los Angeles. Connex and its
partners in the Massachusetts Bay Commuter Railroad Company (the Bombardier
group and a local partner, ACI) also launched a contract for the management of
suburban trains in the Boston area on July 1, 2003.

In Canada, Connex repurchased GVI in August 2004, a company that provides
transportation services in the south suburbs of Montreal.

In Australia, Connex operates the entire suburban rail network of Melbourne as
well as the monorail and light rail network of Sydney. Since October 2004, it
has also been operating bus services in Perth, Brisbane and Sydney.

In the rest of the world, Connex operates through partnership with other
operators a high-frequency right-of-way bus system (BRT : Bus Rapid Transit) in
Bogota (Colombia) and bus lines in Israel and Lebanon. In Israel, Connex is also
part of the consortium that has been awarded the concession for the future
tramway of Jerusalem.

Supplementary Services

Connex offers innovative transportation services in certain cities that
supplement traditional transportation networks. For example, in France Connex
offers Creabus, an on-demand minibus service that is tracked by a Global
Positioning System, or GPS, which operates in Dieppe, Montlucon, Vierzon,
Bourges, Bordeaux, Ile-de-France and Fairfax (United States). Connex also
manages all of the on-demand transportation services in the Nord Brabant region
of the Netherlands.

Connex manages taxi services in Baltimore, Denver and the Netherlands. It
provides transport for persons with reduced mobility in Bordeaux and other
regions of France, as well as in the United States ("paratransit") and Canada.

Intercity and Regional Transportation

Connex provides regional transportation services through the operation of road
and rail networks. As with urban transportation services, Connex is responsible
for designing, planning, operating, maintaining and providing security on the
vehicles and stations it uses in its regional networks, as well as for ticket
sales and customer service.

Further, Connex has recently developed ferry transport service in areas such as
Finnmark (Norway, since 2003) and Zeeland province (Netherlands).

In France, Connex has a strong presence in the intercity and student
transportation markets, involving more than 60 French departments across the
country. Connex also operates a number of regional rail networks, covering
approximately 850 kilometers, through contracts with regional public authorities
or sub-contracts with the Societe Nationale des Chemins de Fer (SNCF), the
French national railroad company, particularly in the regions of Brittany,
Provence, the Alps and the French Riviera.

In Europe, Connex has a strong presence in Germany, Denmark, Norway, Sweden,
Finland, Slovenia, Belgium, Spain, the Czech Republic and the Netherlands.
Through Eurolines, a company in which Connex has a 50% interest together with
Keolis, Connex provides transport by motorcoach on regular international routes
throughout Europe.

Passenger Information Services

Growth in Veolia Environnement's transportation business depends on increased
use of public transportation networks, which in turn is closely related to the
quality of service provided by these networks. To increase passenger usage of
its networks, Connex's efforts focus on adequately matching service offerings
with demand for these services, and developing local information services
relating to transportation systems for travelers.

Accordingly, Connex has developed the "Optio" system, a service that provides
anyone who wants to use public transport in a region (regardless of the
operator) with the information that they need. The service involves use of a
central telephone operator, internet site, wireless text messages, such as SMS,
and wireless internet access, such as WAP. The "Optio" system currently operates
in the department of Oise in France.

In addition, Connex has developed "Connector Plus", a real-time information
system installed in the rail network of Melbourne (Australia), which notifies
users of service interruptions or delays through wireless text messages on their
mobile phones. Connex has installed the "Connector Plus" system in Stockholm and
is testing it in Bordeaux.

Connex has also recently created several internet sites that allow users to find
their itineraries on local transportation systems in France and Australia.

Industrial Markets

Beyond the personnel transport services provided by numerous subsidiaries in
France and the rest of Europe, Connex is present in two areas of industrial
activity which represent slightly more than 3% of its revenues: rail transport
(freight transport and management of industrial rail junctions with related
logistics) and airport services. At the beginning of 2004, Connex created a
dedicated subsidiary, Connex Industries, for the purpose of grouping its
European activities in these areas. In addition, Connex created a subsidiary in
the Netherlands (Connex Cargo Nederland) in order to be able to provide services
to markets in North Sea ports.

Rail Transport

In the area of freight transport, Connex operates a number of regional freight
trains in France under sub-contract with SNCF, and offers rail transport
services for long distance freight in Germany through its subsidiary Connex
Cargo Logistics. After the opening of the European rail freight market to
competition, Connex obtained its operator's license and security certificate in
France in 2004. These documents will allow Connex to market itself directly to
international clients, with services to be provided on rail freight corridors
throughout Europe.
In the area of industrial rail junctions and related logistics, Connex manages
junctions in France and Germany for customers in the automobile, petrochemical
and refining industries with factories that are linked to a national rail
network.

Airport Services

This activity covers a range of services to airlines (freight transport on the
platform of Charles de Gaulle airport, baggage handling, maintenance of
vehicles, etc.). It is conducted by VE Airport, 60% of the share capital of
which is owned by Connex.

Connex intends to develop its industrial market activities by relying on Veolia
Environnement's existing client network. It will focus in particular on those
industrial market activities that will help to enrich the Group's offerings and
constitute a growth area for Connex.

Description of Activities in 2004
---------------------------------

In 2004, Connex won several contracts as it pursued its expansion, among which
the principal contracts are:

In Australia, a renewal and extension of a contract for the operation of the
entire suburban rail network of Melbourne, expected to generate total revenues
of approximately 1.35 billion euros during a 5-year period.

In Germany, following Connex's win in 2003 of a public tender to operate
Germany's regional Marschbahn line, Connex strengthened its competitive position
vis a vis Deutsche Bahn by winning a new rail contract in the Nordharz region,
expected to generate total revenues of approximately 402 million euros during a
12-year period.

In the United States, a "Metrolink" contract for the suburbs of Los Angeles,
expected to generate total revenues of approximately 70 million euros during a
5-year period. This marks the second contract (after Boston) that Connex has
taken over from Amtrak, the prior operator.

In France, Connex was selected to manage the transportation network in Toulouse
during 2005 (expected to generate total revenues of approximately 54 million
euros during a 6-month period), which marks the largest city contract won by
Connex in France since the one involving St. Etienne in 2000. During this time,
the public authority in Toulouse will be conducting a bidding process for a
6-year contract to manage the transportation network, in which Connex intends to
participate.

Connex renewed the majority (based on 2004 revenues) of its contracts due to
expire in 2004, including in those in Nice, Toulon, St. Etienne and Chambery. No
significant contracts were lost.

Connex's results in Scandinavia during 2004 were disappointing, however, in
particular with respect to its bus activities in Sweden and Denmark and its
"Norland" railway contract. Accordingly, Connex was forced to revise its outlook
for the region, and decided to write-off (euro)70 million of goodwill recorded
in connection with its acquisition of Linjebuss in 1998.

Connex pursued growth outside of France during 2004 by developing a presence in
Canada and, at the end of the year, Switzerland.

Principal Contracts

The following table shows the principal contracts signed or renewed in 2004 with
either public authorities or industrial or commercial companies(27).

<TABLE>
------------------------------------------------------------------------------------------------------------
<S>                   <C>         <C>         <C>              <C>              <C>
   Public Authority    Month of       New      Duration of     Estimated        Services to be Provided
          or           Signature   Contract     Contract         Total
 Company and Location     of      or Renewal                  Cumulative
       thereof         Contract                                 Revenue
                         or of                                (in euros)
                        Renewal
------------------------------------------------------------------------------------------------------------
France
------------------------------------------------------------------------------------------------------------
Nice                  June        Renewal     7 years       595 million     Operation of urban network
                                                                            (tram and bus) for the
                                                                            community of Nice Cote d'Azur.
------------------------------------------------------------------------------------------------------------
Toulon                June        Renewal     8 years       314 million     Operation of urban network
                                                                            (tram and bus) for the
                                                                            community of Toulon Provence
                                                                            Mediterranee.
------------------------------------------------------------------------------------------------------------
Saint Etienne         July        Renewal     8 years       345 million     Operation of urban network
                                                                            (tram and bus) for Saint
                                                                            Etienne.
------------------------------------------------------------------------------------------------------------
Chambery              December    Renewal     6 years       156 million     Operation of urban network
                                                                            (bus) for Chambery Metropole.
------------------------------------------------------------------------------------------------------------
</TABLE>

------------------------

27   Revenues expected under foreign contracts won during 2004 have been
     converted into euros at the rate of exchange prevailing on December 31,
     2004. Accordingly, these amounts may differ from the amounts announced in
     earlier press releases.

<PAGE>

<TABLE>
------------------------------------------------------------------------------------------------------------
<S>                   <C>         <C>         <C>              <C>              <C>
   Public Authority    Month of       New      Duration of     Estimated        Services to be Provided
          or           Signature   Contract     Contract         Total
 Company and Location     of      or Renewal                  Cumulative
       thereof         Contract                                 Revenue
                         or of                                (in euros)
                        Renewal
------------------------------------------------------------------------------------------------------------
Toulouse              December    New         6 months      54 million      Operation of urban network
                                              (firm         (for 6 months)  (bus and metro) for the
                                              commitment)                   Syndicat Mixte des Transports
                                              + 4 + 2                       Toulousains.
                                              months
                                              possible
------------------------------------------------------------------------------------------------------------
Ille et Vilaine       October     Renewal     6 1/2 years     52 million      Operation of intercity lines
                                                                            in the department of Ille et
                                                                            Vilaine.
------------------------------------------------------------------------------------------------------------
Europe
(outside France)
------------------------------------------------------------------------------------------------------------
Germany               March       New         12 years      402 million     Rail contract in the Nordharz
                                                                            region.
------------------------------------------------------------------------------------------------------------
Netherlands           December    New         6 years       210 million     Operation of regional and
                                                                            urban bus services in the
                                                                            region of Apeldoorn, located
                                                                            in the province of Gelderland.
------------------------------------------------------------------------------------------------------------
Finland               May         New         6 years       55 million      Management of 12 bus lines, 62
                                                                            buses and 130 drivers in the
                                                                            city of Vantaa.
------------------------------------------------------------------------------------------------------------
Germany               May         New         10 years      70 million      Operation of regional trains
                                                                            in Brandenburg.
------------------------------------------------------------------------------------------------------------
Sweden                May         New         9 years       92 million      Operation of an urban
                                                                            transport network in the city
                                                                            of Vaxjo and an intercity
                                                                            network in Kronoberg county.
------------------------------------------------------------------------------------------------------------
North America
------------------------------------------------------------------------------------------------------------
Denver                June        New         3 years       22 million      Operation of a bus network in
                                              (plus a       (for 3 years)   Denver.
                                              2-year
                                              renewal
                                              option)
------------------------------------------------------------------------------------------------------------
Los Angeles           November    New         5 years       70 million      Metrolink: Operation of a rail
                                              (plus a       (for 5 years)   network in the suburbs of Los
                                              5-year                        Angeles.
                                              renewal
                                              option)
------------------------------------------------------------------------------------------------------------
Asia
------------------------------------------------------------------------------------------------------------
Australia             February    Renewal     5 years       1.348 billion   Operation of the entire
                                  and                                       suburban rail network of
                                  expansion                                 Melbourne.
------------------------------------------------------------------------------------------------------------
New Zealand           March       New         4 years       28 million      Operation of suburban trains
                                                                            of Auckland.
------------------------------------------------------------------------------------------------------------
</TABLE>

Acquisitions and Divestitures in 2004

In August 2004, Connex acquired Groupe Autobus Viens Inc., an operator of urban
and school-related transportation services in the south suburbs of Montreal,
Canada. The acquisition price was 10.8 million euros. This marks Connex's first
Canadian presence.

In August 2004, Connex purchased two bus companies: Transport Management Group
in Perth and National Bus Company in Brisbane, Australia. The two bus companies'
revenues totaled 25.9 million euros in 2003. The acquisition price was 16.4
million euros.

In October 2004, Connex acquired Montanesa (2003 revenues: 19.6 million euros),
the company holding the concession for the urban and urban beltway transport
network of Pampelune. The acquisition price was 1.8 million euros.

Connex also acquired some smaller companies in Europe (France, Poland, Slovenia
and Germany) and the United States.

In total, over the course of 2004, Connex created or purchased 49 companies,
merged 23 companies, sold 3 companies and liquidated 1 company. As a result, as
of December 31, 2004, Connex held 429 consolidated companies (compared to 407 in
2003).

4.1.6.5 - Development of Synergies: Multiservice Contracts to Benefit Industrial
          and Commercial Clients

Outsourcing and Multiservices Market

Veolia Environnement believes that its position in the environmental services
market for industrial and commercial customers has allowed it to take advantage
of the synergies that exist among its four divisions. The growth in this market,
estimated to be greater than 10% per year, was initially driven by the
development of outsourcing, as industrial companies sought to outsource certain
peripheral activities to external service providers. This outsourcing trend
covers all of Veolia Environnement's businesses, including energy services,
water services, waste management services and the on-site management of rail
junctions.

Veolia Environnement offers a "multiservices" alternative to its customers,
which involves the provision of services by several of its divisions under a
single contract. This allows Veolia Environnement to better respond to the
expectations of certain customers who wish to outsource a range of services to a
single service provider. This relationship also allows for greater technical
synergies, economies of scale and commercial complementarity.

Veolia Environnement's largest multiservices contract, signed in 2003 with
Peugeot Citroen Automobile, provides a good illustration of the synergies that
are possible. The subsidiary created to service this contract, Societe
d'Environnement et de Services de l'Est, manages all of the environmental
services at Peugeot's sites in Sochaux, Mulhouse and Vesoul, involving more than
twenty different activities. By delegating such a broad range of activities to
Veolia Environnement, Peugeot Citroen Automobile is able to ensure the
regulatory compliance of its sites, while realizing significant savings. These
savings largely result from an overhaul of the previous organization and work
plan, the implementation of skill training programs, the reassumed management of
activities that were previously subcontracted, and the implementation of a new
energy policy.

Veolia Environnement's Organization for the Provision of Multiservices

To develop this multiservices activity, Veolia Environnement has established a
specific organization, VE Industries ("VEI"), to coordinate its various
activities. While VEI plays a coordinating role, each of Veolia Environnement's
divisions remains responsible for the ultimate performance of services falling
within its expertise.

VEI prepares Veolia Environnement's bids for multiservice contracts, with a
project manager from VEI appointed for each multiservices contract. Commercial
projects and bids are prepared in coordination with Veolia Environnement's
divisions, and are then submitted to a commitments committee before their
submission to clients.

Later, contract performance is often entrusted to an ad hoc company formed by
the divisions involved in the project, in particular when Veolia Environnement
decides to utilize the personnel of one of its industrial clients. Each division
participates in the share capital of such ad hoc company to the extent of its
provision of services under the contract, with revenues and other financial
items relating to the income statement and balance sheet of such ad hoc company
being consolidated in each division's financial statements to the extent of its
participation. Finally, Veolia Environnement has created a reporting body to
follow the performance of these specialized companies.

Multiservices Contracts

Demand for multiservices contracts during 2004 was strongest outside of France,
in particular in Germany and the United Kingdom. Therefore, in addition to the
multiservices contracts entered into in 2003, notably with Alstom, Peugeot
Citroen Automobile and Arcelor, Veolia Environnement entered into the following
multiservices contracts in 2004:

<TABLE>
-------------------------------------------------------------------------------------------------------------
    Company         Location       Month of    Duration     Estimated Total   Services to be Provided
                                  Signature       of           Cumulative
                                 of Contract    Contract        Revenue
                                                              (in euros)
-------------------------------------------------------------------------------------------------------------
<S>                 <C>          <C>           <C>           <C>              <C>
VISTEON              Duren          March       10 years      60 million      Management of energy services,
Deutschland        (Germany)                                                  industrial fluids, water cycle,
GmbH                                                                          industrial waste, metallic
                                                                              residue, industrial cleaning
                                                                              and chemical products
                                                                              at VISTEON's production site,
                                                                              as well as management
                                                                              and maintenance of industrial
                                                                              and administrative buildings.
-------------------------------------------------------------------------------------------------------------
Corus               Trostre        October      10 years      78 million      Management and optimization of
Packaging Plus      (United                                                   Corus' existing effluent treatment
                    Kingdom)                                                  plant; construction, operation
                                                                              and maintenance of a new boiler
                                                                              facility; provision of on-site
                                                                              waste management services.
-------------------------------------------------------------------------------------------------------------
</TABLE>

4.1.7 - Other Information Relating to Veolia Environnement's Business

4.1.7.1 - Competition

Most markets for environmental services are very competitive and are
characterized by increasing technological challenges arising from regulatory
changes, as well as the presence of experienced competitors.

Competition in each of the markets Veolia Environnement serves occurs primarily
on the basis of the quality of the products and services provided, reliability,
customer service, financial strength, technology, price, reputation and
experience in providing services. Additional considerations include the ability
to adapt to changing legal and regulatory environments, as well as the ability
to manage employees accustomed to working for governmental authorities or
non-outsourced divisions of industrial or commercial enterprises. In each of the
markets in which Veolia Environnement operates, its competitive strengths are
its high level of technological and technical expertise, its financial position,
its geographical reach and its experience in providing environmental management
services, managing privatized and outsourced employees and meeting regulatory
requirements.

With regard to the provision of environmental services to industry in
particular, Veolia Environnement's main competitors are Suez and RWE, which
provide a range of services including energy, water and waste management.
Certain actors in the area of electricity production also enrich their offering
through the provision of industrial fluids. Veolia Environnement anticipates
that other enterprises that compete with it in individual sectors will, in the
coming years, seek to expand their activities to become integrated environmental
management services providers.

With regard to the provision of environmental services to public authorities,
there has been a tendency over the last few years to return the provision of
such services to local government control, which has reduced the number of
delegated management contracts available in the market. Nevertheless, this
tendency has remained fairly limited.

New actors from the public works and building sectors may begin to offer
services in the market following completion of large and/or extensive
investments. The emergence of such new actors is a natural outgrowth of a market
in which ownership of infrastructure constructed to support the provision of
comprehensive environmental services often reverts back to the client at the end
of a contract's term. For the moment, however, these new actors have acted on a
project-by-project basis, and do not seem to have a global strategy for
establishing a true competitive presence in the market.

Water

Through Veolia Water, Veolia Environnement's principal competitors in the water
sector are Suez (through its subsidiary Ondeo) and RWE (through its U.K.
subsidiary Thames Water and its American subsidiary American Water Works). In
addition, General Electric has recently entered the market for services to
industrial companies as it consolidates all of its acquisitions in the water
services sector into a single business unit.

At both the national and regional level, Veolia Environnement has a number of
local competitors, particularly in the building and public works sectors.
Examples of such competitors include Saur in France and FCC and Agbar in Spain.
In the United States, competitors include American Water (a subsidiary of RWE)
and United Water (a subsidiary of Suez). In Asia, various conglomerates
(Marubeni, Mitsui, Kerry Utilities, Cheung Kong Infrastructure) have attempted
to form partnerships in order to conduct water activities. Further, Veolia
Environnement faces competition from newly emerging competitors, and from public
establishments and local mixed public-private companies.

Waste Management

Through Onyx, Veolia Environnement's principal competitors in the waste
management sector are either solely regional, or they cover only one part of the
sector in which Onyx operates.

In Europe, where Onyx conducts the majority of its waste management activities,
the principal competitor is Suez, acting through its subsidiary SITA.

Onyx has taken significant steps toward consolidating its market position in
North America, where its principal competitor is Waste Management.

In Latin America, Onyx's operations are concentrated in Brazil and Mexico, where
it primarily competes with Suez and a variety of local companies.

In the Asia/Pacific region, Onyx's main competitors are Cleanaway and Suez
(acting through SITA), as well as various local companies.

Energy Services

The energy services market has many actors and Veolia Environnement, through its
subsidiary Dalkia, therefore faces very dispersed competition. Veolia
Environnement believes that the only three companies with a strong international
presence and a diversified and complete range of services in this market similar
to its own presence and services are Suez (Elyo), RWE and Cofatech (GDF).

Transportation

Through Connex, Veolia Environnement's principal competitors in the
transportation market are large private operators, primarily French or British,
and public monopolies that conduct their activities in open markets. Major
competitors include Keolis (which counts the SNCF as an industrial partner and
shareholder but which also witnessed during 2004 the purchase of 53% of its
share capital by 3i, an investment fund), Transdev (a subsidiary of the Caisse
des Depots et Consignations, which has an alliance with the French metro
operator, RATP), the Deutsche Bahn (the national rail operator in Germany) and
the British groups Arriva, First Group, National Express (the Australian
activities of which Connex acquired in 2004), Go Ahead and Stagecoach.

In North America, the transport company MV has adopted an aggressive pricing
strategy that now positions it as a competitor, along with Connex's historical
competitors in the market that include Laidlaw and the subsidiaries of the
British groups First Group, National Express and Stagecoach (which in 2004
significantly reduced its U.S. activities by selling a part thereof to First
Group). In the area of rail transport, Amtrak's persistent budget difficulties
could lead the way to further delegated private management.

In Asia, Veolia Environnement anticipates that groups in China and Singapore may
in the long-term become new competitors in an increasingly dynamic
transportation market.

4.1.7.2 - Contracts

Veolia Environnement provides a range of services either directly to the
customer making the request--for example, in connection with an outsourcing
agreement Veolia Environnement has with a public authority or industrial or
commercial company--or indirectly on behalf of such customer for the benefit of
a third party--for example, in connection with the delegated public service
management of a drinking water production and distribution service. The services
Veolia Environnement provides are often vast and multi-functional, requiring
adequate employee infrastructure and specialized resources. They may also
require management of works or infrastructure that are technically complex--an
example would be a wastewater treatment network and purification plant. These
works or infrastructure may either be provided by the client, or financed and
constructed by Veolia Environnement itself.

Veolia Environnement's services to the public provided on behalf of public
authorities include water distribution, wastewater treatment, collection and
treatment of household waste, public transport and energy services. In numerous
countries, the provision of such services, often referred to as general economic
interest or public services, is considered to be the responsibility of the local
public authority. Accordingly, the public authority is charged not only with
implementing regulations or controls over the provision of public services, but
must also implicate itself more directly in their management, through one of the
following means:

-     The public authority can decide to directly manage and provide public
      services on its own ("direct" or "internal" management), thereby limiting
      the number of projects granted to private operators like Veolia
      Environnement, or

-     The public authority may prefer to confer on a third party the entire
      responsibility for providing the public services, in which case the
      latter, depending on the specifications of the contract, would be
      responsible for providing the human resources, materials and finances
      necessary to provide the services. The public authority may also request
      that the third party finance and construct any required infrastructure
      under the contract. Third parties to whom the public authority resorts may
      be either private operators, mixed public-private companies or other
      public entities.

Based on the different ways in which public authorities choose to manage the
provision of public services, Veolia Environnement has developed various types
of contracts to respond to their specific requirements. The contracts Veolia
Environnement employs generally fall into one of two categories, depending on
whether Veolia Environnement is entrusted with total responsibility for
provision of a public service and whether Veolia Environnement has a financial
and commercial relationship with end users:

-     the public authority chooses to directly manage and provide public
      services on its own (direct management), but has only limited means and
      therefore calls upon a private operator to provide certain limited
      services or works, to whom it pays a set price under contract.
      Alternatively, the public authority may prefer a more expansive contract
      involving construction and management of services, which may include
      financing of required infrastructure. These are known as public market
      contracts under municipal law, also referred to as Build, Operate,
      Transfer contracts (for example, a contract for building, financing and
      operating a water purification plant), or from now on in France as
      "partnership contracts", or

-     the public authority entrusts a company with the responsibility for the
      full provision of a service, with the latter assuming all or part of the
      operational risks. Generally, the provision of the service is then
      financed by the end user of the service. The contractor is thus
      responsible for and free to implement the means necessary to provide the
      service, but must do so in accordance with the terms set by the public
      authority in respect of expected performances and prices charged to end
      users. This is the logic of "delegated management", "concession" and
      Build, Own, Operate contracts, under which the entity that assumes
      management also assumes the "risks and perils" or "risks and advantages"
      to the extent its compensation is substantially a function of its
      operating results.

The general type of contract Veolia Environnement employs in a given instance
does not in itself determine the specific operating conditions under which
Veolia Environnement provides its services. Further, such contracts are subject
to various nuances. Under Veolia Environnement's delegated public service
management contracts, for example, even though Veolia Environnement is generally
paid by the end users of the service, it sometimes receives compensation by the
public authority as well. This can occur in the case of a management contract
that provides for variable compensation by the public authority, based on the
fulfillment of specific targets by the private operator.

The historic traditions of the various countries in which Veolia Environnement
operates tend to favor one of the above-mentioned general contract types over
the other. In France, for example, where there is a long tradition of granting
concessions, delegated public service management contracts are often the
preferred choice.

At the same time, France has adopted a new regulation dated June 17, 2004 that
permits the development of "partnership contracts". This new legal form of
contract allows a public authority to entrust a private operator with full
management of public services, including construction and financing. The private
operator is then compensated by the public authority following completion of
various agreed upon performances.

Current practices in various countries have tended to converge, with public
authorities resorting to one or the other contract types depending on the
situation. All such contracts have, in most cases, the common feature of being
long-term agreements.

Veolia Environnement also enters into outsourcing contracts for the management
of complex services with its industrial and commercial clients, which are
analogous to the contracts entered into with public authorities above.

Despite differences related to the nature of clients, the services contracted
for and the nature of the legal systems in which Veolia Environnement operates,
the expectations of Veolia Environnement's clients have tended to converge
towards (i) a demand for transparency during the bid process and during contract
performance, (ii) formation of a real partnership in search of ways to improve
productivity and performance, and (iii) a desire for clear performance targets
and variable compensation depending on achievement.

Veolia Environnement is also very attentive to contractual provisions, in
particular when Veolia Environnement must finance the investments called for
under a contract. Given the complexity of management agreements and their
generally longer term, Veolia Environnement possesses skills regarding contract
analysis and control. The legal departments of Veolia Environnement's divisions
are involved in the preparation of contracts, and controls are imposed on the
implementation of Veolia Environnement's main contracts. Each year, Veolia
Environnement's internal audit department includes a review of the contractual
and financial stakes of Veolia Environnement's most significant contracts in its
annual program.

4.1.7.3 - Intellectual Property

Veolia Environnement currently owns a significant number of patents and
trademarks in France and other countries around the world that are of value to
Veolia Environnement's business. However, Veolia Environnement believes that the
diversity of its patents and trademarks does not make any of its activities
dependent on any one of these patents or trademarks individually.

4.1.7.4 - Financing of Transactions

See paragraph 5.1.3 below.

4.1.7.5 - Property, Plants and Equipment

Veolia Environnement rents a building located at 36/38, avenue Kleber, 75116,
Paris, France that it uses as its corporate headquarters. Veolia Environnement's
and its divisions' senior management have maintained their offices in this
building since May 2002, where certain central functions are performed.

Veolia Environnement's real properties are relatively limited. Many buildings
and installations that Veolia Environnement uses do not belong to it. Very
often, service contracts are performed through use of buildings or installations
belonging to the client. Veolia Environnement may also lease properties. Even
when Veolia Environnement has legal ownership, Veolia Environnement may not have
the right to dispose of such real property due to contractual provisions which
obligate it to transfer these assets to the client or another successor at the
end of a contract.

However, Veolia Environnement is sometimes the full owner of real property,
including industrial installations, in particular for activities undertaken
outside global contracts. In Veolia Environnement's waste management division,
for example, Veolia Environnement may own CSDUs (storage centers for ultimate
waste), and in its energy services division, Veolia Environnement may own
co-generation plants.

4.1.7.6 - Marketing

Veolia Environnement markets its products and services by continuously offering
to provide a more comprehensive range of environmental services to clients. The
Company often sells its products and services by responding to requests for
consultations (cf. ss.4.1.7.2 supra). These may be highly regulated events when
it comes to a public authority conducting a public bid tender, but generally
Veolia Environnement is able in such situations to take advantage of its
reputation and know-how and propose a solution that is best adapted to a
client's needs. In the absence of a formal bidding procedure, which is generally
the rule for commercial clients, Veolia Environnement analyzes the environmental
service needs of prospective clients and demonstrates to them how Veolia
Environnement's services could improve the efficiency of their operations.

4.1.7.7 - Seasonality

Because of the diverse nature of Veolia Environnement's operations and its
worldwide presence, Veolia Environnement's business is typically not subject to
material seasonal variations. Veolia Environnement's results are only slightly
affected globally, with the exception of Dalkia, which realizes the bulk of its
operating results in the first and fourth quarters of the year, corresponding to
periods in which heating is used in Europe. In the water sector, household water
consumption and the related treatment services required tend to be more elevated
between May and September in the northern hemisphere, where Veolia Water
conducts the majority of its activity.

4.1.7.8 - Raw Materials

Veolia Environnement purchases raw materials on a worldwide basis from numerous
suppliers. Veolia Environnement seeks to accumulate and maintain a reserve
inventory of raw materials and supplies, qualify new suppliers, and develop
production processes in its own facilities. Veolia Environnement undertakes to
secure the supply of strategic materials through medium-term and long-term
contracts. It has not experienced difficulties in obtaining sufficient amounts
of raw materials and supplies in recent years and it does not have any reason to
anticipate any material difficulties in the future. However, the price of raw
materials and supplies may vary substantially.

Fuel prices for instance have increased recently, and Veolia Environnement
cannot anticipate the evolution of these prices in the future. Veolia
Environnement's operations historically have not been, and are not expected to
be in the future, materially affected in the long-term by changes in the price
or availability of energy or other raw materials, as Veolia Environnement's
contracts typically contain price adjustment and/or indexing provisions designed
to compensate Veolia Environnement for increases in the cost of providing its
services(28), which would assist the Company in passing along a portion of the
rise in energy or raw material prices to clients (subject to a possible time
period in which the Company would have to await reimbursement) (cf. ss.4.7.1
infra).

In the transportation division, numerous contracts contain indexing clauses that
take variations in fuel costs into account, which significantly reduces the
impact of a rise or fall in fuel prices. In certain contracts, notably those
involving the United States, Veolia Environnement is entitled to full
compensation in the event of rising fuel prices.

In the waste management division, collection services involving non-hazardous
solid and liquid waste are the most sensitive to fluctuations in fuel prices.
However, for clients that have contracts with Veolia Environnement, indexing
clauses in those contracts generally allow the Company to pass along a good
portion of its increase in such costs in the prices it charges to clients. For
clients not bound by contract, increases in fuel costs are either fully or
partially passed along to clients through an updating of tariffs or through
commercial negotiation.

------------------------

28   Such provisions include indexing clauses that take into account the
     variation of certain parameters, review clauses in the case of a rise in
     certain parameters above a given level, hardship clauses (unforeseeable
     changes due to extraordinary circumstances) or re-equilibrium clauses.

<PAGE>

In the energy services division, the situation with respect to combustible
materials used for activities is similar to the description above. With respect
to gas supplies in particular, the deregulation of the market has not altered
Veolia Environnement's use of indexing clauses in its contracts. Veolia
Environnement intends to develop the skills necessary to manage and optimize its
gas supplies within the new market environment.

4.1.8 - Ethics

Veolia Environnement's presence in nearly 80 countries around the world
necessitates that it implement a set of principles for ensuring compliance with
various human rights norms and governance standards set forth under
international laws and treaties.

These principles must take into account the Company's cultural diversity and
emphasize environmental protection above all, which is one of the Company's
foremost concerns. In addition, they must integrate the Company's traditional
values, which are based on a close relationship with clients, consumers and
civil society and the autonomy of each of the Company's operating divisions.

To this end, the Company implemented the "Ethics, Commitment and Responsibility"
program in February 2003, which was updated in December 2004. This program is
intended to guide the daily behavior of Veolia Environnement's employees.

The program reaffirms the fundamental values shared by all of Veolia
Environnement's employees, including, for example, the need for strict
observance of the laws in effect in the different countries where Veolia
Environnement operates, loyalty towards Veolia Environnement's clients and
towards consumers, sustainable development, a sense of solidarity (tolerance,
respect of others and social dialogue), control of risks and effective corporate
governance.

In March 2004, Veolia Environnement created an ethics committee to examine and
settle any questions relating to the ethics program. The ethics committee has
between three and five members and may pursue any matter that it wishes
regarding Group ethics. Employees may also freely consult with the committee.
The ethics committee must act independently with respect to matters it treats
and hold the information relating thereto confidential. Each year, the ethics
committee prepares a report on the Group's adherence to ethical norms, including
any difficulties encountered and suggested improvements, if any.

Finally, because compliance with ethical norms is a daily endeavor for Group
employees, certain additional norms and procedures have been implemented at the
divisional level, with various persons in each division having responsibility
for their implementation. The Company's risk committee oversees the application
of these norms and procedures, which it does by reviewing progress reports
related thereto. The risk committee performs this oversight work by meeting with
representatives of the divisions and Veolia Environnement, with the Company's
senior executive vice president acting as chairman.

4.1.9 - Risk Management

Effective risk management helps to ensure that Veolia Environnement's future
development and fundamental values are always taken into account, and therefore
constitutes a primary objective for the Company.

4.1.9.1 - Organization of risk management

Risk management

In order to strengthen its ability to anticipate, analyze and balance risks of
all natures and to help ensure it is adequately prepared to deal with such
risks, Veolia Environnement created a risk department in 2004. The risk
department has been charged with implementing a structured risk management
process, which may be modified as appropriate, that is based on a set of
international standards entitled "COSO". The objective of such standards--and,
accordingly, Veolia Environnement's own global risk management process--is to
assure that a company's culture, strategic objectives, assumed risks and
internal controls are as consistent with each other as possible. The risk
department is therefore responsible for ensuring the consistent application of
Veolia Environnement's global risk management process. In particular, it
oversees the implementation of rules of conduct that will create an internal
environment that is both consistent with and favorable to a mastery of risks;
the definition of the Group's objectives consistent with risk tolerance and
profile; the adoption of appropriate responses to identified risks; and the
implementation of effective controls and appropriate communication throughout
the Group.

The creation of a risk department complements the functions of Veolia
Environnement's risk committee, which was restructured in 2004. The risk
committee, which is chaired by the senior executive vice president and led by
Veolia Environnement's risk director, is composed of two to three
representatives from each division (a legal officer and technical or operating
officer in particular), as well as officers from Veolia Environnement's
corporate departments. The risk committee is responsible for charting risks,
encouraging dialogue and exchange regarding best practices, and assuring that
the Group's strategy with respect to risks is being fully implemented. It plays
a synthesizing role and provides a methodology to operating divisions for
classifying, evaluating and treating risks.

The risk committee meets at quarterly intervals throughout the year on the basis
of an annual work program structured around the principal risks faced by the
Group. In 2004, the risk committee examined the following items in particular:
measures undertaken to manage environmental risk, prevention of the risks
related to legionella, review of the implications of new regulations relating to
incineration facilities and dioxin emissions, crisis communication and ethical
issues.

Each division includes various representatives that have been appointed to help
manage risk. Further, Veolia Environnement's energy services division and waste
management division established their own risk committees in 2004 and in early
2005, respectively, so as to ensure adequate coordination of risk management
management between the divisional and Group level.

Control

Effective risk management entails ensuring that appropriate procedures are
complied with and that, more generally, the Group's financial interest and
fundamental values are taken into account. The Group's internal audit
department, created in 2002, helps to perform this mission.

The director of the internal audit department reports directly to the Group's
chairman and chief executive officer.

The internal audit department carries out its functions throughout the Group
according to an annual program and in conformity with a charter approved by the
accounts, audit and commitments committee. The internal audit department has
three missions (post-acquisition matters, internal controls, cross-control), and
acts in accordance with independent professional standards, in particular those
of the Institute of Internal Auditors (at the international level), and those of
the French Institute of Auditors and Internal Control (at the national level).
Tools to follow up on audit recommendations have also been established.

The director of the internal audit department participates in meetings of the
accounts, audit and commitments committee and presents it with summaries of the
department's work. The director also periodically furnishes the accounts, audit
and commitments committee with an activity report and audit program.

4.1.9.2 - Principal work carried out in 2004

In addition to managing legal and financial risks, Veolia Environnement focused
in 2004 on managing risks related to the environment, the safety of personnel
and crisis management.

Legal risks

Veolia Environnement places great importance on the management of legal risks
given the nature of its business--environmental services--an area that requires
taking a long-term view of the public interest and that has been increasingly
subject to stricter and more complex regulation.

The nature of Veolia Environnement's activities (outsourcing of local public
services with operations in nearly 80 countries and relationships with a variety
of representatives and counterparties) has led Veolia Environnement to adopt
legal vigilance rules to guide Veolia Environnement's employees in their
activities and in the preparation of legal documents. In particular, these rules
cover civil liability and insurance policies, criminal responsibility,
litigation reporting, intellectual and industrial property, ethics, standard
contractual clauses, sponsorship and patronage, commercial intermediaries,
confidentiality and compliance with labor laws and security norms. The rules
also cover the Group's legal organization, delegation of powers, selection and
training of directors and proper conduct of board and shareholders' meetings.

As a company with shares listed on the Paris and New York stock exchanges,
Veolia Environnement must also adhere to certain rules relating to:

o     Publications: Veolia Environnement has created a disclosure committee to
      supervise and control the collection, dissemination and public disclosure
      (including filing with market authorities) of information relating to
      Veolia Environnement and its business (cf. ss.6.1.2.2 infra).

o     Corporate Governance: In particular, Veolia Environnement must adhere to
      rules governing relations with shareholders, the board of directors, board
      committees and management, and must ensure proper application of
      regulations applicable to listed companies (cf. ss.6.1 infra).

o     Insider Trading: To help prevent insider trading, Veolia Environnement has
      adopted a code of conduct governing trading in the Company's shares.
      Pursuant to this code, the Group's senior managers are deemed to be
      "permanent insiders" and trading by any of them in the Company's shares is
      prohibited at all times, except during strictly defined periods.

The legal departments of the Group and of each division help ensure, on a daily
basis, the adequate management of Veolia Environnement's legal risks. This is
performed in tight liaison with operating teams in the field and consistently
with the Group's overall risk management process.

Financial risks

In the context of its operating and financial activities, the Group is exposed
to liquidity risks and risks relating to fluctuations in interest rates,
exchange rates and share value.

Veolia Environnement has centralized the management of its exposure to these
risks in order to better limit them. Its strategy is embodied in certain
management rules set forth in a manual entitled "Rules for Management of
Financing/Treasury and Associated Risks", which is distributed to the Group's
subsidiaries. This centralized management system aims to actively manage the
Group's market risks. Veolia Environnement's treasury and financing department
is directly responsible for the adoption and implementation of coverage
mechanisms for the Group, including by assisting the Group's divisions in
identifying their respective exposures and implementing coverage mechanisms in
each country where they operate. Veolia Environnement has established a treasury
management system that allows it to continuously follow the main indicators
relating to liquidity and the financial instruments used to manage interest rate
and exchange rate exposure. Veolia Environnement has also implemented a
transaction control structure through its middle and back offices that allows it
to adhere to limits imposed by senior management and oversee the security of
transactions. In addition, financial risk management teams submit daily, weekly
and monthly reports to Veolia Environnement's senior management on the evolution
of markets and the consequences (including potential ones) on the Group's
liquidity and the value of its portfolio of derivative instruments. The reports
also include detail on hedging operations and their impact on the breakdown of
fixed-rate and floating-rate debt.

Veolia Environnement also centralizes the management of interest rate risks. The
Group uses all of the interest rate management tools available in the market,
including interest rate swaps and options in particular.

The Group is also exposed to the risk of fluctuations in currency exchange rates
as a result of the international nature of its activities, which require
management of cash flows in many currencies. Because the Group's expenses and
revenues are denominated primarily in the local currency of each country in
which the Group operates, the effect of exchange rate fluctuations on the
Group's business is limited. The Group implements coverage mechanisms in respect
of these risks by using a range of products available in the market, including
forward purchases and sales, currency swaps and currency options. In addition,
to limit Veolia Environnement's exposure to the impact of fluctuations of
exchange rates on the liabilities recorded in its balance sheet, Veolia
Environnement has adopted a policy to allocate financing in different currencies
with the objective of financing its local operations in local currency. In
addition, in connection with the management of assets in foreign currencies,
Veolia Environnement has implemented a strategy that seeks to provide financing
in different currencies as a function of the ability to generate future cash
flows in such currencies. This strategy aims to limit Veolia Environnement's
exposure to exchange rate risks with respect to future cash flows, and uses, in
addition to debt, the entirety of products that permit the conversion of euro
resources into other currencies (currency swaps and cross-currency swaps).

Veolia Environnement monitors the Group's liquidity in coordination with
designated managers at the divisions' level. The Group centralizes the
incurrence and management of new significant financings in order to steer its
present and future liquidity to optimum levels. The Group satisfies its
financing needs through bank loans, commercial paper and debt issues on the
international capital markets and the international private placement markets.

The Group also manages its exposure to the impact of fluctuations in the price
of shares by conducting limited trades in the market. Regarding VE shares, the
Group intervened in the market only rarely during 2004. These interventions were
conducted in a centralized fashion, and were included in daily and monthly
reports to senior management. Further, following the entry into force on October
13, 2004 of the European Union's "Market Abuse Directive", Veolia Environnement
conducted only limited trades in its shares, in the context, for example, of
adjusting hedging transactions following an increase in share capital reserved
for employees or the repurchase by the Company of a portion of Vivendi
Universal's shareholdings in the Company (cf. ss.3.2.2 supra).

See also section 5.1.3.6 below.

Environmental and sanitary risks

Veolia Environnement aims to provide its professional guarantee on the quality
of products it distributes, such as drinking water, or the services it provides,
such as transportation services where passenger safety is paramount. The Company
believes that compliance with the environmental and safety regulations
applicable to its activities is extremely important. In particular, it strives
to comply with regulations concerning atmospheric emissions in the case of its
incineration facilities, with regulations relating to "sensitive" installations
(including cooling towers, air-conditioning networks, sanitary hot water
networks, wastewater treatment plants) and with suggested measures for
controlling legionella. It also seeks to comply with transportation regulations
applicable to its transport activities.

Veolia Environnement believes that mere compliance with regulatory norms does
not suffice to ensure adequate control of sanitary risks, and it has voluntarily
taken a number of steps to establish strict vigilance and prevention procedures
in the context of a global sanitary policy, particularly with respect to its
multi-service offerings (for example, sanitary diagnosis and checkpoint controls
and inspections). When Veolia Environnement operates installations that do not
belong to it or in which it cannot undertake direct investments, information is
furnished to the client in order to allow it to take the required measures.

Veolia Environnement's actions in this domain are coordinated by its health
department and by its environmental management system at the Group level. They
are supported by the research department and developed at the Group's
operational entities level.

Risks relating to the safety of personnel

Veolia Environnement is an organization that includes more than 250,000
employees around the world. Most of these employees work either at client sites
or at various other sites that do not belong to Veolia Environnement or its
subsidiaries.

Within this context, Veolia Environnement has set forth certain objectives and
established various programs to help ensure the safety of its employees. These
include action plans relating to health and safety, employee training, an effort
to encourage communication that takes safety into account, an effort to
incorporate safety concerns into the decision-making process, an emphasis on
wearing appropriate protective gear and the implementation of reporting and
evaluation procedures relating to safety concerns.

Veolia Environnement's actions in this domain are implemented at the divisional
and operational level and coordinated by its human resources department.

Crisis management

Veolia Environnement has implemented a crisis management system, which has been
operational since October 1, 2003. This system relies on the active
participation of all of Veolia Environnement's divisions, including their
subsidiaries abroad, and aims to guarantee an adequate response in the case of a
serious accident in one of Veolia Environnement's areas of activity that could
affect the health and safety of individuals or the environment. The crisis
management system includes rules for managing information and deploying crisis
teams in the event of such an accident. Training and simulation exercises are
periodically conducted as well.

4.1.10 - Internal Controls

Definition of Internal Controls

Internal controls are the body of rules that allow the Group to produce
financial information in conformity with regulatory requirements. Financial
information consists of the financial statements, management's discussion and
analysis (rapport de gestion) and all other information relating to Group
finances that are published in financial releases, including the French document
de reference, U.S. Form 20-F, press releases of a financial nature and analyst
or investor reports.

Organization

In 2004, Veolia Environnement created an internal control department with
respect to financial matters. The internal control department is responsible for
coordinating the work of other departments in identifying, standardizing and
making more reliable the key processes for producing financial information
within the Group. Internal controls begin at the level at which financial
information is entered into the Group's consolidation system, and end at the
level at which financial information is verified either by a third party or by
an internal department (non-finance related) charged with the task.

With respect to the set of international standards entitled " COSO 2", the
internal control department's work involves two of these standards in
particular: (i) "Control Activities": Establishment of the Group's financial
procedures, and (ii) "Information and Communication": implementation of rules
for communicating information to ensure a broad understanding of the Group's
procedures and consistency of the various financial procedures then-existing.

The internal control department employs a network of internal control personnel
present in each division and operating unit. It carries out its work with three
main objectives:

         o   Identifying and formalizing the key processes for developing
             financial information, which are then summarized and broadly
             distributed throughout all levels of the Group;

         o   Harmonizing financial management systems relating to their
             implementation;

         o   Ensuring that employees possess the requisite skills and have the
             necessary resources at their disposal to effectively produce the
             Group's financial information.

The internal control department relies initially on the effective management of
all of the Group's business procedures, including non-finance related procedures
(commercial, technical, human resource, legal, economic, etc.) that are overseen
and evaluated by the risk department. It follows up with a rigorous evaluation
of the application of the Group's rules, overseen by the internal audit
department.

Compliance with Regulatory Requirements

Regarding the Group's compliance with Section 404 of the U.S. Sarbanes-Oxley Act
(internal control over financial reporting), the internal control department is
responsible for implementing the controls over financial reporting, while the
audit department is charged with their evaluation through the distribution of
questionnaires and performance of audit work.

Further, under the French Financial Security Law of August 1, 2003 (Loi de
Securite Financiere), Veolia Environnement's chairman is required to furnish
shareholders with a report relating to internal audit procedures in conformity
with Article L.225-37 paragraph 6 of the French Commercial Code. This report
will be presented at the combined general shareholders' meeting of May 12, 2005,
and is attached hereto. This report was prepared on the basis of an internal
control review program that was launched in 2003. Veolia Environnement expanded
the review program in 2004 to include more detailed tests, in anticipation of
the entry into force in 2006 of Section 404 of the U.S. Sarbanes-Oxley Act.

The statutory auditors' report (established pursuant to the last paragraph of
Article 225-235 of the French Commercial Code) on the chairman's report relating
to internal controls over financial and accounting information is also attached
as an annex to this reference document(29).

4.1.11 - Principal Establishments

See paragraph 5.3 below, note 7.9 to the statutory financial statements.

----------------------

29   Available in the French version of the reference document (annexe 2, page
     26 of annexes).

<PAGE>

4.2      DEPENDENCE OF THE COMPANY

Veolia Environnement believes that its activities are not materially dependent
on any one patent or license that it may own, nor on any one industrial,
commercial or financing contract. Veolia Environnement also believes that it is
not materially dependent upon any particular contract or customer.

4.3      LITIGATION

Compagnie Generale des Eaux

On February 27, 2001, the French Competition Council (Conseil de la concurrence)
notified Compagnie Generale des Eaux of a complaint alleging that several joint
ventures that it had formed with other water services companies affected the
level of competition in the market. On July 11, 2002, the Council rejected the
allegations of anticompetitive cooperation (entente anticoncurrentielle) among
the water services companies in question and refused to impose monetary
sanctions or issue an injunction against these companies. However, the Council
found that the existence of the joint ventures constituted a "collective
dominant position" in the market and requested the French Ministry of Economy,
Finance and Industry to take all necessary measures to modify, complete or
terminate the pooling of means arrangement of these companies through their
joint ventures. Compagnie Generale des Eaux contested this finding, first before
the relevant judicial authorities, which declared that they did not have
jurisdiction over the matter (decision dated July 12, 2004 of the commercial
section of the French Supreme Court (Cour de cassation)), and then before the
relevant administrative authorities (action currently pending before the French
Conseil d'Etat). In light of the nature of the litigation, Veolia Environnement
has not accrued a reserve for its potential outcome.

SADE

In April 2000, SADE, a subsidiary of Veolia Water, and 40 other companies
received notice from the French Competition Council of a complaint alleging
anticompetitive agreements (entente anticoncurrentielle) among these companies
in respect of public bids for 44 public sector construction contracts in the
Ile-de-France department, which includes Paris and its suburbs. These companies,
including SADE, filed answers to the complaint in September 2000. The Council
filed a supplemental complaint in November 2001, which replaced its original
complaint and reduced the number of construction contracts subject to scrutiny
to 32 contracts. The companies filed an answer to the new complaint in January
2002. However, on October 26, 2004, the Council filed a second supplemental
complaint, the stated objective of which was to clarify and supplement the
information contained in the earlier complaints. SADE, which is currently
implicated with respect to 9 contracts in the complaint, filed a response in
January 2005 that contested the Council's complaint on the merits and on the
basis of irregularities in the complaint procedure that affected its right of
defense. At this stage of the litigation the Company cannot evaluate the
associated financial risk and, accordingly, has not accrued a reserve for the
potential outcome.

OTV

At the end of 1993, NOSS, a consortium led by Northwest Water International
Limited in which Veolia Water participates through its subsidiary Omnium de
Traitement et Valorisation, or OTV, won a contract to build a water treatment
facility and a wastewater collection network in the city of Bangkok pursuant to
an offer made in a public tender held in 1992. The value of the contract at the
time was 150 million pounds sterling and required 38 months of public works.
Because of numerous difficulties encountered with Bangkok municipal authorities
(including, for example, restrictions on access to key sites and modifications
of project specifications) and the failure to agree on compensation during the
ensuing discussions, NOSS terminated the contract on March 6, 1998 and commenced
an arbitration proceeding for damages. The Bangkok municipal authorities
rescinded the contract in June 1999 and drew on the project guarantees, which
were partially paid by the issuer banks. In addition, all related outsourcing
contracts were terminated by mutual consent, except for a contract with Euro
Iseki Limited, or EIOL, which commenced its own arbitration proceeding against
NOSS. The dispute between EIOL and NOSS has been settled, at no cost to OTV.
Regarding the claim against the city of Bangkok, Veolia Environnement does not
expect that a final award will be rendered in this proceeding for several years,
as arbitrators are still in the process of being appointed. Although OTV is
jointly and severally liable with the other members of the NOSS consortium in
respect of any monetary damages that may be awarded to the other parties in
these proceedings, it does not believe, given the current stance taken by the
city of Bangkok, that this litigation will have a material adverse effect on the
Company. Nevertheless, OTV has accrued a reserve for its potential outcome.

Water Applications & Systems Corporation and Aqua Alliance International

Several present and former indirect subsidiaries of Veolia Water in the United
States(30) are defendants in lawsuits in the United States in which the
plaintiffs seek to recover for personal injury and other damages for alleged
exposure to asbestos, silica and other potentially harmful substances. Regarding
the lawsuits against Veolia Water's former subsidiaries, certain of Veolia
Water's current subsidiaries have retained all liability relating thereto and
are sometimes involved in the management of such lawsuits. Further, the
purchasers of Veolia Water's former subsidiaries in some instances benefit from
guarantees given by Veolia Water or by the Company in respect of the outcome of
such lawsuits. These lawsuits typically allege that the plaintiffs' injuries
resulted from the use of products manufactured or sold by Veolia Water's present
or former subsidiaries or their predecessors. There are generally numerous other
defendants, in addition to Veolia Water's present or former subsidiaries, which
allegedly contributed to the claimed injuries. Reserves have been accrued by
Veolia Water's present subsidiaries for their estimated liability in these cases
based on, among other things, the nexus between the claimed injuries and the
products manufactured or sold by Veolia Water's subsidiaries or their
predecessors, the extent of the injuries allegedly sustained by the plaintiffs,
the involvement of other defendants, and the availability of insurance coverage.
These reserves are accrued at the time such liabilities are probable and
reasonably estimable. A number of such claims have been resolved to date either
through settlement or dismissal. To date, none of these claims has been tried to
a verdict. Veolia Environnement does not expect these claims to have a material
adverse effect on its business, financial condition or results of operation. It
is not possible, however, to predict the extent to which additional claims of
this type may be filed in the future against Veolia Water's present or former
subsidiaries or the amounts for which Veolia Water's present or former
subsidiaries ultimately may be liable as a result of such claims.

Connex

On November 27, 1998, the French General Direction for Consumers, Competition
and the Prevention of Fraud, or DGCCRF, obtained an order from a French court
authorizing it to perform an inspection on the premises of Veolia
Environnement's transportation subsidiary CGEA Transport (now Connex) and other
companies in the public transportation market, with the objective of obtaining
elements of proof relating to possible anti-competitive practices in this
market. The DGCCRF proceeded to perform these inspections and seizures in 1998.
Connex was informed in February 2003 that the Ministry of Economy, Finance and
Industry had requested the French Competition Council to render a decision in
this matter on the merits. In September 2003, the French Competition Council
notified Connex of two grievances that raised the possibility, between 1994 and
1999, of collusion among operators which might have had the effect of limiting
competition at the local and national level in the public transportation market
relating to urban, inter-urban and school services. In September 2004, the
French Competition Council notified Connex of additional grievances alleging the
existence of an anticompetitive agreement (entente anticoncurrentielle) at the
European Union level. In January 2005, the judge advocate (rapporteur) of the
French Competition Council transmitted his conclusions, in which a part of one
of the grievances was dropped. Possible sanctions relating to this matter will
be announced at a later date in the conclusions of a government commissioner.
Accordingly, given the absence of any additional information allowing it to
estimate possible sanctions, Veolia Environnement has not accrued any reserves
for this claim as of this date.

------------------------

30   These include subsidiaries of Aqua Alliance and subsidiaries of Water
     Applications & Systems Corporation (formerly known as United States Filter
     Corporation), the holding company of the former USFilter group the majority
     of the activities of which were sold to different purchasers in 2003 and
     2004 (cf. ss.4.1.4 and 4.1.6.1 supra).

<PAGE>

Onyx

Following a fire that started on July 25, 1997 in a landfill operated by Onyx
Mediterranee, a subsidiary of Onyx, in Septemes-les-Vallons, in the south of
France, Onyx Mediterranee was ordered under a May 6, 2003 judgment of the
criminal court (tribunal correctionnel) of Aix-en-Provence, and under a December
17, 2003 decision of the Court of Appeal of Aix-en-Provence, to pay a
(euro)100,000 fine for the involuntary destruction of property. The sanction was
amnestied after payment of the fine. Furthermore, the tribunal ordered an expert
review in respect of the claims for indemnification brought by civil parties
relating primarily to the deterioration of woods and plantations. Veolia
Environnement believes that such litigation will not have a material adverse
effect on the financial condition of the Company in light of insurance coverage
notably and, accordingly, has not accrued a reserve in respect of the potential
outcome.

Dalkia

During 2004, arbitration proceedings between Finenergia, an Italian subsidiary
of Dalkia, and members of the Jacorossi family were settled. The proceedings
arose in connection with Finenergia's planned acquisition of the Fintermica
group, which was never completed because due diligence conducted in respect of
the Fintermica group proved unsatisfactory. The settlement puts a definitive end
to the dispute, which represented one of Dalkia's greatest potential
liabilities. Given the terms of the settlement and the tax position of Dalkia's
Italian subsidiaries, as well as the reserves accrued in respect of this claim
in prior fiscal years, the settlement did not have a material impact on the 2004
financial statements of these Italian subsidiaries.

Proactiva

On September 22, 1999 and February 10, 2000, several lawsuits were filed in the
Commonwealth Court in Arecibo, Puerto Rico (transferred to San Juan, following
the decision of the Supreme Court of Puerto Rico) against, among others,
Compania de Aguas de Puerto Rico, or CAPR. CAPR was a subsidiary of Aqua
Alliance until 2000, when it was transferred to Proactiva, Veolia
Environnement's joint venture with FCC. The complaints allege that CAPR operated
(until June 2002) a wastewater treatment facility in Barceloneta, Puerto Rico,
that emitted offensive odors and hazardous substances into the environment,
which damaged the health of the plaintiffs, a group of local residents. On
August 11, 2003, the Supreme Court of Puerto Rico overturned the order of the
court of first instance authorizing the consolidation of the lawsuits of the
different plaintiffs, leaving this question open to further debate. The lawsuit
is currently in the preliminary stage of determining damages and responsibility.
Concurrently, a mediation proceeding commenced on May 28, 2003, at the request
of the court and all parties, in order to find a complete solution to this
litigation. This mediation proceeding has not yet resulted in a specific
proposal. In light of the state of advancement of these two proceedings and
CAPR's insurance coverage, Veolia Environnement has not accrued a reserve for
the potential outcome of this litigation.

The aggregate amount of reserves accrued by Veolia Environnement in respect of
all litigation, including tax claims, in which Veolia Environnement or its
subsidiaries are involved(31), cover the losses that Veolia Environnement
believes are probable as a result of all types of litigation in which it is
involved in the course of its business, including a large number of claims and
proceedings that, individually, are not material to Veolia Environnement's
business. The largest individual reserve accrued in Veolia Environnement's
financial statements relating to litigation amounts to approximately (euro)10
million.

------------------------

31   See Note 15 to the consolidated financial statements.

<PAGE>

Other than as described above, there are no other exceptional facts or legal
proceedings in which the Company is currently involved which may have a material
adverse effect on its results of operations, assets, financial condition or
perspectives.

4.4      HUMAN RESOURCES

4.4.1    Social Policy

Developing the professional skills of employees is a critical factor in the
provision of environmental services. Any improvements in service quality for the
Company's customers and end-users are dependent upon the skills of employees and
their full involvement in the missions and tasks entrusted to them. Skill
development has also become increasingly important given that most countries
around the world are experiencing an aging of their working populations and will
soon encounter a shrinking labor force. Veolia Environnement's human resource
policy is therefore focused on enhancing the skills of employees as well as
their loyalty to the Company. Regardless of the nature of their activities or
the countries in which they conduct business, the Group's subsidiaries are
guided by the following common principles that are applied according to their
specific local needs:

         o   offering employees the ability to progress throughout their
             careers, while favoring deeper integration of employees through
             continuous improvements in work conditions;

         o   encouraging employees to develop an interest in the life of the
             Group through the development of social dialogue and local human
             resource initiatives;

         o   providing employees with fair compensation based on their
             contribution to the Group's activities, through compensation that
             includes salary, social welfare benefits and various forms of
             incentives and profit-sharing.

4.4.1.1  Improving knowledge of social reality and human resources policies in
         the Veolia Environnement Group

The implementation of a coherent human resource policy would not be possible
without continuous efforts to develop awareness of human resource practices
throughout the Group. Accordingly, Veolia Environnement has developed a process
for collecting human resources data that covers all of its subsidiaries
worldwide. A network of more than 500 correspondents gathers information
provided by one hundred human resource indicators, which have been progressively
refined so as to allow analysis in real-time and facilitate comparisons by
geographic area or activity. Thanks to these indicators, the Group's
subsidiaries and its divisions are able to design follow-up and monitoring tools
that are particularly useful in improving their human resource practices. The
Group also carefully monitors its data concerning staff turnovers, limited-term
contracts, overtime, absenteeism and industrial accidents. It has set targets
for itself in various such areas, which have been integrated into the "Veolia
Environnement 2005" efficiency plan.

In an effort to improve its practices and to better anticipate changes in its
business, Veolia Environnement has intensified its research in the area of
social policy. The social observatory (observatoire social), having conducted a
study on the integration of young people and adults into the workplace through
apprenticeship in 2003, conducted a study in June 2004 on continuing education
using a representative sample of employees in France. A qualitative study
involving certain subsidiaries in five European countries is also currently in
progress, so as to prepare Veolia Environnement's European group committee for a
later discussion on skills management. The social observatory has also renewed
ties with several public research centers, such as Centre d'etudes de l'emploi
(management of age differences), Centre d'etudes et de recherche sur les
qualifications (skill management), Groupe lyonnais de sociologie industrielle
(inter-cultural management). It regularly welcomes young researchers preparing
their thesis on the life of corporations.

In 2004, Veolia Environnement's establishment of a comprehensive skill
management program for the Group also led to the development of information
relating to jobs and required skills, selection of a Group-wide software program
to follow the evolution of employee skills, annual interviews and training. In
order to have a consistent human resource policy, the Group must also develop a
classification system common to all of its executives. This classification
system is currently being finalized and should be progressively extended to
supervisors as well.

During 2004, Veolia Environnement also carried out regular audits and monitoring
of its human resource policies, through use of its worldwide consolidation tool.
In order to ensure the consistency of the Group's various analytical tools for
monitoring its human resource policies and their deployment, Veolia
Environnement created a "social perspectives" department at the beginning of
2005. This department oversees the work of the social observatory, the teams in
charge of human resource data, the persons who provide information relating to
jobs and required skills, and the persons who oversee collective bargaining in
the areas of work requirements, employment and professional training.

4.4.1.2 Professional advancement and improvement of working life are at the core
        of Veolia Environnement's development

Providing those who commit themselves to the development of their skills with
the possibility for professional advancement

Each employee of the Group must be afforded the possibility for professional
advancement at each stage of his or her career. At the beginning, hiring through
apprenticeship is just one of the ways that Veolia Environnement seeks to
attract young people to careers in environmental services. It may also resort to
professionalization contracts to hire job seekers. In both instances, however,
employees must commit themselves to developing their skills throughout their
careers. Accordingly, employees must be guided in their career development, with
the skills that they acquire through experience being validated along the way.
Those who do not have basic knowledge in certain areas must be offered the means
for acquiring such knowledge. Employees in the later stages of their careers
must be able to benefit from assistance aimed at diversifying their careers and
better valuing the skills they have already acquired. By the end of 2005, Veolia
Environnement will aim to have 3% of its employees committed to a career path
that leads to a recognized qualification (diploma or title), including 2%
through apprenticeship.

Since the end of 2004, the Company has implemented a series of professional
advancement tools to reflect the principles adopted by various corporate
partners in France in an inter-professional agreement entered into in September
2003 (most of which were taken up in the May 4, 2004 law):

         o   systematic professional assessment reviews or meetings;

         o   development of tutoring, in particular by creating a tutorship
             position within the Group's service companies;

         o   implementation of professional counseling and advice services for
             employees;

         o   creation of a training binder, which includes employees' training
             history and experience;

         o   implementation of "skill development contracts", enabling employees
             to acquire a title or a diploma through combination of past
             achievements and continuing education;

         o   development of programs to combat illiteracy;

         o   renewal of work groups so as to better anticipate skill needs and
             the expected evolution of skills;

         o   development of tools to afford employees greater visibility with
             respect to possible career advancement (mapping of skills and
             jobs).

Veolia Environnement's initiatives in support of professional advancement are
part of a policy that encourages active employee mobility. Whenever possible,
Veolia Environnement favors internal mobility for filling available positions
over external hiring. In case of the loss of one of its contracts, Veolia
Environnement systematically offers its employees various job reclassification
possibilities. In consideration of Veolia Environnement's efforts to ensure
continuity of employment for its employees, the latter must be willing to rotate
among the Group's various activities, all of which have in common the provision
of services related to the environment. During 2004, 68,000 visits were recorded
in the area of the Group's intranet site dedicated to managing vacant job posts
and job requests. 10,256 transfers were organized, 2,434 of which allowed Veolia
Environnement to avoid external hiring.

The agreement that Veolia Environnement signed with its unions on October 4,
2004 embodies the professional advancement principles set forth above. It
constitutes one of the first company agreements to reflect concretely the
professional training reform initiated by various corporate partners and public
authorities in France. Veolia Environnement's policy on professional advancement
goes hand in hand with the training opportunities it offers at the Veolia
Environnement Campus, described below.

Veolia Environnement Campus: a tool of pedagogical excellence dedicated to a
ll subsidiaries

Veolia Environnement Campus meets several objectives:

         o   Enriching employees' skills in their jobs and work environments;

         o   Accompanying and facilitating professional mobility;

         o   Strengthening organizational culture around environmental services
             jobs;

         o   Organizing the transfer of know-how within the companies of the
             Group;

         o   Increasing Veolia Environnement's value to clients through the
             heightened expertise of its employees.

The campus also constitutes a forum for cultural diversity and interaction, a
meeting place for divisions' activities and a technological showcase of the
activities of Veolia Environnement.

A greatly diversified training offer

The campus' training offer encompasses all of the skills necessary for the
optimal provision of environmental services. Training is available for all
staff, including initial training through apprenticeship and continuing
education initiatives. This training is enriched by the support of many Group
employees, who help to design, conduct and evaluate training programs.

Initial training contributes to greater recognition of the activity of
environmental services and can help to improve its image through the award of
valued and recognized diplomas. The Veolia Environnement Campus, which is the
only establishment in France created by a private corporation in the
environmental field, offers the award of 15 diplomas, from CAP to Bac +5, with
the latter training category falling within the new European
License/Master/Doctorate (LMD) degree structure. The Veolia Environnement Campus
also has partnerships with universities and research centers both in France and
abroad.

In 2004, the Veolia Environnement Campus trained 630 apprentices, with an
average success rate of approximately 95%. Thanks to a diversified offering of
approximately 1,000 courses, nearly 14,000 trainees participated in continuing
education programs. Training periods last on average from 3 to 5 days, using the
most advanced pedagogical methods and communication techniques available.

A spreading of missions worldwide

Because Veolia Environnement's primary goal with respect to training is to
develop the skills of its employees worldwide, Veolia Environnement relies upon
its campus to:

         o   Give an international dimension to its training;

         o   Organize multinational training courses;

         o   Accompany and advise training heads in each country;

         o   Create associated centers and partnerships.

The Veolia Environnement Campus has spread its mission worldwide through the
creation of training centers with similar aims in the United Kingdom, the Czech
Republic and Morocco. Other centers provide support in Germany, Australia,
Sweden, Gabon, Malaysia, China and Mexico.

Ensuring the safety of employees and improving working conditions

Veolia Environnement's employees often work at external sites under conditions
that involve risks to their safety. They are sometimes entrusted with tasks that
entail strong physical demands, which may generate health problems. Safety and
improvement of working conditions therefore constitute permanent focus areas
within Veolia Environnement. Each division has prepared various voluntary
policies for risk prevention. In addition to the continuous improvement of
safety material and individual protective gear, several priority safety measures
have been systematically implemented, aimed at:

         o   preventing dangers by continuing the process for identifying and
             evaluating risks, which has been conducted since 2002 by Veolia
             Environnement's divisions;

         o   training and informing employees on how to recognize and prevent
             industrial accidents and understand the risks assumed: for example,
             an international day of safety prevention and awareness actions was
             organized in October 2004 at each of Onyx's sites;

         o   integrating the monitoring of accident indicators (frequency and
             seriousness) into the operational management of each company within
             the Group;

         o   strengthening the safety network, in particular at the
             international level;

         o   developing dialogue and coordination of efforts relating to safety
             with staff representatives, in the context of 2,242 groups which
             are dedicated to the study of health and safety issues;

         o   supporting injured persons, both during their convalescence and the
             time that they resume work. It is also Veolia Environnement's
             responsibility to better understand the causes of accidents and, if
             necessary, to undertake the appropriate remedial actions for
             ensuring that such accidents do not happen again;

         o   ensuring the safety of travel abroad: Veolia Environnement must
             work to ensure the safety of employees who are either based in or
             traveling for business in high-risk countries. Each month, a list
             of countries where travel is either prohibited or where specific
             precautions must be taken is circulated to employees. This
             classification by country enables Veolia Environnement to undertake
             appropriate measures for achieving maximum security, and also makes
             possible rapid evacuations in the event they are necessary.

Ensuring the physical safety of employees to the fullest extent possible is part
of a larger effort aimed at improving employee working conditions. Absenteeism,
for example, may not only indicate health problems related to physical risks,
but can sometimes reflect the absence of incentive to engage fully in one's
professional life. Therefore, reduction of physical risks must go hand in hand
with individual and collective actions to create more balance between work and
personal life.

Employee health is a concern in every part of the world, but Veolia
Environnement must be even more vigilant in countries where the population
suffers from a serious epidemic. In 2004, Veolia Environnement therefore joined
the "World Coalition of Corporations against AIDS", and organized, in
cooperation with the Pasteur Institute, an important AIDS prevention and
treatment campaign in Gabon and India. Moreover, Veolia Environnement not only
invests in the health of its employees, but also in the health of populations in
countries that it serves. For example, Veolia Water launched a broad program in
Tangiers focusing on the improvement of water and water-treatment infrastructure
and the raising of awareness regarding hygiene and health issues for
schoolchildren, the impact of which will be evaluated and made public.

A discussion on the theme "Safety, Health & Work Life" is expected to occur
during 2005, as part of the activities of Veolia Environnement's group committee
in France.

4.4.1.3  Promoting social dialogue at all levels of Veolia Environnement

Strengthening social dialogue around strategic goals for Veolia Environnement
and its employees

The establishment of a group committee in France has strengthened dialogue
within Veolia Environnement. Not only has this committee fulfilled its mission
of providing information and coordination on subject matters concerning all of
Veolia Environnement's divisions, but it has also constituted a framework for
the preparation of agreements with unions. For example, an agreement relating to
skills development and professional advancement has been signed by Veolia
Environnement's six representative trade unions. It must now be adapted to the
requirements of each division and subsidiary in France. Since the end of 2004,
negotiations have begun to reproduce this agreement at the subsidiary level and
place it at the center of employee dialogue.

This effort should help to intensify a spirit of consultation and negotiation,
which is already very developed within the Group. Consultative work involves
13,457 staff representatives worldwide, and in 2004 resulted in 1,360
agreements, 64% of which related to employee compensation, 17% to health, safety
and work conditions, and 8% to social dialogue.

While strongly rooted in French social and institutional realities, Veolia
Environnement's human resource policy must also be applied in the various other
countries where the Group conducts its activities. The "social model" that has
been constructed in France, however, cannot be inflexibly applied in other
countries without taking into account specific local nuances. This is where
social dialogue again assumes its importance for the Group, and in this spirit,
a European group committee is currently being established. This new committee
will bring together representatives from each of the European countries in which
the Group does business.

Favoring participation and social innovation

The principles developed by the Company regarding human resource management do
not constitute a rigid framework. They leave room for participation by each
operating entity and favor practical initiatives. The diversity of the Group's
practices and activities is one of its greatest assets.

For the second consecutive year, Veolia Environnement has collected information
from its operating entities in 40 countries regarding their social and corporate
initiatives. The 335 initiatives mentioned in such surveys were first analyzed
and then distributed to all companies within the Group so as to favor the
sharing of best practices.

In 2004, "social innovation" trophies were awarded for the following
initiatives:

         o   Connex, for its "De l'absence a la presence" project, a new
             approach to the reduction of absenteeism of employees of the
             Stockholm metro in Sweden;

         o   Onyx/Renosol, for its annual safety action plan on all of its sites
             in France;

         o   Dalkia, for the contribution of funds related to the development of
             employment and completion of social projects in the Czech Republic;

         o   Veolia Water, for its program to combat school drop outs and
             improve health education in the schools of Tangiers in Morocco,
             entitled "Une ecole de qualite";

         o   Dalkia, for the creation of a block-release channel in urban
             engineering in Lithuania;

         o   The Sluzeb Environment Institute in Prague, for the development of
             staff training programs in the Czech Republic.

4.4.1.4  A compensation policy that includes social welfare benefits and
         employee profit-sharing

Veolia Environnement applies a global compensation policy, which is consistent
with the Group's results and includes the following components: salary, social
welfare benefits and employee savings. This policy consists of:

         o   awarding competitive compensation based on the markets and
             countries concerned;

         o   enabling employees to earn fair compensation which takes into
             account their own personal efforts;

         o   strengthening social welfare benefits;

         o   reinforcing the pension systems that exist in various countries;

         o   developing employee savings.

Regarding social welfare benefits for employees, Veolia Environnement has been
able to take advantage of its size and international dimension to improve the
pricing and services offered under the health and insurance policies provided by
companies within the Group. For this purpose, it has carried out a restructuring
of insurance contracts in order to optimize the costs and services provided
under such policies and to limit the financial risks in case of excess.

Regarding pensions, after having closed access to certain service pension funds
that had become too risky (replaced by defined contribution funds), Veolia
Environnement carried out a full audit of its social commitments worldwide and
implemented a software consolidation tool for these commitments in order to
optimize the management thereof. This management process relies upon the work of
a steering group, which includes representatives of the financial and human
resource departments of each division. The steering group is charged with
controlling commitments and enhancing the performance of investments.

Finally, the year 2004 was marked by a renewed effort to encourage employee
shareholding in the context of a group savings plan managed by Sequoia (ss.6.4.3
infra). The plan is available in 7 countries, and consists of regular offers to
employees who may wish to become shareholders of Veolia Environnement in the
future. The plan has collected more than 13,000 subscriptions so far. Currently,
given the share capital increases that occurred during 2002 and 2004,
approximately 30,000 employees own approximately 0.62% of Veolia Environnement's
share capital.

4.4.2    Corporate Information (NRE Law(32))

The corporate information below has been drawn from an international database,
which Veolia Environnement has worked on developing since 2001. This database
includes more than one hundred corporate indicators, yielding more than 150,000
pieces of data per year, which can be sorted by company, country and
geographical area or region. All companies within the Group whose results are
either fully or proportionally consolidated for accounting purposes are included
within this database.

The 2003 data appearing below has been retreated to take into account changes in
Veolia Environnement's scope, so as to make comparisons with 2004 data more
meaningful. As a result, unless otherwise indicated, the 2003 data below
excludes FCC and the sold activities of USFilter.

--------------------------

32   Law no. 2001-420 of May 15, 2001 on new economic regulations (nouvelles
     regulations economiques, or "NRE").

<PAGE>

The main corporate indicators drawn from the international database are
presented below under different subheadings. Investors are cautioned not to
place undue reliance on such figures, in particular in the case of averages,
since the figures below are often aggregated across all parts of the world, and
may require more detailed analysis at the level of the specific geographic area,
country or business concerned.

Total Number of Employees

As of December 31, 2004, Veolia Environnement had 251,584 employees, an increase
of 4.29% (10,356 employees) over 241,228 employees as of December 31, 2003
(under the new scope of consolidation).

The following table shows the distribution of Veolia Environnement's employees
by activity and geographic location as of December 31, 2004:

--------------------------------------------------------------------------------
                    Water*      Waste      Energy    Transport    Total      %
                             Management*  Services
--------------------------------------------------------------------------------
Europe              49,965      47,728     39,140     52,183    189,408** 75.29%
--------------------------------------------------------------------------------
Of which France     27,400      32,730     18,976     25,837    105,335** 41.87%
--------------------------------------------------------------------------------
North America       3,364       10,319       7         4,664      18,354   7.30%
--------------------------------------------------------------------------------
South America       2,498       7,487      3,669        384       14,038   5.58%
--------------------------------------------------------------------------------
Africa/Middle East  7,517       5,671        78         285       13,551   5.39%
--------------------------------------------------------------------------------
Asia/Pacific        4,504       7,565       392        3,772      16,233   6.45%
--------------------------------------------------------------------------------
Total               67,848      78,770     43,286     61,288    251,584**   100%
--------------------------------------------------------------------------------
%                   26.97%      31.31%     17.21%     24.36%       100%
--------------------------------------------------------------------------------

              * Proactiva's employees (8,626 employees) have been divided
              according to activity, between water (1,633 employees) and waste
              management (6,993 employees).
              ** The total number for France includes 392 employees who work at
              the Company's headquarters and at the Veolia Environnement Campus.

As of December 31, 2004, 41.87% of the Company's employees were located in
France, 33.42% in the rest of Europe, 6.39% in the United States and 18.32% in
the rest of the world.

Breakdown of employees by type of contract and by category

As of December 31, 2004, Veolia Environnement employed 234,122 persons
(representing 93.1% of its employees) under indefinite term employment
contracts (an increase of 6.3% from 2003) and 17,462 persons under fixed-term
employment contracts (a decrease of 16.9% from 2003). During 2004, 5,245
fixed-term employment contracts were converted into indefinite term employment
contracts (or 30%). As of December 31, 2004, 21,005 of Veolia Environnement's
employees (or 8.3% of total employees) were managers (little changed from
2003), 230,579 were non-managerial employees (an increase of 4.7% from 2003),
and 47,171 were women (or 18.7% of total employees, an increase of 4.9% from
2003).

In France, among the 105,600 employees as of December 31, 2004 (including 265
employees in Reunion), 100,327 (or 95%) were employed under indefinite term
employment contracts and 5,273 under fixed-term employment contracts. During
2004, 2,027 fixed-term contracts were converted into indefinite term contracts
(or 38.4 %). Of Veolia Environnement's employees in France, 11,106 (or 10.5%)
were managers, 94,494 were non-managerial employees and 21,062 (or 20%) were
women.

Weighted average annual number of employees

This figure corresponds to the number of employees that Veolia Environnement
would have had if the latter had all been working full time during the entire
year. It is calculated by weighting the total number of employees against the
employment rate and the amount of time worked by each employee. In 2004,
Veolia Environnement's weighted average number of employees was 233,032 (an
increase of 3.5% from 2003), of which 219,235 (or 94%) were employed under
indefinite term employment contracts (an increase of 4.5% from 2003).

In France, the weighted average number of employees during 2004 was 99,954, of
which 95,433 (or 95.5%) were employed under indefinite term employment
contracts.

Consolidated weighted average annual number of employees

This figure is calculated by weighting the average annual number of employees
of consolidated companies against the level of consolidation of such
companies. In 2004, the consolidated weighted average number of employees was
235,521. For purposes of this calculation, FCC and USFilter's activities have
been included pro rata temporis.

Hiring

During 2004, Veolia Environnement hired 37,591 new employees under indefinite
term employment contracts (an increase of 10.4% from 2003) and 19,423(33) new
employees under fixed-term employment contracts.

5.9% of Veolia Environnement's weighted average annual number of employees
were employed under fixed-term employment contracts during 2004 (compared to
6.9% in 2003).

In France during 2004, Veolia Environnement hired 12,183 new employees under
indefinite term employment contracts, including 1,140 managers, and 13,119(34)
new employees under fixed-term employment contracts (or 4.5% of the total
number of employees hired). 4.5% of Veolia Environnement's weighted average
annual number of employees in France were employed under fixed-term employment
contracts during 2004.

Departures

During 2004, the total number of departures reached 55,632 (+7.8% as compared
with 2003), including 6,871 individual dismissals (-4.7% as compared with
2003) and 689 mass layoffs (-53% as compared with 2003).

In France, the total number of departures in 2004 reached 24,715, including
2,799 individual dismissals and 37 mass layoffs.

Overtime

The total amount of overtime hours during 2004 was 16,645,883 (+8.7% as
compared with 2003), corresponding to an average of 66.1 overtime hours per
employee, which the Group would like to reduce. However, the concept of
"overtime" varies depending on the definition set forth by local authorities
in countries where the Company conducts business, which can sometimes render
it difficult to assess such an indicator. Furthermore, in a services business
like that of Veolia Environnement, a large number of overtime hours are due to
emergency interventions made by on-call or on-site personnel, for example to
restore drinking water or heating within a reasonable period of time.

------------------------

33   Not including contracts transformed into indefinite-term contracts (5,245
     worldwide).

34   Not including contracts transformed into indefinite-term contracts (2,027
     in France).

<PAGE>

In France, the total number of overtime hours was 2,440,317, corresponding to
an average of 23 overtime hours per employee.

Temporary employees

The number of temporary employees during 2004 (in full time equivalent) was
10,328 (-3.0% as compared with 2003), which represents 4.4% of the total
full-time equivalent of employees.

In France, the number of temporary employees during 2004 (in full time
equivalent) was 7,446, which represents 7.4% of the total full-time equivalent
of employees.

Information relating to staff cutback and employment protection plans,
reclassification efforts, rehiring and support measures

Variations in Veolia Environnement's scope often result in transfers of
employees without their contracts being terminated. The limited number of
restructurings (excluding FCC and U.S. asset sales) that occurred during 2004
corresponded mostly either to a loss in certain markets, or to a required
reorganization of certain units. These restructurings are always carried out
not only in compliance with applicable legislation and in consultation with
the corporate partners, but also in ways that favor internal reclassifications
and mobility within the Group.

Organization of working hours and absenteeism

The organization of working hours depends on the companies involved, the
nature of their activities and their location, and is designed to meet the
needs of the companies themselves as well as those of employees. Although work
schedules are most commonly based on daily working hour requirements, they may
vary significantly from country to country. For example, depending on the
country, the workweek may be equal to 4, 5 or 6 days, and mandatory arrival
and departure times, daily schedules, rules relating to alternate short and
long workweeks and annualized limits on working hours may vary.

The average workweek in VE's business is 38.2 hours (compared to 38.7 hours in
2003). The number of part-time employees (in full-time equivalent) totaled
13,407 in 2004 (an increase of 11.8% from 2003), representing 5.7% of the
total workforce in full time equivalent.

The total number of days on which employees were absent totaled 2,922,695 in
2004 (an increase of 1.1% from 2003), including 2,006,669 days off for
sickness (representing 68.7% of the total) and 320,758 days off for industrial
accidents (representing 11.0% of the total), with the rest of the days
relating mainly to absences for family events, maternity and trade union
absences.

In France, the average workweek is 35.1 hours. The number of part-time
employees (in full-time equivalent) totaled 6,558 in 2004 (representing 6.6%
of the total workforce in full time equivalent). The total number of days on
which employees were absent totaled 1,571,748 in 2004, including 1,056,399
days off for sickness (representing 67.2% of the total) and 233,181 days off
for industrial accidents (representing 14.8% of the total).

Compensation, labor contributions and equality

The annual average gross compensation of all employees worldwide reached
(euro)24,273 per employee in 2004 (an increase of 3.4% from 2003). You should
not place undue reliance on the annual average gross compensation figures,
which are given for indicative purposes only. Compensation paid to employees
varies greatly as a result of the diverse nature of Veolia Environnement's
activities and of the work performed by employees, and can vary based on
geographic location as well.

Veolia Environnement's labor contributions represented 31.1% of its total
employment costs (30.9% in 2003). The average gross compensation paid to male
employees was (euro)24,825 per employee ((euro)24,003 in 2003), compared to
(euro)21,640 ((euro)20,930 in 2003) paid to female employees (representing a
difference of (euro)3,185, or 12.8%). This difference was mainly due to the
nature of work performed and to differences in age, seniority and training
often found between the two populations. Veolia Environnement's policy is to
promote equality in the workplace between men and women that possess similar
capabilities and qualifications.

In France, the annual average gross compensation of all employees reached
(euro)26,462 per employee in 2004. The average gross compensation paid to male
employees was (euro)27,049 per employee and that paid to women was
(euro)23,758 per employee (representing a difference of (euro)3,291, or
12.2%). Labor contributions represented 44.3% of total employment costs.

Ratio of average compensation to average minimum wages

This indicator enables Veolia Environnement to compare its compensation levels
with the minimum wages guaranteed or implemented in each country in which it
operates, and to in turn assess the minimum level of resources of its
employees in each of these countries. In the 18 countries studied that have
mandatory minimum wages set by law (in which over two-thirds of Veolia
Environnement's employees are located), VE employees' weighted average
compensation was (euro)25,399 in 2004, compared to average minimum wages of
(euro)11,525, which results in a ratio of 2.2, which is similar to last year's
ratio of 2.1.

Profit-sharing and participation

In 2004, Veolia Environnement paid its employees in France (euro)45,012,912
under profit-sharing arrangements ((euro)28,539,109 in 2003) and
(euro)50,323,479 under participation agreements ((euro)41,840,108 in 2003).
The total amount paid under profit-sharing and participation agreements was
(euro)95,336,392, or 3.6% of total employment costs ((euro)70,379,217 in
2003).

13,218 employees subscribed to the Sequoia Group Savings Plan opened in
October 2004 in Germany, Belgium, France, Hungary, the Czech Republic, Sweden
and Switzerland. The total amount of subscriptions amounted to
(euro)21,664,992, excluding employer contributions.

Labor relations and union agreements

         o   Number of collective agreements signed: 1,360 collective agreements
             signed (1,131 in 2003), including 863 agreements relating to
             compensation, 229 agreements relating to health, safety and working
             conditions, 114 agreements relating to social dialogue and 154
             agreements relating to other themes or regrouping several themes;

         o   Number of employee representatives: 13,457 (+22%);

         o   Number of collective agreements signed in France: 522 collective
             agreements signed, including 336 agreements relating to
             compensation, 61 agreements relating to health, safety and working
             conditions, 66 agreements relating to social dialogue and 59
             agreements relating to other themes or regrouping several themes;

         o   Number of employee representatives in France: 9,144.

Sanitary and safety conditions

The definition of a workplace accident varies by country. In some countries,
only accidents that cause more than 2 or 3 days of absence from work, or even
more days in some instances, qualify as true workplace accidents. Veolia
Environnement, on the other hand, has a common definition for all countries and
subsidiaries, which includes any workplace accident, outside of travel, which
causes at least one day of absence from work. In 2004, the number of workplace
accidents resulting in leave for at least one workday was 11,336 (a decrease of
13.7% from 2003), and the number of days not worked due to workplace accidents
was 320,758 (an increase of 2.5% from 2003), despite an increase in staff of
4.29%.

The rate of frequency of workplace accidents, which is calculated as the total
number of accidents over one million workable hours, went from 34.3 to 28.6 in
one year. The rate of severity of workplace accidents, which is calculated as
the number of lost workdays due to accidents over one thousand workable hours
worked, decreased slightly to 0.81, as compared to 0.82 in 2003.

Veolia Environnement provided safety training to 85,937 employees during 2004
(or 34.2% of staff), an increase of 14.8% compared to 2003. As a sign of the
importance of these issues, 2,241 bodies throughout the world are dedicated to
dealing with sanitary and safety issues in the workplace (1,601 bodies in 2003).

In France, the frequency and seriousness of accidents are often more elevated
than the worldwide average, but they are tracked much more closely than in many
other countries where regulations are less strict. In 2004, the number of
workplace accidents with leave for at least one workday was 5,973, and the
number of days not worked due to workplace accidents was 233,181. The rate of
frequency of workplace accidents was 35.13, and the rate of severity of
workplace accidents was 1.37. Veolia Environnement provided safety training to
33,983 employees during 2004 (or 32% of staff), and has 655 bodies dedicated to
dealing with sanitary and safety issues in the workplace. Veolia Environnement
has as one of its primary objectives the reduction of the frequency and
seriousness of workplace accidents, in pursuit of which it has already
implemented various measures.

Training

Veolia Environnement places great importance on the development of the skills of
its employees, in order to maintain the employability of its staff and, by
extension, on training, mobility and the creation of motivating professional
careers.

A specific effort has been made to develop training abroad:

         o   Total number of training hours: 3,499,162 hours (+14.2% as compared
             with 2003);

         o   Percentage of training expenses in payroll: 2.01%;

         o   Total number of persons taking part in training actions: 194,163
             (+28.6% as compared with 2003), including 22,255 managers and
             171,908 non-managers (representing 88.5% of all training
             participants). 160,730 participants were men and 33,433 were women
             (representing 17.2% of all training participants);

         o   Average duration of training actions: 18 hours (20 hours in 2003).

In France, in 2004:

         o   Total number of training hours: 1,284,599 hours;

         o   Percentage of training expenses in payroll: 2.68%;

         o   Total number of persons taking part in training actions: 72,490,
             including 9,457 managers and 63,033 non-managers, divided into
             61,606 men and 10,884 women;

         o   Average duration of training actions: 18 hours.

Employment and integration of disabled workers

The number of disabled employees amounted to 3,834 as of December 31, 2004
(+7.6% as compared to 2003). This figure, however, does not cover Veolia
Environnement's activities in certain jurisdictions that do not have a precise
definition of a "disabled person". In France, the number of disabled employees
amounted to 2,552 as of December 31, 2004.

Social work

Veolia Environnement provided (euro)51,079,111 in subsidies related to social
work in 2004 (compared to (euro)54,260,043 in 2003). This figure, however, does
not cover all of Veolia Environnement's activities in this domain, and does not
include subsidies in a number of countries that do not record this amount
separately from other labor-related charges. In France, Veolia Environnement
provided (euro)35,206,432 in subsidies related to social work.

Outsourcing and procurement

Veolia Environnement sometimes chooses to outsource those activities which are
not part of its core activities. It uses companies that respect the fundamental
principles of the International Labor Organization. The financial data currently
available does not allow Veolia Environnement to calculate the importance of
outsourcing, which is moreover difficult to measure on a worldwide level.

With respect to matters that more specifically relate to procurement, which has
certain similarities to outsourcing, the charter signed by Veolia Environnement,
which covers all participants in its procurement network around the world, sets
forth the principles and rules governing its procurement activities, including
ethical principles and the rules adopted by the International Labor Organization
relating to forced labor, child labor, equality of opportunity and freedom of
association. Veolia Environnement requires all of its suppliers to respect these
rules and principles through specific contractual clauses in its supply
arrangements with them.

Impact of activities on regional development and local populations

This issue is discussed in Veolia Environnement's 2004 Sustainable
Development Report.

4.5      INVESTMENT POLICIES

4.5.1 - Research and Development

Veolia Environnement must make continuous efforts to adapt its know-how, due to
factors such as rapidly changing demographics in emerging economies, the aging
of the population in more developed countries, the trend towards urbanization
across the globe, and the imposition of increasingly stringent environmental and
health standards.

More than ever, the ability to innovate has become a priority for Veolia
Environnement, to which it has devoted greater resources in all segments of its
business. Veolia Environnement's research and development activities are
coordinated by its research, development and technology department, or "research
department". In 2004, this department consisted of nearly 600 employees
worldwide with a total annual budget of (euro)98 million(35).

Veolia Environnement's researchers aim to design new processes and services that
correspond as closely as possible to evolving client requirements, while paying
constant attention to technical, economic, environmental and sanitary
performance. At the same time, Veolia Environnement seeks to preserve its
technological advances through constant improvement in its operating
performance. Research and development efforts that successfully achieve the
foregoing enable Veolia Environnement both to extend its service offering to
clients and to reduce the cost of providing such services.

----------------------------

35   For the fiscal year ended December 31, 2004, research costs totaled
     (euro)62.7 million, which, when added to development costs, totaled
     (euro)98 million.

<PAGE>

Veolia Environnement has three main research centers in France, which are
divided by area of technical expertise:

o        Creed, which is based in Limay and has branches in the United Kingdom
         and Australia, focuses on waste treatment technologies (incineration,
         co-incineration, CET, etc.), on material recovery and on optimization
         of services in the energy sector, including by resorting to alternative
         energies (fuel cells and wood channels) or renewable energies (solar
         sensors).

o        Eurolum focuses on information systems (both for the operator and for
         the traveling client), on innovative transportation systems
         (transportation on demand, for example), on vehicles and clean fuels,
         and on infrastructures, logistics and monetics.

o        Anjou Research, based in Maisons-Laffitte, is the historical research
         center of Compagnie Generale des Eaux. Its work mainly relates to water
         themes (from production to distribution of drinking water) and
         purification (urban and industrial wastewater treatment, odor
         treatment). This research center also includes an expert center on
         membranes.

Veolia Environnement established an international research and development
correspondent network in 2003 in order to supplement the work of its research
centers. This network enables Veolia Environnement to identify and analyze
specific local needs in terms of technical development and innovation, and
constitutes a forum for exchange among Veolia Environnement's research
department, area universities and research organizations. This network also
facilitates the circulation throughout the world of studies conducted by Veolia
Environnement's research department. In addition to the research centers
mentioned above, Veolia Environnement has also created research units in
connection with specific contracts that further highlight Veolia Environnement's
technical expertise. For example, Veolia Environnement provides technical and
financial support to research projects conducted at the Berlin Centre of
Competence for Water (KompetenzZentrum Wasser), an international center for
water research and knowledge transfer that has become an international reference
point for information relating to the protection of water resources.

Veolia Environnement's research department coordinates technical "support"
functions relating to technological information, environmental management,
intellectual property defense and laboratory analysis. The research department
also coordinates the functions of various other departments, such as Veolia
Environnement's health department.

In the health and sanitary safety field, Veolia Environnement finds answers to
the new risks it faces by developing techniques of analysis and prevention,
which may sometimes include the development of specific curative treatments as
well. The health department assists in defining the scope of Veolia
Environnement's research programs in this regard, and later assists in
completing them. In particular, the health department identifies emerging
sanitary dangers and establishes sanitary indicators, and conducts work aimed at
achieving better command over the risk of legionnaire's disease. The health
department is also a recognized partner for public health bodies and
institutions such as the Institut de Veille Sanitaire, Direction Generale de la
Sante, AFSSE or INSERM.

Veolia Environnement's research department also concentrates on the protection
of the environment. A specific environmental department assesses the
environmental impact of Veolia Environnement's activities and steers Veolia
Environnement's environmental management system. It prepares the follow-up,
monitoring and reporting procedures of the Group's environmental data and
contributes to the preparation of the Group's commercial offers. A network of
information experts within the research department manages the Group's
scientific and technical information and places at employees' disposal tools for
technical, competitive and regulatory monitoring.

In the area of energy services in particular, Veolia Environnement conducted
research and development activities aimed at developing tools to enable Dalkia
to adapt to new market conditions, and to generally improve the performance of
existing installations. Moreover, Veolia Environnement's research teams are
still exploring the possibilities offered by technological breakthroughs (such
as fuel cells) and their potential application.

In the area of waste management, numerous programs have been created to help
optimize waste treatment conditions (relating to combustion capacity, smoke
treatment at incineration facilities, greater mastery of composting and
methanization procedures, automated sorting, etc.). Research on sanitary
landfills (or "bioreactors") also continued in France, Australia and the United
States. Finally, Veolia Environnement's research teams are seeking to optimize
the conditions of waste biodegradation through re-circulation of leachates and
recovery of biogas emissions.

In the area of transportation, research continued on a logistics program, which
consists of providing innovative technologies to traveling agents of the
divisions (permanent geo-localization and built-in computer systems). The
logistics program allows work to be organized more efficiently, leading to
better client service and, in the future, a source of savings for all parties
involved. With respect to the struggle against air pollution, work is being
conducted on optimizing the operation of electric buses, while carpooling and
self-service vehicles are also being experimented with.

In the area of water, research efforts have focused in particular on the
protection of water resources. For example, Veolia Environnement is involved in
the "Bankfiltration" project at the Berlin Centre of Competence for Water, which
is aimed at controlling the entire water cycle, including ground water. The
project involves the efforts of approximately thirty researchers and five
universities. Other research is being conducted in Australia on the injection of
groundwater, which will expand Veolia Environnement's experience in this field
as well as the array of technologies Veolia Environnement is capable of offering
to clients. With respect to drinking water production, research efforts relate
to the optimization of treatment processes and the use of membranous
technologies.

In the area of wastewater treatment, research into pollution control
installations and networks have enabled the development of real-time management
tools for wastewater treatment systems. With respect to sewage sludge, research
into agronomic recovery is carried out in tandem with the development (in
particular by industrialization) of new processes such as Biothelys, which
reduces the amounts of sludge emitted, Saphyr, which sanitizes and reduces
odors, and Pyromix, which co-incinerates sludge and household waste.

The perfecting of tools to assist operations also constitutes a significant part
of Veolia Environnement's research and development efforts. Efforts relate to
all type of operations (networks, plants, tanks, stations, etc.), and all
fields: water, wastewater treatment, waste management, transportation and
energy. Recent developments made with the help of artificial intelligence
(neural networks, fuzzy logic, genetic algorithms, etc.) should lead to valuable
new uses, in particular for the advanced conduct of processes. They should lead
to a range of functions enabling Veolia Environnement to anticipate incidents,
to define automatic instructions and to prepare more adjusted maintenance
programs.

At each step of the research process, researchers implement sophisticated tools,
such as digital fluid mechanics, for example. Such technology enables
researchers to simulate the running of works (plants and networks) and to test
scenarios to improve their efficiency. It is also very useful in the context of
research programs: by permitting the simulation of the greatest number of
scenarios, over a shorter period, such software enables the optimization of test
protocols for the development of a process.

Veolia Environnement's researchers take part in European research programs
(involvement in the LIFE and PCRD projects in particular) and build up a strong
network of fruitful relations with numerous industrial, university and
institutional partners. Such partnerships allow Veolia Environnement to achieve
operating developments that expand Veolia Environnement's service offerings and
anticipate required technical improvements.

4.5.2 -  Principal Capital Expenditures

See paragraph 5.1.3.4 below.

4.5.3 -  Return on Capital Employed

See paragraph 5.1.3.7 below.

4.6      PRINCIPAL SUBSIDIARIES AND AFFILIATES

See paragraph 5.3 below, note 7.9 to the consolidated financial statements and
the organizational chart set forth in paragraph 3.1.12 above.

4.7      RISK FACTORS

4.7.1 -  Market risks and risks relating to Operations (including environmental
         risks)

Competition and commercial development.

Veolia Environnement's business is highly competitive and requires substantial
human and capital resources. Large international competitors and local niche
companies serve each of the markets in which Veolia Environnement competes.
Accordingly, Veolia Environnement must make constant efforts to remain
competitive and convince potential clients of the quality and cost value of its
service offerings. Competitors may also introduce new technology or services
that Veolia Environnement would have to match in order to remain competitive,
which could result in significant development costs for Veolia Environnement.

In addition, Veolia Environnement performs a substantial portion of its business
under contracts, often of a long-term nature, with governmental authorities and
clients from the industrial and commercial sectors. These contracts are often
awarded through competitive bidding, at the end of which Veolia Environnement
may not be retained even though it may have incurred significant expenses in
order to prepare the bid. Veolia Environnement's contracts may not be renewed at
the end of their term, which in the case of important contracts may oblige
Veolia Environnement to engage in a costly reorganization or restructuring of
assets and operations covered by the contract when the contract does not provide
for the transfer of the related assets and employees to the succeeding operator
and/or adequate indemnification to cover Veolia Environnement's costs of
termination.

Veolia Environnement's business operations in some countries may be subject to
additional risks.

While Veolia Environnement's operations are concentrated mainly in Europe,
Veolia Environnement conducts business in markets around the world. Sales
generated in countries outside of Europe and North America represented
approximately 8.04% of Veolia Environnement's total revenue in 2004. The risks
associated with conducting business in some countries outside of Western Europe,
the United States and Canada can include slower payment of invoices, which is
sometimes aggravated by the absence of legal recourse for non-payment,
nationalization, social, political and economic instability, increased currency
exchange risk and currency repatriation restrictions, among other risks. Veolia
Environnement may not be able to insure or hedge against these risks.
Furthermore, Veolia Environnement may not be able to obtain sufficient financing
for its operations in these countries. The establishment of public utility fees
and their structure can be highly political, slowing and impeding for several
years any increase in fees that no longer allow coverage of service costs and
appropriate compensation for a private operator. The occurrence of unfavorable
events or circumstances in certain countries may lead Veolia Environnement to
record exceptional provisions or depreciation charges in connection with its
operations in these countries, which could have a material adverse effect on
Veolia Environnement's results.

Veolia Environnement's long-term contracts may limit its capacity to quickly and
effectively react to general economic changes affecting Veolia Environnement's
performance under those contracts.

The general circumstances or conditions under which Veolia Environnement enters
into a contract may change over the term of the contract, particularly in the
case of long-term contracts. For example, changes in the prices of Veolia
Environnement's supplies may increase beyond levels that were foreseen or
foreseeable at the time the contract was entered into or changes in end user
behavior may significantly affect Veolia Environnement's financial performance
under the contract. Because Veolia Environnement's contracts generally do not
allow Veolia Environnement to unilaterally terminate them or interrupt or
suspend the performance of its obligations under them, Veolia Environnement
attempts to foresee these possible changes at the time it negotiates its
contracts and typically includes adjustment mechanisms in its contracts (such as
price index clauses or the right to initiate a review or modification process).
However, Veolia Environnement may not always be able to foresee all potential
changes or to negotiate adjustment clauses that cover all possible scenarios. In
addition, even if Veolia Environnement's contracts include these types of
adjustment clauses, Veolia Environnement's ability to react to these changes is
limited to the adjustments permitted by these clauses. For example, Veolia
Environnement's long-term contracts typically provide for pre-determined fees or
payments for Veolia Environnement's services (either from the client or from the
end user according to a set price list), and Veolia Environnement cannot adjust
these fees or prices to reflect anticipated shifts in costs or product demand
other than in accordance with the terms of the adjustment clause. Also, Veolia
Environnement's right to initiate a review or modification process in respect of
a contract may be subject to conditions, including the consent of the other
parties to the contract or of a third party (such as a public authority). As a
result, Veolia Environnement may be required to continue performing its
obligations under its contracts even if the general conditions or circumstances
of Veolia Environnement's performance are different from those that had been
foreseen and provided for at the time the contract was signed, which in some
cases may alter the financial equilibrium of the contract and adversely affect
Veolia Environnement's financial performance under the contract.

The rights of governmental authorities to terminate or modify Veolia
Environnement's contracts could have a negative impact on Veolia Environnement's
revenue and profits.

Contracts with governmental authorities make up a significant percentage of
Veolia Environnement's revenue. In numerous countries, including France for
instance, government contracts often allow the governmental authority to modify
or terminate these contracts under certain circumstances, but generally with
full indemnification. In other countries, however, Veolia Environnement may not
be entitled to or be able to obtain full indemnification in the event its
contracts are terminated by governmental counterparties.

Changes in prices of fuel and other commodities may reduce Veolia
Environnement's profits.

The prices of Veolia Environnement's supplies of fuel and other commodities,
which are significant operating expenses for Veolia Environnement's businesses,
are subject to sudden increases. Although most of Veolia Environnement's
contracts contain tariff adjustment provisions that are intended to reflect
possible variations in prices of Veolia Environnement's supplies using certain
pricing formulas, such as Veolia Environnement's price index formulas, there may
be developments that could prevent Veolia Environnement from being fully
protected against such increases, such as delays between fuel price increases
and the time Veolia Environnement is allowed to raise its prices to cover the
additional costs or Veolia Environnement's failure to update an outdated cost
structure formula. In addition, a sustained increase in supply costs beyond the
price levels provided for under Veolia Environnement's adjustment clauses could
reduce Veolia Environnement's profitability to the extent that it is not able to
increase its prices sufficiently to cover the additional costs.

Environmental risks.

1) Veolia Environnement incurs significant costs of compliance with various
environmental, health and safety laws and regulations.

Veolia Environnement has made and will continue to make significant capital and
other expenditures to comply with applicable environmental, health and safety
laws and regulations. Veolia Environnement is continuously required to incur
expenditures to ensure that the installations that it operates comply with
applicable legal, regulatory and administrative requirements (cf. ss. 4.8.1
infra), including general precautionary obligations, or to advise its clients so
that they undertake the necessary actions for the compliance of their
installations. These expenditures mainly relate to air pollution (including, for
example, the control of emissions from Veolia Environnement's transportation
vehicles, its heat generation plants and its waste incineration facilities), the
quality of drinking water, the disposal of wastewater and other effluents and
the protection of land and biodiversity (including through restrictions on waste
disposal and the use of landfills). In order to limit the impact of its
activities on the environment and better control its environmental risks, the
Company has implemented an "Environmental Management System" (EMS) based on ISO
Standard 14001 that is applicable to all of its relevant operations throughout
the world (representing approximately 60% of total revenues). Under its EMS
system, the Company has set forth certain objectives for itself, notably the
improvement of its environmental performance and a careful monitoring of the
compliance of its priority installations with applicable regulatory, contractual
and internal rules. To track its progress, the Company implemented a bi-annual
reporting system during 2004. The costs related to these preventative measures
are included in industrial investment expenses, which in 2004 totaled 2.315
billion euros (cf. ss.4.8.3 and ss.5.1.3.4 infra).

Each of Veolia Environnement's operations, moreover, may become subject to
stricter general or particular laws and regulations, and correspondingly greater
compliance expenditures, in the future. If Veolia Environnement is unable to
recover these expenditures through higher tariffs, this could adversely affect
its operations and profitability. Moreover, the scope of application of
environmental, health, safety and other laws and regulations is becoming
increasingly broad. These laws and regulations govern, among other things, any
discharge in a natural environment, the collection, treatment and disposal of
all types of waste, and the rehabilitation of old sites.

2) Veolia Environnement's failure to comply with any applicable environmental,
health and safety laws and regulations may cause it to incur liability or other
damages that it might be required to compensate.

These increasingly broad laws and regulations expose Veolia Environnement to the
risk of liabilities, including in connection with assets that Veolia
Environnement no longer owns and activities that have been discontinued. In some
circumstances, Veolia Environnement could be required to pay fines or damages
under these laws and regulations or undertake remedial action even if Veolia
Environnement exercises due care in conducting its operations and it complies
with all applicable laws and regulations. Moreover, regulatory authorities may
require Veolia Environnement to conduct investigations and undertake remedial
activities, curtail operations or close facilities temporarily or permanently in
connection with applicable laws and regulations, including to prevent imminent
risks or in light of expected changes in those laws and regulations.

In the event of an accident or other incident, Veolia Environnement could also
become subject to claims for personal injury, property damage or damage to the
environment (including natural resources). The obligation to take such measures
or to compensate for such damages might have a material adverse effect on the
Group's activities or resources. Accordingly, Veolia Environnement pays great
attention to controlling sanitary risks, both those present in its installations
and those that emanate from such installations in the form of environmental
pollution which conventional treatment methods cannot fully treat. In
particular, Veolia Environnement's subsidiaries continuously strive to control
the risk of legionella at their most sensitive sites (including cooling towers,
air-conditioning networks and sanitary hot water networks).

In application of existing norms, and in consideration of the recommendations of
internal and external experts, Veolia Environnement's subsidiaries implement
control and maintenance measures either directly or in collaboration with the
owners of installations when Veolia Environnement is not the owner thereof.
Veolia Environnement monitors its incineration facilities with heightened
vigilance so as to control atmospheric emissions, in particular the level of
dioxins. When Veolia Environnement designs new installations, it tries to
provide technical specifications that are stricter than those then prevailing in
the market. For older installations, Veolia Environnement regularly conducts
improvement work on its own facilities and strongly recommends to managers of
facilities that are not its own that they do the same.

3) Specific measures are required in connection with technological risks
(article L. 225-102-2 of the French Commercial code regarding [Seveso.]
installations).

Among the facilities that Veolia Environnement owns and operates, one has been
categorized a "Seveso" facility. "Seveso" facilities are places where dangerous
substances are present in quantities equal to or above thresholds specified in
European Union Directive 96/82/EC (also known as the Seveso II Directive),
relating to the control of major accident hazards involving dangerous
substances. As such, these facilities are the subject of special concern and
heightened regulation. Veolia Environnement's "Seveso" facility is a toxic waste
incineration factory at Limay (Yvelines). The manipulation of waste and toxic
products in this facility can, in the case of an accident, cause serious damage
to the environment, neighbors or employees, exposing Veolia Environnement to
potentially substantial liabilities. For this reason, Veolia Environnement has
implemented safety measures at this facility aimed at preventing accidents and
protecting the environment, neighbors and employees ("Internal Action Plan"). It
has also implemented an emergency protocol in coordination with local public
officials to deal with potential accidents ("Specific Action Plan"). These
measures are designed to complement the other requirements that typically apply
to this type of facility, so as to limit as much as possible the risks
associated with the transport, handling and storage of waste and other toxic
products, and better control atmospheric emissions and the discharge of
industrial fluids.

Moreover, in the context of Veolia Environnement's outsourcing contracts, Veolia
Environnement's subsidiaries are involved in the operation of Seveso sites by
industrial clients (particularly petroleum or chemical industry sites). In the
event of an accident at one of these sites, Veolia Environnement may be held
jointly liable with its clients for pollution or other serious accidents. Given
this risk, Veolia Environnement attempts to ensure strict adherence to the legal
regulations applicable to these sites. It also acts in accordance with the
various safety and hygiene measures that have been implemented at these sites,
recently strengthened by Article 8 of a July 30, 2003 law relating to the
prevention of technological risks.

Further, given the potential serious nature of the risks to which Veolia
Environnement may be exposed, the Group has implemented three mechanisms in
particular for controlling these risks. First, in order to help prevent
incidents that may harm individuals, assets or the environment, Veolia
Environnement has implemented procedures to monitor the regulatory compliance
and functioning of its installations. This is the goal of its EMS system (cf.
supra), which is complemented by various certification measures (in particular
ISO 14001 certification) (for more details, see ss.4.8.3 infra and VE's 2004
Sustainable Development Report). Second, Veolia Environnement regularly conducts
or has performed internal or external audits to identify and prevent industrial
risks (such as fire, machine breakdown, environmental damage, etc.). Third,
Veolia Environnement has taken out insurance policies for property damage and
civil liability in the case of accidental pollution (cf. ss.4.7.2 infra).

Veolia Environnement may make significant investments in projects without being
able to obtain the required approvals for the project.

To engage in business, Veolia Environnement must in most cases obtain a contract
and sometimes obtain, or renew, various permits and authorizations from
regulatory authorities. The competition and/or negotiation process which must be
followed to obtain such contracts is often long, complex and hard to predict.
The same applies to the authorization process for activities that may harm the
environment which are often preceded by increasingly complex studies and public
investigations. Veolia Environnement may invest significant resources in a
project or public tender without obtaining the right to engage in the desired
business nor sufficient compensation or indemnities to cover the cost of Veolia
Environnement's investments. These situations increase the overall cost of
Veolia Environnement's activities and, if Veolia Environnement does not obtain
the desired business or is forced to withdraw from a public tender, its business
may not grow as much or as profitably as Veolia Environnement hopes.

Currency exchange and interest rate fluctuations may negatively affect Veolia
Environnement's financial results and the price of its shares (cf. ss.5.1.3.6.1
and 5.1.3.6.2 infra).

Veolia Environnement holds assets, earns income and incurs expenses and
liabilities directly and through its subsidiaries in a variety of currencies.
Veolia Environnement's financial statements are presented in euro. Therefore,
when Veolia Environnement prepares its financial statements, it must translate
its assets, liabilities, income and expenses in other currencies into euro at
then-applicable exchange rates. Consequently, increases and decreases in the
value of the euro in respect of these other currencies will affect the value of
these items in Veolia Environnement's financial statements, even if their value
has not changed in their original currency. For example, an increase in the
value of the euro may result in a decline in the reported value, in euro, of
Veolia Environnement's interests held in foreign currencies.

In addition, because Veolia Environnement has a significant amount of debt
outstanding, its results of operations and financial condition may be affected
by changes in prevailing market rates of interest. Veolia Environnement manages
this exposure to interest rate risk by setting a target fixed rate for a
significant part of its debt, which Veolia Environnement achieves either through
fixed rate debt or interest rate hedging activities. At December 31, 2004 Veolia
Environnement's outstanding total long-term debt amounted to (euro)15.9 billion,
of which 46.4% was subject to variable rates and 53.6% was subject to fixed
interest rates (after giving effect to financial hedging instruments).
Fluctuations in interest rates may also affect Veolia Environnement's future
growth strategy. A rise in interest rates may force Veolia Environnement to
finance acquisitions or operations or refinance existing debt at a higher cost
in the future, which may lead Veolia Environnement to decide to curtail or delay
its then current expansion plans.

Veolia Environnement's business operations may be the target of foul play or
terrorism.

Out of concern for public health and the need to assure the availability of
water resources to the public, public authorities have adopted various laws and
regulations aimed at protecting water resources from the risk of foul play and
terrorism. Accordingly, Veolia Environnement's drinking water production and
distribution activities must comply with these laws and regulations, which
generally call for the safeguarding of facilities, water sources and treatment
procedures. Further, Veolia Environnement is generally required to implement
monitoring and crisis procedures at its water sites either in partnership with
or at the direction of the local public authority. It may also decide to
implement additional safeguards on its own or in collaboration with local law
enforcement. Nevertheless, the implementation of such safeguards with respect to
Veolia Environnement's water activities may not be sufficient to prevent the
occurrence of foul play or terrorism.

Veolia Environnement's activities in the areas of waste management, energy
services and public transportation are subject to similar risks. Moreover,
Veolia Environnement may have employees who work or travel in areas where the
risk of foul play, kidnapping or terrorism is either temporarily or permanently
elevated.

As a result, despite the measures that Veolia Environnement has attempted to
implement, any one of its activities may fall victim to foul play or terrorism
in the future. If an attack were to occur, it could negatively affect Veolia
Environnement's image and have a material adverse effect on its results.

4.7.2 - Insurance

Background and Insurance Procurement Policy

Insurance renewals as of January 1, 2004 were characterized by (i) the
underwriting by Codeve Insurance Company Limited, Veolia Environnement's
consolidated insurance subsidiary, of underlying contracts for property damage
and civil liability beginning on January 1, 2004, in continuation of the Group's
policy adopted in 2003 to accept a primary layer of retention, (ii) a decrease
in the insurance premiums paid to outside insurers as a result of an opening of
the process to competitive bidding and the renegotiation of contracts with
insurers within a more favorable market environment, and (iii) recognition by
the Company that there are a reduced number of insurers willing to insure at
economically competitive terms the risks of large companies (catastrophic
exposure in property damage/business interruption, fortuitous pollution risk and
motor liability for public passenger transportation).

Veolia Environnement's insurance programs--covering property damage/business
interruption, comprehensive general liability and environmental impairment
liability--have been renewed at the same limits and primary coverage as in the
prior year.

Veolia Environnement's policy for insurance policies for all of its operating
divisions consists of:

         o   maintaining common insurance policies to establish a coherent risk
             transfer policy and maximize economies of scale, while taking into
             account the specificities of Veolia Environnement's businesses and
             legal or contractual constraints;

         o   optimizing the thresholds and the means for accessing the insurance
             or reinsurance markets through use of varying deductibles or
             acceptance of a primary layer of retention through Codeve Insurance
             Company Limited; and

         o   tailoring insurance coverage to meet Veolia Environnement's
             contractual obligations, which are often triggered through its
             participation in public bid tenders.

Organization and Implementation of Insurance Procurement Policy

Organization

Veolia Environnement's role with respect to insurance procurement is to (i)
establish an insurance procurement policy to cover Veolia Environnement's
activities, based on the needs expressed by its subsidiaries in particular, (ii)
select and sign contracts with outside providers (brokers, insurers, loss
adjusters, etc.), (iii) monitor claims that impact second-line insurance
coverage, (iv) manage consolidated subsidiaries specializing in insurance or
reinsurance coverage, (v) lead and coordinate the network of insurance managers
present among Veolia Environnement's principal subsidiaries, and (vi) prepare
and deliver an annual report on insurance activities.

Implementation of Insurance Procurement Policy

The implementation of an insurance procurement policy aimed at covering risk is
effected in coordination with Veolia Environnement's global risk management
process (cf. ss.4.1.9 supra). Implementation is affected by insurers'
willingness to cover risks related to Veolia Environnement's activities, by the
market availability of insurance and reinsurance, and by the relationship
between premiums and the level of coverage, exclusions, limits, sub-limits and
deductibles.

In 2004, Veolia Environnement undertook actions principally related to:

         o   the determination of retention levels on the basis of the
             divisions' knowledge of their risks and loss history, an evaluation
             of the costs and coverage proposed by insurers, as well as
             contractual obligations that sometimes require Veolia
             Environnement's subsidiaries to retain contracts with limited
             deductibles;

         o   the reinforcement of efforts to identify, prevent and protect
             against risks through deployment of a rating system for the
             "property damage and business interruption" risk profile for Veolia
             Environnement's most important facilities;

         o   the reinforcement of its information process for the insurance and
             reinsurance markets;

         o   the opening of insurance coverage to competitive bidding or the
             renegotiation of contracts, in particular relating to its civil and
             pollution liability coverage;

         o   a review of major past claims of the Company and of the insurance
             limits relating to civil liability; and

         o   extending the adoption of its coverage to the greatest number of
             subsidiaries.

Veolia Environnement generally only purchases insurance policies from insurers
and reinsurers who have at least an "A" credit rating.

Main Insurance Policies

Civil Liability

As of January 1, 2003, Veolia Environnement entered into an 18-month layered
insurance program that provides coverage for up to US $400 million on the
Bermuda market. It provides coverage for all of Veolia Environnement's
subsidiaries in amount over and above US $50 million. This program was renewed
on July 1, 2004 for a 12-month period, and provides coverage for up to US $450
million in amount over and above US $50 million.

An underlying general liability policy agreement insures Veolia Environnement's
non-North American subsidiaries for up to (euro)50 million per claim with an
annual ceiling of (euro)100 million. Veolia Environnement's subsidiaries outside
the United States and Canada are insured in excess of (euro)1.5 million through
local policies, except for railroad activities ((euro)8 million attachment
point), sea transportation and Veolia Water Systems ((euro)10 million). Veolia
Environnement's North American business units are responsible for purchasing US$
50 million in insurance coverage. This program was renewed on January 1, 2004
for an 18-month period.

Veolia Environnement also maintains various environmental impairment liability
insurance policies that provide coverage to its subsidiaries with annual limits
ranging from US $5 million to US $50 million per claim. A worldwide insurance
policy (excluding the U.S. and Canada) was renewed on January 1, 2004 for an
18-month period. Coverage is up to (euro)50 million per claim throughout the
period of insurance. Veolia Environnement's excess general liability policies
described above also cover third party claims resulting from sudden and
accidental events.

Property Damages and Business Interruption Policies

All of Veolia Environnement's divisions maintain property damage insurance
policies to cover assets that they own as well as those for which they have a
contractual obligation to insure. Some policies provide either "business
interruption" coverage or "additional cost of working" coverage depending on
such subsidiaries' exposure and their capacity to use internal or external
solutions to ensure service continuity. These policies contain standard market
terms. The level of premiums, deductibles and sub-limits for exceptional
socio-political or natural events reflects the terms proposed, or sometimes
imposed, by insurers in the markets in which the risk is underwritten. Group
insurance coverage implemented on January 1, 2004 carries a limit per claim of
up to (euro)205 million. Some of this coverage contains further underlying
limits per claim or per year.

During 2004, Veolia Environnement did not present any claims in excess of
(euro)10 million.

Other Insurance Policies

In light of the difficulties encountered in the insurance market, Veolia
Environnement covers motor liability risks relating to the vehicles used in its
activities (such as passenger transportation or collection of hazardous and
non-hazardous waste) through deductibles or reserves accrued per event from
(euro)150,000 to (euro)1 million. Depending on the country, collateral may be
required, including sureties or letters of credit.

Construction projects are insured through construction all-risk policies either
by the main contractor or the operating company.

Self-Insured Retention and Deductibles

For any insured claim or loss, Veolia Environnement remains liable for the
deductible amount. Veolia Environnement's deductibles for property damage
policies range from (euro)50,000 to more than (euro)1 million, while the main
deductible under Veolia Environnement's general liability policies is between
(euro)30,000 and US$2 million.

Veolia Environnement's consolidated insurance subsidiary, Codeve Insurance
Company Limited, has underwritten:

         o   beginning on January 1, 2004, underlying contracts for (euro)5
             million per event for property damage and business interruption,
             which may be increased to (euro)7.5 million per event involving
             collision or derailment; and

         o   beginning on July 1, 2004, underlying contracts for (euro)1.5
             million per civil liability claim and environmental liability
             claim.

Codeve Insurance Company Limited also underwrote a quota-share of insurance
contracts relating to construction projects in which one of Veolia
Environnement's subsidiaries was acting as lead.

The consolidated insurance subsidiary's portfolio of risks involves all aspects
of Veolia Environnement's business in numerous countries. The subsidiary is
protected by a stop-loss of (euro)37.5 million per year for property damage
insurance after the exhaustion of the (euro)12.5 million total annual claims
limit borne by the subsidiary, which is triggered by claims greater than
(euro)500,000 in damages or the original deductible if the latter is higher, or,
in the case of claims involving collision or derailment, by claims greater than
(euro)2 million in damages. For civil liability, there is an annual stop-loss of
(euro)5 million, occurring after the exhaustion of the (euro)10 million total
annual claims limit borne by the insurance subsidiary, which is triggered by
claims greater than (euro)30,000 in civil liability or the original deductible
if the latter is higher.

Veolia Environnement's consolidated reinsurance subsidiary, VE Services Re,
underwrote primary insurance coverage of (euro)1.5 million per claim for civil
liability until June 30, 2004 as well as a quota-share of Veolia Environnement's
property damage coverage and general liability policies issued by French
insurers.

100% of the quota-share reinsurances accepted have been retroceded, enabling
Veolia Environnement to benefit from the gap in prices between the insurance and
reinsurance markets. The underlying retained coverages for civil liability
insurance ((euro)1.5 million per claim) is protected by a stop-loss for Codeve
Insurance Company Limited as described above.

4.8      ENVIRONMENTAL REGULATION, POLICIES AND COMPLIANCE

4.8.1 -  Environmental Regulation

Veolia Environnement's businesses are subject to extensive, evolving and
increasingly stringent environmental regulations in developing countries as well
as in the European Union and North America.

Water

Water and wastewater services activities are highly sensitive to governmental
regulation. In Europe and North America, governments have enacted significant
environmental laws at the national and local level in response to public concern
over the environment. The quality of drinking water and the treatment of
wastewater are increasingly subject to regulation in developing countries as
well, both in urban and rural areas.

The quality of drinking water is strictly regulated at the European Union level
by Directive 98/83/CE of November 3, 1998, relating to the quality of water
destined for human consumption, which was transposed into EU member states and
French law by a decree on December 20, 2001 (certain provisions of which have
also been incorporated into the French public health code). This directive
introduces, beyond quality control, the concept of evaluating risks on an
ongoing basis, which risks may ultimately be addressed by future directives or
regulations. The collection, treatment and discharge of urban, industrial and
commercial wastewater is governed by Directive 91/271 of May 21, 1991, the
objectives of which were further reinforced and expanded by water Directive
2000/60/CE of October 23, 2000. Public authorities also impose strict
regulations upon industrial and commercial wastewater that enters collection
systems and the wastewater and sludge from urban wastewater treatment plants.

France has numerous laws and regulations concerning water pollution, as well as
numerous administrative agencies involved in the enforcement of those laws and
regulations. Certain discharges, disposals, and other actions with a potentially
negative impact on the quality of surface or underground water sources require
authorization or notification. For instance, public authorities must be notified
of any facility that pumps groundwater in amounts that exceed specified volumes
and French law prohibits or restricts release of certain substances in water.
Individuals and companies are subject to civil and criminal penalties under
these laws and regulations.

In the United States, the primary federal laws affecting the provision of water
and wastewater treatment services are the Water Pollution Control Act of 1972,
the Safe Drinking Water Act of 1974 and related regulations promulgated by the
Environmental Protection Agency (EPA). These laws and regulations establish
standards for drinking water and liquid discharges. Each U.S. state has the
right to establish criteria and standards stricter than those established by the
EPA and a number of states have done so.

Waste Management

In numerous countries, waste treatment facilities are subject to laws and
regulations that require Veolia Environnement to obtain permits to operate most
of its facilities from governmental authorities. The permitting process requires
Veolia Environnement to complete environmental and health impact studies and
risk assessments with respect to the relevant facility. Operators of landfills
must provide specific financial guarantees (which typically take the form of
bank guarantees) that cover in particular the monitoring and recovery of the
site during, and up to 30 years after, its operation. In addition, landfills
must comply with a number of standards, and incineration plants are usually
subject to rules that limit the emission of pollutants. Waste may also be
subject to various regulations depending upon the type of waste. For example,
sludge produced at wastewater treatment stations that will be composted must
comply with strict regulations relating to its content of organic materials and
trace metals (heavy metals like cadmium, mercury or led). Further, the NFU
44-095 standard, established in 2002 and henceforth applicable in France,
strictly regulates the composting of material that results from the treatment of
wastewater.

In France, pursuant to the provisions of the Environment Code (articles L. 511-1
et seq.) relating to classified facilities for the protection of the
environment, several decrees and ministerial and administrative orders establish
rules applicable to landfills for household, industrial, commercial and
hazardous waste. These orders govern, among other things, the design and the
construction of waste treatment centers. Hazardous waste is subject to strict
monitoring at all stages of the treatment process. Waste-to-energy centers are
subject to numerous restrictions, including in particular limitations on the
amount of pollutant emissions: for example, directive 2000/76/CE of December 4,
2000 on the incineration of waste fixes emission thresholds for dioxins and NOX
in particular. In connection with the application of this directive in France,
compliance studies were submitted by waste treatment operators to the French
government in June 2003, in order to help determine the measures that these
waste treatment operators will have to undertake to update their sites by the
end of 2005.

At the European Union level, the framework for waste management regulation is
provided by directives that set overall regulatory goals of waste prevention,
collection, recycling and reuse. European Union member states must prohibit the
uncontrolled discarding, discharge and treatment of waste. In addition, several
European regulations seek to have member states define a national strategy that
allows for the progressive reduction of dumping of biodegradable waste. The
regulations are intended to promote recycling, composting and energy recovery of
household waste. Further, the European Union has, through directive 2003/87/CE
of October 13, 2003, implemented a quota system for the emission of greenhouse
gases. Veolia Environnement's waste management business is excluded from the
first phase (2005-2007) of this directive, but may be targeted subsequently, and
may as a result establish procedures to reduce methane and carbon dioxide
emissions.

The major statutes governing Veolia Environnement's waste management activities
in the United States include the Resource Conservation and Recovery Act of 1976,
the Clean Water Act, the Toxic Substances Control Act, the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended (also
known as "CERCLA" or "Superfund"), and the Clean Air Act, all of which are
administered either by the EPA or state agencies to which the EPA delegates
enforcement powers. Each state in which Veolia Environnement operates also has
its own laws and regulations governing the generation, collection and treatment
of waste, including, in most cases, the design, operation, maintenance, closure
and post-closure maintenance of landfills and other solid and hazardous waste
management facilities.

Energy Services

Veolia Environnement's energy-related activities in Europe (primarily the supply
of thermal and independent energy) are subject to a European directive that
establishes emission limits for sulfur dioxide, nitrogen oxides and dust and
regulates the construction of combustion plants. Other existing directives
require the implementation of national emission ceilings for certain atmospheric
pollutants such as sulfur dioxide, nitrogen oxide and volatile organic
compounds.

The use of gas and other combustible material in France is subject in some
instances to a domestic natural gas tax. Energy produced by a co-generation
facility is exempt from this tax for a period of five years after the facility
begins operations.

In addition, Dalkia, in its capacity as an operator, must respect a number of
environmental requirements at its sites of operation. In France, Dalkia must
respect regulations based on a July 19, 1976 law and its implementing decrees
relating to the environmental protection of designated installations by
obtaining and renewing various permits and authorizations from regulatory
authorities.

In relation to controlling the risk of legionnaire's disease, the health
ministry has recommended, since 1997, that health professionals and managers of
establishments implement best practices for the maintenance of sanitary hot
water networks, air climate systems and other installations at risk, these
recommendations having since been extended to all establishments that receive
the public. In connection with regulations relating to classified facilities for
the protection of the environment, provisions relating to the control and
maintenance of these facilities are strengthened each year, with new language
specifying the obligations of owners and operators of facilities that use
cooling towers, installations for the production of cool air, combustion or
electricity.

For large combustion installations (thermal output greater than 20 MW), new
regulations were imposed in 2002 (for new installations) and in 2003 (for
existing installations) with respect to emission limits, in application of
European Union directive 2001/80/CE of October 23, 2001.

With respect to its production of sanitary hot water, Dalkia is directly
affected by European directive 98/83/CE, which addresses the quality of water
destined for human consumption. 18 states, including France, believe that the
directive applies to cold and to hot water and to all types of management
systems for production and distribution.

With respect to European Union directive 2003/87/CE of October 13, 2003 on
quotas for the emission of greenhouse gases, Veolia Environnement's energy
services have been affected and, for combustion installations of more than 20
MW, are part of the national plans of EU member states for the allocation of
quotas, implemented in February 2005. Dalkia also has certain contractual
obligations to limit greenhouse gas emissions. Finally, markets for the exchange
of quotas provided for at the European level are already functioning in certain
countries such as the United Kingdom.

Transportation

Veolia Environnement's transportation service activities are subject to a number
of national and European regulations and particularly European Union directives
that limit emissions from petrol and diesel engines and require Veolia
Environnement to obtain certain permits.

In the European Union, standards called "EURO" have been established for
polluting emissions from thermal engines. All new vehicles currently constructed
in the European Union are in compliance with "EURO 3" standards and Connex's
networks are renewing their fleets with "EURO 3" vehicles. In 2005, a "EURO 4"
standard takes effect with even stricter requirements for the reduction of
polluting emissions.

Further, Connex has made a commitment, in connection with its environmental
management system, to lower its total emissions globally and to prepare for the
new standards by testing and experimenting with emission reduction systems which
will eventually be sold, thereby reaffirming its role as expert and consultant
to client collectivities.

Finally, Connex is subject to the environmental standards applicable to depots
and garages whose activities may present a danger or inconvenience to the
environment. For this reason, the majority of sites in France are subject to the
regulations governing classified facilities for the protection of the
environment, more generally in the form of a simple notification.

4.8.2 - Environmental Policies

Veolia Environnement strives to contribute to the enhancement of quality of life
in places where it operates. As a worldwide leading provider of environmental
management services, Veolia Environnement has placed the challenges of
sustainable development at the heart of its strategy. To this end, Veolia
Environnement does not focus only on the preservation of the environment and the
protection of natural resources, but also assumes its economic and social
responsibilities, particularly at a local level where Veolia Environnement is
committed to stimulating progress. Further information concerning Veolia
Environnement's commitment to sustainable development is contained in its 2004
Sustainable Development Report.

Preserving ecological balances

Whether through the limitation of water evaporation, the enhancement of the
quality of its waste, the effort to optimize energy consumption in connection
with its water distribution and treatment activities, the use of alternative
energies in its heating operations, the recovery and treatment of biogas
emissions at its landfills or the use of low-emission fuels in its fleet of
public or private transport vehicles, Veolia Environnement gets involved in the
main environmental problems currently affecting our planet by applying its
know-how, technological capabilities and research potential to these problems.
Veolia Environnement contributes to the enhancement of quality of life and
sanitary conditions of local populations in its day-to-day operations. For
example, by supplying drinking water to impoverished areas Veolia Environnement
helps to reduce infant mortality. In developed countries Veolia Environnement
has implemented plans to protect against the risk of the presence of legionella
in public or industrial facilities, thereby improving public sanitation.

Preserving economic and social balances

Veolia Environnement also considers the economic and social factors that
underlie the course of development in the countries in which it operates, and it
works to develop solutions that are adapted to local constraints and know-how
transfers. For example, Veolia Environnement has developed integration
strategies in Shanghai, Prague and Gabon, that have allowed Veolia
Environnement's local employees to better understand the challenges in the
provision of water services. Veolia Environnement gives preference to a
partnership approach with non-governmental organizations (NGOs), local
authorities and associations in the implementation of action plans for the
population of emerging countries, which permits the development of model plans
that can be reproduced. In each of its projects, Veolia Environnement seeks to
create a beneficial and educational dimension for the improvement of public
health and the protection of the environment.

Moreover, Veolia Environnement is participating in an initiative for developing
a charter on public-private partnerships and access of the public to essential
services, which is being supported by the French Ministry of Foreign Affairs and
pursued by several agencies of the United Nations. Veolia Environnement
participated in an event organized around this initiative at a meeting of the
U.N. Sustainable Development Commission that was held in New York on April
28-29, 2004, and confirmed its commitment thereto at the World Urban Forum held
in Barcelona in September 2004. This initiative forms part of the United
Nations' Millenium Development Goals, which were announced in 2000 by the U.N.
Secretary General. The initiative aims at defining the role of private operators
with respect to local public service management, while emphasizing the
principles of transparency and the sharing of technology and know-how,
principles to which Veolia Environnement already adheres in connection with its
adherence to the U.N. Global Compact.

At the World Urban Forum in Barcelona, Veolia Environnement also shared some of
its concrete experience in aiding development around the world. Veolia
Environnement often does so in partnership with experienced international
organizations, in areas where its operational know-how is able to contribute
high added value.

In Morocco for example, Veolia Environnement has joined forces with UNICEF and
the French Committee for UNICEF to participate in the implementation of a
program backed by the Moroccan government that aims to combat school dropouts,
particularly among girls. Scheduled to last three years, this partnership also
includes the urban district of Tangiers, a Moroccan NGO, the Amendis
Corporation, a subsidiary of Veolia Water, and Veolia Water Force, Veolia
Environnement's urgent humanitarian intervention group. The two focal points
will be improvement of health infrastructure in schools (installation of
permanent water and toilet facilities) and the raising of awareness on the part
of teachers and parents regarding hygiene and health issues for schoolchildren
and their families. Work will be undertaken at 9 establishments whose needs have
been identified as urgent.

Acting in tandem with Veolia Water Force, Waterdev is the expression of Veolia
Environnement's will to go beyond urgent conditions and enter into developmental
activities. Its purpose is to share experiences and to design, in partnership
with public actors, representatives from non-profit organizations and NGOs,
solutions that will facilitate public access to water and sewage services in the
poor areas of large cities.

Veolia Water Force also mobilized alongside the French Red Cross to aid victims
of the tsunami that devastated populations in Southeast Asia on December 26,
2004. More than 36 tons of supplies were sent to the Maldives, Indonesia and Sri
Lanka. Hundreds of employee volunteers helped respond to the crisis both on-site
and through the provision of logistics. More than 30 such volunteers went to
Indonesia and Sri Lanka to set up mobile units for treating drinking water and
supplying refugee camps, hospitals and schools. These volunteers also
disinfected more than 20 water wells, while at the same time training local
municipal technicians in ways to analyze water quality. Veolia Environnement's
efforts were financed by its divisions, by its municipal partners and by a
(euro)500,000 donation from the Veolia Environnement Business Foundation. Going
forward, Veolia Water Force's efforts will focus more on the long-term, in
particular the rebuilding that will be required in devastated areas.

Finally, in 2004 Veolia Environnement participated in a partnership to protect
the Antarctic region through its cooperation agreement with Institut
Paul-Emile-Victor (IPEV), an entity that manages the French presence on this
continent. This agreement, signed on July 10, 2003, relates to the analysis of
the environmental impact of research bases on polar environments. It confirms
Veolia Environnement's willingness to engage in sustainable development,
particularly in this part of the world. It also supplements partnerships signed
with Australian organizations in October 2001 and Chilean organizations in
October 2002 that related to, among other matters, waste management and the
prevention of water shortages.

The Veolia Environnement Institute: a prospective tool for the environment and
sustainable development

Human management of the environment represents a major challenge that requires
the mobilization of a large number of resources, the support of the public at
large and close cooperation among international, national and local
participants. To address this challenge, Veolia Environnement created the Veolia
Environnement Institute, or VEI, in 2001 to encourage prospective reflection on
a number of issues relating to sustainable development, as well as to
progressively shed light on the principal trends that will influence the
provision of environmental management services over the next decade.

Through its Prospects Committee, which is exclusively composed of individuals of
international reputation and standing, VEI benefits from the contribution of
leading external expertise on different key subjects (including public health,
economy and human sciences) while maintaining a presence in the daily realities
of Veolia Environnement's different activities. This dual capability represents
both the originality and the strength of VEI, which intends to be at the heart
of the main environmental debates and issues of the 21st century. The main
themes to be considered by VEI in 2005, which are defined by the members of the
Prospects Committee, will include the relationship between health and the
environment, the consequences of climatic change, urban growth and the
sociological and economic dimensions of environmental change.

As of the date hereof, the members of VEI's Prospects Committee are: Amartya Sen
(India), economist, winner of the Nobel Prize for Economics in 1998, professor
of political economics and economics at Lamont University and professor of
philosophy at Harvard University; Helene Ahrweiler, historian, president of the
University of Europe and an expert for UNESCO on human and social sciences;
Philippe Kourilsky, biologist, President of the Pasteur Institute in Paris,
France, Director of Research at the Centre nationale de recherche scientifique
(CNRS) and professor at the College de France; Pierre-Marc Johnson (Canada),
attorney, ex-prime minister of Quebec, Canada, and expert on environmental
matters; and Harvey Fineberg (USA), President of the Institute of Medicine of
the United States.

4.8.3 -  Environmental Information (article 116 of NRE Law)

As a specialist in environmental management services, Veolia Environnement is
concerned about the environmental consequences of each of its activities, both
in France and worldwide. In this respect, Veolia Environnement consistently
endeavors to comply with applicable regulations, to meet the needs and requests
of its clients and to optimize the techniques it implements. To illustrate its
commitment, Veolia Environnement highlights below some of the more significant
environmental actions that it has undertaken regardless of any regulatory or
contractual obligation to do so. Readers are also referred to Veolia
Environnement's 2004 Sustainable Development Report for further information
regarding the Company's commitment to sustainable development.

Use and Protection of Natural Resources

Water Resources

Veolia Environnement preserves water resources by working to prevent wasteful
usage in its own installations and in those of its clients. In this respect, the
continued implementation of Veolia Environnement's environmental management
system provides, in particular, for the monitoring of water consumption and
quality in all of Veolia Environnement's activities. Veolia Environnement's
current action plan reflects two primary concerns: increased monitoring of the
health quality of water destined for human consumption, and control of leaks in
cold water distribution networks (raw or treated) and leaks in domestic hot
water production networks. During 2004, Veolia Environnement installed an
indicator to monitor the quality and compliance with regulatory standards of its
drinking water. Veolia Environnement's industrial water consumption amounted to
246.3 million cubic meters in 2004.

Climatic developments in certain regions of the world heighten stresses on water
resources. Veolia Environnement studies and promotes techniques through which
alternative resources are used, such as the production of drinking water by
desalination of seawater and production of water for industry or farm irrigation
by recycling wastewater. These developments are done strictly in association
with local authorities, regulatory proceedings and the scientific community.

Veolia Environnement also takes measures to avoid polluting water resources. For
example, 94.5% of Onyx's landfills are equipped with treatment stations for
leachate (water that percolates through stored waste). In addition, Veolia
Environnement's wastewater treatment efficiency, measured at biological
treatment stations with a capacity greater than 50,000 EH, reached 93% in 2004.

Energy - Energy efficiency and the use of renewable energies

Veolia Environnement contributes to the reduction of energy consumption. Dalkia
optimizes energy management for close to 80,000 energy installations in the
world, from municipal heating networks to public housing, commercial or
industrial building boilers. Optimizing the energy efficiency of such thermal
installations relies upon the quality of their operations and maintenance, as
well as upon their modernization.

Dalkia's strong growth emphasizes the use of heating networks that offer
optimized energy performances by concentrating production on a single site and
involving co-generation. Efforts in this field include all of Veolia
Environnement's activities. Veolia Environnement is not only developing the use
of renewable energies, like biomass and solar energy (Dalkia), but it is also
capturing energy from incineration factories and biogas from landfills (Onyx).

Connex has set as an objective for 2005 the provision of environmental
performance training to 90% of its public transport drivers during the first
five years of their careers. This training effort enables Veolia Environnement
not only to enhance passengers' comfort and limit polluting emissions, but also
to achieve significant fuel economy. In 2004, 59% of Veolia Environnement's
employees participated in training activities.

Veolia Environnement's total energy consumption amounted to 97.1 million MWh in
2004.

Use of soils

In 2003, Veolia Environnement integrated all activities relating to the
treatment and recovery of sludge in a single entity (SEDE Environment). This
integration continued during 2004, resulting in the implementation during 2005
of indicators to measure the quality of sludge. This is expected to result in
Veolia Environnement's having a specific and integrated overview of sludge
management options, allowing it to optimize its agricultural recovery in
particular.

In this way Veolia Environnement has pursued its efforts to control the quality
of waste in the sewage networks and acted upstream to enhance the quality of
sludge produced by implementing pollutant controls in Veolia Environnement's
wastewater treatment networks (through its Actipol method). Veolia Water has
finalized a reference and certification system defining the applicable
requirements for a sewage system for the production of quality sludge to be used
as compost. As a second step, Veolia Environnement promotes the agricultural
recovery of sludge through composting and engages an independent certifying body
to audit its composting and agricultural recovery networks. This recovery is
done in conjunction with the agricultural recovery of the fraction usable for
fertilization from household waste.

Veolia Environnement produced 757,200 tons of compost in 2004, 46% of which was
eligible to be used in agricultural activities.

Veolia Environnement has initiated a quality enhancement program for organic
matter produced from organic waste and a program to evaluate their agricultural
impact (the Quali-Agro program led by CREED - Veolia Environnement's center for
research on waste energy services) in coordination with the INRA. Veolia
Environnement is also active in the rehabilitation of polluted soils. Relying on
several processes, including thermal absorption, Onyx processes almost all of
the pollutants present in the soil at industrial sites.

Air Pollution

Limiting Greenhouse Gases Emissions
-----------------------------------

Certain of Dalkia's activities (combustion installations with thermal output
greater than 20 MW) are subject to European Union directive 2003/87/CE of
October 13, 2003, which implemented an emissions trading system for greenhouse
gases in EU member states (transposed into EU member states in early 2005).
Further, Veolia Environnement controls its emission of greenhouse gases in all
its activities, and it is implementing an action plan to improve the energy
performance of its activities. In addition to the implementation of the energy
efficiency policy described above, this action plan provides, in particular, for
Veolia Environnement's active participation in the flexibility mechanisms
provided for by the Kyoto protocol that entered into force on February 16, 2005.
Veolia Environnement's direct emissions of greenhouse gases (including biogas
from landfills) reached the equivalent of 31.5 million tons of carbon dioxide in
2004.

The evaluation of the production and emission of methane (CH4) gas in landfills
is particularly uncertain (to date there exist many national and international
methods.) Veolia Environnement participates in studies to develop and bring
consistency to the different methods, notably in the context of the "Greenhouse
Gases" protocol developed by international authorities. Veolia Environnement
contributes to the reduction of CH4 emissions by setting-up biogas capture,
burning and energy recovery systems in specialized technical landfills.
Currently, 72 of the landfills for which Veolia Environnement controls
investments are equipped with biogas collection and treatment systems.

Other Emissions
---------------

Installations that Veolia Environnement operates mainly emit sulfur and nitrogen
oxides (SOX and NOX), carbon monoxide (CO), volatile organic compounds and dust.
The method of calculating emissions of SOX from waste incineration units
(hazardous and non-hazardous) was improved in 2004 and allowed Veolia
Environnement to estimate that these emissions amounted to approximately 151
grams per ton of incinerated waste in 2004. Veolia Environnement is still
working towards the development of an indicator for NOX emissions. For example,
Connex, in partnership with ADEME, is pursuing a study to identify and assess
the market systems capable of reducing the NOX emissions of its buses and
coaches. Dalkia has also been conducting an evaluation program for several years
on the various techniques available for reducing emissions (low emission
burners, smoke recirculation, air staging, combustion modeling, etc.).

Veolia Environnement attempts to reduce its emissions, in addition to complying
with regulatory standards, by:

         o   enhancing air pollution treatment and developing more effective
             treatment technologies, including treating smoke from Veolia
             Environnement's waste incineration units, enhancing the quality of
             emissions of Veolia Environnement's transport vehicles and
             utilizing low NOx combustion technology in the case of Dalkia's
             activities, and

         o   reducing consumption and favoring the use of clean fuels, such as
             fuel oil or low sulfur coal, natural gas, natural gas for
             combustion installations or vehicles, and electric or dual-mode
             vehicles.

Veolia Environnement has developed a semi-continuous method to monitor emissions
of dioxins during waste incineration, allowing for control of the aggregate flow
of such pollutants emitted throughout the year. Veolia Environnement offers this
reliable and efficient measurement technique to all of its clients.

Noise and Odors

Veolia Environnement has developed new treatment and storage techniques for
odors, particularly in wastewater treatment plants and landfills for household
waste. Veolia Environnement also uses new and more silent technologies in some
of its installations, including special wall coatings, sound traps and exhaust
gas exit silencers for cogeneration installations or transport vehicles.

Waste

The permanent increase in waste quantities around the world presents major risks
for the environment. Veolia Environnement strives to develop every aspect of the
waste management business that enables it to limit such risks, including the
reduction of the sources of waste, waste collection and processing, selective
sorting, waste recycling and waste-to-energy recovery. Veolia Environnement's
efforts also address the waste produced by its own activities, such as residues
from combustion, residues from smoke purification, treated sludge and leachate
(water that percolates through waste at landfills).

Preserving biological balance, natural environments and protected species

In France, numerous activities fall under the control of either the ICPE
(facilities classified for environmental protection) or its equivalent.
Therefore, all business development is conducted in connection with the
realization of environmental impact studies concerning very precise facets of
flora and fauna. The control of these impacts therefore comprises a constant
preoccupation for Veolia Environnement's different business operations (waste
treatment, decontamination stations, combustion facilities, railway
depositories, etc.) In addition, Veolia Environnement's researchers closely
follow the evolution of scientific debates on biodiversity in order to be able
to identify the most pertinent indicators in Veolia Environnement's areas of
activity.

Evaluation or certification regarding the environment

Veolia Environnement's activities have been subject to environmental
certification, both external (ISO) and internal, for a long time. The number of
Veolia Environnement's ISO 14001 certified sites has increased continuously
since 1999. In addition, Veolia Environnement seeks to achieve the targets set
by its environmental management system for all of its installations, which lead,
subject to the circumstances of each of the entities concerned, to the general
application of the ISO 14001 certification standards. Veolia Environnement
currently has 529 sites covered by an ISO 14001 certification.

Compliance with applicable legal and regulatory provisions

Veolia Environnement's environmental management system includes, among other
things, an environmental audit program that allows it to monitor its sites'
regulatory compliance, as well as their compliance with contractual obligations
and Group standards. Veolia Environnement has defined a general framework to
ensure consistency of the audit systems developed by its divisions, and each of
Veolia Environnement's divisions remains responsible for the definition and
implementation of its own system. Veolia Environnement's goal is to conduct
audits for 80% of priority sites by 2005 and 100% by 2008. Priority sites are
drinking water production sites and urban treatment stations, waste treatment
sites, Dalkia's classified installations and several of Connex's transportation
centers. As of December 31, 2004, 57% of Veolia Environnement's primary
facilities were subject to a regulatory compliance audit. These facilities are
the most sensitive to environmental impacts.

Expenses incurred to preserve the environment

Given the nature of its services, a large majority of Veolia Environnement's
expenditures and investments have a direct impact on the environment. Veolia
Environnement's capital expenditures amounted to (euro)2.315 billion in 2004,
which includes not only investments of a contractual nature, but also expenses
incurred for research and development, employee training, Veolia Environnement's
certification program and the implementation of Veolia Environnement's
environmental management system.

Prevention of environmental risks

In addition to the measures described above to reduce environmental risks,
Veolia Environnement has established an environmental department. This
department ensures that the objectives and actions of Veolia Environnement's
divisions are consistent, particularly in connection with the implementation of
the environmental management system, and encourages information sharing and best
practices. It leads an environmental committee, composed of representatives of
all of Veolia Environnement's divisions and departments (particularly its
sustainable development, legal and communication departments).

In addition, Veolia Environnement created a risk department in 2004 that is
charged with identifying, evaluating and managing risks according to a set
methodology. Its work is complemented by that of a risk committee, which is
chaired by the senior executive vice president. The risk committee meets at
quarterly intervals throughout the year and brings together representatives from
each division as well as officers from Veolia Environnement's corporate
departments. This committee tracks Veolia Environnement's efforts with respect
to risk management, in particular in the areas of industrial, environmental and
health risks (cf. ss.4.1.9 supra).

Veolia Environnement has also established crisis management procedures that
cover environmental crisis management, including, in particular, on-call and
alarm systems at national and international levels that would allow any
necessary measures to be taken as soon as possible.

Reserves and guarantees for environmental risks

As of December 31, 2004, Veolia Environnement's accrued reserves for site
remediation amounted to (euro)367 million.

Indemnities and damages paid in 2004 for environmental claims pursuant to court
orders

As of December 31, 2004, Veolia Environnement's accrued reserves for litigation
ended in 2004 (including all types of claims and disputes) amounted to (euro)105
million.

International environmental targets

Veolia Environnement applies its environmental management system, as described
above, to all its subsidiaries worldwide.

<PAGE>

                                   CHAPTER 5
                      ASSETS--FINANCIAL CONDITION--RESULTS

5.1      COMMENTS ON RESULTS

5.1.1    Major developments in 2004

5.1.1.1  Overview

During 2004, Veolia Environnement completed its strategic restructuring to
refocus on its core activities. Further maturation of its contract portfolio and
continued implementation of the "Veolia Environnement 2005" efficiency plan led
to a solid improvement in Veolia Environnement's profitability and financial
structure. These actions were conducted in parallel with a strategy to
strengthen and further develop Veolia Environnement's contract portfolio.

5.1.1.2. An enriched and renewed contract portfolio with longer maturity

Veolia Environnement renewed and extended several significant contracts during
2004, including:

         o   Renewal of a water distribution contract in Rennes (France) for a
             10-year term;

         o   In Water, a 18-year extension of a wastewater treatment contract
             with the city of Richmond (California), expected to generate total
             revenues of approximately (euro)50 million during this period;

         o   In Waste management, a 10-year extension of a contract to operate,
             maintain and manage a waste-to-energy recovery plant in Miami-Dade
             County (United States), expected to generate additional total
             revenues of (euro)1,085 million during this period;

         o   A 5-year extension of a contract for integrated waste management
             with the county of Sheffield (United Kingdom), expected to generate
             additional total revenues of more than (euro)525 million during
             this period; and

         o   In the transportation division, the renewal and expansion of
             contracts in Nice (and surrounding areas), Toulon and Saint-Etienne
             (France), and the renewal and expansion of a contract for the
             operation of the entire suburban rail network of Melbourne
             (Australia), the latter expected to generate total revenues of
             approximately (euro)1.5 billion during a 5-year period.

Veolia Environnement also won new contracts and activities during 2004, among
which the most significant were:

         o   A 30-year contract for water and wastewater management in Zlin in
             eastern Moravia (Czech Republic), expected to generate total
             revenues of approximately (euro)360 million during this period;

         o   In water, a 20-year contract (renewable for another 20-year term)
             for water management signed with Kladno-Melnik (Central Bohemia),
             expected to generate total revenues of more than (euro)600 million
             during this period;

         o   A 35-year contract for the rehabilitation and operation of drinking
             water plants in the province of Guizhou (China), expected to
             generate total revenues of approximately (euro)210 million during
             this period;

         o   Two water contracts in China expected to generate total revenues of
             approximately (euro)790 million, one with the city of Hohhot for a
             30-year term, the other with the city of Weinan for a 22-year term;

         o   Acquisition of a 74.9% interest in Braunschweiger Versorgungs-AG
             (BV-AG), a company that provides environmental services to the city
             of Braunschweig. Services will include water distribution and
             management of a municipal heating, electricity and gas network. In
             2005, Veolia Environnement will invest (euro)370 million to acquire
             its 74.9% interest in BV-AG, which has annual revenues of
             approximately (euro)300 million;

         o   A 21-year contract for waste management in Poland, launched in
             January 2004 with the inauguration of a landfilling facility in
             Chrzanow near Cracow, expected to generate total revenues of
             approximately (euro)250 million during this period;

         o   A 20-year contract for the collection, management, transfer and
             treatment of household and commercial waste in Pontiac, Michigan
             (United States), expected to generate total revenues of
             approximately (euro)185 million during this period;

         o   A contract between Dalkia (energy services division) and the Polish
             Treasury Ministry to privatize the heating and power station of
             Poznan (ZEP Poznan). The contract was signed at the beginning of
             2004 and is expected to generate annual revenues of approximately
             (euro)74.6 million;

         o   An 8-year contract for the global management of energy
             installations on behalf of hospitals in the Lazio region of Rome
             (Italy), expected to generate total revenues of approximately
             (euro)430 million during this period;

         o   A 5-year contract (term beginning on July 1, 2005) for the
             operation of a rail network in the suburbs of Los Angeles (United
             States), expected to generate total revenues of approximately
             (euro)70 million during this period;

Finally, during 2004 operations commenced under the Group's water contract with
the city of Shenzhen (China), which was awarded to the Group in 2003.

Following an evaluation conducted by the British research organization EIRIS
(Ethical Investment Research), Veolia Environnement was added to the FTSE4Good
Index, which confirms the Group's progress with respect to sustainable
development issues.

5.1.1.3. Successful completion of restructuring plan

During 2004, Veolia Environnement pursued its strategic restructuring to refocus
on its core environmental services activities.

Sales of activities in the U.S.
-------------------------------

         o   In February 2004, Veolia Environnement finalized the sale of
             farmlands located in Imperial Valley (California) to Imperial
             Irrigation District (IDD) for US$77.3 million.

         o   At the end of July 2004, Veolia Environnement completed the sale of
             USFilter Corporation's equipment and short-term services businesses
             to Siemens. After application of the contractual price adjustment
             mechanisms, the final value of the sale amounted to US$975 million.

         o   At the end of September 2004, Veolia Environnement completed the
             sale of its Culligan business to Clayton Dubilier & Rice, for total
             consideration of US$612 million.

These U.S. sales represent the final step in the implementation of the strategic
refocusing of Veolia Environnement's water operations in North America, which
was originally announced in September 2003. They are part of Veolia
Environnement's broader effort to concentrate more fully on the development of
outsourcing on behalf of public authorities, as well as on the provision of
services involving long-term contracts with municipal or industrial clients.
Including the sale of Everpure and Surface Preparation in 2003 (resulting in
US$345 million in proceeds), the total proceeds generated from Veolia
Environnement's U.S. asset sales in 2003 and 2004 amounted to approximately
US$2.0 billion.

Sale of FCC
-----------

During 2003, Veolia Environnement and its partner in FCC's holding company, Ms.
Esther Koplowitz, had a number of disagreements relating to the strategic
development of FCC. To avoid creating a deadlock and in the interest of FCC's
development, Veolia Environnement proposed to Ms. Koplowitz several alternative
ways to resolve the parties' differences. Ms. Koplowitz, however, informed
Veolia Environnement in the third quarter of 2003 of her preference to formally
commence negotiations to repurchase the Company's indirect interest in FCC.
Veolia Environnement accepted the principle of a sale of its interest in FCC and
various proposals were exchanged. In this context, Veolia Environnement informed
the Spanish stock market authorities (Comision Nacional del Mercado de Valores)
on March 1, 2004 of these negotiations.

Negotiations during the first half of 2004 resulted in the sale of Veolia
Environnement's 49% stake in B 1998 S.L., the holding company that owns 52.5% of
FCC, to a company controlled by Ms. Esther Koplowitz. The transaction allowed
Veolia Environnement to reduce its net financial indebtedness by (euro)1.1
billion, and resulted in a total cash payment to Veolia Environnement of
(euro)916 million (before transaction fees), including an exceptional dividend
paid by B 1998 S.L. to Veolia Environnement prior to the sale. The transaction,
which closed on September 15, 2004, was subject to applicable Spanish anti-trust
regulatory approvals.

Sale of Berlikomm
-----------------

As part of the refocusing of its activities on water distribution, Berlin Water
sold telecommunications operator Berlikomm at the end of August 2004.

Impact of Asset Sales
---------------------

The asset sales referred to above allowed Veolia Environnement to reduce its
debt by (euro)2.4 billion in 2004.

5.1.1.4. Evolution of the shareholder structure

Following a shareholder restructuring on December 9, 2004, Vivendi Universal
reduced its holdings in Veolia Environnement from 20.36% to 5.30% of share
capital. This constituted a significant step in the restructuring of Veolia
Environnement's shareholder base. At the same time, in order to help develop its
employee shareholder base, Veolia Environnement repurchased 2% of its share
capital from Vivendi Universal in connection with the shareholder restructuring,
for an amount of (euro)194.8 million.

5.1.1.5. Preliminary results under the "Veolia Environnement 2005" efficiency
plan

The "Veolia Environnement 2005" efficiency plan, which aims to generate
(euro)300 million in savings in 2006, is being implemented according to
schedule. Savings realized during 2004 amounted to (euro)126 million, of which
(euro)116 million was included in EBIT (as defined below). Accordingly, Veolia
Environnement continues to have an objective of (euro)300 million in annual
savings beginning in 2006.

Savings for 2004 were achieved in the areas of purchases (18%), structural and
IT costs (30%), operational processes (34%) and asset management (18%).

5.1.2    Accounting and financial information

5.1.2.1    Definitions

         o   On December 31, 2004, Veolia Environnement began applying the
             provisions of Article 23100 of CRC Regulation n(degree) 99-02,
             which allows companies to report their share in the net income of
             businesses sold during the year on a separate line item of the
             income statement. The net income of the sold activities is composed
             of the net income of the businesses until the date of the
             transaction, capital gain (loss) from the sale and the related
             taxes.

         o   The term "new scope of consolidation" excludes the North American
             assets sold in 2003 and 2004 (i.e. Surface Preparation, Everpure,
             Culligan and USFilter's short-term equipment and short-term
             services activities) and FCC (leading Proactiva to be
             proportionally consolidated at 50%, in lieu of full consolidation).

         o   As used in this report, the term "internal growth" includes growth
             resulting from new contracts won and the expansion of existing
             contractual arrangements through increases in prices and/or volumes
             delivered. Veolia Environnement also frequently offers, in the
             course of bidding on a contract, to acquire operating assets
             related to the performance of the contract. As a result, internal
             growth also includes acquisitions of assets for dedicated use in a
             particular project or contract.

         o   The term "external growth" relates to growth resulting from
             acquisitions (net of disposals) of entities that hold multiple
             contracts and assets used in one or more markets.

         o   EBIT, a French GAAP measure of operating performance, is defined as
             operating income (loss) before amortization and depreciation of
             goodwill and intangible assets with indefinite lives and
             restructuring costs. EBIT complies and is calculated in accordance
             with the definition of "resultat d'exploitation" set forth in CRC
             Regulation n(degree) 99-02 under French GAAP.

         o   Non-recurring income and charges are recorded as "other income
             (expense)". Non-recurring income and charges are defined as those
             resulting from extraordinary events that are not likely to reoccur
             in the ordinary course of Veolia Environnement's operations,
             including capital gains and losses recorded in connection with the
             sale of Veolia Environnement's subsidiaries and assets.

         o   Recurring consolidated net income reflects EBIT after adding or
             deducting, as the case may be, the recurring portion of
             amortization and depreciation of goodwill and intangible assets
             with indefinite lives, financial income (expense), Veolia
             Environnement's share in net earnings of companies accounted for by
             the equity method, minority interests and ordinary tax expenses.

5.1.2.2    Revenue

The following table shows a breakdown of revenue (according to of Article 23100
of CRC Regulation 99-02 under French GAAP):

<TABLE>
----------------------------------------------------------------------------------------------------------------
 (in millions of (euro), except     At          At          % change     Internal    External      Impact of
 for %)                          December     December      2004/2003     growth      growth       exchange
                                 31, 2004     31, 2003                                               rate
                                                                                                  fluctuations
----------------------------------------------------------------------------------------------------------------
<S>                               <C>          <C>             <C>         <C>          <C>            <C>
 Revenue under new scope of
 consolidation..............     24,645        23,821         3.5%        3.9%         0.5%          -0.9%
----------------------------------------------------------------------------------------------------------------
</TABLE>

-----------------------------  -------------  -----------
  Variation of the percent
  consolidation of
  Proactiva.................         +28           +79
-----------------------------  -------------  -----------
  FCC.......................           -        +2,965
-----------------------------  -------------  -----------
  Assets sold in the U.S....           -        +1,738
-----------------------------  -------------  -----------
 Consolidated revenue.......      24,673(1)     28,603
-----------------------------  -------------  -----------

(1) After application of the specific provisions of Article 23100 of CRC
Regulation 99-02 as described above.


The following table shows a breakdown of revenue under the new scope of
consolidation by division:

<TABLE>
-----------------------------------------------------------------------------------------------------------
(in millions of (euro), except for %)                 At December 31,     At December 31,       % change
                                                           2004                2003            2004/2003
-----------------------------------------------------------------------------------------------------------
<S>                                                   <C>                 <C>                 <C>
Water..................................................   9,798.4             9,585.1            +2.2%
Waste Management.......................................   6,197.7             5,909.3            +4.9%
Energy Services........................................   5,035.5             4,654.0            +8.2%
Transportation.........................................   3,613.0             3,673.1            -1.6%
-----------------------------------------------------------------------------------------------------------
Total new scope........................................  24,644.6            23,821.5            +3.5%
-----------------------------------------------------------------------------------------------------------
Total new scope at constant 2003 exchange rate.........  24,862.4            23,821.5            +4.4%
-----------------------------------------------------------------------------------------------------------
</TABLE>

The negative impact of currency fluctuations ((euro)218 million) is mainly
attributable to the weaker U.S. dollar (negative impact of (euro)172 million),
which traded at an average rate of exchange of $1.2462 per euro in 2004 compared
to $1.1418 per euro in 2003. Internal growth amounted to 3.9% at constant
exchange rates.

The following table shows a breakdown of revenue by division in France and
elsewhere under the new scope of consolidation:

<TABLE>
-----------------------------------------------------------------------------------------------------------------------------
(in millions of               As at December 31, 2004            As at December 31, 2003                 % change
(euro), except for %)
-----------------------------------------------------------------------------------------------------------------------------
                            France    Outside     Total       France    Outside      Total       France    Outside      Total
                                      France                            France                             France
-----------------------------------------------------------------------------------------------------------------------------
<S>                         <C>       <C>        <C>          <C>       <C>         <C>            <C>       <C>         <C>
Water                       6,095.5   3,702.9    9,798.4      6,115.8   3,469.3     9,585.1       -0.3%     +6.7%       +2.2%
-----------------------------------------------------------------------------------------------------------------------------
Waste Management......      2,802.4   3,395.3    6,197.7      2,648.1   3,261.2     5,909.3       +5.8%     +4.1%       +4.9%
-----------------------------------------------------------------------------------------------------------------------------
Energy Services.......      3,074.7   1,960.8    5,035.5      2,912.6   1,741.4     4,654.0       +5.6%    +12.6%       +8.2%
-----------------------------------------------------------------------------------------------------------------------------
Transportation........      1,466.5   2,146.5    3,613.0      1,346.2   2,326.9     3,673.1       +8.9%     -7.8%       -1.6%
-----------------------------------------------------------------------------------------------------------------------------
Total.................     13,439.1  11,205.5   24,644.6     13,022.7  10,798.8    23,821.5       +3.2%     +3.8%       +3.5%
-----------------------------------------------------------------------------------------------------------------------------
</TABLE>

Revenue generated in France increased from (euro)13,022.7 million in 2003 to
(euro)13,439.1 million in 2004, reflecting solid growth of more than 5% across
all divisions except for water, which in 2003 recorded higher than normal
revenue due to the heatwave that struck most of France.

Revenue generated outside France increased by 3.8% to (euro)11,205.5 million in
2004 (compared to (euro)10,798.8 million in 2003), and by 5.8% at constant
exchange rates. Growth in the water, waste management and energy services
divisions was particularly strong and helped contribute to the overall positive
result.

The following table shows a breakdown of revenue by division and by geographical
regions outside of France under the new scope of consolidation:

<TABLE>
---------------------------------------------------------------------------------------------------------------------
(in millions of              Europe (outside          Americas                Rest of                Total
(euro), except for %)            France)                                       World
                              2004      2003       2004       2003        2004       2003       2004       2003
-----------------------------------------------------------------------------------------------------------------
<S>                         <C>       <C>           <C>       <C>       <C>        <C>         <C>        <C>
Water.................      1,990.7   2,061.8       561.7     395.2     1,150.5    1,012.3     3,702.9    3,469.3
Waste Management......      1,566.4   1,457.5     1,303.3   1,339.5       525.6      464.2     3,395.3    3,261.2
Energy Services.......      1,876.4   1,670.0        47.9      40.7        36.5       30.7     1,960.8    1,741.4
Transportation........      1,598.1   1,994.3       276.7     190.3       271.7      142.3     2,146.5    2,326.9
..................................................................................................................
Total.................      7,031.6   7,183.6     2,189.6   1,965.7     1,984.3    1,649.5    11,205.5   10,798.8
-----------------------------------------------------------------------------------------------------------------
</TABLE>

Revenue from Europe outside France remained stable due to the loss of the Connex
South Eastern license in 2003, which was offset by growth in the other
divisions. Excluding the effect of the loss of Connex South Eastern, revenue
from Europe outside France grew by 7.4%, and by 7.2% at constant exchange rates.

The principal factors contributing to this increase were:

     o   expansion in waste management activities in the UK and Northern Europe,

     o   expansion in energy services activities in Italy and the UK,

     o   development of transportation activities in Eastern Europe, and

     o   growth in water activities in Germany.

In the Americas, revenue increased by 21% at constant exchange rates, due
primarily to the full-year impact of operations under the Boston transportation
contract and other new development in the transportation division.

In the rest of the world, revenue increased by 20.3%, due primarily to new
contracts won by the water division in China, a solid performance by the waste
management division and operations under the newly renewed and expanded
Melbourne contract in the transportation division.

Water*
-----

Veolia Environnement's water business generated revenue of (euro)9.8 billion in
2004, an increase of 2.2% compared with 2003, despite the negative impact of
fluctuations in currency exchange rates (which represented a 0.8% decline in
revenue). At constant exchange rates, revenue from the water business grew by
3.0% in 2004, including the 0.5% positive impact of external growth. As a
result, the water business recorded internal growth of 2.5%, which is primarily
attributable to the following:

     o   In France, revenue was affected by weather conditions that were much
         less favorable than in 2003, which led to a reduction in Veolia
         Environnement's billings for payments it collected on behalf of local
         water authorities (third-party revenues) during 2004. Nevertheless, the
         business benefited from an excellent rate of contract renewals and an
         important contribution from new contracts and complementary services.
         Revenue growth came to 1%. However, when adjusted for the reduction in
         total billings collected from local water authorities, revenue grew by
         2.6%.

     o   Outside France, excluding Veolia Water Systems, internal growth
         remained strong at nearly 9%. The business benefited from highly
         favorable trends across Europe and from the commencement of operations
         under new contracts won in the Asia-Pacific region (representing
         internal growth of 19%). The activities retained in the United States
         also performed well.

     o   Revenue posted by Veolia Water Systems declined slightly by 2.7% at
         comparable scope and constant exchange rates, due to measures
         undertaken both in France and elsewhere to refocus on more profitable
         contracts.

--------------
* Under new scope of consolidation.


Waste Management
----------------

The waste management business generated revenue of (euro)6.2 billion in 2004, an
increase of 4.9% compared with 2003, despite the negative impact of fluctuations
in currency exchange rates relating to the U.S. dollar in particular (which
represented a 2.1% decline in revenue). At constant exchange rates, waste
management revenue increased by 7.0% compared with 2003, despite negative
external growth of 0.2%. Internal growth of 7.2% in the waste management
business was primarily attributable to the following:

     o   In France, despite a challenging economic environment, the expansion of
         waste collection, sorting and waste-to-energy activities as well as an
         overall improvement in service offerings helped to lift internal
         revenue growth to 6.6%.

     o   Total revenue growth outside France, excluding Latin America
         (Proactiva), was nearly 8% at comparable scope and constant exchange
         rates. Business in Northern and Central Europe (in particular in the
         United Kingdom, Norway and the Czech Republic) posted continued strong
         growth. In the United States, the solid waste and industrial services
         activities recorded strong performance. Operations in Asia continued to
         benefit from satisfactory growth in volumes, especially in Hong Kong.
         Revenue in Australia posted a tangible increase following expansion in
         New South Wales and Queensland.

Energy Services
---------------

The energy services business generated revenue of (euro)5.0 billion in 2004, an
increase of 8.2% compared with 2003. Revenue growth resulted mainly from
internal growth of 7.2%, and to a small extent from 1% in external growth
(principally relating to the acquisition of Giglio in Italy). Internal growth of
7.2% in the energy services business was primarily attributable to the
following:

     o   Revenue in France grew by 5.9% as a result of expansion in business, in
         particular with industrial customers, and the entry into service of
         cogeneration plants.

     o   Outside France, internal revenue growth was 9.6%. Expansion was
         particularly strong in Southern Europe (internal growth in Italy ran at
         nearly 18% due to new contract wins, while overall growth came to 29%
         due primarily to the acquisition of Giglio) and in the UK (growth of
         12.6% at comparable scope and constant exchange rates).

Transportation
--------------

The transportation business generated revenue of (euro)3.6 billion in 2004, a
1.6% decrease compared with 2003. This decrease was primarily due to negative
internal growth of 1.9% and the impact of fluctuations in currency exchange
rates (which represented a 0.5% decline in revenue), which was partially offset
by external growth of 0.8%. At constant exchange rates, revenue from the
transportation business decreased by 1.1% compared with 2003. Negative internal
growth of 1.9% in the transportation business was primarily attributable to the
discontinuation of rail and bus operations in the United Kingdom in November
2003. Excluding the impact of this discontinuation, internal growth came to
14.7%, which was primarily attributable to the following:

     o   In France, internal revenue growth of 8% was due to both business
         expansion as well as contract renewals or expansions.

     o   Outside France, excluding the impact of the operations discontinued in
         the UK, internal growth was up 19.6%. Connex benefited in particular
         from the full-year impact of operations under the Boston contract, rail
         contracts won in Germany and the renewal and expansion of the Melbourne
         contract in Australia.

5.1.2.3    Operating Income (Loss) before Amortization Charges and
           Restructuring Costs (EBIT)

The following table shows a breakdown of EBIT (according to Article 23100 of CRC
Regulation 99-02 under French GAAP):

<TABLE>
------------------------------------------------------------------------------------------------------
                                             At December 31,     At December 31,      % change
 (in millions of (euro), except for %)             2004                2003           2004/2003
------------------------------------------------------------------------------------------------------
<S>                                          <C>                 <C>                <C>
EBIT under new scope of
  consolidation.....................              1,615.8             1,437.4           +12.4%
------------------------------------------------------------------------------------------------------
  Variation of the percent
  consolidation of Proactiva........                 +1.1                +0.8
--------------------------------------------------------------------------------
  FCC...............................                    -              +275.3
--------------------------------------------------------------------------------
  Assets sold in the U.S............                    -               +37.4
--------------------------------------------------------------------------------
Consolidated EBIT...................           1,616.9(1)             1,750.9
--------------------------------------------------------------------------------
</TABLE>

(1) After application of the specific provisions of Article 23100 of CRC
Regulation 99-02 as described above.

The following table shows a breakdown of EBIT by division under the new scope of
consolidation:

<TABLE>
--------------------------------------------------------------------------------------------------
(in millions of (euro), except for %)          At December 31,     At December 31,    % change
                                                    2004                 2003         2004/2003
--------------------------------------------------------------------------------------------------
<S>                                            <C>                 <C>                <C>
Water.....................................         830.3                 743.2          +11.7%
Waste Management..........................         455.8                 382.5          +19.2%
Energy Services...........................         295.8                 274.4           +7.8%
Transportation............................         103.3                  92.6          +11.5%
Holding Company Costs.....................         (69.4)                (55.3)         +25.5%
--------------------------------------------------------------------------------------------------
Total new scope...........................       1,615.8               1,437.4          +12.4%
--------------------------------------------------------------------------------------------------
Total new scope at constant 2003
exchange rate.............................       1,631.6               1,437.4          +13.5%
--------------------------------------------------------------------------------------------------
</TABLE>

Water*
-----

EBIT of the water division amounted to (euro)830.3 million in 2004, an 11.7%
increase from the (euro)743.2 million recorded in 2003. At constant exchange
rates, EBIT increased by 12.2% in 2004, which was primarily attributable to the
following:

     o   In France, profitability of the water division decreased slightly in
         2004, given that weather conditions were less favorable than in 2003
         (when a heatwave struck most of France). However, this was almost
         entirely offset by the continued pursuit of productivity and
         cost-control measures in France.

     o   Outside France, operating margins improved due primarily to an increase
         in tariffs under the Berlin water contract. In the rest of Europe, EBIT
         increased in Germany, the Czech Republic and Romania. In Asia,
         operations under new contracts are beginning in accordance with
         development plans. In the United States, Veolia Environnement
         implemented a new organizational structure for the U.S. assets it
         decided to retain. Engineering and technology activities within the
         water division benefited from a strategy aimed at choosing contracts
         more selectively, and also recorded a significant increase in
         profitability.

As a result of these factors, the water division's EBIT/revenue ratio increased
from 7.7% in 2003 to 8.5% in 2004.

--------------
* Under new scope of consolidation.


Waste Management
----------------

EBIT of the waste management division amounted to (euro)455.8 million in 2004, a
19.2% increase from the (euro)382.5 million recorded in 2003. At constant
exchange rates, EBIT increased by 22.4% in 2004, which was primarily
attributable to the following:

     o   In France, results were strong due to the impact of several
         profitability measures and rationalization of operating processes that
         occurred over the past few years, in particular in the areas of
         collection, incineration and hazardous waste activities. The waste
         management division has also attempted to refocus itself on the
         provision of high value-added services.

     o   Outside France, EBIT increased noticeably in Northern Europe. In the
         United Kingdom, for example, the waste management division benefited
         from an improvement in the profitability of municipal contracts and the
         impact of large integrated contracts, while in Norway the division's
         recycling activities yielded favorable results. In the United States,
         EBIT increased due primarily to industrial service activities.

As a result of the general improvement in profitability, the waste management
division's EBIT/revenue ratio increased from 6.6% in 2003 to 7.4% in 2004.

Energy Services

EBIT of the energy services division amounted to (euro)295.8 million in 2004, a
7.8% increase at current and constant exchange rates from the (euro)274.4
million recorded in 2003. The increase was primarily attributable to the
following:

     o   In France, EBIT improved due in particular to continued strengthening
         of work organization.

     o   Outside France, EBIT increased strongly in Italy due to the twin
         effects of new commercial development and efforts to improve
         profitability. EBIT also increased in Eastern Europe, benefiting from
         the commencement of operations under new contracts won over the past
         two years, in particular in Poland and the Baltic region.

As a result of these factors, the energy services division's EBIT/revenue ratio
remained stable at 5.9% in 2004.

Transportation
--------------

EBIT of the transportation division amounted to (euro)103.3 million in 2004, an
11.5% increase compared with 2003. At constant exchange rates, EBIT increased by
12.5% in 2004, which was primarily attributable to the following:

     o   In France, businesses performed well, in particular the inter-city
         transportation business.

     o   Outside France, results improved noticeably due to profits realized
         under the Boston contract, the initial effects of the newly expanded
         Melbourne contract and contract negotiations in Germany. This
         improvement was offset, however, by difficulties encountered in the
         Scandinavian market, which involved bus activities in Sweden and
         Denmark and an operating deficit by the Norland Trafic railway line in
         Sweden.

As a result of these factors, the transportation division's EBIT/revenue ratio
increased from 2.5% in 2003 to 2.9% in 2004.

EBIT by Region

The following table shows a breakdown of EBIT of the Company by geographical
region under the new scope of consolidation:

--------------------------------------------------------------------------------
                                           At December 31,     At December 31,
                                                2004                2003
--------------------------------------------------------------------------------
France                                           41%                 38%
Europe (outside France)...................       42%                 47%
Americas..................................        7%                  8%
Rest of World.............................       10%                  7%

Assets disposals in the United States and Spain have led to an increase in the
proportional contribution to EBIT of Veolia Environnement's activities in
France.

EBIT margins (EBIT/revenue ratio)

EBIT margins (under the new scope of consolidation) improved in different
divisions due to an improvement in operating performances, and broke down as
follows:

--------------------------------------------------------------------------------
                                           At December 31,     At December 31,
                                                2004                2003
--------------------------------------------------------------------------------
Water.....................................      8.5%                7.7%
Waste Management..........................      7.4%                6.6%
Energy Services...........................      5.9%                5.9%
Transportation............................      2.9%                2.5%
--------------------------------------------------------------------------------
Total new scope...........................      6.6%                6.0%
--------------------------------------------------------------------------------


Operating Expenses

The following table shows a breakdown of operating expenses in 2004 and 2003:

--------------------------------------------------------------------------------
(in millions of (euro))                    At December 31,     At December 31,
                                                2004                2003
--------------------------------------------------------------------------------
Personnel costs...........................      7,424               8,569
Depreciation and reserves.................      1,478               1,719
Other expenses............................     14,247              16,646
--------------------------------------------------------------------------------
Total.....................................     23,149              26,934
--------------------------------------------------------------------------------


5.1.2.4    Amortization of Goodwill and Depreciation of Intangible Assets with
           Indefinite Lives

Amortization and depreciation charges relating to goodwill and intangible assets
with indefinite lives decreased from (euro)2,424.5 million in 2003 to
(euro)253.3 million in 2004. Amortization and depreciation charges in 2004 broke
down as follows:

     o   (euro)146.9 million in recurring amortization expense, compared to
         (euro)209.6 million in 2003, and
     o   (euro)106.4 million in non-recurring amortization expense, compared to
         (euro)2,214.9 million in 2003.

Recurring amortization expense decreased in 2004, due primarily to the write-off
as of June 30, 2003 of goodwill relating to USFilter, and the allocation of
goodwill amortization relating to FCC to a separate line item of the income
statement for businesses that have been sold.

Non-recurring amortization charges in 2004 consisted primarily of a write-off of
(euro)70.0 million of goodwill for the transportation division in various parts
of the Scandinavian market. Other non-recurring amortization charges (amounting
to (euro)36.4 million) involved mainly the waste management ((euro)19.0 million)
and energy services ((euro)14.9 million) divisions, in light of the market
environment in 2004 and future prospects in these markets.

In 2003, amortization and depreciation charges relating to goodwill and
intangible assets with indefinite lives amounted to (euro)2,424.5 million,
principally due to a write-off in the first half of 2003 of (euro)2,091.3
million of goodwill recorded in connection with the acquisition of USFilter and
several trademarks held by USFilter (which are recorded as intangible assets
with an indefinite life) following Veolia Environnement's reorganization of its
U.S. water activities and the contemplated divestment of several of these
activities (sale of "Equipment - short term contracts" and "consumer and
commerce poles"). In addition, in light of the market environment in 2003 and
the prospects for its markets, in 2003 Veolia Environnement wrote-off goodwill
amounting in the aggregate to (euro)123.6 million, of which (euro)36 million was
recorded in several engineering subsidiaries of the water division, (euro)21.6
million in German waste management operations and (euro)18.8 million in energy
services activities. This (euro)123.6 million write-off of goodwill also
included a charge of (euro)9.7 million in the transportation division due to the
termination of the Connex South Eastern license, and charges of (euro)24.2
million relating to FCC, notably with respect to its cement activities in the
U.S.

5.1.2.5    Restructuring Costs

Restructuring costs decreased from (euro)93.3 million in 2003 to (euro)51.0
million in 2004. Restructuring costs in 2004 related mainly to:

     o   (euro)28.5 million accrued in the water division, due primarily to the
         implementation of restructuring plans for subsidiaries, including
         Veolia Water Systems ((euro)8.5 million), Novo in Berlin ((euro)8.0
         million) and Apa Nova Bucuresti in Bucharest ((euro)3.1 million).
         Various other restructuring charges amounted to less than (euro)2
         million each;

     o   (euro)17.1 million accrued in the energy services division, of which
         (euro)10.6 million and (euro)6.5 million related to employee
         termination costs in France and abroad, respectively;

     o   (euro)2.7 million accrued in the waste management division; and

     o   (euro)2.7 million accrued in the transportation division.

In 2003, restructuring costs amounted to (euro)93.3 million. Restructuring costs
in 2003 related mainly to:

     o   (euro)31.5 million accrued in the transportation division, of which
         (euro)20.9 million relate to the additional costs incurred in
         connection with the loss of the South Eastern license in the United
         Kingdom, which were fully paid in 2003 to obtain the release of Veolia
         Environnement's financial obligations under the license. Most of the
         remaining balance relates to the reorganization of German
         transportation activities ((euro)3.6 million);

     o   (euro)33.9 million accrued in the water division, including (euro)12.7
         million recorded by USFilter's subsidiaries in the United States in
         connection with various profitability measures (particularly in its
         engineering activities), (euro)9.8 million relating to Veolia Water's
         engineering activities (particularly in the Benelux region), and
         (euro)4.0 million in connection with changes in the management of the
         Africa and Middle East region;

     o   (euro)15.1 million accrued in the energy services division, of which
         (euro)14.6 million were recorded in France and the remaining (euro)0.5
         million elsewhere; and

     o   (euro)12.6 million accrued in the waste management division, including
         (euro)5.0 million in costs associated with a reorganization plan in the
         United States.

5.1.2.6    Operating Income

Operating income is defined as EBIT after amortization and depreciation of
goodwill and intangible assets with indefinite lives and restructuring costs. It
is therefore affected by exceptional write-offs of goodwill and market shares.
In 2004, operating income amounted to (euro)1,312.6 million, compared to an
operating loss of (euro)766.9 million in 2003, which was mainly due to the
write-off of goodwill and indefinite life intangible assets associated with the
acquisition of USFilter.

For 2004, operating income broke down as follows by division: water ((euro)744.8
million, excluding the results of Proactiva), waste management ((euro)384.0
million, excluding the results of Proactiva), energy services ((euro)233.7
million), and transportation ((euro)13.9 million).

For 2003, operating income broke down as follows by division: water
((euro)-1,456.3 million, excluding the results of Proactiva), waste management
((euro)292.8 million, excluding the results of Proactiva), energy services
((euro)210.3 million), transportation ((euro)33.4 million), and FCC ((euro)209.7
million).

5.1.2.7  Financial Income (Expense), Net

Veolia Environnement incurred net financial expense of (euro)635.0 million in
2004, compared to net financial expense of (euro)749.9 million in 2003. The
decrease in net financial expense was partially due to a continued decline in
financing costs, from (euro)623.7 million in 2003 to (euro)602.1 million in
2004. It was also equally due to a reduction in net accruals of reserves, which
fell from (euro)134.1 million in 2003 to (euro)45.8 million in 2004.

The decrease in financing costs is principally attributable to a reduction in
outstanding indebtedness, which offset an increase in the average cost of debt
from 4.31% in 2003 to 4.63% in 2004. The increase in the average cost of debt
resulted from an extension in the maturity of debt, the implementation of
fixed-rate hedges in 2004 and the investment of proceeds resulting from asset
sales into short-term money market instruments (to be used for the redemption of
VE's outstanding OCEANEs on January 3, 2005).

Excluding the impact of financing costs, Veolia Environnement recorded net
financial expense of (euro)32.9 million in 2004, compared to net financial
expense of (euro)126.2 million in 2003. The other principal components of
financial income and expense in 2004 were the following:

     o   a one-time capital gain of (euro)44.4 million from the sale of shares
         of Vinci, as well as a one-time capital gain of (euro)7.8 million from
         the sale of shares of Rome Vendome (compared to a capital gain of
         (euro)30.5 million in 2003 from the sale of shares of Vinci),

     o   a non-recurring write back of reserves of (euro)3.6 million relating to
         shares of Veolia Environnement held as treasury stock (compared to net
         accrual of reserves of (euro)61.1 million in 2003, including a
         (euro)69.8 million reserve accrued in connection with several financial
         credits held by USFilter),

     o   the amortization of (euro)34.7 million in redemption premium (stable
         compared to (euro)34.1 million in 2003), a substantial part of which
         corresponds to redemption premium on Veolia Environnement's convertible
         bonds, or OCEANEs ((euro)30.2 million),

     o   the amortization of (euro)18.8 million in borrowing costs, a slight
         increase compared to 2003 ((euro)14.0 million),

     o   commissions paid to financial institutions amounting to (euro)9.6
         million (compared to (euro)13.0 million in 2003), and

     o   a net foreign exchange loss of (euro)19.9 million (compared to
         (euro)7.8 million in 2003).

5.1.2.8    Other Income (Expense)

Non-recurring income and charges are recorded as "other income (expense)".
Non-recurring income and charges are defined as those resulting from
extraordinary events that are not likely to reoccur in the ordinary course of
Veolia Environnement's operations, including capital gains and losses recorded
in connection with the sale of Veolia Environnement's subsidiaries and assets.
Veolia Environnement recorded net other expense of (euro)57.3 million in 2004,
compared to (euro)62.4 million in 2003.

Net other expense in 2004 principally resulted from:

     o   a (euro)55.2 million capital loss recorded in connection with the sale
         by Berlin Water of telecommunications operator Berlikomm,

     o   a (euro)13.8 million settlement paid to resolve a dispute relating to a
         failed acquisition in Italy,

     o   other insignificant charges.

Net other expense in 2003 resulted from the (euro)65.0 million in capital losses
recorded in connection with the sale of several of USFilter's activities
(including the impact of fluctuations in exchange rates on the sales proceeds)
and reserves accrued in respect of USFilter activities in the process of being
sold, a (euro)28.3 million reserve accrued in respect of companies in the United
Kingdom to be sold following Connex's strategic decision to withdraw from the
U.K. transportation market, and a (euro)21.6 million reserve accrued by FCC in
respect of the sale of Grubar Hotels. These capital losses and reserves more
than offset net capital gains of (euro)52.5 million from various divestments in
2003. These net capital gains resulted primarily from a (euro)30.8 million gain
on the sale of Veolia Environnement's interest in Wyuna and a (euro)40.8 million
gain on the sale by FCC of Compania de Energia Hydroelectrica de Navarra.

5.1.2.9  Income Tax Expense

Income tax expense in 2004 was (euro)182.4 million, compared to (euro)274.4
million in 2003.

2004 tax expense is composed of a tax charge of (euro)226.0 million, partially
offset by (euro)43.6 million in deferred income tax benefits (compared to
(euro)352.2 million and (euro)77.8 million, respectively, in the 2003 accounts).
In 2004, this tax expense does not take into account tax charges on divestments,
which are included in the net income for discontinued operations.

While the Group's profitability has improved, its average tax rate (calculated
on the basis of income tax before taxes on income resulting from minority
interests and before amortization and depreciation of goodwill and intangible
assets with indefinite life) has decreased from 32.5% in 2003 to 20.9% in 2004.
This decrease is due to the effect of tax synergies of the Group's U.S. and
French businesses. Further, the improvement in operating profitability has had a
favorable impact on tax planning. The Group believes that it should be able to
record additional deferred tax assets in the future, in particular in the area
of fiscal year losses which were not taken into account in the balance sheet in
2003.

5.1.2.10   Share in Net Earnings of Companies Accounted for by the Equity Method

The Group's share in net earnings of companies accounted for by the equity
method reached (euro)22.4 million in 2004, compared to (euro)44.4 million in
2003. The largest contributions were made by companies accounted for by Onyx
using the equity method ((euro)9.1 million), Veolia Water ((euro)5.8 million)
and Proactiva ((euro)5.0 million). The decrease in the Group's share of net
earnings of equity investees in 2004 compared to 2003 is primarily attributable
to the sale of FCC in 2004, which in 2003 contributed (euro)30.7 million to the
Group's share of net earnings of equity investees.

5.1.2.11   Minority Interests

The Group's income allocable to minority interests totaled (euro)127.1 million
in 2004, compared to (euro)245.5 million in 2003. The principal minority
interests in 2004 are related to the Group's water subsidiaries ((euro)42.4
million), energy services subsidiaries ((euro)44.9 million), waste management
subsidiaries ((euro)18.1 million) and transportation subsidiaries ((euro)12.7
million). The decrease in income allocable to minority interests in 2004
compared to 2003 is primarily attributable to the sale of FCC in 2004.

The Group's income allocable to minority interests totaled (euro)245.5 million
in 2003. The principal minority interests in 2003 were related to FCC
((euro)111.9 million), the Group's water subsidiaries ((euro)61.2 million,
mainly related to Berlin Water), energy services subsidiaries ((euro)41.4
million), waste management subsidiaries ((euro)15.5 million), transportation
subsidiaries ((euro)11.3 million) and Proactiva ((euro)(5.8) million).

5.1.2.12   Income (loss) from discontinued operations


(in millions of (euro))                          Water        FCC        Total
                                              activities
                                              in the U.S.
Net income of businesses sold.............         0.2       36.0         36.2
Capital gains or losses...................       (47.2)      36.1        (11.1)
Taxes.....................................      (201.7)     (31.2)      (232.9)
--------------------------------------------------------------------------------
Income (loss) from businesses sold........      (248.7)      40.9       (207.8)
--------------------------------------------------------------------------------

The net income from U.S. businesses sold ((euro)0.2 million) includes the effect
of restructurings related to the sale of these assets. The capital loss incurred
takes into account the price adjustments negotiated with buyers.

Income (loss) related to USFilter was heavily influenced by the tax consequences
of the U.S. asset sale, such that:

     o   Veolia Environnement recorded a (euro)63.5 million charge relating to
         its use of deferred tax assets in connection with the sale. Given the
         way in which Veolia Environnement structured the sale, this charge was
         considerably lower than the one in excess of (euro)200 million
         mentioned in Veolia Environnement's 2003 annual report on Form 20-F.

     o   Moreover, as a result of tax regulation in France, currency gains and
         losses on loans and debts are taxed without taking into account the
         effects of currency fluctuations on equity. Consequently, a French tax
         charge of approximately (euro)138 million was imposed on the sale of
         U.S. assets. In previous fiscal years, this tax charge has been
         deducted directly from a currency transaction adjustments reserve in
         accordance with consolidation rules relating to net foreign
         investments. This (euro)138 million tax charge therefore has no impact
         on shareholders' equity, as indicated in Veolia Environnement's
         semi-annual report of June 30, 2004.

Regarding FCC, it contributed to net income for a 9-month period. The sale of
FCC yielded a consolidated capital gain of (euro)36.1 million. Further, Veolia
Environnement paid (euro)31.2 million to Spanish tax authorities during 2004
relating to the sale of FCC, in accordance with a tax treaty between France and
Spain.

The principal components of the profit and loss accounts for discontinued
operations for the year ended December 31, 2004 are the following:


(in millions of (euro))                         Water      FCC         Total
                                        activities in
                                                  the
                                                  U.S.
Revenues..................................     878.3     1,488.7      2,367.0
EBIT......................................      26.0       131.6        157.6
Operating income..........................      25.2       111.6        136.8
Financial income (expense), Net...........      (5.0)       (4.3)        (9.3)
Other income (expense)....................         -       (19.2)       (19.2)
Income tax expense........................      (7.9)      (37.4)       (45.3)

Equity in net income of affiliates........     (12.1)       29.5         17.4
Minority interests........................         -       (44.2)       (44.2)
-------------------------------------------------------------------------------
Consolidated net income (loss) of
businesses sold                                  0.2        36.0         36.2
-------------------------------------------------------------------------------

5.1.2.13          Consolidated Net Income (Loss)

The Group recorded consolidated net income of (euro)125.4 million in 2004 (with
a positive contribution of (euro)333.2 million from businesses that the Group
has decided to retain in the future), compared to a consolidated net loss of
(euro)2,054.7 million in 2003. Recurring consolidated net income, which
represents the Group's consolidated net income excluding exceptional items,
amounted to (euro)352.9 million in 2004, an increase of 41% compared to
(euro)249.7 million in 2003. Recurring consolidated net income reflects EBIT
after adding or deducting, as the case may be, the recurring portion of
amortization and depreciation of goodwill and intangible assets with indefinite
lives, financial income (expense), Veolia Environnement's share in net earnings
of companies accounted for by the equity method, minority interests and ordinary
tax expenses.

Based on the average number of shares outstanding during each period
((euro)406.4 million in 2004 compared to (euro)405.0 million in 2003) and the
number of treasury shares not taken into account in Veolia Environnement's
consolidated net position in each period ((euro)4.2 million), Veolia
Environnement recorded net earnings per share of (euro)0.31 in 2004, compared to
a net loss per share of (euro)(5.13) in 2003. Recurring net earnings per share
amounted to (euro)0.88 in 2004 compared to (euro)0.62 in 2003.

Consolidated net income in 2004 broke down as follows:

<TABLE>
----------------------------------------------------------------------------------------------------------------
(in millions of (euro))                               Recurring    Non-Recurring     Total         Comments
----------------------------------------------------------------------------------------------------------------
<S>                                                   <C>          <C>             <C>          <C>
EBIT ............................................     1,616.9            -         1,616.9      Section 5.1.2.3
Restructuring costs .............................         -            (51.0)        (51.0)     Section 5.1.2.5
Amortization and depreciation of goodwill and                                                   Section 5.1.2.4
   intangible assets with indefinite life........      (146.9)        (106.4)       (253.3)
Financial income (expenses) (1)..................      (624.8)         (10.2)       (635.0)     Section 5.1.2.7
Other income (expenses)..........................         -            (57.3)        (57.3)     Section 5.1.2.8
Equity in net income of affiliates...............        22.4            -            22.4      Section 5.1.2.10
Minority interest................................      (163.2)          36.1        (127.1)     Section 5.1.2.11
Income taxes.....................................      (351.5)         169.1        (182.4)     Section 5.1.2.9
Income from businesses sold......................         -           (207.8)       (207.8)     Section 5.1.2.12
----------------------------------------------------------------------------------------------------------------
Total 2004.......................................       352.9         (227.5)        125.4
----------------------------------------------------------------------------------------------------------------
</TABLE>

(1)    Due to the fact that income from businesses sold in 2004 (water
       activities in the U.S. and FCC) has been included in the "Non-Recurring"
       column of the line item "Income from businesses sold", the recurring
       portion of "Financial income (expenses)" has been adjusted upwards by
       (euro)66 million to take into account the full-year effect of these
       sales. The non-recurring portion of "Financial income (expenses)" has
       been adjusted downwards by an equal (euro)66 million to neutralize this
       effect.

The (euro)103 million increase in recurring consolidated net income for 2004
compared to 2003 is principally due to the improved performance of Veolia
Environnement's businesses (yielding a positive effect of (euro)133 million),
which was partially offset by an increase in the average cost of financing
(yielding a negative effect of (euro)27 million).

Consolidated net income in 2003 broke down as follows:

<TABLE>
--------------------------------------------------------------------------------------------------------------
(in millions of (euro))                                             Recurring    Non-Recurring      Total
--------------------------------------------------------------------------------------------------------------
<S>                                                                 <C>          <C>               <C>
EBIT.............................................................    1 750.9           -           1750.9
Restructuring costs..............................................        -           (93.3)         (93.3)
Amortization and depreciation of goodwill and intangible
   assets with indefinite life...................................     (209.6)     (2,214.9)      (2,424.5)
Financial income (expenses)......................................     (712.0)        (37.9)        (749.9)
Other income (expenses)..........................................        -           (62.4)         (62.4)
Equity in net income of affiliates...............................       46.0          (1.6)          44.4
Minority interest................................................     (257.3)         11.8         (245.5)
Income taxes.....................................................     (368.3)         93.9         (274.4)

--------------------------------------------------------------------------------------------------------------
Total 2003.......................................................      249.7      (2,304.4)      (2,054.7)
--------------------------------------------------------------------------------------------------------------
</TABLE>

5.1.3    Liquidity and Capital Resources

5.1.3.1  Cash Flows

Net cash flow from operating activities remained nearly unchanged in 2004,
decreasing from (euro)3,098 million in 2003 to (euro)3,036 million in 2004, due
primarily to net changes in working capital requirements of (euro)69 million.

Excluding the impact of Veolia Environnement's securitization and receivable
sales program, working capital requirements decreased by (euro)341 million in
2004 compared to an increase of (euro)151 million in 2003, reflecting continued
improvement in the monitoring and control of working capital needs as a result
of efforts that began in 2003.

Excluding net changes in working capital requirements, net cash flow from
operating activities was stable in 2004 at (euro)2,707 million, compared to
(euro)2,701 million in 2003. This stability was the result of the following
factors that offset each other:

     o   disposals that led to a decrease in cash flow of (euro)288 million;

     o   fluctuations in currency exchange rates that led to a decrease in cash
         flow of (euro)30 million; and

     o   improvement in the Group's operating performance that led to an
         increase in cash flow of (euro)324 million.

Net cash flow from investing activities includes cash flows resulting from
acquisitions and divestitures of tangible and financial assets, acquisitions and
disposals of businesses, equity-method investments and net changes in long-term
and short-term loans made by Veolia Environnement in connection with its
activities. Cash outflows from investing activities were (euro)760 million in
2004, compared to an outflow of (euro)3,112 million in 2003. Veolia
Environnement's cash outflow in 2004 primarily resulted from (euro)2,315 million
in cash used in industrial investments, (euro)334 million in financial
investments and (euro)278 million in purchases of marketable securities. These
investments were largely financed through the cash generated by asset disposals
in 2004 of (euro)2,130 million.

Net cash outflow from financing activities was (euro)1,030 million in 2004,
compared to a net cash inflow of (euro)441 million in 2003. Net cash outflow
from financing activities in 2004 is primarily attributable to the repayment of
long-term financial debt in connection with the Group's efforts to reduce its
total outstanding net indebtedness. Net cash inflow from financing activities in
2003 is primarily attributable to additional short-term borrowings and long-term
debt incurred by Veolia Environnement (which were used to reduce existing
long-term debt) in the context of the implementation of the Group's financing
policy for 2003.

5.1.3.2  Sources of Funds

Financings

As of December 31, 2004, Moody's and Standard & Poor's had assigned the
following credit ratings to the company:

<TABLE>
....................................................................................................................
                                Short-term      Long-term      Outlook              Most recent action
....................................................................................................................
<S>                             <C>             <C>            <C>          <C>
Moody's....................        P-2            Baa1         Stable       In September 2003,  Moody's  confirmed
                                                                            its ratings on the company.

Standard & Poor's (1)......        A-2            BBB+         Stable       In September  2004,  Standard & Poor's
                                                                            confirmed its ratings on the company.
....................................................................................................................
</TABLE>

(1) The EMTN program is rated BBB by S&P.


In 2004, Veolia Environnement sought to strengthen its finances. Actions
undertaken fell into the following three categories:

     o   continued implementation of a policy to extend the average maturity of
         indebtedness;

     o   elimination of financial debt covenants (interest coverage ratio and
         debt coverage ratio) in syndicated credit and bilateral credit lines;

     o   extension of the average maturity of available cash.

Veolia Environnement's main financing activities in 2004 included:

     o   Implementation of a syndicated credit facility in the amount of
         (euro)3.5 billion in February 2004. In order to optimize the Group's
         liquidity, Veolia Environnement decided to replace its two existing
         syndicated credit facilities (one arranged by Societe Generale with
         (euro)2,164.7 million outstanding due on November 3, 2004, and another
         arranged by Deutsche Bank with (euro)2,250 million outstanding due on
         March 13, 2006) with a single (euro)3.5 billion 5-year syndicated
         credit facility on February 19, 2004. This new syndicated credit
         facility, which extends the average maturity of the Group's debt and
         improves its cost of financing, does not contain any financial
         covenants that trigger an early repayment of the facility.

     o   Renegotiation of bilateral credit lines. Veolia Environnement pursued
         negotiations to further extend the maturity of its existing bilateral
         credit lines and eliminate any financial covenants that could trigger
         an early repayment.

     o   A 22-year bond issuance in the United Kingdom by Three Valleys, a
         British water subsidiary. This 200 million British pounds bond issuance
         (issued on July 13, 2004 at a fixed rate of 5.875%) was undertaken in
         order to align this subsidiary's debt with its future cash flows, and
         to repay an intra-group loan.

     o   Implementation of a letters of credit facility in the U.S. for US$1.5
         billion in order to assist in the development of Veolia Environnement's
         activities in the U.S.

Finally, to optimize the management of working capital, Veolia Environnement
renewed a receivables sales program in 2004, under which Veolia Environnement
had sold (euro)825 million in receivables as of December 31, 2004.

The following table shows Veolia Environnement's total outstanding financial
debt, net of cash and other financial assets, at December 31, 2004 and 2003.

                                                           At December 31,
  (in millions of (euro))                               2004           2003

Long-term financial debt.........................     10,801.4       12,586.4
Short-term financial debt........................      5,120.2        3,826.7
                                                   ------------   ------------
Total financial debt.............................     15,921.6       16,413.1
                                                   ------------   ------------
Long-term loans..................................        417.2          409.9
Short-term loans.................................        394.6          457.9
Other marketable securities*.....................      1,678.1        1,202.6
Cash and cash equivalents*.......................      3,635.1        2,538.4
                                                   ------------   ------------
Total financial assets...........................      6,125.1        4,608.8
                                                   ============   ============
Total net debt...................................      9,796.5       11,804.3

* Cf. paragraph 5.1.3.6.3, Liquidity risk.



The following table lists the aggregate maturities of Veolia Environnement's
long-term debt at December 31, 2004:

                                                     Payments Due by Period
                                                  -----------------------------
                                                  Less than    2 to 5    Over 5
(in millions of (euro))                Total       2 years     years     years
                                     --------      --------    ------    ------
Bank loans.....................      4,579.9        867.7     1,699.8   2,012.4
Bonds..........................      6,221.5         49.4     1,982.9   4,189.2
                                     --------      --------   -------   -------
Total..........................      10,801.4       917.1     3,682.7   6,201.6
                                     ========      ========   =======   =======

Because Veolia Environnement's total net financing costs include all of its
financial income, net of charges, its net debt takes into account all financial
assets that generate financial income, including short-term and long-term loans
and marketable securities and cash.

5.1.3.3  Divestments and Disposals of Assets

Veolia Environnement received proceeds from divestments of (euro)2,466 million
in 2004, or (euro)2,130 million net of the negative cash flow of such
divestments.

Strategic divestments totaled (euro)2,150 million, and related to sales in the
U.S. for (euro)1,283 million (sale of equipment and short-term services
businesses for US$1,015 million, sale of Culligan for US$612 million and sale of
farmlands for US$77 million, net of sales costs totaling US$106 million) and the
sale of FCC for a net value of (euro)867 million. These divestments will allow
the Group to refocus its activities on its strategic businesses. Cash held by
the businesses sold amounted to (euro)336 million, almost all of which was
attributable to FCC ((euro)283 million).

5.1.3.4  Use of Funds

Capital Expenditures

Capital expenditures amounted to (euro)2,315 million in 2004, a 5.7% decrease
compared to (euro)2,456 million in 2003. Excluding FCC, capital expenditures
amounted to (euro)2,218 million in 2004, a 0.6% decrease compared to (euro)2,232
million in 2003. This decrease is primarily attributable to Veolia
Environnement's decision to prioritize less capital-intensive activities and to
the impact of the implementation over the past few years of Veolia
Environnement's policy to enhance the selectivity of its investments. Veolia
Environnement's capital expenditures were made in its different divisions in the
following manner:

     o   Capital expenditures in the water business amounted to (euro)1,004
         million in 2004 (a decrease of 1% compared to 2003), of which (euro)402
         million were for growth-related spending and (euro)602 million were for
         replacement and maintenance spending;

     o   Capital expenditures in the waste management business amounted to
         (euro)720 million in 2004 (an increase of 4% compared to 2003), of
         which (euro)329 million were for growth-related spending and (euro)391
         million were for replacement and maintenance spending;

     o   Capital expenditures in the energy services business amounted to
         (euro)305 million in 2004 (a decrease of 5% compared to 2003), of which
         (euro)154 million were for growth-related spending and (euro)151
         million were for replacement and maintenance spending;

     o   Capital expenditures in the transportation business amounted to
         (euro)163 million in 2004 (a decrease of 11% compared to 2003), of
         which (euro)55 million were for growth-related spending and (euro)108
         million were for replacement and maintenance spending; and

     o   Capital expenditures in Proactiva and Veolia Environnement's share
         (49%) of FCC's capital expenditures amounted to (euro)110 million (a
         decrease of 54% compared to 2003, due to the sale of FCC during the
         year), of which (euro)46 million were for growth-related spending and
         (euro)64 million were for replacement and maintenance spending.

Financial Investments

Veolia Environnement's financial investments (including cash in acquired
companies, which amounted to (euro)104 million in 2004) totaled (euro)334
million in 2004, compared to (euro)474 million in 2003. Veolia Environnement's
financial investments (excluding cash in acquired companies) were made in its
different divisions in the following manner:

     o   Financial investments in the water business amounted to (euro)188
         million in 2004 (compared to (euro)291 million in 2003), primarily
         relating to Veolia Environnement's investment in the operator of the
         Shenzhen contract in China ((euro)102 million), as well as investments
         in the Czech Republic ((euro)24 million) and Berlin ((euro)12 million);

     o   Financial investments in the waste management business amounted to
         (euro)53 million in 2004 (compared to (euro)31 million in 2003),
         including the repurchase of a minority interest in a subsidiary in
         Ireland ((euro)13 million) and the purchase of IWS in Australia
         ((euro)11 million);

     o   Financial investments in the energy services business amounted to
         (euro)88 million in 2004 (compared to (euro)68 million in 2003),
         primarily related to the acquisition of ZEP Poznan in Poland ((euro)54
         million);

     o   Financial investments in the transportation business amounted to
         (euro)67 million in 2004 (compared to (euro)37 million in 2003),
         primarily relating to investments in Australia ((euro)17 million),
         Canada ((euro)10 million) and Sweden ((euro)10 million).

The remaining (euro)42 million in financial investments relate to investments
made by FCC and Proactiva. The net decrease in comparison to 2003 is due to the
sale of FCC.

Cash related to financial investments amounted to (euro)104 million, primarily
related to the Shenzhen contract ((euro)60 million).

5.1.3.5  Working Capital

Excluding the impact of Veolia Environnement's securitization and receivable
sales program, working capital requirements decreased by (euro)341 million in
2004 compared to a decrease of (euro)151 million in 2003. For the second
consecutive year, Veolia Environnement's working capital requirements have
decreased due to continued improvement in its monitoring and control of working
capital requirements across its divisions.

5.1.3.6  Market Risk

As a result of its global operating and financing activities, Veolia
Environnement is subject to various market risks relating primarily to
fluctuations in interest rates, foreign currency exchange rates, liquidity risk
and equity market risk due to investment securities. Veolia Environnement has
centralized the management of its exposure to these risks in order to better
limit them. Its strategy is embodied in certain management rules set forth in a
manual entitled "Rules for Management of Financing/Treasury and Associated
Risks", which is distributed to the Group's subsidiaries. This centralized
management system aims to actively manage the Group's market risks. Veolia
Environnement's treasury and financing department is directly responsible for
the adoption and implementation of coverage mechanisms for the Group, including
by assisting the Group's divisions in identifying their respective exposures and
implementing coverage mechanisms in each country where they operate. Veolia
Environnement has established a treasury management system that allows it to
continuously follow the main indicators relating to liquidity and the financial
instruments used to manage interest rate and exchange rate exposure. Veolia
Environnement has also implemented a transaction control structure through its
middle and back offices that allows it to adhere to limits imposed by senior
management and oversee the security of transactions. In addition, financial risk
management teams submit daily, weekly and monthly reports to Veolia
Environnement's senior management on the evolution of markets and the
consequences (including potential ones) on the Group's liquidity and the value
of its portfolio of derivative instruments. The reports also include detail on
hedging operations and their impact on the breakdown of fixed-rate and
floating-rate debt.

5.1.3.6.1         Exposure to Interest Rate Risk

As a result of its financing activities, Veolia Environnement's operating
results are exposed to fluctuations in interest rates. Veolia Environnement's
short-term debt accrues interest at rates that are principally set on the basis
of short-term market indexes or rates, such as EONIA for commercial paper and
EURIBOR and LIBOR for short-term credit lines. Long-term debt accrues interest
at either fixed or variable rates. Veolia Environnement's debt is mainly
denominated in euros, U.S. dollars, British pounds, Czech crowns and Australian
dollars.

The following table shows a breakdown of long-term debt by currency denomination
and interest rate (fixed or variable) as of December 31, 2004:

-----------------------------------------------------------------------------
(in millions of (euro), except for %)        Long-term debt        %

-----------------------------------------------------------------------------
EURO.........................                                    80.2%
GBP..........................                                     5.0%
USD..........................                                     4.4%
CZK..........................                                     3.4%
AUD..........................                                     0.9%
NOK..........................                                     0.5%
Others.......................                                     5.6%
-----------------------------------------------------------------------------
Total........................                      10           100.0%
-----------------------------------------------------------------------------
Fixed rate...................                                    83.5%
-----------------------------------------------------------------------------
Variable rate................                                    16.5%
-----------------------------------------------------------------------------
Total........................                      10           100.0%
-----------------------------------------------------------------------------


The following table shows a breakdown of long-term debt after giving effect to
financial hedges and interest rate swaps as of December 31, 2004:

--------------------------------------------------------------------------------
                         Amount                                %
Long-term debt           and %                            Fixed/Capped
                                                          or Variable
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
EUR...............      11,735.5   Fixed/Capped Rate          50.5%
                          73.8%    Variable Rate              49.5%
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
USD...............       1,386.6   Fixed/Capped Rate          82.7%
                          8.7%     Variable Rate              17.3%
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
GBP...............       1,008.8   Fixed/Capped Rate          44.7%
                          6.3%     Variable Rate              55.3%
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
Other.............       1,772.7   Fixed/Capped Rate          56.5%
                          11.1%    Variable Rate              43.5%
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
Total debt .......      15,921.6   Fixed/Capped Rate          53.6%
                         100.0%    Variable Rate              46.4%
--------------------------------------------------------------------------------

Veolia Environnement has centralized the management of its exposure to interest
rate risks. It uses all of the interest rate risk management instruments
available in the market, including interest rate swaps and collars.

As of December 31, 2004, after giving effect to financial hedging instruments,
approximately 53.6% of total gross debt bore interest at fixed or capped rates,
while 46.4% was subject to variable interest rates.

The currency breakdown of Veolia Environnement's total gross debt was impacted
primarily by U.S. asset sales, which reduced the amount of dollar-denominated
debt by US$1.9 billion. Following these U.S. asset sales, Veolia Environnement
proceeded to unwind a portion of its cross currency swap portfolio, thereby
repaying dollar-denominated debt while generating cash in euros. As a result,
dollar-denominated debt after giving effect to financial hedging instruments
decreased from 18.2% of gross debt during 2003 to 8.7% of gross debt during
2004.

The proceeds from asset sales in 2004 were used to repay Veolia Environnement's
OCEANEs maturing on January 3, 2005, which were redeemed for (euro)1,535.3
million, including a repayment premium of (euro)91 million. Between the time of
the asset sales and the repayment of debt, proceeds from the asset sales were
invested in short-term instruments including investment funds and certificates
of deposit.

The Group manages its interest rate exposure on the basis of debt net of cash
generated by disposals. As of December 31, 2004, therefore, one should subtract
from total gross debt the proceeds from these asset sales that were invested in
short-term instruments, i.e. (euro)2,150 million, which were then used to repay
long-term debt that was set to mature in early 2005. After giving effect to this
calculation, total gross debt amounts to approximately (euro)13.8 billion, with
62% of this reduced debt bearing interest at a fixed rate and 38% bearing
interest at a variable rate.

The improvement in the Group's cash position, resulting from a decrease in debt
due in particular to proceeds from asset sales, therefore resulted in a
mechanical increase of the portion of its debt bearing interest at fixed rates,
from approximately 50% in the past to approximately 62% currently. The Group has
decided not to modify this allocation, given that such increase will help to
reduce the Group's exposure to a future rise in interest rates by lessening the
sensitivity of financing costs to changes in rates. Veolia Environnement's
policy aimed at protecting future cash flows resulted in a slight increase in
financing costs, from 4.31% in 2003 to 4.63% in 2004, as a result of cash
generated from asset sales.

5.1.3.6.2    Exposure to Foreign Currency Risk

Veolia Environnement has worldwide operations in nearly 80 countries that
include significant operations in countries outside of the euro zone, mainly the
United States and the United Kingdom.

Because product and operating costs are based largely on the currency in which
related revenue are generated, Veolia Environnement faces limited related
foreign exchange exposure linked to commercial transactions. However, Veolia
Environnement has an active policy for identifying and hedging against such
exposure, particularly at the time it makes bids for new contracts. Veolia
Environnement may use a variety of products available in the market to hedge its
exposure, including forward purchases and sales, currency swaps and currency
option contracts.

Veolia Environnement has significant investments denominated in foreign
currencies, principally U.S. dollars and British pounds. Veolia Environnement's
policy is to hedge its exposure to currency fluctuations by incurring debt
denominated in the corresponding currency based on future cash flow projections.
This policy aims at limiting Veolia Environnement's exposure to currency
fluctuations with respect to its future cash flows, and uses, in addition to
debt, a variety of products available in the market, including cross currency
swaps.

The following table shows, as of December 31, 2004, Veolia Environnement's
outstanding foreign currency positions that mature in less than one year.

--------------------------------------------------------------------------------
(millions of (euro)
equivalent)                   Currency Swaps               Currency Swaps
                            (lender currency)            (borrower currency)
--------------------------------------------------------------------------------
USD............................     -                           425.6
--------------------------------------------------------------------------------
GBP............................    21.9                         430.2
--------------------------------------------------------------------------------
PLN............................     -                           134.6
--------------------------------------------------------------------------------
NOK............................     -                           118.0
--------------------------------------------------------------------------------
SEK............................     1.4                          98.2
--------------------------------------------------------------------------------
Other..........................    67.9                         161.2
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
                              Forward Purchases              Forward Sales
--------------------------------------------------------------------------------
USD............................    15.9                           4.8
--------------------------------------------------------------------------------
GBP............................    24.2                          14.9
--------------------------------------------------------------------------------
Other..........................     5.1                           4.1
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
                              Purchase Options               Sale Options
--------------------------------------------------------------------------------
USD............................     -                             0.8
--------------------------------------------------------------------------------

The following tables show, as of December 31, 2004, Veolia Environnement's
outstanding foreign currency positions that mature after at least one year:

     ----------------------------------------------------------------------
                Cross                 (millions of (euro)      Maturity
           Currency Swaps                 equivalent)
     ----------------------------------------------------------------------
     EUR / USD.....................          158.3             07/07/2006
     ----------------------------------------------------------------------
     EUR / USD.....................          299.1             06/30/2008
     ----------------------------------------------------------------------
     EUR / USD.....................           3.0              08/14/2008
     ----------------------------------------------------------------------
     EUR / HKD.....................          44.8              06/30/2006
     ----------------------------------------------------------------------
     CZK / EUR.....................          13.2              04/29/2009
     ----------------------------------------------------------------------

--------------------------------------------------------------------------------
(millions of (euro) equivalent)      Currency Swaps           Currency Swaps
                                    (lender currency)       (borrower currency)
--------------------------------------------------------------------------------
USD................................        9.6                       -
--------------------------------------------------------------------------------
                                    Forward Purchases          Forward Sales
--------------------------------------------------------------------------------
USD..............................          9.7                      0.3
--------------------------------------------------------------------------------
                                    Purchase Options            Sale Options
--------------------------------------------------------------------------------
USD..............................          3.2                      3.2
--------------------------------------------------------------------------------

Veolia Environnement has centralized the management of its exposure to foreign
currency risks in order to better control its exposure.

5.1.3.6.3         Liquidity Risk

Veolia Environnement monitors the liquidity of the Group in coordination with
designated managers at the relevant operating level. It centralizes the
incurrence and management of new material financings of the Group in order to
steer its present and future liquidity to optimum levels. The Group satisfies
its financing needs through bank loans, commercial paper and debt issues on the
international capital markets and the international private placement markets.

At December 31, 2004, Veolia Environnement had the following sources of funds
available:


                                                            millions of (euro)
                                                            -----------------
The Company
      Undrawn portion of medium-term syndicated loans                3,500.0
      Undrawn medium-term credit lines......................           915.0
      Undrawn short-term credit lines.......................           643.1
      Marketable securities.................................         1,611.7
      Cash and cash equivalents ............................         2,416.5
                                                                 ------------
Subsidiaries
      Marketable securities.................................            66.4
      Cash and cash equivalents ............................         1,218.7
                                                                 ============
Total ......................................................        10,371.4


As of December 31, 2004, Veolia Environnement had sources of funds available
that totaled (euro)10.4 billion, of which (euro)5.3 billion was comprised of
marketable securities and cash and cash equivalents. During 2004, Veolia
Environnement undertook several actions to optimize its liquidity. The
particularly high level of liquidity of the Group as of December 31, 2004 was
due to the retention of proceeds from assets sales conducted during 2004, so as
to be able to finance:

     o   the redemption of OCEANEs maturing on January 3, 2005, which were
         redeemed for (euro)1,535.3 million, including a repayment premium of
         (euro)91 million; and

     o   the acquisition of Braunschweig BV-AG on January 7, 2005, for an amount
         totaling (euro)372 million.

Further, Veolia Environnement restructured its bilateral credit lines and
syndicated credit facilities during 2004, which included the following actions
in particular:

     o   the replacement of Veolia Environnement's two existing syndicated
         credit facilities (one arranged by Societe Generale with (euro)2,164.7
         million outstanding due on November 3, 2004 and another arranged by
         Deutsche Bank with (euro)2,250 million outstanding due on March 13,
         2006) with a single (euro)3,500 million 5-year syndicated credit
         facility on February 19, 2004. This new syndicated credit facility does
         not contain any financial covenants (interest coverage ratios or debt
         coverage ratios) that could trigger an early repayment of the facility;

     o   renegotiation of short and medium-term credit lines so as to eliminate
         financial ratio covenants, extend their maturity and reduce borrowing
         costs;

     o   cancellation of a US$650 million syndicated credit facility in favor of
         Onyx Waste Services.

The undrawn amount under Veolia Environnement's credit lines stood at (euro)5.1
billion as of December 31, 2004, compared to (euro)7 billion as of December 31,
2003.

The actions taken above allowed Veolia Environnement to extend the average
maturity of its available sources of funds and to optimize their amount and
cost.

Available sources of funds after redemption of the outstanding OCEANEs and the
acquisition of Braunschweig AG amounted to approximately (euro)8.5 billion.

Recent Developments

Veolia Environnement redeemed the outstanding OCEANEs (issued on April 26, 1999)
that matured on January 3, 2005, for an amount totaling (euro)1,535.3 million,
including a repayment premium of (euro)91 million.

In addition, Veolia Environnement refinanced the debt it incurred in connection
with its acquisition of Berlin Water, which consisted of a (euro)600 million
loan in favor of RWE/Veolia Berliner Wasser Beteiligungs AG RVB due to mature on
January 15, 2005. This loan was refinanced in order to extend its maturity by
three years; accordingly, it is now due to mature on January 13, 2008. This loan
is guaranteed by Veolia Environnement, and does not contain any financial
covenants.

5.1.3.6.4   Exposure to Equity Risk

At December 31, 2004, Veolia Environnement held 16,183,548 of its shares as
treasury stock with a market value of (euro)431 million. Veolia Environnement
has imputed 4,230,619 of these shares, with a value of (euro)112.7 million, to
its shareholders' equity.

Moreover, Veolia Environnement held 204,809 shares of Vivendi Universal through
one of its subsidiaries. At December 31, 2004, the total value of these shares
amounted to (euro)4.8 million.

5.1.3.7  Return on Capital Employed (ROCE)

Veolia Environnement's investment policy requires it to analyze different
criteria in making investment decisions, including decisions relating to capital
expenditures and financial investments. In order to manage the profitability of
its contracts globally, Veolia Environnement uses a measure of performance,
which it refers to as "return on capital employed" or "ROCE," that measures
Veolia Environnement's ability to provide a return on the capital invested in
its business. Veolia Environnement defines ROCE as the relation between (i) its
results of operations, net of tax, and its equity in the net income of
affiliates, and (ii) the average amount of capital employed in Veolia
Environnement's business over the same period. In order to take into account the
significant changes in scope over the few last years, the ROCE is calculated on
a consolidated basis excluding businesses sold in 2002, 2003 and 2004 (cf.
paragraph 5.1.2.1 infra).

For purposes of calculating ROCE, Veolia Environnement defines results of
operations, net, as the sum of operating income (loss) before amortization and
depreciation of goodwill and indefinite life intangible assets and restructuring
costs (EBIT) excluding businesses sold in 2002, 2003 and 2004 and equity in net
income of affiliates (before write-off of goodwill associated with equity
investments in affiliates), less income taxes. The following table shows the
calculation of Veolia Environnement's results of operations, net of tax, in
2002, 2003 and 2004:


<TABLE>
(in millions of (euro))                                                At December 31,
                                                             2004           2003          2002

<S>                                                         <C>           <C>           <C>
EBIT...................................................     1,616.9       1,750.9       1,971.3
EBIT excluding businesses sold in 2004, 2003 & 2002....     1,615.8       1,748.6       1,847.3
Income taxes(1)........................................      (320.8)       (335.4)       (437.3)
Equity in income of affiliates(2)......................        23.5          47.4          40.4
                                                        --------------------------------------------
Results of operations, Net.............................     1,318.5       1,460.6       1,450.4
</TABLE>

-------------------
(1)    Excluding tax income (expense) related to U.S. divestments and related
       restructuring, which represented tax income of (euro)61 million in 2003
       and (euro)138 million in 2004.
(2)    Before write-off of goodwill recorded in connection with these
       investments.


Veolia Environnement determines the average amount of capital invested in its
business as the average of its invested capital at each of the beginning and the
end of the relevant period, excluding businesses sold in 2001, 2002, 2003 and
2004. The following table shows the calculation of the average amount of Veolia
Environnement's capital invested in 2001, 2002, 2003 and 2004:

<TABLE>
(in millions of (euro))                                               At December 31,
                                                       2004         2003          2002          2001
<S>                                                  <C>          <C>           <C>           <C>
Property, plant and equipment and other              15,703.3     17,168.3      18,445.7      18,668.3
intangible assets, Net............................
Goodwill (before write-offs of goodwill)..........    4,597.2      5,313.4       7,531.9       8,035.8
Investments accounted for using the equity
method(1).........................................      229.0        449.9         453.6         528.9
Working capital requirement(2)....................     (405.2)       (18.9)        712.6         670.4
Reserves and allowances...........................   (2,673.4)    (2,913.9)     (2,946.1)     (3,195.7)
Subsidies and deferred income(3)..................     (881.4)      (850.5)       (674.4)       (623.8)
Other long term debt..............................     (272.6)      (399.3)       (427.5)       (496.6)
                                                     --------     --------      --------      --------
Total capital invested                               16,296.8     18,749.0      23,095.8      23,587.3
Capital Invested in businesses sold in 2004.......                (3,167.5)
Capital Invested in businesses sold in 2003.......                                (130.8)
Capital Invested in businesses sold in 2002.......                                            (1,219.0)
                                                     --------     --------      --------      --------
Total capital invested excluding businesses sold..   16,296.8     15,581.5      22,965.0      22,368.3
                                                     --------     --------      --------      --------
Average total capital invested....................   15,939.1     20,857.0      22,732.1
</TABLE>

------------------
(1)  Net write-off of goodwill recorded in connection with these investments.
(2)  Veolia Environnement defines working capital as inventories and work in
     progress and accounts receivable, less accounts payable. Working capital
     does not include any deferred tax assets (liabilities) related to U.S.
     divestments and related restructuring, which amounted to (euro)126 million
     in 2004.
(3)  Excluding financing of co-generation facilities in the energy services
     division, which amounted to (euro)516.4 million in 2004, (euro)624.5
     million in 2003 and (euro)739.0 million in 2002.


The following table shows the calculation of Veolia Environnement's ROCE in
2002, 2003 and 2004:

                                                  Average Total
                               Results of       Capital Invested         ROCE
                            Operations, Net      During the Year
(in millions of (euro))
2002                             1,450.4              22,732.1           6.4%
2003                             1,460.6              20,857.0           7.0%
2004                             1,318.5              15,939.1           8.3%

Unlike Veolia Environnement's results of operations, ROCE is not significantly
affected by fluctuations in currency exchange rates. The improvement in ROCE in
2004 is mainly attributable to the following three factors:

     o   the impact of impairment of goodwill and intangible assets with
         indefinite life in June 30, 2003 on the average capital invested in the
         U.S. with respect to water activities, as well as the impact of U.S.
         asset sales and the sale of FCC;

     o   the impact of the "Veolia Environnement 2005" efficiency plan, which
         led to an improvement of 0.4% for 2004;

     o   the impact of the continued maturity of contracts and stability in the
         level of capital invested, which led to an improvement of 0.6% for
         2004.

5.1.3.8  Principal Audit Fees and Services

During 2004, Veolia Environnement paid the following fees to its principal
auditors in connection with services rendered on behalf of the Group:

<TABLE>
------------------------------------------------------------------------------------------------
(in millions of (euro))                                Salustro Reydel         Ernst & Young
                                                                   At December 31,
                                                       2004        2003       2004        2003
------------------------------------------------------------------------------------------------
<S>                                                   <C>         <C>        <C>          <C>
Audit services, review of financial statements(1)      12.2        11.9       11.8         9.6
Audit-related services  (2)                             4.9         3.3        7.3         2.1
Other services (tax services, etc.)                       -           -        0.4         3.4
------------------------------------------------------------------------------------------------
Total                                                  17.1        15.2       19.5        15.1
------------------------------------------------------------------------------------------------
</TABLE>

(1)  Includes fees relating to proportionally consolidated companies
(2)  Includes fees relating to the preparation of comfort letters, attestations,
     acquisition audits and IFRS review.


5.1.3.9    Migration to International Financial Reporting Standards (IFRS)

5.1.3.9.1         Migration program launched at the end of 2003

Veolia Environnement launched a program at the end of 2003 to prepare the
company for the change of the accounting principles applicable to its financial
statements from French GAAP to International Financial Reporting Standards
(IFRS). Pursuant to a decision adopted by the European Union, all European
listed companies are required to adopt IFRS on January 1, 2005, with retroactive
effect to January 1, 2004.

In connection with its migration program, Veolia Environnement has created a
steering committee composed of the principal financial officers of the Group,
which is chaired by the chief financial officer. This committee has already
completed work under the migration program that has led to:

     o   the formation of project teams charged with analyzing the differences
         between French and US GAAP, on the one hand, and IFRS, on the other, on
         the basis of the IFRS published or proposed so far, including the
         potential impact that the change to IFRS may have on Veolia
         Environnement's financial statements;

     o   IFRS training for nearly 1,200 employees, who form part of Veolia
         Environnement's financial, legal and operating teams;

     o   distribution of a group-wide manual of accounting principles and
         procedures that has been rewritten to reflect IFRS; and

     o   adaptation of consolidation systems and procedures to meet the
         specificities of the IFRS principles relating to consolidation.

These efforts have allowed Veolia Environnement, working together with all other
entities within the Group, to establish an opening balance sheet under IFRS as
of January 1, 2004.

5.1.3.9.2       2004 Opening Balance Sheet Under IFRS

Accounting principles and methods
---------------------------------

In accordance with Regulation (EC) No. 1606/2002 of the European Parliament and
of the Council of July 19, 2002 and with Regulation (EC) No. 1725/2003 of the
European Commission of September 29, 2003, Veolia Environnement will prepare its
consolidated financial statements under IFRS beginning with its 2005 fiscal
year.

Pursuant to IFRS 1 (adopted by the European Union in Regulation (EC) No.
707/2004) relating to the first-time adoption of IFRS, the first set of
financial statements to be published under IAS/IFRS will be those in respect of
the 2005 fiscal year, which will include 2004 comparative figures prepared under
IAS/IFRS.

IFRS 1 offers companies the choice of various options in connection with their
first-time adoption of IFRS. As a result, Veolia Environnement has made the
following choices:

     o   no restatements for business combinations prior to January 1, 2004;

     o   cumulative actuarial gains and losses unrecognized at December 31, 2003
         to be charged to shareholders' equity at January 1, 2004;

     o   exchange differences reset to zero at January 1, 2004;

     o   valuation of tangible and intangible assets to be left at historical
         cost;

     o   sales of "Dailly" (discounting of receivables) to be consolidated
         retrospectively from January 1, 2004.

Further, Veolia Environnement has opted to apply the following standards in
advance:

     o   IAS 32 and 39, which relate to financial instruments (Regulation (EC)
         No. 2086/2004 and No. 2237/2004);

     o   IFRS 5, which relates to discontinued activities (Regulation (EC) No.
         2236/2004); and

     o   IFRIC 4 (interpretation of IAS 17 on leases).


Finally, the Group has decided to retain the proportionate consolidation method,
in accordance with IAS 31.

The following balance sheets at January 1, 2004 have been prepared under IFRS,
in accordance with the standards and interpretations that have been published
thus far. Some uncertainty remains regarding the definition and interpretation
of certain accounting standards, in particular those relating to the treatment
of concessions. New accounting pronouncements could significantly affect the
future preparation of financial statements under IFRS. Veolia Environnement's
auditors have examined these balance sheets.

IFRS Balance Sheet at January 1, 2004 (Assets) - Transition table
-----------------------------------------------------------------

<TABLE>
-----------------------------------------------------------------------------------------------------------------
(in billions of (euro))   French  Activities  Employee    Financial   Contractual  Deferred      Other       IFRS
                           GAAP      sold     benefits   instruments    analysis      tax    restatements
                                    IFRS 5     IAS 19    IAS 32 / 39  IAS 16 / 17   IAS 12
-----------------------------------------------------------------------------------------------------------------
<S>                       <C>     <C>         <C>        <C>          <C>          <C>       <C>             <C>
Goodwill (1)                4.2      -0.6         -          -             -            -          0.6        4.2
Other intangible            2.8      -0.8         -          -            -0.1          -         -0.7        1.2
assets (2)
Tangible assets (3)        14.4      -1.4         -          -            -2.8          -          0.5       10.7
Financial assets (4)        1.8      -0.3        -0.1        0.4           1.5          -         -0.1        3.2
Deferred tax assets         0.9      -0.1         -          -             0.1          0.1        -          1.0
------------------------------------------------------------------------------------------------------------------
Total Fixed Assets         24.1      -3.2        -0.1        0.4          -1.3          0.1        0.3       20.3
------------------------------------------------------------------------------------------------------------------
Assets used in             10.6      -2.0         -          1.2          -0.1          -          -          9.7
operations (5)
Gross cash (6)              2.5      -0.4         -          0.7           -            -          0.1        2.9
Other current assets        1.7       -           -         -1.1           0.1          -          -          0.7
(6)
------------------------------------------------------------------------------------------------------------------
Total Current Assets       14.8      -2.4         -          0.8           -            -          0.1       13.3
------------------------------------------------------------------------------------------------------------------
Total Fixed Assets
and Current Assets         39.0      -5.6        -0.1        1.2          -1.3          0.1        0.4       33.6
------------------------------------------------------------------------------------------------------------------
Assets from                 -         5.6         -          -             -            -          -          5.6
activities sold (10)
------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS               39.0       -          -0.1        1.2          -1.3          0.1        0.4       39.2
------------------------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

IFRS Balance Sheet at January 1, 2004 (Shareholders' Equity and Liabilities)
- Transition table

<TABLE>
------------------------------------------------------------------------------------------------------------------
(in billions of (euro))   French  Activities  Employee    Financial   Contractual  Deferred      Other       IFRS
                           GAAP      sold     benefits   instruments    analysis      tax    restatements
                                    IFRS 5     IAS 19    IAS 32 / 39  IAS 16 / 17   IAS 12
------------------------------------------------------------------------------------------------------------------
<S>                       <C>     <C>         <C>        <C>          <C>          <C>       <C>             <C>
Shareholders'               3.6       -          -0.1       -0.2           0.1         -0.1        -          3.3
equity (group share)
Minority interest           2.7      -0.7         -         -0.3           -            -          -          1.7
------------------------------------------------------------------------------------------------------------------
Total Shareholders'         6.3      -0.7        -0.1       -0.5           0.1         -0.1        -          5.0
Equity
------------------------------------------------------------------------------------------------------------------
Provisions for
liabilities and             1.6       -           0.1        -            -0.6          -         -0.1        1.0
charges (7)
Long-term financial        12.6      -0.4         -          1.5           0.1          -          0.6       14.4
debt (8)
Deferred tax                0.8      -0.1         -          -             0.1          0.2        -          1.0
liabilities
Other long-term             1.9      -0.1         -         -0.4          -0.9          -         -0.1        0.4
liabilities
------------------------------------------------------------------------------------------------------------------
Total Non-Current          16.9      -0.6         0.1        1.1          -1.3          0.2        0.4       16.8
Liabilities
------------------------------------------------------------------------------------------------------------------
Total Long-Term            23.2      -1.3         -          0.6          -1.2          0.1        0.4       21.8
Capital
------------------------------------------------------------------------------------------------------------------
Accounts payable           10.7      -1.7         -          -            -0.2          -          -          8.8
Provisions for
liabilities and             1.3      -0.2         -          -             -            -         -0.2        0.9
charges (7)
Short-term                  3.8      -0.3         -          0.6           -            -          0.1        4.2
financial debt (9)
------------------------------------------------------------------------------------------------------------------
Total Current              15.8      -2.2         -          0.6          -0.2          -         -0.1       13.9
Liabilities
------------------------------------------------------------------------------------------------------------------
Total Long-Term
Capital and Current        39.0      -3.5         -          1.2          -1.4          0.1        0.3       35.7
Liabilities
------------------------------------------------------------------------------------------------------------------
Liabilities from            -         3.5         -          -             -            -          -          3.5
activities sold(10)
------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES          39.0       -           -          1.2          -1.4          0.1        0.3       39.2
------------------------------------------------------------------------------------------------------------------
</TABLE>

The following notes help to explain any restatements made, excluding analysis of
"activities sold", which is separately explained in note 10 below.

(1)    This item consists mainly of assets acquired in connection with the
       acquisition of businesses, which under French GAAP is accounted for as
       intangible assets.

       Under IFRS, this item has been restated as goodwill.

       Further, goodwill will no longer be amortized. Instead, IAS 36 provides
       that goodwill impairment tests must be conducted at least once per year.

       Accordingly, the Group will continue its policy of systematically
       reviewing all of its long-term assets on an annual basis. It has adjusted
       its valuation methods and analytical structures in order to comply with
       IFRS requirements, namely by identifying its cash generating units (CGU)
       and the value in use of each CGU.

(2)    See the paragraph below on "Contractual Analysis: IAS 17- IFRIC 4".

(3)    Following contractual analysis (see "Contractual Analysis: IAS 17- IFRIC
       4" below), a number of tangible assets were reclassified as financial
       assets.

(4)    IFRS restatements mainly involved:

         o     a (euro)1.5 billion reclassification of tangible and intangible
               assets in connection with "Contracts Corresponding to IFRIC 4"
               (see "Contractual Analysis: IAS 17- IFRIC 4" below), and

         o     a reassessment of derivatives.

(5)    The restatement under IAS 39 resulted from the consolidation of
       securitization programs in France and sales of "Dailly" (discounting of
       receivables) (see discussion of debts under notes 8 and 9 below).

(6)    The principal restatement made with respect to "other current assets", in
       accordance with IAS 32, was a (euro)0.9 billion reclassification of BMTNs
       (Bons a Moyen Terme Negociables) into cash. See note 11 of the annual
       consolidated financial statements.

(7)    The restatement of provisions for liabilities and charges primarily
       involved:

         o     a reclassification of amortization charges for decay as a
               deduction from tangible assets (see "Contractual Analysis: IAS
               17- IFRIC 4" below); and

         o     an updating of provisions. The updated rate corresponds to a
               risk-free rate before tax in the relevant monetary zone.

       In accordance with IAS 37, expense schedules were prepared and long-term
       provisions - in this case, provisions to restate landfills - were reduced
       following reanalysis and updating.


(8) Restatements of long-term financial debt broke down as follows (in euro
billions):

       -------------------------------------------------------------------------
       Long-term financial debt under French GAAP                         12.6
       -------------------------------------------------------------------------
       TSAR (reclassification of minority interests)          (a)          0.3
       Water securitization as at January 1                   (b)          0.3
       Impact debt at amortized cost                          (c)         -0.1
       Cross currency swap                                    (d)          0.2
       Fair value hedge                                                    0.1
       Consolidation of ad-hoc entities                       (b)          0.4
       Public authority loans                                              0.1
       COGEVOLT                                               (e)          0.7
       FCC/USFilter debt reclassified as liabilities for sale             -0.4
       Miscellaneous                                                       0.1
       -------------------------------------------------------------------------
                                IFRS Impacts 1.8
       -------------------------------------------------------------------------
       IFRS long-term financial debt                                       14.4
       -------------------------------------------------------------------------

         (a)   In December 2001, VEFO (Veolia Environnement Financiere de
               l'Ouest) issued (euro)300 million in subordinated loan notes
               redeemable by preference shares (TSAR), which will mature on
               December 28, 2006. Considering the characteristics of the TSARs,
               these securities were categorized as minority interests under
               French GAAP. Under IFRS, the TSARs will be categorized as debt
               instruments pursuant to an analysis under IAS 32 and 39.

         (b)   Application of the SIC 12 interpretation led to the consolidation
               of securitization programs ((euro)0.3 billion) and ad-hoc
               entities ((euro)0.4 billion).

               Under French GAAP, application of the French Financial Security
               Law resulted in the reconsolidation of securitization programs
               and ad-hoc entities beginning on January 1, 2004.

         (c)   Financial debt is categorized based on the interest rate method
               in effect, which led to the reclassification of repayment
               premiums and issuance costs as a reduction of liabilities.

         (d)   Reassessment of a cross currency swap (under French GAAP) the
               value of which is recorded in "other non-current financial
               assets".

         (e)   Under French GAAP, "deferred income" includes payments made in
               respect of income from the securitization of future receivables
               in the energy services division (referred to as a "COGEVOLT"
               transaction). COGEVOLT transactions are used to help finance the
               cost of Dalkia's co-generation plants. Since January 1, 1998, the
               proceeds have been amortized on an actuarial basis over the
               duration of these receivables, which ranges between 5 and 12
               years.

               Under IFRS, COGEVOLT transactions will be treated as additional
               financing and recognized as financial debt.

(9)  Restatements of short-term financial debt principally relate to the
     consolidation of operations of sales of "Dailly" receivables in France.

(10) Activities sold - assets and liabilities relating to USFilter and FCC.
     These transactions are described in paragraph 5.1.1.3 above.

Shareholders' Equity Transition Table
-------------------------------------

--------------------------------------------------------------------------------
(in billions of (euro))                                Group share     Minority
--------------------------------------------------------------------------------
Shareholders' equity under French GAAP                     3.6            2.7
Reset of actuarial gains and losses to zero     (1)       -0.1             -
Contractual analysis                            (2)        0.1             -
Financial instruments                           (3)       -0.2             -
FCC sale                                                    -            -0.7
Reclassification of TSARs                       (4)         -            -0.3
Deferred tax                                              -0.1
--------------------------------------------------------------------------------
                             IFRS Impacts                 -0.3           -1.0
--------------------------------------------------------------------------------
Shareholders' Equity under IFRS                            3.3            1.7
--------------------------------------------------------------------------------

(1)  Veolia Environnement reviewed its pension obligations and similar benefit
     commitments as part of the implementation of IAS 19. No new material
     commitments were identified.

     The restatement above reflects Veolia Environnement's decision to reset
     actuarial gains and losses to zero at January 1, 2004.

(2) See "Contractual Analysis: IAS 17- IFRIC 4" below.

(3) The early adoption of IAS 32 and IAS 39 by Veolia Environnement primarily
resulted in the following:

     o   allocation to shareholders' equity of the value of treasury stock,
         representing an amount of (euro)110 million;

     o   accounting for financial debt at amortized cost;

     o   recording of derivatives in the balance sheet at fair value and
         revaluation of items hedged by fair value hedge derivatives.

Under IAS 32 and IAS 39, all derivative financial instruments (including those
incorporated in other contracts) must be recorded in the balance sheet at their
market value.

Variations in the market value of derivatives are recorded as reserves or as
income depending on whether the derivative is used as a fair value hedge, a cash
flow hedge or a net investment hedge (debt denominated in foreign currencies
allocated to foreign investments), or is not used at all for hedging purposes.

(4) See note 8(a) above relating to the analysis of TSARs under IFRS.

Contractual Analysis: IAS 17- IFRIC 4
-------------------------------------

Veolia Environnement provides environmental management services to municipal and
industrial clients. In so doing, Veolia Environnement manages numerous contracts
with its municipal and industrial clients under which it operates assets that it
returns at the end of the contract. In certain cases, Veolia Environnement may
also be called upon to provide asset financing on behalf of these clients.

As part of the analysis conducted to implement IFRS, Veolia Environnement was
required to examine the "substance" of such contracts. For purposes of this
examination, Veolia Environnement relied on IAS 17 (Accounting for leases), and
in particular on the interpretation thereof, IFRIC 4, published in December
2004.

IFRIC 4 ("Determining whether an arrangement contains a lease") deals with how
to consider and account for service agreements that, though not having the legal
form of a lease, convey rights to use assets to customers in return for
payments. Under IFRIC 4, such service agreements are categorized as leases,
which are then analyzed and accounted for as leases according to the criteria
set forth in IAS 17 (risk and reward analysis).

In accordance with IAS 17, the contract operator becomes in this instance a
lessor vis-a-vis its customers, to whom it transfers the risks and rewards of
the activity. As a result, the operator records a financial receivable to
reflect the financing carried.

Veolia Environnement conducted an analysis of its contract portfolio in light of
these standards and interpretations, and identified three types of contracts:

Contracts covered by the IFRIC 4 interpretation

These contracts were analyzed pursuant to IAS 17 and, if the requirements were
met, they were accounted for as financial receivables.

Contracts that fell into this category included certain industrial contracts,
Build, Operate & Transfer (BOT) contracts, incineration contracts and
co-generation contracts.

The restatement that ensued under IFRS resulted in a reclassification of these
assets from "tangible assets" under French GAAP to "financial receivables" under
IFRS, in an amount of approximately (euro)1.6 billion.

Concession and affermage contracts
----------------------------------

While it waits for the forthcoming accounting rules on concessions to be issued,
Veolia Environnement has chosen to retain its existing accounting methods for
these contracts, except for certain restatements in terms of presentation.
Accordingly, financial depreciation (amortissement de caducite), recorded under
French GAAP as provisions for risks and charges, were reclassified as a
deduction from tangible assets (as set forth in note 7 above). On the other
hand, tangible assets recorded in connection with concession contracts, as well
as related provisions (for renewal and total guarantee), continue to be recorded
as liabilities as they were under French GAAP.

Other contracts
---------------

Tangible assets related to contracts falling in neither of the categories above
continue to be recorded as tangible assets. In accordance with IAS 16, the
component-based approach was adopted.

5.1.3.10        Outlook

The publication of consolidated financial statements for 2004 under IFRS is
scheduled for May 2005.

There remains a degree of uncertainly on some key IAS/IFRS standards and
interpretations, in particular relating to the treatment of concessions. Veolia
Environnement undertakes no obligation to revise or update any forward-looking
statements, or to make any other forward-looking statements, whether as a result
of new information, future events or otherwise.

<PAGE>

5.2   CONSOLIDATED FINANCIAL STATEMENTS


<TABLE>
                                       CONSOLIDATED BALANCE SHEETS - ASSETS

                                               ------------------------------------------------------------------
                                         Notes                         At December 31,
                                               ------------------------------------------------------------------
                                                   2004          2004          2003         2003          2002
                                               ($ millions)    ((euro)       Proforma
                                                               millions)
                                               ------------  ------------  ------------   -----------  -----------
<S>                                         <C>    <C>           <C>          <C>           <C>          <C>
Goodwill, net.............................  3      4,847.0       3,558.5      3,665.3       4,238.4      6,152.8
Other intangible assets, net..............  4      2,532.6       1,859.3      1,964.7       2,749.1      3,904.9
Property plant and equipment..............        22,673.0      16,645.6     15,374.3      17,698.1     17,679.2
Publicly-owned utility networks...........         9,899.7       7,268.0      6,830.5       7,024.2      6,463.6
Accumulated depreciation..................      (13,715.8)    (10,069.6)    (9,228.2)    (10,303.1)    (9,602.0)
Property, plant and equipment, net........  5     18,856.9      13,844.0     12,976.7      14,419.2     14,540.8
Investments accounted for using the
equity method.............................  6        306.7         225.2        210.2         445.7        448.0
Investments accounted for using the cost
method....................................  7        240.0         176.2        196.7         206.2        278.0
Portfolio investments held as financial
assets....................................  7      1,079.5         792.5      1,040.7       1,162.2      1,243.5
Financial assets..........................         1,626.2       1,193.9      1,447.6       1,814.1      1,969.5
Total long-term assets....................        27,862.7      20,455.7     20,054.3      23,220.8     26,568.0
Inventories and work-in-progress..........  8      1,012,5         743.3        731.3       1,067.8      1,174.5
Accounts receivable.......................  8     12,746.1       9,357.7      8,688.9      10,432.9     11,145.8
Short-term loans..........................  9        537.6         394.7        425.6         457.9        487.6
Cash and cash equivalents................. 10      4,951.4       3,635.1      2,157.9       2,538.4      2,381.9
Other marketable securities............... 10      2,285.7       1,678.1      1,200.8       1,202.6        260.6

Total current assets......................        21,533.3      15,808.9     13,204.6      15,699.6     15,450.4
                                               ------------  ------------  -----------  ------------  -----------
Discontinued operations...................               -             -      5,661.5             -            -
                                               ------------  ------------  -----------  ------------  -----------
TOTAL ASSETS..............................        49,396.0      36,264.6     38,920.4      38,920.4     42,018.4
                                               ============  ============  ===========  ============  ===========
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

For the convenience of the reader, the financial statements as of and for the
year ended December 31, 2004 have been translated into U.S. Dollars at the rate
of U.S. $ 1 = (euro)0.7342.

<PAGE>

<TABLE>
                                   CONSOLIDATED BALANCE SHEETS - LIABILITIES AND
                                               SHAREHOLDERS' EQUITY


                                               ------------------------------------------------------------------
                                         Notes                         At December 31,
                                               ------------------------------------------------------------------
                                                   2004          2004          2003         2003          2002
                                               ($ millions)    ((euro)       Proforma
                                                               millions)
                                               ------------  ------------  ------------   -----------  -----------
<S>                                       <C>  <C>           <C>           <C>            <C>          <C>
Share capital.............................         2,739.2       2,011.0      2,001.6       2,001.6      5,404.4
Additional paid-in capital................         8,656.3       6,355.1      6,321.9       6,321.9      2,919.1
Retained earnings.........................        (6,712.8)     (4,928.3)    (2,694.0)     (2,694.0)    (2,333.1)
Net Income................................           170.8         125.4     (2,054.7)     (2,054.7)       339.2
                                               ------------  ------------  -----------  ------------  -----------
Total shareholders' equity................ 12      4,853.4       3,563.2      3,574.8       3,574.8      6,329.6
Minority Interests........................ 13      2,799.7       2,055.4      1,971.9       2,679.8      2,585.2
Deferred income........................... 14      1,903.9       1,397.8      1,457.1       1,475.0      1,413.4
Reserves and allowances................... 15      3,641.4       2,673.4      2,687.8       2,913.9      2,946.1
Bonds.....................................         8,474.3       6,221.5      8,022.5       8,047.2      5,633.8
Other long-term financial debt............         6,238.3       4,579.9      4,190.8       4,539.2      7,279.2
                                               ------------  ------------  -----------  ------------  -----------
Long-term debt............................ 16     14,712.6      10,801.4     12,213.3      12,586.4     12,913.0
Other long-term liabilities...............           372.7         273.6        302.0         399.3        427.5
                                               ------------  ------------  -----------  ------------  -----------
Total long-term liabilities and                   28,283.7      20,764.8     22,206.9      23,629.2     26,614.8
   shareholders' equity...................
Accounts payable..........................  9     14,138.1      10,379.6      9,637.6      11,464.5     11,607.7
Bank overdrafts and other short-term       16      6,974.2       5,120.2      3,500.0       3,826.7      3,795.9
   borrowings.............................
Total current liabilities.................        21,112.3      15,499.8     13,137.5      15,291.2     15,403.6
                                               ------------  ------------  -----------  ------------  -----------
Discontinued operations...................               -             -      3,575.9             -            -
                                               ------------  ------------  -----------  ------------  -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY        49,396.0      36,264.6     38,920.4      38,920.4     42,018.4
                                               ============  ============  ===========  ============  ===========
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

For the convenience of the reader, the financial statements as of and for the
year ended December 31, 2004 have been translated into U.S. Dollars at the rate
of U.S. $ 1 = (euro)0.7342.

<PAGE>

<TABLE>
                                         CONSOLIDATED STATEMENTS OF INCOME

                                               ------------------------------------------------------------------
                                         Notes                         At December 31,
                                               ------------------------------------------------------------------
                                                   2004          2004          2003         2003          2002
                                               ($ millions)    ((euro)       Proforma
                                                               millions)
                                               ------------  ------------  ------------   -----------  -----------
<S>                                       <C>  <C>           <C>           <C>            <C>          <C>
Revenues..................................        33,607.5      24,673.3     23,821.5      28,603.0     30,078.7
Costs of sales............................       (28,074.5)    (20,611.2)   (19,949.6)    (23,725.6)   (24,638.1)
Selling, general and
   administrative costs...................        (3,456.5)     (2,537.6)    (2,509.8)     (3,208.3)    (3,508.8)
Other operating income (expense)..........           125.9          92.4         75.3          81.8         39.5
                                               ------------  ------------  -----------  ------------  -----------
EBIT......................................         2,202.4       1,616.9      1,437.4       1,750.9      1,971.3
Goodwill amortization and depreciation
   of intangible assets with
   indefinite life (1).................... 25       (345.0)       (253.3)      (242.7)     (2,424.5)      (327.2)
Restructuring costs.......................           (69.5)        (51.0)       (86.5)        (93.3)       (56.6)
                                               ------------  ------------  -----------  ------------  -----------
Operating income (loss)...................         1,787.9       1,312.6      1,108.2        (766.9)     1,587.5
Financial income (expenses)............... 25       (864.9)       (635.0)      (708.2)       (749.9)      (648.1)
Other income (expenses)................... 25        (78.1)        (57.3)       (14.2)        (62.4)       (59.7)
                                               ------------  ------------  -----------  ------------  -----------
Net income (loss) before
   taxes, minority and equity interests ..           844.9         620.3        385.8      (1,579.2)       879.7
Income taxes.............................. 17       (248.4)       (182.4)      (195.4)       (274.4)      (437.3)
                                               ------------  ------------  -----------  ------------  -----------
Net income (loss) before
   minority and equity
   interests .............................           596.5         437.9        190.4      (1,853.6)       442.4
Equity in net income of affiliates........  6         30.5          22.4         10.9          44.4         39.0
Minority interest......................... 13       (173.1)       (127.1)      (136.6)       (245.5)      (142.2)
                                               ------------  ------------  -----------  ------------  -----------
Net income (loss) before
   discontinued operations
   income.................................           453.9         333.2         64.7      (2,054.7)       339.2
                                               ------------  ------------  -----------  ------------  -----------
Discontinued operations income............          (283.1)       (207.8)    (2,119.4)            -            -
                                               ------------  ------------  -----------  ------------  -----------
Net income (loss).........................           170.8         125.4     (2,054.7)     (2,054.7)       339,2
                                               ============  ============  ===========  ============  ===========
Basic earnings per share..................                          0.31        (5.13)        (5.13)        0.93
Diluted earnings per share................                          0.31        (5.13)        (5.13)        0.93
Average number of common
shares outstanding........................                   400,436,495  400,322,945   400,322,945  364,711,156
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.
(1)   includes goodwill and intangible asset  write-downs of (euro)106.4 million
      in 2004, (euro)2,214.9 million in 2003 and (euro)77.0 million in 2002.

For the convenience of the reader, the financial statements as of and for the
year ended December 31, 2004 have been translated into U.S. Dollars at the rate
of U.S. $ 1 = (euro)0.7342.

<PAGE>

<TABLE>
                                       CONSOLIDATED STATEMENTS OF CASH FLOWS
                       (Prepared in accordance with International Accounting Standard No. 7)

                                               Notes                       At December 31,
                                                     ------------------------------------------------------------
                                                          2004            2004          2003            2002
                                                      ($ millions)                ((euro) millions)
                                                     --------------    ------------------------------------------
<S>                                                  <C>               <C>            <C>             <C>
Cash flow from operating activities:
Net income (loss).................................          170.8          125.4      (2,054.7)         339.2
Adjustment to reconcile net income to net cash
   provided by operating activities
Depreciation and amortization.....................  25    3,029.9        2,224.4        4,486.2       2,396.7
Financial provisions..............................  25      113.9           83.6          188.3         112.3
Gains on sale on property and equipment and
   financial assets, net..........................          280.0          205.6           12.8        (105.6)
Undistributed earnings of affiliates, net.........           (6.5)          (4.8)         (27.0)        (15.2)
Deferred taxes....................................          (95.4)         (70.0)         (97.4)        (19.3)
Minority interests................................  13      233.3          171.3          245.5         142.2
Net changes in current assets and liabilities.....              -              -              -             -
Prepaid, deferrals and accruals...................  4       (39.1)         (28.7)         (53.1)        (70.5)
Increase (decrease) in working capital (1)........  9       447.9          328.8          397.6        (463.1)
Net cash provided by operating activities.........        4,134.9        3,035.6        3,098.2       2,316.7
                                                       -----------    -----------    -----------   -----------

Cash flow from investing activities:
Purchase of property, plant and equipment.........       (3,153.3)      (2,315.0)      (2,455.7)     (2,603.4)
Proceeds from sale of property, plant and
   equipment......................................          429.2          315.1          226.0         198.1
Purchase of investments...........................         (517.2)        (379.7)        (266.1)     (1,005.9)
Proceeds from sales of investments ...............        2,437.6        1,789.6          450.0       1,259.9
Purchase of portfolio investments held as
   financial assets...............................           62.2           45.7        (207.7)       (124.8)
Proceeds from sales of portfolio investments held
   as financial assets............................           34.1           25.0           44.0         313.5
Disbursement on notes receivables.................         (180.5)        (132.5)         (78.7)       (420.9)
Principal payment on notes receivables............          176.3          129.4           77.3         158.5
Net (increase) decrease in short-term loans.......           56.0           41.1           27.3         110.2
Sales and purchases of marketable securities......         (379.1)        (278.3)        (928.4)          6.2
Net cash used in investing activities.............       (1,034.7)        (759.6)      (3,112.0)     (2,108.6)
                                                       -----------    -----------    -----------   -----------
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

(1) The decrease in working capital excludes the deferred taxes for the period.


For the convenience of the reader, the financial statements as of and for the
year ended December 31, 2004 have been translated into U.S. Dollars at the rate
of U.S. $ 1 = (euro)0.7342.

<PAGE>

<TABLE>
                                CONSOLIDATED STATEMENTS OF CASH FLOWS - (Continued)
                       (Prepared in accordance with International Accounting Standard No. 7)



                                                                               At December 31,
                                                         -------------------------------------------------------
                                                              2004          2004         2003         2002
                                                          ($ millions)              ((euro) millions)
                                                         --------------    -------------------------------------
<S>                                                      <C>               <C>          <C>         <C>
Cash flow from financing activities:
Net increase (decrease) in short-term borrowings.........    2,437.1       1,789.2        399.0     (2,031.7)
Proceeds from issuance of bonds and other long-term debt.    1,448.9       1,063.7      4,132.8      4,194.1
Principal payment on bonds and other long-term debt......   (4,724.7)     (3,468.7)    (3,791.2)    (3,870.4)
Net proceeds from issuance of common stock...............      227.7         167.2          9.9      1,554.1
Purchase of treasury stock...............................     (249.5)       (183.2)           -       (115.8)
Cash dividends paid......................................     (542.8)       (398.5)      (309.3)      (300.0)
Net cash provided by financing activities                   (1,403.4)     (1,030.3)       441.2       (569.7)
                                                           -----------   -----------  -----------  -----------
Effect of foreign currency exchange rate changes on cash        34.7          26.5       (210.2)       (92.1)
   and cash equivalents..................................
Change in cash and cash equivalents                          1,732.9       1,272.2        217.2       (453.7)
Cash and cash equivalents:
      Beginning..........................................    2,523.6       1,852.8      1,635.6      2,089.3
      Ending.............................................    4,256.3       3,125.0      1,852.8      1,635.6
Cash and cash equivalents ...............................    4,951.1       3,635.1      2,538.4      2,381.9
- Cash liabilities ......................................     (694.8)       (510.1)      (685.6)     (746.3)
                                                           -----------   -----------  -----------  -----------
Cash and cash equivalents                                    4,256.3       3,125.0      1,852.8      1,635.6
Supplemental disclosures of cash flow information:
      Cash payments for:
      Interest...........................................                                 625.9        682.8
      Income Taxes.......................................                                 352.2        342.7
Supplemental disclosures for non-cash investing and
   financial activities:
      Acquisition:
      Issuance of common stock in settlement of note                                          -            -
         payable
      Issuance of common stock of subsidiaries...........                                     -            -
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

For the convenience of the reader, the financial statements as of and for the
year ended December 31, 2004 have been translated into U.S. Dollars at the rate
of U.S. $ 1 = (euro)0.7342.

<PAGE>

<TABLE>
                            CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY



((euro) millions except for share information)    Number       Share    Additional   Retained     Net       Shareholders'
                                                 of Shares    capital    paid- in    earnings    income        equity
                                                                          capital
                                               -------------------------------------------------------------------------
<S>                                            <C>            <C>        <C>        <C>          <C>        <C>
Balance at December 31, 2001...................346,175,772    4,673.4     2,269.6    1,048.2    (2,251.2)     5,740.0
                                               -------------------------------------------------------------------------
Net income for the year 2002...................          -          -           -          -       339.2        339.2
Foreign currency translation adjustment........          -          -           -     (957.2)          -       (957.2)
Dividends paid and net income appropriation....          -          -           -   (2,438.7)    2,251.2       (187.5)
Treasury shares................................          -      (64.1)      (86.9)         -           -       (151.0)
Conversion of warrant - Capital increase....... 58,894,687      795.1       736.4          -           -      1,531.5
Other..........................................          -          -           -       14.6           -         14.6
                                               -------------------------------------------------------------------------
Balance at December 31, 2002...................405,070,459    5,404.4     2,919.1   (2,333.1)      339.2      6,329.6
                                               -------------------------------------------------------------------------
Net income for the year 2003...................          -          -           -          -    (2,054.7)    (2,054.7)
Foreign currency translation adjustment........          -          -           -     (509.1)           -      (509.1)
Dividends paid and net income appropriation....          -          -           -      121.4      (339.2)      (217.8)
Treasury shares................................          -       40.3      (40.3)          -           -            -
Capital decrease...............................         56   (3,443.1)    3,443.1          -           -            -
Other..........................................          -          -           -       26.8           -         26.8
                                               -------------------------------------------------------------------------
Balance at December 31, 2003...................405,070,515    2,001.6     6,321.9   (2,694.0)   (2,054.7)     3,574.8
                                               -------------------------------------------------------------------------
Net income for the year 2004...................          -          -           -          -       125.4        125.4
Foreign currency translation adjustment........          -          -           -       33.2           -         33.2
Dividends paid and net income appropriation....          -          -           -   (2,272.6)    2,054.7       (217.9)
Treasury shares................................          -        2.6        14.7        1.7           -         19.0
Capital increase...............................  1,351,468        6.8        18.5          -           -         25.3
Other..........................................          -          -           -        3.4           -          3.4
                                               -------------------------------------------------------------------------
Balance at December 31, 2004...................406,421,983    2,011.0     6,355.1   (4,928.3)      125.4      3,563.2
                                               -------------------------------------------------------------------------
Balance at December 31, 2004 ($ millions)......          -    2,739.2     8,656.3   (6,712.8)      170.8      4,853.4
                                               -------------------------------------------------------------------------
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

For the convenience of the reader, the financial statements as of and for the
year ended December 31, 2004 have been translated into U.S. Dollars at the rate
of U.S. $ 1 = (euro)0.7342

<PAGE>

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Description of business

1.1. Presentation of the Group

Veolia Environnement ("VE" or the "Group") is a "societe anonyme" , a form of
stock corporation under French law, listed on both the Paris and New York stock
exchanges.

Veolia Environnement was formed at the end of 1999 and is an independent
worldwide group providing environmental services, which are organized into four
divisions : water, waste management, energy services and transportation. Veolia
Environnement has been listed on the Paris stock exchange since July 20, 2000
and on the New York stock exchange since October 5, 2001.

SEGMENT DESCRIPTION

Veolia Environnement supplies a wide array of environmental management services
to a range of public authorities and industrial, commercial and residential
customers. The Group offers a variety of integrated services, including water
treatment and system operation, waste management, energy services, and
transportation services.

The following is a brief description of each of the Group's business segments:

o    Water--the Group manages and operates water and wastewater treatment and
     distribution systems for public authorities and private companies. The
     Group is also a designer and manufacturer of water and wastewater treatment
     equipment and water systems.

o    Waste management--the Group collects hazardous and non-hazardous waste and
     offers related services, including disposal, treatment and recycling.

o    Energy services--the Group provides energy management services and offers a
     wide range of industrial utilities and facilities management services.

o    Transportation--the Group provides integrated transportation solutions
     involving bus, train, maritime, tram and other networks.

1.2. Significant Events

During 2004, Veolia Environnement completed its strategic restructuring to
refocus on its core environmental services activities.

1.2.1. Sales of activities in the U.S.

o        In February 2004, Veolia Environnement announced the sale of farmlands
         located in Imperial Valley (California) to Imperial Irrigation District
         for US$77.3 million.

o        At the end of July 2004, Veolia Environnement completed the sale of
         USFilter Corporation's equipment and short-term services businesses to
         Siemens. After application of the contractual price adjustment
         mechanisms, the final value of the sale amounted to US$975 million.

o        At the end of September 2004, Veolia Environnement completed the sale
         of its Culligan business to the private equity firm Clayton Dubilier &
         Rice, for total consideration of US$612 million.

These U.S. sales represent the final step in the implementation of the strategic
refocusing of Veolia Environnement's water operations in North America, which
was originally announced in September 2003. They are part of Veolia
Environnement's broader effort to concentrate more fully on the development of
outsourcing on behalf of public authorities, as well as on the provision of
services involving long-term contracts with municipal or industrial clients.
Including the sale of Everpure and Surface Preparation in 2003 (resulting in
US$345 million in proceeds), the total proceeds generated from Veolia
Environnement's U.S. asset sales in 2003 and 2004 amounted to approximately
US$2.0 billion.

1.2.2. Sale of FCC

During 2003, Veolia Environnement and its partner in FCC's holding company, Ms.
Esther Koplowitz, had a number of disagreements relating to the strategic
development of FCC. To avoid creating a deadlock and in the interest of FCC's
development, Veolia Environnement proposed to Ms. Esther Koplowitz several
alternative ways to resolve the parties' differences. Ms. Esther Koplowitz,
however, informed Veolia Environnement in the third quarter of 2003 of her
preference to formally commence negotiations to repurchase the Company's
indirect interest in FCC. Veolia Environnement accepted the principle of a sale
of its interest in FCC and various proposals were exchanged. In this context,
Veolia Environnement informed the Spanish stock market authorities (Comision
Nacional del Mercado de Valores) on March 1, 2004 of these negotiations.

Negotiations during the first half of 2004 resulted in the sale of Veolia
Environnement's 49% stake in B 1998 S.L., the holding company that owns 52.5% of
FCC, to a company controlled by Ms. Esther Koplowitz. The transaction allowed
Veolia Environnement to reduce its net indebtedness by (euro)1.1 billion, and
resulted in a total cash payment to Veolia Environnement of (euro)916 million
(before transaction fees), including an exceptional dividend paid by B 1998 S.L.
to Veolia Environnement prior to the sale. The transaction, which closed on
September 15, 2004, was subject to applicable Spanish anti-trust regulatory
approvals.

1.2.3. Sale of Berlikomm

As part of the refocusing of its activities on water distribution, Berlin Water
sold telecommunications operator Berlikomm at the end of August 2004.

1.2.4. Impact of Asset Sales

The asset sales referred to above allowed Veolia Environnement to reduce its
debt by (euro)2.4 billion in 2004.

1.2.5. Evolution of the shareholder structure

Following a shareholder restructuring on December 9, 2004, Vivendi Universal
reduced its holdings in Veolia Environnement from 20.36% to 5.3% of share
capital. This constituted a significant step in the restructuring of Veolia
Environnement's shareholder base. At the same time, in order to help develop its
employee shareholder base, Veolia Environnement repurchased 2% of its share
capital from Vivendi Universal in connection with the shareholder restructuring,
for an amount of (euro)194.8 million.

Note 2. Summary of significant accounting policies
--------------------------------------------------

Basis of Preparation

The consolidated financial statements of the Group have been prepared in
accordance with accounting principles generally accepted in France ("French
GAAP") and are in accordance with the provisions of the January 3, 1985 law and
its implementation rule as of February 17, 1986 and the new rules approved by
the "Comite de la Reglementation Comptable" in April 1999.

The Group applies the recommendation of the "Conseil National de la
Comptabilite" and includes in its consolidated financial statements assets
financed by capital leases, pension obligations and employee termination costs.
Veolia Environnement applies the preference method for the treatment of capital
leases.

Financial statements of subsidiaries have been adjusted when necessary, in order
to homogenize valuation methods in the Group.

The Group does not apply regulation CRC 2002-10, relating to amortization and
depreciation of assets.


Change of presentation and accounting principles

On December 31, 2004, Veolia Environnement began applying the provisions of
Article 23100 of CRC Regulation 99-02, which allows companies to report their
share in the net income of businesses sold during the year on a separate line
item of the income statement. These businesses are excluded from the new scope
of consolidation and therefore no longer contribute to consolidated revenues for
the fiscal year in which they were sold, as follows: the North American
activities disposed of in 2004 and FCC (which leads to accounting for Proactiva
using proportional consolidation and no longer using full consolidation). The
result of discontinued operations includes net income of the activities until
the disposal date, capital gains and losses and the related taxes.

The cash-flow statement includes flows generated by the disposed activities
until the date of disposal.

Article 133 of the "Loi de Securite Financiere" of August 1, 2003 eliminated
from the French Commercial Code the provision that makes consolidation by a
controlling company subject to the holding of at least one share. As a result of
this statutory amendment, substantive control is determined by reference to the
interpretation of SIC-12 of the IFRS standards. This amendment is applicable to
Veolia Environnement as of January 1, 2004. On December 31, 2004, "special
purpose entities", within the meaning of paragraph 10052 of CRC Regulation
99-02, were consolidated, which resulted in long-term financial debt in the
amount of (euro)364.6 million and the securitization program in France in the
amount of (euro)334.2 million.

Pro-forma balance sheet and income statements were established for 2003 to
present the accounts of the Group excluding FCC (that led to accounting for
Proactiva using proportional consolidation) and the Water American activities
sold in 2003 and 2004 under separate lines of the balance sheet and the income
statement.

In 2003, the Group changed the amortization plans for tangible fixed assets in
Waste and Energy activities, which impacted the financial statements by
(euro)33.1 million.

In 2002, the Group did not change its presentation or accounting principles.


Convenience Translations

The consolidated balance sheet and consolidated statements of income and cash
flows include amounts as of and for the year ended December 31, 2004 denominated
in millions of U.S. dollars. These amounts have been translated for convenience
as permitted under Rule 3-20 of Regulation S-X of the U.S. Securities Exchange
Commission and have been prepared using an exchange rate of U.S.$1 to
(euro)0.7342, which was the exchange rate as of December 31, 2004. Convenience
translations are presented solely for the convenience of the reader of these
financial statements and should not be construed as representations that the
local currency has been, could have been, or could in the future be converted
into U.S. dollars at this or any other rate of exchange.


Principles of Consolidation

All companies over which the Group has legal or effective control are fully
consolidated.

The Group uses the equity method of accounting for its investments in certain
affiliates in which it owns less than 20% of the voting shares. In these
situations, the Group exercises significant influence over the operating and
financial decisions of the affiliate either (a) through the disproportionate
representation on the affiliate's board of directors, e.g., the percentage of
directors appointed to the board by the Group is greater than the percentage of
its shareholding interest and those directors allow the Group to exercise
significant influence, and (b) because there is no shareholder with a majority
voting ownership in the affiliate, which is a consideration under French
accounting principles in determining whether significant influence exists, or
(c) because the Group exercises substantive participating rights through
shareholder agreements that allow the Group to veto or block decisions taken by
the board of the affiliate in question. Significant investments in which the
Group has 20% to 50% ownership or otherwise exercises significant influence are
accounted for using the equity method.

The proportional method of consolidation is used for investments in jointly
controlled companies, where the Group and other shareholders have agreed to
exercise joint control over significant financial and operating policies. For
such entities, the Group records its proportional interest in the balance sheet
and income statements.

All other investments in affiliates that are not consolidated are accounted for
at cost.

Subsidiaries acquired are included in the consolidated financial statements as
of the acquisition date. All material intercompany transactions have been
eliminated. In the case of proportionally consolidated companies, intercompany
transactions are eliminated on the basis of the Group's interest in the company
involved.


Use of Estimates

The preparation of financial statements requires management to make estimates
and assumptions that affect the reported amounts of assets, liabilities,
revenues and expenses, and the disclosures of contingent assets and liabilities.
Actual results could differ significantly from these estimates. Significant
estimates made by management in the preparation of these financial statements
include amounts for pension liabilities, deferred taxes, valuation estimates for
long-lived assets, reserves as well as recorded and disclosed amounts for
certain financial instruments.


Translation of Foreign Subsidiaries' Financial Statements

Balance sheets, statements of income and cash flows of subsidiaries whose
functional currency is different from that of the Group are translated into the
reporting currency at the applicable exchange rate (i.e., the closing year-end
rate for balance sheets, or the average annual rate for income and cash flow
statements). Translation gains and losses are recorded in retained earnings. The
exchange rates of the significant currencies of non-euro countries used in the
preparation of the consolidated financial statements were as follows:

<TABLE>
                               Year-End Closing Exchange Rates       2004          2003          2002
                               -------------------------------
<S>                                                                 <C>           <C>           <C>
(one currency = xx(euro))
---------------------------------------------------------------  ------------  ------------  ------------
U.S. dollar...................................................      0.7342        0.7918        0.9536
Pound sterling................................................      1.4183        1.4188        1.5373

                                 Average Annual Exchange Rates       2004          2003          2002
                                 -----------------------------
(one currency = xx(euro))
---------------------------------------------------------------  ------------  ------------  ------------
U.S. dollar...................................................      0.8025        0.8758        1.0545
Pound sterling................................................      1.4721        1.4422        1.5889
</TABLE>

The balance sheets, income and cash flow statements of subsidiaries operating in
highly inflationary economies are re-measured (according to the historical
method) into a functional currency. The functional currency is defined as the
currency used in the dominant country of the economic area to which the
subsidiaries belong. Related translation effects are included in net income.
These financial statements are then translated from the functional currency into
the reporting currency on the basis of the year-end or average annual exchange
rate and the translation adjustments are recorded in retained earnings.


Revenue Recognition

Revenues are recorded when title passes to the customer or when services are
rendered and measured in accordance with contracts; title of property is
considered to have passed to the customer when goods are shipped.

Revenues resulting from government subsidies associated with long-term operating
agreements are recorded ratably over the year.

Revenues relating to specific activities are discussed in applicable sections of
these footnotes.


EBIT

EBIT, which appears as a profit and loss account sub-total, is defined as
operating income before amortization and depreciation of goodwill and
indefinite-life intangible assets and restructuring charges. This corresponds to
the definition of "resultat d'exploitation" as defined under French GAAP in the
rule CRC 99-02.


Other income and expenses

This item includes income or expenses resulting from exceptional operations or
events that are not part of the ordinary operations of Veolia Environnement.
This primarily includes capital gains and losses on sales of subsidiaries,
affiliates and activities.


Goodwill and Business Combinations

All business combinations are accounted using the purchase accounting method.
Under the purchase accounting method, assets acquired and liabilities assumed
are recorded at their fair value. The excess of the purchase price over the fair
value of net assets acquired, if any, is capitalized as goodwill and amortized
over the estimated period of benefit on a straight-line basis. Amortization
periods for goodwill range from 20 to 40 years.


Other Intangible Assets

Start-up costs relating to the implementation of new activities, including
pre-operating costs, are amortized over their estimated useful life.

Other intangible assets include costs incurred to obtain contracts, such as fees
paid to local authorities for public services contracts. Fees paid to local
authorities are amortized over the duration of the contract, which can be up to
30 years. Market share and trademarks are not amortized.

Business assets acquired, such as customer lists and operating rights, are
amortized over their estimated useful life.


Property, Plant and Equipment

Property, plant and equipment is carried at cost less accumulated depreciation.
Depreciation is computed using the straight-line method using the following
useful lives:

                                                             Estimated useful
                                                                   lives
                                                                 in years
                                                           --------------------

        Buildings.........................................       20 to 50
        Technical systems.................................        7 to 24
        Transport equipment...............................        3 to 25
        Other equipment and machinery.....................        3 to 12

Assets financed by capital lease are capitalized and amortized over the shorter
of the lease term or the estimated useful lives of the assets. Amortization
expense on assets acquired under such leases is included with depreciation and
amortization expense. Interest expense incurred as a result of expenditures for
a fixed asset during the period necessary for its intended use is capitalized as
part of the historical cost of fixed assets.


Valuation of Long-lived Assets

Long-lived assets are regularly re-evaluated according to circumstances, either
internal or external, which could lead to depreciation. If this is the case, an
exceptional amortization or valuation allowance is recorded on the basis of the
asset's fair value.


Valuation of goodwill and other intangible assets

Veolia Environnement performs an annual review of its goodwill and other
intangible assets during its strategic planning in mid-year. If the long-term
prospects of an activity appear durably downgraded, an estimate is made and an
impairment is booked in the interim closing accounts if necessary. Assets are
valued at market value in case of a decision to sell them and at fair value if
they are retained. At the closing date, a negative budget variance that is
considered to be irreversible may lead to an impairment test. In case of
disposal, market value is based on the multiples method (broker surveys) or the
similar recent transactions method. When the assets are retained, the preferred
valuation is the discounted future cash flows method. Alternative methods are
the multiple method or similar recent transactions method.


Balance sheet recognition of financing assets

     Lease contracts

     As mentioned above, Veolia Environnement uses the preference method for the
     treatment of capital leases and uses IAS 17 criteria to identify capital
     lease contracts.

     In order to make this classification, leases can be examined with respect
to the following criteria:

     o   the lease transfers ownership of the asset to the lessee by the end of
         the lease term;

     o   the lessee has the option to purchase the asset at a price which is
         expected to be sufficiently lower than the fair value at the date the
         option becomes exercisable such that, at the inception of the lease, it
         is reasonably certain that the option will be exercised;


     o   the lease term is for the major part of the economic life of the asset
         even if title of property is not transferred;

     o   at the inception of the lease the present value of the minimum lease
         payments amounts to at least substantially all of the fair value of the
         leased asset;


     o   the leased assets are of a specialized nature such that only the lessee
         can use them without major modifications being made;

     o   if the lessee can cancel the lease, the lessor's losses associated with
         the cancellation are borne by the lessee;

     o   gains or losses from the fluctuation in the fair value of the residual
         fall to the lessee; and

     o   the lessee has the ability to continue the lease for a secondary period
         at a rent that is substantially lower than market rent.


Financial Assets

     Investments Accounted for Using the Cost Method

     Investments in unconsolidated affiliates are carried at cost. Any negative
     difference between the carrying value and fair value which is not temporary
     is subject to a reserve.

     Portfolio Investments Held as Financial Assets

     Portfolio and other investments include unlisted and listed equity
     securities of unconsolidated subsidiaries and long-term loans that are
     recorded at cost. When fair value is less than cost and is determined to be
     other than temporary, a valuation allowance is provided. Estimated fair
     value is determined on the basis of the Group's share of the equity of the
     companies concerned adjusted to market value in case of listed securities
     or pursuant to other applicable procedures.

     Bonds and Debentures

     Issue costs, as well as discounts and premiums on convertible debt are
     amortized over the life of the debt.


Inventories and Work-in-progress

Group companies value inventories according to the provisions of the French
Commercial Code, either on a first-in-first-out or a weighted average cost
basis. Inventories are stated at the lower of cost or net realizable value.


Deferred Taxes

Deferred tax assets are recognized in cases of deductible temporary differences,
net tax operating loss carry forwards and/or tax credit carry forwards. Deferred
tax liabilities are recognized in the case of taxable temporary differences.
Deferred tax assets are recorded at their estimated net realizable value.
Deferred tax assets and liabilities are adjusted for the effects of changes in
tax laws and rates on the enactment date.


Cash, Cash Equivalents and Marketable Securities

Cash and cash equivalents include all cash balances and short-term highly liquid
investments with original maturities of three months or less at the time of
purchase and are stated at cost, which approximates their fair value.

Marketable securities including treasury shares and other highly liquid
investments: Treasury shares are classified as marketable securities when they
are acquired to stabilize the market price of the Group's shares or in
connection with stock options granted to directors and employees. Treasury
shares held for other reasons are recorded as an offset to shareholders' equity.
Marketable securities are carried at cost, and a valuation allowance is provided
if the fair value is less than the carrying value.


Pension Plans

The Group has several pension plans. Pension obligations are calculated using
the projected unit credit method. This method is based on the probability of
personnel remaining with companies in the Group until retirement, the
foreseeable changes in future compensation, and the appropriate discount rate
for each country in which the Group maintains a pension plan. This results in
the recognition of pension-related assets or liabilities, and the recognition of
the related net expenses over the estimated term of service of the employees.

Employees in France and most other European countries are eligible for severance
pay pursuant to applicable law immediately upon termination. The Group provides
reserves for such employee termination liabilities using the projected unit
credit method.


Stock Based Compensation

The Group has adopted stock option incentive plans that grant options on its
common shares to certain directors and officers. The purpose of these stock
option plans is to align the interest of management with the interest of
shareholders by providing certain officers and other key employees with
additional incentives to increase the Group's performance on a long-term basis.
Shareholders' equity is credited for the cumulative strike price to reflect the
issuance of shares upon the exercise of options.

Treasury shares held to cover commitments relating to stock option purchases are
shown under marketable securities at the lower of cost or fair market value. The
Group accounts for any capital gains in the year in which shares under the plan
are sold.


Derivative Financial Instruments

The Group manages certain of its financial risks by using derivative financial
instruments that qualify as hedges.

     Interest rate swaps and caps

     The Group primarily uses interest rate swaps and caps to manage interest
     rate risks relating to its borrowing requirements. The goal of these swaps
     is, depending on the circumstances involved, to substitute fixed for
     floating rates and floating for fixed rates, as well as to modify the
     underlying index on floating rate debt.

     For transactions that qualify for hedge accounting, the income or expense
     associated with these instruments is recognized when the income and expense
     on the hedged item is itself recognized. Thus the differences in the
     interest receivable and payable on interest swaps and caps and the
     associated premiums and cash payments are recognized over the term of the
     contracts as an adjustment in the interest expense of the financial debt.

     Interest rate derivatives used to manage interest rate risk related to
     debt, but which do not qualify for hedge accounting are recognized in the
     following manner:
     -    an allowance is recorded for the unrealized losses on the market value
          of the instrument.
     -    unrealized gains on the instruments are recognized only when sold or
          matured.

     Foreign currency derivatives

     The Group uses currency swaps and forward exchange contracts to manage its
     foreign currency risk. Forward exchange contracts are mainly used to hedge
     firm and anticipated transactions relating to assets and liabilities
     denominated in foreign currencies. Cross currency swaps are used to modify
     the interest rate and currency of foreign denominated debt or to hedge net
     foreign investments.

     The difference (known as premium/discount) between the forward rate and the
     spot rate of forward exchange contracts and cross currency swaps that
     qualify as hedging transactions is recognized over the term of the contract
     as interest income or expense.

     Cross currency derivative instruments that hedge a balance sheet item or
     foreign net investment are measured at the year-end rate. Any change in
     value is recognized in the balance sheet with offsets relating to:

     -    the income statement when the hedged item is remeasured (monetary or
          currency liabilities or receivables);
     -    currency translation adjustments in equity for hedges on net
          investments.

     Unrealized gains and losses resulting from future foreign currency hedging
     transactions (firm or highly probable) that are not yet recognized on the
     balance sheet, are deferred and recognized when the hedging transaction is
     realized.


Foreign Currency Transactions

Foreign currency transactions are converted into euros at the exchange rate in
effect on the transaction date. At year-end, receivables and payables
denominated in foreign currencies are remeasured into euros at year-end exchange
rates. The resulting exchange losses and gains are recorded in the current
earnings period.

Exchange gains or losses on borrowings denominated in foreign currencies or on
foreign currency derivatives that qualify as hedges on net investments in
foreign subsidiaries are included in equity as currency translation adjustments.


Research and Development

The Group's research and development costs are expensed as incurred.


Earnings Per Share

Basic earnings per share calculations are based on the Group's net income after
taxes divided by the weighted average number of common shares outstanding, in
compliance with "Avis no. 27 de l'Ordre des Experts Comptables".


Dilutive earnings per share reflect the potential dilution that would occur if
all securities and other contracts to issue ordinary shares were exercised or
converted. For this calculation, the weighted average number of common shares
outstanding includes shares issuable on exercise of dilutive options.

As of December 31, 2004, the potential dilutive securities or other contracts to
issue ordinary shares are warrants issued in December 2001 and stock options.


Accounting Policies Specific to Environmental Services Activities

     Public Service Contracts

     The Group holds public service contracts relating to its operations in
     water distribution and treatment, district heating networks, urban
     transportation and waste collection and treatment. Under the French legal
     system, there are three primary types of public service contracts:
     "affermage" (or public service management) contracts, where the operator is
     granted the obligation to manage and maintain facilities owned and financed
     by local authorities, "concession," facility management contracts similar
     to "BOT" (build-operate transfer) agreements, and contracts presenting
     mixed characteristics of affermage and concession contracts.

     Revenue is recognized on these contracts when services are rendered in
     accordance with the terms of the contracts. On an exceptional basis, the
     Group may also operate management contracts in which it manages a public
     service for a fixed fee as well as an incentive which is calculated in
     relation to the performance of the contract. For these contracts, the Group
     recognizes billing to customers as revenue and all related costs as
     operating expenses.

     In France, the Group's public service contracts are primarily "affermage"
     contracts.

     Facilities

     Facilities operated by the Group are generally financed by local
     authorities and remain theirs throughout the contract period. Individual
     facilities financed by the Group as a consequence of specific contractual
     terms are recorded as fixed assets and depreciated to their estimated
     residual value, if any, using the shorter of their economic useful lives or
     the contract's term. Wherever the contract's term is shorter than the
     useful economic life of the asset, such depreciation is classified under
     liabilities as financial depreciation.

     Fees Paid to Local Authorities

     The Group does not have any obligation to make compensation payments to
     local authorities during the contract period, except for fees that have
     been agreed upon by both parties and formally defined by the contract.

     The Group's policy is to expense fees that are paid to local authorities on
     a pro-rata basis when these fees are paid annually and to amortize these
     costs on a straight-line basis over the life of the contract when the fees
     consist of payments at the beginning of the contract.

     Commitments to Maintain and Repair Assets

     The Group generally assumes a contractual obligation to maintain and repair
     facilities managed through public service contracts. Corresponding repair
     and maintenance costs are expensed as incurred, except for some investments
     in specific contracts for which costs are accrued in advance.

     Planned Maintenance Projects

     The Group's policy is to expense costs relating to planned maintenance
     projects as they are incurred.

     Landfill Capitalization and Depletion

     Landfill sites are carried at cost and amortized on a pro-rata basis using
     the units of production method over the estimated useful life of the site
     as the airspace of the landfill is consumed. Landfill costs include
     capitalized engineering and other professional fees paid to third parties
     incurred to obtain a disposal facility permit. When the Group determines
     that a facility cannot be developed or the likelihood of permit grants
     cannot be determined before final authorization, as is the case in France
     and the United Kingdom, these costs are expensed as incurred.

     Landfill Closure and Post-closure Costs

     The Group has financial obligations relating to closure and post-closure
     costs and the remediation of the disposal facilities it operates or for
     which it is otherwise responsible.

     Landfill final closure and post-closure accruals include estimates for
     costs of the final cap and cover for the site, methane gas control,
     leachate management, groundwater monitoring, and other monitoring and
     maintenance to be incurred after the site ceases to accept waste. The cost
     estimates are prepared by engineers based on the applicable local, state
     and federal regulations and site specific permit requirements. These
     estimates do not take into account discounts for the present value of total
     estimated costs. The Group accrues a reserve for these estimated future
     costs pro-rata over the estimated useful life of the sites.

     Accruals for environmental remediation obligations are recognized when such
     costs are probable and reasonably estimable.

     These liabilities are classified as reserves and allowances.


     Construction

     To calculate their margin, construction companies record revenue according
     to the percentage of completion method. This method is applied to contracts
     with a duration of six months or more; for contracts with a duration of
     less than six months, the completed contracts method is used.

<PAGE>

Note 3. Goodwill and business combinations
------------------------------------------

         Goodwill by segment is detailed as follows:

<TABLE>
                                                                         2004
                        2002         2003     ---------------------------------------------------------------------
((euro) millions)        Net          Net         Change in      Foreign     Amortization     Other         Net
                                               consolidation    exchange         (3)        movements
                                                 scope (1)     translation
                                                                   (2)
                      ---------------------------------------------------------------------------------------------
<S>                    <C>          <C>              <C>           <C>          <C>         <C>          <C>
Water...............   3,291.1      1,655.0          67.2          (1.7)        (54.4)            -      1,666.1
Waste Management....   1,285.7      1,097.4          21.6         (37.6)        (67.5)         (5.2)     1,008.7
Energy Services.....     704.1        705.5          35.4             -         (45.0)        (15.8)       680.1
Transportation......     209.1        207.4           9.5           0.6         (16.6)          0.4        201.3
FCC & Proactiva.....     662.8        573.1        (549.2)         (1.8)        (19.8)            -          2.3
                      ---------------------------------------------------------------------------------------------
Total...............   6,152.8      4,238.4        (415.5)        (40.5)       (203.3)        (20.6)     3,558.5
                      =============================================================================================
</TABLE>

------------------
(1)  The changes in consolidation scope are mainly related to the sale of
     FCC (for (euro)(549.2) million), the acquisitions of the company holding
     the Shenzhen contract (for (euro)36.6 million), Wabag Gmbh in Germany (for
     (euro)13.3 million), the company holding the Zlinska contract in the Czech
     Republic (for (euro)11.0 million) in Water segment and of Dalkia Poznan
     (for (euro)26.6 million) in Energy segment.

(2)  Foreign exchange translation adjustments are mainly the result of the
     depreciation of the U.S. dollar against the euro.

(3)  Total goodwill amortization expenses for the years ended December 31, 2004,
     2003 and 2002 were (euro)(203.3) million, (euro)(1,773.8) million and
     (euro)(327.2) million, respectively. They include goodwill write-downs of
     (euro)(36.4) million in 2004, (euro)(1,564.2) million in 2003 and
     (euro)(77) million in 2002.

     The difference in goodwill amortization expense between the consolidated
     balance sheets and the income statement is due to the goodwill amortization
     of FCC ((euro)20.0 million), which is booked against discontinued
     operations income in the income statement, and to the amortization of
     Scandinavian market shares in the Transportation segment ((euro)70.0
     million), whose balance sheet impact is recorded in intangible assets (see
     note 4).

The following is a summary of the most significant acquisitions during the
periods presented in the accompanying financial statements.

FCC

FCC was sold on September 15, 2004.

In October 1998, Vivendi Universal acquired for cash 49% and obtained joint
control of a Spanish holding company whose only asset was a 57% ownership
interest in FCC, a publicly listed company in Spain active in the environmental
services sector. Vivendi Universal sold to the Group its interest in the holding
company for (euro)691 million. The holding company, which fully consolidates
FCC, is reflected in the Group's financial statements using the proportionate
consolidation method. The details of the Group's acquisition are as follows (in
millions of euros):

      Fair value of net tangible and intangible assets acquired ..........212
      Purchase price .....................................................691
      Goodwill recorded on acquisition ...................................479

Goodwill from this transaction is being amortized over 20 years.

In 2004, amortization of goodwill relates to the first half year. The impact is
included in the item "Discontinued operations income".

USFilter Corporation

In April 1999, Vivendi Universal acquired for cash 100% of the outstanding
shares of United States Filter Corporation, a U.S.-based water treatment and
equipment manufacturing company. The transaction was accounted for as a
purchase. The details of the acquisition are as follows (in millions of euros):

      Fair value of net tangible and intangible assets acquired ..........459
      Purchase price ...................................................5,801
      Goodwill recorded on acquisition .................................5,342

Goodwill from this transaction is being amortized over 40 years.

In 2004, the sale of "Equipment - short term contracts" and "Consumer and
Commercial" units of USFilter has no impact on the goodwill, which had been
fully written off in 2003.

On January 1, 2001, Veolia Environnement renounced the imputation of a part of
the initial goodwill of USFilter recorded as a reduction of shareholders'
equity. As a result, the net goodwill was increased by 2,037 million on December
31, 2001. The goodwill recorded on the acquisition was (euro)5,342 million, of
which (euro)3,253 million was initially recorded as an asset, and (euro)2,089
million as a reduction of shareholders' equity following the acquisition of
USFilter by Veolia Environnement from Vivendi Universal on December 23, 1999,
which the Group has now renounced. The amortization of the goodwill initially
recorded as an asset as of December 31, 2001 was (euro)216 million.

Taking into account the theoretical amortization of the goodwill recorded as a
reduction of shareholders' equity of (euro)52 million (calculated as if the
goodwill had been recorded as an asset), the net goodwill reintegrated as an
asset amounts to (euro)2,037 million.

Goodwill amortization in 2001 included a write-off of goodwill of (euro)2,611
million, related to activities of USFilter. The management determined that the
goodwill was impaired, and goodwill was written down based upon an estimate of
discounted future cash flow. The analysis was based on a projection over 10
years with a terminal value and with a discount rate of 7% for the goodwill. The
management revised the estimated cash flows as a result of the evolution of the
U.S. economic situation.

In 2002, the Group actualized the projection of USFilter over 10 years, with a
terminal value and utilized a discount rate of 6% taking into account the
reduction in the US risk-free rate. As a result of commercial gains and business
development in 2002, and its perspectives for 2003 and despite the US economic
situation in 2002, the valuation did not call into question the long-term growth
prospects of USFilter. The carrying value of the goodwill of USFilter was
justified as of December 31, 2002.

As of June 30, 2003, the Group booked a write-off of goodwill of (euro)1,441
million. The review of the values (goodwill and trademarks) as of December 31,
2003 relating to activities to be sold and to those maintained did not call into
question the December 30, 2003 valuation.

Onyx Waste Services (previously Superior Services)

In June 1999, Veolia Environnement acquired for cash 100% of the outstanding
shares of Superior Services, a U.S. based waste management company. The
transaction was accounted for as a purchase. The details of the acquisition are
as follows (in millions of euros):

      Fair value of net tangible and intangible assets acquired ...........168
      Purchase price ......................................................932
      Goodwill recorded on acquisition ....................................764
      Goodwill net at December 31, 2004 ...................................460

Goodwill from this transaction is being amortized over 40 years.

Note 4. Other intangible assets
-------------------------------

The evolution of net intangible assets is as follows:

<TABLE>
((euro) millions)       2002     2003    Additions  Disposals   Amortization  Change     Foreign      Other      2004
                                                                             in scope    exchange      move
                                                                                        translation   -ments
                     ----------------------------------------------------------------------------------------------------
<S>                    <C>       <C>        <C>        <C>          <C>        <C>           <C>         <C>       <C>
Fees paid to local
   authorities (1)...  568.5     528.1      14.9       (1.4)        (35.2)     (135.7)       (0.6)       17.2      387.3
Trademarks, market
   share and
   business assets
   acquired (2)......2,283.5   1,227.0      14.5       (7.1)       (102.7)     (537.8)      (65.0)      (29.7)     499.2

Software                90.9     123.1      35.7       (2.4)        (52.4)       (0.2)        0.1        20.7      124.6

Prepaid expenses (3).  440.8     449.5      28.7          -         (44.5)       (3.4)       (2.3)        0.8      428.8
                       521.2     421.4      39.6        3.8         (29.8)       (9.5)      (13.5)        7.4      419.4
Other intangible
   assets............
                     ----------------------------------------------------------------------------------------------------
Total................3,904.9   2,749.1     133.4       (7.1)       (264.6)     (686.6)      (81.3)       16.4    1,859.3
                     ====================================================================================================
</TABLE>

------------------
(1)  Fees paid to local authorities relating to public service contracts,
     which are primarily located in France, amounted to (euro)387.3 million in
     2004, compared with (euro)528.1 million in 2003, and (euro)568,5 million in
     2002. These are amortized over the term of the contracts to which they
     relate. They include amortization of fees paid to local authorities at the
     beginning of the contract in "Compagnie Generale des Eaux" for (euro)16.0
     million and in its regional subsidiaries for (euro)8.2 million. Change in
     scope relates to FCC proceeds for (euro)(138) million.

(2)  Trademarks, market share and business assets amounted to (euro)499.2
     million, compared with (euro)1,227.0 million in 2003, and (euro)2,283.5
     million in 2002. These assets mainly include the valuation of waste
     management operating rights for Onyx Waste Services for (euro)134.7 million
     and the trademarks of Veolia Water North America ("VWNA") for (euro)110.3
     million. The carrying value of trademarks, market share and business assets
     are reviewed every year based on the same criteria used to assess their
     initial value, such as the position of the market, net sales and gross
     operating surplus or deficit. If the review indicates an other than
     temporary reduction in value, a valuation allowance is recorded (see note
     2). The Scandinavian market shares of the Transportation segment have been
     written off for (euro)70.0 million. The changes in scope of consolidation
     are principally due to the effects of the sales of Culligan trademarks and
     of "Equipment - short term contracts" units of USFilter for (euro)(566.0)
     million. Foreign exchange translation adjustments are mainly the result of
     the depreciation of the US dollar against the euro.

(3)  Prepaid expenses include expenses of (euro)428.8 million, (euro)449.5
     million, and (euro)440.8 million, as of December 31, 2004, 2003 and 2002,
     respectively, to be allocated over several financial years, mainly relating
     to the difference between the contractual amounts of debt servicing
     payments made to local authorities and the expense charged to income over
     the contract period. Certain subsidiaries of the Group may be obligated to
     assume responsibility for the repayment of the debt entered into by local
     authorities relating to the utility network they manage. These obligations
     are part of the contracts between Veolia Environnement and the local
     authorities; there are no guarantees given to the lenders. The annual
     payments generally decrease each year and extend over a period shorter than
     the contract period. This difference between the amounts paid to the local
     authorities and the expense charged to income is recorded as a prepaid
     expense on the balance sheet.

     Total amortization expense for other intangible assets for the years ended
     December 31, 2004, 2003 and 2002 was (euro)264.6 million, (euro)875.0
     million (including (euro)70.0 million and (euro)650.7 million respectively
     in impairment) and (euro)214.2 million, respectively. Accumulated
     amortization amounted to (euro)1,058.7 million, (euro)1,761.3 million and
     (euro)874.5 million, as of December 31, 2004, 2003 and 2002, respectively.


Note 5. Property, plant and equipment

<TABLE>
Evolution of property, plant and equipment:

                                                                     December 31,
                      ------------------------------------------------------------------------------------------------------------
((euro) millions)                                                                             Foreign        Other
                        2002       2003      Additions   Disposals   Deprecia-   Change in    exchange     movements      2004
                                                                       tion        scope     translation
                      ---------  ---------   ---------   ---------   ---------   ---------   -----------   ---------    ---------
<S>                   <C>         <C>          <C>         <C>       <C>          <C>             <C>       <C>          <C>
Property, plant and
   equipment......    17,679.2    17,698.1     1,501.7     (902.8)           -    (1,555.4)       (96.0)           -     16,645.6

Publicly-owned
   utility networks    6,463.6     7,024.2       427.3     (102.5)           -       (85.2)       (12.3)      (28.5)      7,268.0
                      ---------  ----------   ---------  ---------    ---------   ---------    ---------   ---------     ---------
Total gross book
   value..........    24,142.8    24,722.3     1,974.0   (1,005.3)           -    (1,640.6)      (108.3)      (28.5)     23,913.6
                      =========  ==========  ==========  ==========  ==========  =========== ============  ==========  ===========
Property, plant and
   equipment......    (7,601.5)   (8,183.2)          -      651.0     (1,185.6)      890.6         25.2       (23.3)     (7,825.3)

Publicly-owned
   utility networks   (2,000.5)   (2,119.9)          -       39.4       (183.5)        0.6          6.7        12.4      (2,224.3)
                      ---------  ----------   ---------  ---------    ---------   ---------    ---------   ---------     ---------
Depreciation......    (9,602.0)  (10,303.1)          -      690.4     (1,369.1)      891.2         31.9       (10.9)    (10,069.6)
                      ---------  ----------   ---------  ---------    ---------   ---------    ---------   ---------     ---------

Total net book value  14,540.8    14,419.2     1,974.0     (314.9)    (1,369.1)     (749.4)       (76.4)      (39.4)     13,844.0
                      =========  ==========   =========  =========    =========   =========    =========   =========     =========
</TABLE>

Publicly-owned utility networks are assets financed by the Group as part of
their management of public service contracts, and will be returned to the local
authority at the end of the contract.

Additions are related to the Water segment ((euro)784.7 million), Waste segment
((euro)715.7 million), Energy segment ((euro)199.0 million), Transportation
segment ((euro)166.1 million) and FCC segment ((euro)91.5 million).

Disposals are mainly due to the Water segment ((euro)(100.3) million),
Transportation segment ((euro)(96.4) million) and Energy segment ((euro)(85.0)
million).

Changes in scope are mainly related to the sale of FCC ((euro)(960.5) million),
to the sale of "Equipment - short term contracts" units of USFilter and Culligan
((euro)(440.9) million), and to the acquisition of the Shenzhen contract in the
Water segment ((euro)91.2 million) and of "Groupe Connex GVI" in Canada and
Montanesa in Spain in the Transportation segment (respectively (euro)17.2
million and (euro)11.8 million).

This also includes the effects of the consolidation of ad-hoc entities in Berlin
((euro)364.9 million) according to the "Loi de Securite Financiere".

Effects of foreign currency translation adjustments mainly relate to the Water
segment ((euro)(45.8) million) and Waste segment ((euro)(70.5) million), as a
result of the depreciation of the US dollar against the euro, and to the Energy
segment ((euro)34.6 million) as a result of appreciation of the Czech and Polish
currencies.


<TABLE>
Property, plant and equipment by segment can be broken down as follows:

                                                            At December 31,
                     -------------------------------------------------------------------------------------------
    ((euro) millions)                               2004                                  2003          2002
                     ---------------------------------------------------------------  --------------------------
                        Property,    Publicly-owned     Accumulated           Net           Net           Net
                        Plant and        utility       depreciation/      tangible      tangible      tangible
                        equipment        networks      amortization        assets        assets        assets
                     -------------------------------------------------------------------------------------------
<S>                       <C>             <C>             <C>             <C>           <C>           <C>
Water................     4,865.4         5,990.9         (3,930.6)       6,925.7       6,746.1       6,989.4
Waste Management.....     6,473.9            57.5         (3,165.4)       3,366.0       3,207.5       3,258.9
Energy Services......     2,822.9           747.4         (1,638.4)       1,931.9       1,916.7       2,002.9
Transportation.......     2,483.4           472.2         (1,335.2)       1,620.3       1,629.4       1,443.7
FCC..................           -               -                 -             -         919.5         845.9
                        ----------      ----------       ----------     ----------    ----------    ----------
Total................    16,645.6         7,268.0        (10,069.6)      13,844.0      14,419.2      14,540.8
                        ==========      ==========       ==========     ==========    ==========    ==========


The breakdown of net property, plant and equipment is as follows :

                                                                                 At December 31,
                                                                  --------------------------------------------
((euro) millions)                                                       2004           2003           2002
                                                                  --------------  -------------  -------------
Land.............................................................       785.4          996.1        1,146.7
Buildings........................................................     1,697.2        1,715.3        1,663.3
Technical systems................................................     3,830.8        4,575.7        5,040.7
Assets under construction........................................       672.7          688.6          647.3
Other............................................................     1,834.2        1,539.3        1,579.7
                                                                  --------------  -------------  -------------
Property, plant and equipment....................................     8,820.3        9,515.0       10,077.7
                                                                  --------------  -------------  -------------
Publicly owned utility networks..................................     5,023.7        4,904.2        4,463.1
                                                                  --------------  -------------  -------------
Total............................................................    13,844.0       14,419.2       14,540.8
                                                                  ==============  =============  =============
</TABLE>

Amortization expense for the years ended December 31, 2004, 2003 and 2002 was
(euro)1,369.1 million, (euro)1,500.2 million and (euro)1,485.1 million,
respectively.

Accumulated amortization for the years ended December 31, 2004, 2003 and 2002
was (euro)10,069.6 million, (euro)10,303.1 million and (euro)9,602.0 million,
respectively.

<PAGE>

Tangible assets financed under capital and operating leases are detailed as
follows:

<TABLE>
                                      -----------------------------------------------  ---------------
                                                     Capital lease                        Operating
                                                                                              lease
                                      -----------------------------------------------  ---------------
((euro) millions)                          Gross         Accumulated        Net
                                           value         amortization      value
                                      -------------  --------------------------------  ---------------
<S>                                        <C>               <C>             <C>              <C>
Land.................................       20.8              (10.4)          10.4             20.6
Buildings............................      304.3             (111.7)         192.6            383.2
Technical systems....................      585.2             (337.6)         247.6             31.0
Other................................      531.0             (252.8)         278.2          1,091.7
Buildings-work in progress...........        1.9               (0.5)           1.4                -
                                      -------------  ------------------  ------------  ---------------
Property, plant and equipment........    1,443.2             (713.0)         730.2          1,526.5
                                      -------------  ------------------  ------------  ---------------
Publicly owned utility networks......      307.4             (151.0)         156.4            235.3
                                      -------------  ------------------  ------------  ---------------
Total 2004...........................    1,750.6             (864.0)         886.6          1,761.8
                                      =============  ==================  ============  ===============
Total 2003...........................    1,815.6             (842.9)         972.7          2,267.2
                                      =============  ==================  ============  ===============
Total 2002...........................    1,643.6             (641.3)       1,002.3
                                      =============  ==================  ============
</TABLE>

The decrease of operating leases is related to the effects of the consolidation
of ad-hoc entities in Berlin for (euro)(524) million.

<PAGE>

Note 6. Investments accounted for using the equity method
---------------------------------------------------------

<TABLE>
                                   ---------------------------------------------------------------------------------
((euro) millions)                                                      At December 31,
                                   ---------------------------------------------------------------------------------
                                               Interest              Proportional share of     Proportional share
                                                                            equity                of net income
                                       2004      2003      2002      2004    2003    2002      2004    2003   2002

<S>                                   <C>       <C>       <C>        <C>    <C>     <C>       <C>     <C>    <C>
Realia (1)........................         -    24.09%    24.10%        -    90.4    75.6         -    25.6   13.3
Domino (2)........................    15.00%    30.00%    30.00%     15.2    28.9    28.2      (0.2)   (0.2)  (0.5)
South Staffordshire Water.........         -         -         -        -       -       -         -       -    9.2
Grubar Hoteles....................         -    24.50%    19.70%        -    38.3    46.0         -    (2.5)  (2.1)
Intan utilities berhad(3).........         -    30.00%    30.00%        -     8.2    10.7         -     0.5    0.8
Acque Potabil.....................         -         -    14.36%        -       -    13.4         -       -   (0.1)
Fovarosi Csatomazasi Muvek
     Reszvenytarsasag.............    25.00%    25.00%    25.00%     94.2    87.0    95.4       1.2     1.3    0.5
Eaux du Centre et du Rhone........         -         -    34.97%        -       -     5.6         -       -    0.2
Tiru                                  24.00%    24.00%    24.00%     11.5     6.9     6.4       5.1     1.4    2.7
Grand Bahamas.....................    49.00%    49.00%    49.00%     11.9    12.9    15.9       1.4     1.5    1.5
Technoborgo.......................    49.00%    49.00%    49.00%      8.9     9.1     6.6       1.5     2.3   (0.1)
CICG..............................    41.97%    41.97%    41.97%      5.2     5.3     5.5         -     0.1      -
PCP Holding ......................    19.08%    19.21%    19.85%     10.1     6.5     4.5       3.6     2.0      -

Southern Water Investments Limited    19.90%    19.90%         -     14.8    16.9       -       1.2     4.3      -
Other (per unit < (euro)5 million).                                  53.4*  135.3   134.2       8.6     8.1   13.6
--------------------------------------------------------------------------------------------------------------------
Total.............................                                  225.2   445.7   448.0      22.4    44.4   39.0
--------------------------------------------------------------------------------------------------------------------
</TABLE>

------------------
(1)  Shares left due to the sale of FCC.

(2)  Shares belonging to Proactiva which was 50% consolidated using the
     proportional method as of July 1, 2004. Proactiva was fully consolidated as
     of December 31, 2003.

(3)  Shares sold in 2004.

* The evolution compared to 2003 is due to the sales of the other investments
belonging to FCC ((euro)(75.0) million) accounted for under the equity method.

<PAGE>

<TABLE>
The evolution in 2004 of equity investments is as follows:

                                                     -----------------------------------------------------------------------
        ((euro) millions)      Interest     2003       Net     Distribution      Foreign      Change      Others      2004
                                                     income    of dividends      exchange       in
                                                                                translation    scope

<S>                              <C>       <C>       <C>          <C>           <C>            <C>         <C>      <C>
Realia......................          -     90.4         -              -             -        (90.4)         -         -
Domino......................     15.00%     28.9     (0.2)              -           0.9        (14.4)         -      15.2
Grubar Hoteles..............          -     38.3         -              -             -        (38.3)         -         -
Intan Utilities Berhad......          -      8.2         -              -             -         (8.2)         -         -
Fovarosi Csatomazasi Muvek
   Reszvenytarsasag.........     25.00%     87.0       1.2              -           6.0             -         -      94.2
Tiru........................     24.00%      6.9       5.1          (0.5)             -             -         -      11.5
Grand Bahamas...............     49.00%     12.9       1.4          (1.4)          (1.0)            -         -      11.9
Technoborgo.................     49.00%      9.1       1.5          (1.7)             -             -         -       8.9
CICG........................     41.97%      5.3         -          (0.1)             -             -         -       5.2
PCP Holding.................     19.21%      6.5       3.6              -             -                       -      10.1
Southern Water Investments
   Limited..................     19.90%     16.9       1.2          (3.3)             -             -         -      14.8
Other (per unit < (euro)5            -     135.2       8.6         (10.6)          (3.9)       (73.6)*     (2.4)     53.4
   million)
-------------------------------------------------------------------------------------------------------------------------
Total                                      445.7      22.4         (17.6)           2.0       (224.9)      (2.4)    225.2
--------------------------------------------------------------------------------------------------------------------------
</TABLE>

* Impact of the sale of FCC for (euro)(75)million.

         Dividends received from equity affiliates amount to (euro)17.6 million
         in 2004, (euro)17.4 million in 2003 and (euro)23.8 million in 2002.

         Summarized financial information for the major equity method
         investments is as follows:

((euro) millions)                                    At December 31,
Balance sheet's data                  2004             2003             2002
                              ---------------   --------------   --------------
Long term assets..............     4,871.7          5,676.8          1,865.6
Current assets................     1,949.9          2,648.1            878.9
                              ---------------   --------------   --------------

Total assets..................     6,821.6          8,324.9          2,744.5
Shareholders' equity..........       697.9          1,231.9          1,126.2
Minority interests............         5.1            174.0            176.8
Financial debt................     4,937.0          5,452.3            905.1
Other liabilities
and reserves..................     1,181.6          1,466.7            536.4
                              ---------------   --------------   --------------

Total liabilities and
shareholders' equity..........     6,821.6          8,324.9          2,744.5
                              ===============   ==============   ==============
Income statement's data
Net revenue...................     1,433.6          1,025.4            523.7
Operating income..............       372.0            311.4            104.4
Net income (loss).............        71.3            139.9             65.7

Note 7. Investments accounted for using the cost method
-------------------------------------------------------

Investments accounted for using the cost method are detailed as follows:

<TABLE>
                                                                       At December 31,
                                               -----------------------------------------------------------------
((euro) millions)                                                      2004                      2003      2002
                                                                                           ---------------------
                                                Interest   Gross  Depreciation(1)     Net        Net       Net
                                               -----------------------------------------------------------------
<S>                                              <C>       <C>                <C>   <C>        <C>      <C>
Alazor Inversiones SA(2).....................         -       -                -       -       14.7      10.9
Stadtwerke Weiss Wasser GmbH(3)..............         -       -                -       -          -      29.8
Codeve Insurance Company Ltd(4)..............         -       -                -       -       16.0         -
Genova Acque(5)..............................    20.00%    25.0                -    25.0       25.0         -
Acque Potabili (5)...........................    14.36%    13.4                -    13.4       13.4         -
Ta-Ho Yunlin(6)..............................    33.30%    10.2                -    10.2       10.2       8.9
Rev Suisse recyclage hoding(7)...............    70.00%    13.2                -    13.2          -         -
Stredoceske Vodarny(7).......................    99.76%    13.1                -    13.1          -         -
Other (Per unit <
(euro)10 million in 2004)....................         -   132.3           (31.0)   101.3      126.9     228.4
                                               -----------------------------------------------------------------
Total........................................             207.2           (31.0)   176.2      206.2     278.0
                                               =================================================================
</TABLE>

------------------
(1) Net depreciation expense amounts to (euro)(0.9) million in 2004.

(2) Sold with FCC.

(3) Consolidated in 2003.

(4) Fully consolidated in 2004.

(5) Non consolidated company at December 31, 2004 as a result of loss of
exercise of significant influence.

(6) Beginning of activity, consolidate with the equity method in 2005.

(7) Company bought in 2004 and consolidated in 2005.


Note 8. Other portfolio investments held as financial assets
------------------------------------------------------------

Other portfolio investments held as financial assets can be analyzed as follows:

((euro) millions)                             At December 31,
                            -------------------------------------------------
                                  2004             2003             2002
                            ---------------  ---------------  ---------------
Long-term loans............       478.9            486.2            521.2
Other financial assets.....       580.3            881.4            766.8
Depreciation...............     (273.4)          (212.3)           (53.7)
                            ---------------  ---------------  ---------------
Net value..................       785.8          1,155.3          1,234.3
                            ===============  ===============  ===============

They are detailed as follows:

<TABLE>
                                         ------------------------------------------------------------------------------
      ((euro) millions)                                                    At December 31,
                                         ------------------------------------------------------------------------------
                          2002    2003    Acquisitions      Sales/    Depreciation   Change    Foreign    Other    2004
                                                        Reimbursement                  in      exchange
                                                                                      scope   translation
-----------------------------------------------------------------------------------------------------------------------
<S>                        <C>     <C>       <C>           <C>            <C>       <C>           <C>     <C>     <C>
Gross long term loans..    521.2   486.2     132.5         (129.4)          -       (58.9)        7.1     41.4    478.9
-----------------------------------------------------------------------------------------------------------------------
Valuation allowances...    (8.8)  (76.3)         -               -        5.7          4.0        4.5      0.4   (61.7)
-----------------------------------------------------------------------------------------------------------------------
Net long term loans....    512.4   409.9     132.5         (129.4)        5.7       (54.9)       11.6     41.8    417.2
-----------------------------------------------------------------------------------------------------------------------
Gross other financial
   assets..............    766.8   881.4    (45.7)          (25.0)          -      (193.7)     (14.5)   (22.2)    580.3
-----------------------------------------------------------------------------------------------------------------------
Valuation allowances...   (44.9)  (136.0)        -               -     (83.5)         7.7         0.1       -  ( 211.7)

Net other financial
   assets..............   721.9    745.4    (45.7)          (25.0)     (83.5)       (186.0)    (14.4)   (22.2)   368.6
-----------------------------------------------------------------------------------------------------------------------
Total.................. 1,234.3  1,155.3      86.8         (154.4)     (77.8)       (240.9)     (2.8)    19.6    785.8
-----------------------------------------------------------------------------------------------------------------------
</TABLE>

Long term loans :

Changes in scope are mainly related to the effects of the sale of FCC ((euro)45)
million.

The "Acquisitions" amounts are mainly related to a loan granted by Veolia
Environnement SA to Dalkia International (the latter is consolidated using the
proportional method) for (euro)48.5 million and to the increase of deposits of
Veolia Environnement SA for (euro)16.0 million.

The decrease of the gross long-term loans comes mainly from the reimbursement of
the loans belonging to the previous transportation contract of Melbourne
((euro)(44.6) million).

Valuation allowances mainly include impairment of Water segment long-term loans
in the US amounting to (euro)(58.0) million (allocated in 2003)

At December 31, 2004, net long-term loans include essentially long term loans
within the framework of the participation of Veolia Water in Berlin Water
company for an amount of (euro)107 million and a loan related to Dalkia
International for (euro)48.5 million (other individual amounts are less than
(euro)30 million each).

Other financial assets :

Changes in scope ((euro)(186) million) relate essentially to the sale of FCC
((euro)(20.7) million), to the sale of "Equipment - short term contracts" units
of USFilter ((euro)(93.2) million) and to the elimination of subordinated
borrowings assumed by Veolia Environnement ((euro)(69.2) million) as part of its
securitization of accounts receivable, which resulted from the reconsolidation
of the French water securitization agreement as of December 1, 2004.

Valuation allowances ((euro)(83.5) million) correspond to the amortization of
the redemption premium of our issued bonds amounting to (euro)(34.7) million (of
which convertible bonds for (euro)(30.2) million) and to the amortization of the
balancing cash adjustment of Vivendi Universal / Veolia Environnement swap for
(euro)(39.1) million (see note 24).

As of December 31, 2004, the acquisition flow ((euro)(45.7) million) includes
(euro)(80) million pledged as a collateral guarantee intended to be invested in
the Shenzhen contract. The acquisition was completed in 2004, and the company
has been consolidated since the last quarter 2004.

As of December 31, 2004, net other financial assets mainly include (euro)126
million of pensions assets in the UK, (euro)65.2 million of Southern Water
preferred shares, (euro)28 million corresponding to the net amount of the
redemption premium of bonds.

Note 9. Working capital
-----------------------

<TABLE>
Net working capital is detailed as follows:
((euro) millions)                                   Variation                Foreign
                                              At       in       Change in   exchange     Other        At
                                           December  working     scope     translation  movements  December
                                           31, 2003  capital                                     31, 2004
-----------------------------------------------------------------------------------------------------------
<S>                                        <C>         <C>     <C>           <C>          <C>      <C>
Inventories and work in progress..........  1,067.8        -     (315.7)      (13.4)        4.6      743.3
Accounts receivable....................... 10,432.9    208.8   (1,314.5)     (182.4)      212.9    9,357.7
Accounts payable.......................... 11,464.5    499.2   (1,626.0)      (90.7)      132.6   10,379.6
-----------------------------------------------------------------------------------------------------------
Working capital net.......................    36.2   (290.4)       (4.2)(1)  (105.1)       84.9     (278.6)
-----------------------------------------------------------------------------------------------------------
Variation of differed taxes...............            (38.4)
-----------------------------------------------------------------------------------------------------------
   Working capital net....................           (328.8)
-----------------------------------------------------------------------------------------------------------
</TABLE>

(1)   Changes in scope include essentially the sales of the Culligan and
      "Equipment - short term contracts" units of the Water segment in the US
      ((euro)(382.8) million), the sale of FCC ((euro)(68.5) million) and the
      consolidation of the French securitization of receivables, in accordance
      with the "Loi de Securite Financiere".

Inventories and work in progress
--------------------------------

The breakdown by segment is as follows:

((euro) millions)                                      At December 31,
                                     ------------------------------------------
                                          2004           2003          2002
                                     -------------  -------------  ------------
Water...............................     370.4          529.4         660.0
Waste Management....................     114.2          100.2         101.8
Energy Services.....................     250.1          240.6         229.3
Transportation......................      51.4           42.5          44.2
FCC.................................         -          212.6         209.0
                                     -------------  -------------  ------------
Total...............................     786.1        1,125.3       1,244.3
Less valuation allowance(1).........    (42.8)         (57.5)        (69.8)
                                     -------------  -------------  ------------
Net value(2)........................     743.3        1,067.8       1,174.5
                                     =============  =============  ============

------------------
(1)      Net allowance expenses for 2003 are (euro)(3.5) million.

(2)      In 2004, the decrease in the Water sector is related to the change in
         consolidation scope for (euro)(356.4) million (of which (euro)(138.2)
         million concerns the sale of the Culligan and "Equipment - short term
         contracts" units of water segment in the US and (euro)(206.3) million
         concerns the sale of FCC) and to the effects of foreign currency
         translation adjustments for (euro)(15.1) million.

<PAGE>

Accounts receivable
-------------------

Accounts receivable are detailed as follows:

<TABLE>
((euro) millions)                                                At December 31,
                                            -------------------------------------------------
                                                   2004             2003             2002
                                            ---------------   --------------   --------------
<S>                                             <C>              <C>              <C>
Trade accounts receivable..................     7,639.9          8,824.4          9,271.2
Valuation allowance........................      (371.5)          (464.3)          (484.6)
Total trade accounts receivable............     7,268.4          8,360.1          8,786.6
VAT and other accounts receivable..........     1,211.8          1,146.0          1,347.4
Other including deferred tax...............       877.5            926.8          1,011.8
                                            ---------------   --------------   --------------
Total accounts receivable, net.............     9,357.7         10,432.9         11,145.8
                                            ===============   ==============   ==============
</TABLE>

The majority of trade receivables are due in less than one year.

Securitization of receivables in France

The French securitization agreement was signed in June 2002 for 5 years with a
SPE (Special Purpose Entity). The Group securitized accounts receivable through
its water segment for a total amount of (euro)415 million net of discount
((euro)430.0 million at December 31, 2003). Article 133 of the "Loi de Secutie
Financiere" cancels the provisions of the Commercial law that links the
consolidation by a controlling entity to the holding of at least one share. This
modification of the law requires an analysis in substance of the control of
assets using the SIC-12 interpretation of the IFRS framework. This has been
applicable to Veolia Environnement since January 1, 2004.

As of December 31, 2004, the French securitization program accounted for
(euro)378million of receivables. This decrease is related to the sale of FCC.

Discounting of receivables

The Group discounted (euro)824.7 million of receivables at December 31, 2004
((euro)998.3 million at December 31, 2003).

Allowances for doubtful accounts

The allowances for doubtful accounts for the years ended December 31, 2003, 2002
and 2001 are as follows:

((euro) millions)                                 At December 31,
                                      2004             2003             2002
                                --------------   -------------------------------
Balance at beginning of period..   (464.3)          (484.6)          (472.7)
Amounts charged to expense......   (128.5)          (146.6)          (165.7)
Deductions of reserve*..........     121.8            141.7            100.3
Other adjustments**.............      99.5             25.2             53.5
                                --------------   --------------   --------------
Balance at end of period........   (371.5)          (464.3)          (484.6)
                                ==============   ==============   ==============

------------------

* of which (euro)9.3 million of reversal.

** of which (euro)87.1 million related to change in consolidation scope (sale of
FCC for (euro)(59.7) million and sale of the Culligan and "Equipment - short
term contracts" units of the Water segment in the US for (euro)(22.4) million).


Accounts payable

Accounts payable are detailed as follows (in millions of euros):

                                                 At December 31,
                                   ---------------------------------------------
                                            2004           2003            2002
                                   --------------  -------------  --------------
Trade accounts payable.............      5,030.7        6,242.4         6,307.5
Social and tax costs payable.......      4,695.2        4,415.2         4,359.5
Other (1)..........................        653.7          806.9           940.7
                                   --------------  -------------  --------------
Total accounts payable.............     10,379.6       11,464.5        11,607.7
                                   ==============  =============  ==============

------------------

 (1)  Including deferred tax liabilities of (euro)642.7 million at December 31,
      2004, (euro)793.5 million at December 31, 2003 and (euro)928.0 million at
      December 31, 2002.

Note 10. Short term loans
-------------------------

<TABLE>
                                                    -----------------------------------------------------------------
        ((euro) millions)                                                        At December 31,
                                                    -----------------------------------------------------------------
                                  2002      2003    Variation     Provisions  Change    Foreign      Other      2004
                                                                             in scope   exchange    movements
                                                                                       translation
---------------------------------------------------------------------------------------------------------------------
<S>                              <C>       <C>        <C>             <C>      <C>       <C>          <C>       <C>
Gross short term loans......     652.8     623.5      (41.1)           -       1.4       (5.4)        (20.7)    557.7
----------------------------------------------------------------------------------------------------------------------
Valuation allowance ........   (165.3)   (165.6)           -         2.1       0.3           -           0.2  (163.0)
----------------------------------------------------------------------------------------------------------------------
Net short term loans........     487.6     457.9      (41.1)         2.1       1.7       (5.4)        (20.5)    394.7
---------------------------------------------------------------------------------------------------------------------
</TABLE>

At December 31, 2004, net short-term loans amount to (euro)394.7 million
((euro)457.9 million at December 31, 2003 and (euro)487.6 million at December
31, 2002). The decrease in the net amount ((euro)(41.1) million) is related to
variations of (euro)(10.6) million in a pre-financing equipment investment
linked to contracts in the Transportation segment; to decreases in loans in
Italy (Dalkia) for (euro)12.5 million, in Veolia Water Systems for (euro)24.4
million; and to an increase in a Berlin Water company loan for (euro)31 million.
Other amounts are smaller than (euro)10 million per unit.

Changes in consolidation scope ((euro)1.7 million) are mainly related to the
sale of FCC ((euro)(29.8) million) and the acquisition of Wabag France
((euro)12.0 million). Other amounts are smaller than (euro)20 million per unit.

As of December 31, 2004, short-term loans included (euro)81.0 million related to
a loan granted by "Eaux de Berlin" to a company of the Group, (euro)112.8
million related to the pre-financing of an investment linked to a German
contract in the Transportation segment and (euro)26.3 million related to a
reimbursement in Italy.

Note 11. Cash, cash equivalents and marketable securities
---------------------------------------------------------

Marketable Securities

<TABLE>
                        ---------------------------------------------------------------------------------------------
                                                                 At December 31,
                        ---------------------------------------------------------------------------------------------
      ((euro) millions)                           2004                               2003                 2002
                        ---------------------------------------------------- --------------------  ------------------
                          Gross    Depre-     Net   Unrealized   Estimated     Net     Estimated    Net    Estimated
                          value   ciation    value    gains      fair value   value   fair value   value   fair value
                        ---------------------------------------------------------------------------------------------
<S>                      <C>      <C>       <C>       <C>          <C>        <C>       <C>      <C>        <C>
Veolia Environnement....   283.3   (6.8)      276.5     24.1         300.6      89.7      89.7      91.7       91.7
Sicav................... 1,329.3   (0.3)    1,329.0      0.2       1,329.2         -         -         -          -
BMTN....................       -       -          -        -             -     974.8     974.8         -          -
Vinci...................       -       -          -        -             -      19.5      52.6      37.9       83.4
Vivendi Universal.......     5.8   (1.0)        4.8        -           4.8       5.3       5.3       4.7        4.7
Others..................    68.7   (0.9)       67.8        -          67.8     113.3     113.3     126.3      126.3
---------------------------------------------------------------------------------------------------------------------
Total................... 1,687.1   (9.0)    1,678.1     24.3       1,702.4   1,202.6   1,235.7     260.6      306.1
---------------------------------------------------------------------------------------------------------------------
</TABLE>

The main changes in marketable securities are as follows:

o    Veolia Environnement shares purchased for (euro)195 million;

o    acquisition of short-term  investments  funds Veolia  Environnement  SA for
     (euro)1,329.3 million as a result of the collection of incomes from sales;

o    sale of BMTN ("Bons a Moyen Terme Negociables") for (euro)974.9 million;

o    transfer of Vinci shares belonging to Dalkia.

Veolia Environnement shares have been acquired to cover stock options (770,000
shares) for a total of (euro)26.2 million and to cover future employee schemes
(11,182,929 shares) for a total of (euro)257.1 million in order to secure
employee profit sharing. In connection with Vivendi Universal's placement in
December 2004, Veolia Environnement SA acquired 2% of its capital (8,128,440
shares for (euro)194.8 million).

Cash and cash equivalents amount to (euro)3,635.1 million, consisting at
December 31, 2004 of cash for (euro)971 million, commercial paper for
(euro)2,201 million and short term investments for (euro)463 million (maturity
of less than three months).

The increase in commercial paper of (euro)1,642 million essentially results from
the collection for incomes from sales.

Net valuation allowances amounted to (euro)(3.4) million in 2004.

Note 12. Shareholders' equity
-----------------------------

On August 2, 2002, Veolia Environnement completed its (euro)1.5 billion capital
increase. This capital increase, subscribed to by a group of declared investors,
was conducted by issuing 57.7 million new shares at a subscription price of
(euro)26.5 per share.

During December 2002, Veolia Environnement issued 1.2 million new shares at a
subscription price of (euro)26.5 per share. The shares were subscribed to by the
employee stock purchase plan "Sequoia". 13,345 shares were issued following the
exchange of 93,415 warrants.

In accordance with the Board meeting decision of December 11, 2002, the treasury
stocks (4.7 million shares) not allocated to stock option plans and employee
saving schemes were reclassified under "other portfolio investments held as
financial assets" in Veolia Environnement SA's statutory financial statements
and were allocated as a reduction of consolidated shareholders' equity for an
amount of (euro)151.0 million.

As of December 31, 2002, foreign currency translation adjustments ((euro)(957.2)
million) were mainly due to the depreciation of the dollar against the euro, for
(euro)(821) million. As of December 31, 2002, the accumulated foreign currency
adjustments were (euro)(303.1) million.

At December 31, 2002, "other" includes proceeds from transferred contracts by
Vivendi Universal for an amount of (euro)25.4 million and call options on shares
of Veolia Environnement agreed to by Vivendi Universal for an amount of
(euro)(7.6) million.

In accordance with Resolution no. 17 of the Shareholders' Meeting of April
30, 2003, Veolia Environnement SA reduced its shareholders' equity by (euro)3.4
billion by reducing the nominal value of its shares from (euro)13.5 to (euro)5.
It increased the share premium by the same amount at the same time.

Due to the capital reduction resulting from the reduction of the nominal value
of the shares, the amount of capital and share premium in the treasury stock
allocated to consolidated shareholders' equity was modified by (euro)40.3
million in 2003.

Over the course of 2003, a total of 392 warrants were converted, resulting in
the issuance of 56 new shares.

As of December 31, 2003, the foreign currency translation loss totaled
(euro)509.1 million, of which (euro)296 million resulted from the depreciation
of the dollar against the euro and (euro)89 million from the depreciation of the
pound sterling against the euro.

Foreign currency translation adjustment reserves amounted to (euro)(812.2)
million as of December 31, 2003.

At December 31, 2003, "other" includes income taxes related to capital increase
costs charged against the issuance premium in 2002 which amount to (euro)(10.5)
million.

The Group's consolidated and unconsolidated subsidiaries have certain
restrictions on the distribution of net equity. These restrictions mainly
concern French companies where, pursuant to French law, they are legally
required to reserve a minimum of 5% of annual net income within the retained
earnings account. This minimum contribution is not required once the reserve
equals 10% of the aggregate nominal share capital. The legal reserve is
distributable only upon liquidation.

The share capital of the Group consisted of 405,070,515 shares at December 31,
2003. All shares have one voting right and may be registered upon request by the
owners.

Pursuant to a decision of the chairman and chief executive officer dated
December 6, 2004, Veolia Environnement conducted a capital increase, which was
subscribed to by members of the company savings plan in France and abroad for
(euro)25.3 million.

516,899 treasury shares were monetised in 2004 in the context of the purchase of
Onyx Ireland minority interests.

As of December 31, 2004, foreign currency translation adjustments ((euro)33.2
million) included (euro)94.2 million related to the externalization of foreign
currency translation adjustments for the following discontinued activities:
sales of the Culligan and "Equipment - short term contracts" units of USFilter
((euro)75.3 million), of FCC ((euro)9.3 million) and of Proactiva up to FCC
shares ((euro)9.6 million) ; the others variations ((euro)(61) million) are
mainly related to the dollar ((euro)(72.8) million). Foreign currency
translation adjustment reserves equaled (euro)(779.0) million as of December 31,
2004.

At December 31, 2004, "Other" includes the impact in net equity of the
reconsolidation of Berlin Water company special purpose entities for (euro)6.2
million.


Note 13. Minority interests
---------------------------

Minority interests are detailed as follows (in millions of euros):

<TABLE>
                                                                            2004           2003          2002
                                                                        ------------   ------------  ------------
<S>                                                                       <C>            <C>           <C>
Minority interests at January 1,.......................................    2,679.8        2,585.2       2,531.1
Changes in consolidation...............................................    (634.0)         (11.3)          58.8
Minority interests in income of consolidated subsidiaries..............      171.3          245.5         142.2
Dividends paid by consolidated subsidiaries............................    (180.7)         (91.5)       (112.9)
Impact of foreign currency fluctuations in minority interests..........       10.4         (48.0)        (33.9)
Other Changes..........................................................        8.6          (0.1)         (0.1)
                                                                        ------------   ------------  ------------
Minority interests at December 31,.....................................    2,055.4        2,679.8       2,585.2
                                                                        ============   ============  ============
</TABLE>

In December 2001,TSAR -VEFO ((Veolia Environnement Financiere de l'Ouest), a
company fully controlled by Veolia Environnement SA) issued (euro)300 million of
company obligated manditorily redeemable securities maturing on December 28,
2006. As a result of their composition, these securities are accounted for as
minority interests. The remuneration of these securities is included in the
minority interest table above. VEFO holds 8% of Onyx's capital.

Minority interests in income include an FCC contribution of (euro)44.2 million
for 2004. Minority interests in income disclosed at the profit and loss level
exclude FCC. In 2004, FCC minorities are accounted for under the item
"Discontinued operations income".

Changes in consolidation result from the disposal of FCC, completed on 15
September 2004, for (euro)(723) million and from miscellaneous capital increases
of subsidiaries outside France subscribed by third parties ((euro)113 million).

Note 14. Deferred income
------------------------

Deferred income includes mainly (euro)868.9 million in investment subsidies
received in connection with the management of municipal outsourcing contracts
((euro)817.7 million at December 31, 2003) and (euro)516.4 million in payments
resulting from the securitization of future receivables ((euro)624.6 million at
December 31, 2003). To finance most of its cogeneration plants, Dalkia has sold
in advance the proceeds from the sale of electricity that EDF has pledged to
acquire under long-term contracts. Since January 1, 1998, these proceeds have
been amortized on an actuarial basis over the duration of these loans, which
range from 5 to 12 years.

Note 15. Reserves and allowances
--------------------------------

Reserves and allowances are detailed as follows (in millions of euros):

<TABLE>
                                                                                  At December 31,
                                    At            At       Charged                           Change
                               December 31,  December 31,     to                               in      Translation
                                   2002          2003      expenses  Utilization   Reversal   scope    adjustments   Others    2004
<S>                               <C>           <C>          <C>      <C>           <C>      <C>            <C>       <C>      <C>
Litigation including
 social and fiscal..........      366.7         348.2        101.8     (105.2)      (11.4)    (45.1)        (1.8)     (0.6)    285.9

Financial depreciation......      599.0         634.7         55.6      (42.2)       (3.2)    (16.0)           -     (38.5)    590.4

Maintenance and repair
 costs accrued in advance...      324.9         327.6         75.7      (83.9)       (9.9)      6.1         (0.6)      7.9     322.9

Valuation allowance on
 work in progress...........      233.5         163.3         73.2      (88.8)       (3.3)     12.5         (3.3)     34.0     187.6

Reserves related to fixed
 assets.....................       47.9          54.4         17.0      (10.9)        0.2       0.1          0.5       1.6      62.9

Closure and post closure
 costs......................      388.4         367.7         87.1      (35.1)       (4.5)      5.0         (6.7)    (13.7)    399.8

Pensions....................      234.0         248.8         39.2      (11.7)       (1.1)     (6.2)        (1.3)     (7.7)    260.0

Restructuring costs.........       69.5          62.0         38.7      (43.8)       (7.4)     (0.1)        (1.3)     (0.6)     47.5

Losses on investment in
 unconsolidated companies...       94.7         129.1         39.4      (63.0)       (3.1)    (10.4)         0.9     (23.1)     69.8

Warranties and customer
 care ......................      309.0         289.7        115.5      (83.5)       (1.2)   (144.7)        (3.4)      4.1     176.5

Others......................      278.5         288.4        183.5     (144.3)      (27.2)      5.6         (6.7)    (29.2)    270.1

Total reserves and
 allowances.................    2,946.1       2,913.9        826.7     (712.4)      (72.1)   (193.2)       (23.7)    (65.8)  2,673.4
</TABLE>

The principal reserves and allowances incite the following comments:

Reserves for litigation

This includes those losses that are considered probable and that relate to the
litigation that Veolia Environnement experiences in conducting its normal
business operations.

The Water, Energy and Waste businesses account for (euro)163.0 million,
(euro)79.9 million and (euro)27.1 million of the total reserves for litigation,
respectively. The reserves for the Energy segment include the utilization of a
(euro)17.8 million litigation reserve in Italy.

Changes in scope mainly relate to FCC proceeds amounting to (euro)42.2 million
(of which (euro)38.6 million is linked to tax disputes).

Financial depreciation

Veolia Environnement finances individual installations which, as a consequence
of specific contractual provisions, are accounted for as tangible assets and
amortized, up to their estimated residual value over the shorter of their useful
lives or the period of the contract. When the contract period is shorter than
the useful life of the asset, such depreciation is recorded as a liability under
financial depreciation. These reserves mainly relate to the Water business
((euro)381.7 million) and Energy business ((euro)146.2 million).

Maintenance and repair costs accrued in advance

As part of the obligations under public services contracts, the Group assumes
responsibility for the replacement of fixed assets in the publicly owned utility
networks it manages. Maintenance and repair costs are expensed as incurred
except for specific contracts for which costs are accrued in advance. These
reserves relate to the Water business for (euro)184.1 million and to the Energy
business for (euro)138.8 million.

Valuation allowance on work in progress

The principal reserves relate to the Transportation business ((euro)29.9
million) and the engineering activities of the Water business for (euro)126.4
million. In the Transportation segment, the balance sheet of Bayerische
Oberlandbahn was modified by (euro)18.2 million due to the allocation of
acquisition costs arising from a business combination.

Closure and post-closure costs

The Group has financial obligations relating to closure and post-closure costs
and the remediation of the disposal facilities it operates or for which it is
otherwise responsible.

Landfill final closure and post-closure accruals consider estimates for costs of
the final cap and cover for the site, methane gas control, leachate management,
groundwater monitoring, and other monitoring and maintenance to be incurred
after the site ceases to accept waste. Cost estimates are prepared by engineers
based on the applicable local, state and federal regulations and site specific
permit requirements. These estimates do not take into account discounts for the
present value of total estimated costs.

The Group accrues a reserve for these estimated future costs pro rata over the
estimated useful life of the sites. Those reserves amounted to (euro)367.0
million in 2004, compared to (euro)323.1 million and (euro)322.2 million in 2003
and 2002, respectively. As of December 31, 2004, the total anticipated costs,
undiscounted, amounted to (euro)500 million.

Other reserves and accruals are related to plant dismantling and site
remediation in the Water and Waste business, totaling (euro)20.9 million,
(euro)27.4 million and (euro)54.1 million for the years ended December 31, 2004,
2003 and 2002 respectively.

Pensions

The Group has accrued reserves of (euro)155.3 million and (euro)31.6 million to
cover retirement obligations in France and Germany respectively; these
principally cover the indemnities paid upon retirement. Defined pension schemes
are essentially limited to the British subsidiaries of Veolia Environnement. The
(euro)126 million of net assets invested in funds are accounted for on the
balance sheet as other financial assets (see Note 8).

Restructuring charges

Restructuring reserves relate primarily to the Water and Energy businesses for
(euro)27.3million and (euro)11.1 million, respectively.

Losses on investments in unconsolidated companies

Within its normal activities, Veolia Environnement must book allowances for
certain affiliated companies. The decrease in 2004 is principally due to the
utilization of a reserve covering the closure of U.K. bus activity for an amount
of (euro)25.8 million.

Warranties and customer care

These reserves principally relate to captive insurance companies ((euro)58.6
million of incurred losses), to the engineering and equipment activities of the
Water business ((euro)51.8 million) and to the Energy segment ((euro)45.3
million). The change in scope is related to the sale of FCC.

Other

Other reserves and allowances include those obligations recorded as part of the
normal operating of the Group's subsidiaries.


Note 16. Debt
-------------

Long-term financial debt
------------------------

<TABLE>
                                                ------------------------------------------------------------------------
     ((euro) millions)                                                        At December 31,
                                                ------------------------------------------------------------------------
                            At          At        Acquisitions  Maturities   Change     Foreign      Other         At
                         December    December                   /Disposals  in scope  exchange     movements   December
                         31, 2002    31, 2003                                 (1)    translation               31, 2004
-----------------------------------------------------------------------------------------------------------------------
<S>                     <C>         <C>           <C>          <C>          <C>           <C>      <C>        <C>
Bonds.................     5,633.8     8,047.2       312.5     (2,135.9)    (25.0)        22.7          -       6,221.5
-----------------------------------------------------------------------------------------------------------------------
Other long term
  financial debt......     7,279.2     4,539.2       704.0     (1,156.2)     464.2      (67.3)       96.0       4,579.9
-----------------------------------------------------------------------------------------------------------------------
Long term financial       12,913.0    12,586.4     1,016.5     (3,292.1)     439.2      (44.6)       96.0      10,801.4
  debt................
-----------------------------------------------------------------------------------------------------------------------
</TABLE>

------------------

(1)   Mainly related to the consolidation at 1 January 2004 of special purpose
      entities (SPE) "Eaux de Berlin" ((euro)378 million), the securitization
      program in France (Veolia Water, (euro)325 million) and the transfer of
      FCC's financial debts ((euro)(331) million).

<PAGE>

The table below presents an analysis of the consolidated long-term debt balance
by type of debt instrument (in millions of euros):

<TABLE>
                                                                                 At December 31,
                                                                 -------------------------------------------

                                                                      2004           2003           2002
                                                                 -------------  -------------  -------------
<S>                            <C>                               <C>            <C>            <C>
EMTN                           (a)..............................     5,329.2        5,801.4        3,551.6
US private placement           (b)..............................       305.0          325.6              -
Three Valleys                  (c)..............................       282.5              -              -
Tyseley                        (d)..............................        90.5           96.5          110.5
Montgomery                     (e)..............................        71.8           94.8          119.5
Veolia Environnement 1.5% bond (f)..............................           -        1,535.3        1,535.3
Berliner Wasser Betriebe       (g)..............................     1,356.2        1,865.8        1,977.6
Syndicated credit in CZK       (h)..............................       262.6          216.0              -
Capital Leases                 (i)..............................       815.7          800.5          812.3
SPE                            (i)..............................       364.6              -
Securitization in France       (k)..............................       334.2              -
Bonds, Bank Loans              (l)..............................     1,589.1        1,850.5        4,806.2
                                                                 -------------  -------------  -------------
Total...........................................................    10,801.4       12,586.4       12,913.0
                                                                 =============  =============  =============
</TABLE>

------------------

(a)  On December 31, 2004, European Medium Term Notes (EMTN) outstanding
     consisted of (euro)5,829.2 million (of which (euro)5,329.2 million matures
     in more than one year), and broke down as follows:

     o    (euro)500 million bearing interest of 4.75%, maturing on November 8,
          2005,
     o    (euro)2,000 million bearing interest of 5.875%, maturing on June 27,
          2008,
     o    (euro)1,000 million bearing interest of 5.875%, maturing on February
          1, 2012,
     o    (euro)1,000 million bearing interest of 4.875%, maturing on May 28,
          2013,
     o    (euro)750 million bearing interest of 5.375%, maturing on May 28,
          2018,
     o    (euro)700 million bearing interest of 6.125%, maturing on November 25,
          2033,

     During 2004, Veolia Environnement conducted only one new issuance under its
     EMTN program, in an amount of US$ 27 million bearing interest at U.S.
     LIBOR, and maturing on March 4, 2009. Further, in the first half of 2004,
     Veolia Environnement redeemed part of the outstanding notes relating to its
     issuance of (euro)2 billion conducted in 2001 and maturing on June 27, 2008
     (as set forth above), in the amount of (euro)150 million.

(b)  As of December 31, 2003, Veolia Environnement had issued bonds through a
     private placement in the United States for a global amount of (euro)325.6
     million, which broke down as follows :

     o    Part A, B and C maturing January 30, 2013 with the following
          respective amounts: (euro)33 million (bearing interest of 5.84%),
          (pound)7 million (bearing interest of 6.22%), $147 million (bearing
          interest of 5.78%),
     o    Part D maturing January 30, 2015 for $125 million bearing interest of
          6.02%,
     o    Part E maturing January 30, 2018 for $85 million bearing interest of
          6.31%,

     and which represent a total outstanding of (euro)305.0 million at December
     31, 2004.

     The debt contains two clauses:

     o    In the case of violating the following financial ratios, the debt
          covenant contains an accelerated redemption clause, otherwise
          redemption will occur at maturity.
          o    Interest cover ratio (EBITDA/net interest expense):> 4.00 in 2004
               and subsequent years.
          o    Debt ratio (Net financial debt/EBITDA): <4.00 in 2004 and
               subsequent years.
     o    In the case of notation less than BBB+ or Baa1, covenants would be
          tested on the basis of semi-annual accounts instead of annual accounts
          only. Compensation is due in case of accelerated redemption.

(c)  This bond issuance by Three Valleys (of which (pound)200.0 million is
     outstanding, corresponding to (euro)282.5 million at December 31, 2004),
     bears interest at a 5.875% rate and matures on July 13, 2026. It was
     conducted in order to repay an inter-company loan and align this
     subsidiary's maturing debt with its future cash flows.

(d)  This bond issuance (of which (pound)63.8 million is outstanding,
     corresponding to (euro)90.5 million at December 31, 2004), bears interest
     at a 6.675% rate and matures on June 30, 2018. It was conducted in order to
     finance the Tyseley project. The principal is amortized over the entire
     life of the bond.

(e)  This bond issuance (of which $97.8 million is outstanding, corresponding to
     (euro)71.8 million at December 31, 2004), bears interest at a 4.5% rate and
     matures on January 1, 2012. It was conducted in order to finance a plant in
     Montgomery, Pennsylvania (United States). The principal is amortized over
     the entire life of the bond.

(f)  These bonds, convertible into Vivendi Universal shares (OCEANE) and issued
     on April 26, 1999, matured on January 1, 2005 and were reclassified as
     short-term debt prior to such time. Their value ((euro)1,535.3 million)
     includes a redemption premium of (euro)91 million, with the asset
     counterpart recorded in "Other long-term investments". This has been
     totally amortized as of December 31, 2004.

(g)  Berliner Wasser Betriebe debt as of December 31, 2004 consists of two
     lines:
     o    a debt without guarantee of (euro)1,056.2 million (affiliates),
          compared to (euro)1,265.8 million as of December 31, 2003;
     o    the acquired debt of (euro)600 million which matures on January 15,
          2005 ((euro)300 million of which are classified as short-term debt) is
          guaranteed by Veolia Environnement.

     This guarantee contains two clauses:
     o    "niveau de marge" is linked to the debt coverage ratio
     o    in the case of violating the following financial ratios, the debt
          covenant contains an accelerated redemption clause.
          o    Interest cover ratio (EBITDA/net interest expense): > 4.00 to 1
               in 2004.
          o    Debt ratio (Net financial debt/EBITDA):
                  < 4.00 to 1 in 2004.

     This debt was refinanced on January 13, 2005 and matures on January 13,
     2008. This financing does not include any covenants.

(h)  This syndicated credit facility amounts to 8,000 million in Czech crowns
     ((euro)262.6 million) maturing on November 7, 2008, and was arranged by
     Credit Lyonnais, ING Bank and Komereni Banka. At December 31, 2004, the
     facility had been fully drawn upon for 8,000 million in Czech crowns, or
     (euro)216.0 million, which was indexed to PRIBOR.

(i)  As of December 31, 2004, capital leases mature between 2005 and 2031,
     and have fixed rates of interest ranging between 2.31% and 13.1% and
     variable rates of interest primarily indexed to EONIA, T4M and TAM.

(j)  SPE : according to the "Loi de Securite Financiere" of August 1, 2003, the
     SPE must be consolidated at December 31, 2004 for an amount of (euro)364.6
     million. This principally concerns entities with businesses related to
     "Eaux de Berlin company".

(k)  "Securitization in France": under the "Loi de Securite Financiere" dated
     August 1, 2003, all "Acqueduc II" loans must be consolidated as at December
     31, 2004 for an amount of (euro)334.2 million.

(l)  Other bonds and banks loans mature between 2005 and 2024 and are
     indexed on fixed-interest rates ranging from 1.4% to14.5% and pegged to
     various variable-interest rates, mainly EURIBOR and LIBOR. This amount also
     includes (euro)72.4 million in subordinated debt (TSDI) which matures on
     December 20, 2006.

<PAGE>

Long-term financial debt listed according to the currency in which it is
denominated is as follows (in millions of euros):

                                            At December 31,
                                     -----------------------------
                                         2004           2003
                                     ------------  -------------
 Euro (a)...........................   8,666.1       11,079.5
 U.S. Dollar (b)....................     476.1          312,5
 Pound Sterling.....................     534.6          278.5
 Czech Crowns.......................     370.3          291.9
 Australian Dollar..................      97.7          136.9
 Korean Won.........................     134.2          136.3
 Norwegian Crown....................      55.8           41.3
 Other..............................     466.6          309.5
                                     ------------  -------------
 Total..............................  10,801.4       12,586.4
                                     ============  =============

------------------

(a)  The decrease in Euro-denominated long-term debt by (euro)2,413 million in
     2004 is mainly due to:

     -    transfer to short-term debt of OCEANE for (euro)1,535 million,

     -    transfer to short-term debt of (euro)500 million in EMTN maturing
          November 2005,

     -    transfer to short-term debt of Berlin acquisition debt amounting to
          (euro)300 million,

     -    repurchase of (euro)2 billion in bonds maturing June 2008 for
          (euro)150 million,

     -    sale of FCC of which debt amounted to (euro)316 million as of December
          31, 2003,

     -    consolidation from 1 January 2004 of Special Purposes Entities and
          subordinated borrowings assumed by Veolia Environnement as part of its
          remuneration of accounts receivables to offset the decrease in Euro
          long term debt by (euro)699 million.

(b)   The increase in Sterling-denominated long-term debt by (euro)256 million
      mainly results from the bonds issued by Three Valley for (pound)200
      million ((euro)282.5 million) on July 13, 2004.

The table below presents a summary of the repayment schedules of the long-term
financial debt excluding subordinated securities (in millions of euros):

                                                    At December 31,
                                              2004          2003          2002
                                         -----------  ------------  ------------
  Due between one and two years.........     917.1       3,087.1       2,311.5
  Due between two and five years........   3,682.7       3,710.2       4,660.8
  Due after five years..................   6,201.6       5,789.1       5,940.7
                                         -----------  ------------  ------------
  Total.................................  10,801.4      12,586.4      12,913.0
                                         ===========  ============  ============

Short term borrowings
---------------------

The table below summarizes Veolia Environnement's short-term borrowings (all
amounts are in millions of euro):

<TABLE>
                                                  -------------------------------------------------------------
((euro) millions)                                                             At December 31,
                                                  -------------------------------------------------------------
                                                                                Foreign
                           At December  At December               Change in     exchange       Other    2004
                            31, 2002     31, 2003    Variations    scope(1)   translation    movements
---------------------------------------------------------------------------------------------------------------
<S>                        <C>          <C>          <C>         <C>          <C>            <C>        <C>
Bank overdrafts and
     other short term
     borrowings              3,795.9      3,826.7      1,580.6     (233.6)        (35.7)       (17.8)  5,120.2
--------------------------------------------------------------------------------------------------------------
</TABLE>

(1) Mainly transfer of FCC: (euro)(278) million.


The Group's main short-term borrowings as of December 31, 2004 are detailed
below:

o    Cash liabilities : (euro)510.1 million,

o    (euro)1,535.3 million of bonds convertible into Vivendi Universal shares
     and maturing on January 1, 2005,

o    (euro)500 million EMTN maturing on November 8, 2005,

o    Commercial paper program in the amount of (euro)1,057 million issued by
     Veolia Environnement holding,

o    (euro)212.8 million of accrued interest at Veolia Environnement holding
     level.

o    (euro)300 million acquired debt of Berlin guaranteed by Veolia
     Environnement and maturing on January 15, 2005.

Undrawn credit lines
--------------------

The main unused credit lines as of December 31, 2004 were as follows :

     In Veolia Environnement holding:

     o    (euro)3,500 million of undrawn syndicated credit maturing on February
          19, 2009 without any covenant,

     o    (euro)643 million of undrawn short-term credit line,

     o    (euro)915 million of undrawn medium-term credit line.

Bank borrowings supported by collateral guarantees
--------------------------------------------------

At December 31, 2004, (euro)666 million in bank borrowings was supported by
collateral guarantees. The breakdown by type of asset is as follows (in millions
of euro) :

                               Amount         Total amount on
                               pledged          the balance           %
                                 (a)              sheet (b)         (a)/(b)
                            --------------   ------------------  ---------------
On intangible assets........      1                1,859            0.05%
On tangible assets..........    253               13,844            1.83%
On financial assets (1).....    374                    -                -
                            --------------   ------------------  ---------------
Total long term assets......    628                    -                -
                            --------------   ------------------  ---------------
On current assets...........     38               15,809            0.24%
                            --------------   ------------------  ---------------
Total assets................    666                    -                -
                            --------------   ------------------  ---------------
------------------
(1) As financial assets pledged as collateral are essentially stocks of
consolidated subsidiaries, the ratio is not meaningful.

<PAGE>

<TABLE>
The breakdown by maturity is as follows:


((euro) millions)                         At December   At December                Maturity
                                                  31,           31,
                                                 2003          2004
                                                                     ------------------------------------------
                                                                        Less than        1 to 5     More than
                                                                           1 year         years       5 years

<S>                                              <C>             <C>     <C>            <C>           <C>
         Intangible assets.............            2              1             -             1             -
         Tangible assets...............          283            253            35            75           143
  Land.................................          103             92             3             -            89
  Other tangible assets(1).............          180            161            32            75            54
         Financial assets .............          213            374             -           116           258
  VW Industrial Dvpt (2) (5)...........           60             47             -            47             -
  Chengdu (2) (5)......................           53             47             -             -            47
  VW Korean Daesan (3) (5).............           44             35             -            35             -
  Samsung VW Inchon (2) (5)............           33             48             -             -            48
  Defluent (3) (5).....................            -             40             -             -            40
  Cle Brazil...........................            -             16             -            16             -
  Crivina (2) (5)......................            -             26             -             -            26
  Shenzhen (2) (5).....................            -             89             -             -            89
  PPC (2) (5)..........................            9              9             -             9             -
  Connex Regiobahn (2) (5).............            6              9             -             9             3
  Taitung (2)..........................            -              3             -             -             5
  Technoborgo (2) (6)..................            5              5             -             -             -
  Amendis Tanger Tetouan (4) (5).......            2              -             -             -             -
  Zhuhai (4) (5).......................            1              -             -             -             -
         Current assets ...............           89             38             1             6            31
  Cash collateral......................            3              -             -             -             -
  Accounts receivable..................           72             24             -             3            21
  Inventories..........................           14             14             1             3            10
-----------------------------------------------------------------------------------------------------------------
Total................................            587            666            36           198           432
-----------------------------------------------------------------------------------------------------------------
</TABLE>

------------------

     (1)  mainly equipment and traveling systems.

     (2)  100% of equity pledged as collateral.

     (3)  95% of equity pledged as collateral.

     (4)  Part of equity pledged as collateral less than 10%.

     (5)  Non-consolidated company as of December 31, 2004.

     (6)  Equity method investments as of December 31, 2004.

<PAGE>

Note 17. Income taxes
---------------------

Analysis of Income Tax Expense

Components of the income tax provision are as follows (in millions of euro):

<TABLE>
                                                                             At December 31,
                                                         2004              2003           2003           2002
                                                                      Pro-forma
                                                 --------------     -------------  -------------  -------------
<S>                                              <C>                <C>            <C>            <C>
France..........................................       (92.3)           (143.5)        (143.5)         (93.8)
Other countries.................................      (133.7)           (122.5)        (208.7)        (248.9)
Current income tax expense......................      (226.0)           (266.0)        (352.2)        (342.7)
France..........................................       128.8  (1)        (58.4)         (58.4)         (11.9)
Other countries.................................       (85.1)  (2)       129.0          136.2          (82.7)
Deferred income tax (benefit)...................        43.6              70.6           77.8          (94.6)
                                                 --------------     -------------  -------------  -------------
Total income tax expense........................       182.4            (195.4)        (274.4)        (437.3)
                                                 ==============     =============  =============  =============
</TABLE>

-----------------
(1)  Of which (euro)207 million of deferred tax assets as a result of French tax
     group.
(2)  Of which (euro)83 million of deferred tax assets as a result of US tax
     group.

In 2001, a French Tax Group was created. Veolia Environnement SA paid the Group
tax to the French tax authority. The tax saving is recorded at the Veolia
Environnement SA level.

According to article no. 39 of the 2004 Finance Law, Veolia Environnement
accounted for (euro)8.8 million for exit tax of 2.5% from reserves of long-term
appreciations within the limit of (euro)200 million and after a write-off of
(euro)500,000 on the amount of the reserves.

Deferred Tax Assets and Liabilities

The timing differences which give rise to significant deferred tax assets and
liabilities are as follows (in millions of euro):

<TABLE>
                                                           At December 31,
                                             ------------------------------------------
                                                  2004           2003           2002
                                             ------------   ------------   ------------
<S>                                          <C>            <C>            <C>
Deferred tax assets:
- Employee benefits...........................    59.1           57.7           62.8
- Provisions for risks and liabilities........     7.5           35.9           30.9
- Tax loss....................................   371.3          463.3          442.6
- Other timing differences....................   702.6          574.4          648.3
                                             ------------   ------------   ------------
Gross deferred tax assets..................... 1,140.5        1,131.3        1,184.6
                                             ------------   ------------   ------------
Unrecorded deferred tax assets (1)............  (263.0)        (204.5)        (172.8)
                                             ------------   ------------   ------------
Deferred tax assets recorded in the books.....   877.5          926.8        1,011.8
                                             ------------   ------------   ------------
Deferred tax liabilities:
- Depreciation................................   376.8          338.0          356.8
- Reevaluation of assets......................    86.6           96.1          160.3
- Other taxable timing differences............   179.3          359.4          410.9
                                             ------------   ------------   ------------
Gross deferred tax liabilities................   642.7          793.5          928.0
                                             ============   ============   ============
</TABLE>

------------------
(1)  Represents tax savings from operating leases or other non-activated
     savings. They have not been recorded as assets because their recovery is
     not probable. Net valuation allowance amounted to (euro)(31.7) million in
     2004.

In the consolidated balance sheets, deferred tax assets are classified in
"accounts receivable" and deferred tax liabilities in "accounts payable".

Tax Rate Reconciliation

<TABLE>
                                                                                      At December 31,
                                                                         ----------------------------------------
                                                                             2004          2003          2002
                                                                         -------------  ------------  -----------
<S>                                                                      <C>            <C>           <C>
Statutory tax rate......................................................      35.43%        35.43%       35.43%
Goodwill amortization not deductible for tax purposes...................      14.87%       (55.22)%      12.75%
Permanent differences...................................................     (17.63)%      (13.33)%       8.91%
Lower tax rate on long-term capital gains and losses....................       1.22%        (0.53)%      (5.89)%
Tax losses..............................................................     (15.55)%        8.02%        5.13%
Other, net..............................................................      10.03%         7.75%       (8.73)%
                                                                         -------------  ------------  -----------
Effective tax rate (a)..................................................      28.38%       (17.88)%      47.60%
                                                                         =============  ============  ===========
</TABLE>

------------------
 (a) The effective tax rate is computed by dividing "income taxes and deferred
     taxes" by "Income before minority interest, income taxes and deferred
     taxes."

Net Operating Tax Loss

At December 31, 2004, the Group had tax losses which represent a potential tax
saving of (euro)371.3 million (based on the effective tax rate).

Tax losses expire as follows (in millions of euro):

      Years                                                  Amount
      -----                                                  ------
      2005..............................................       20.7
      2006..............................................       59.8
      2007..............................................       57.1
      2008..............................................       56.1
      2009..............................................       75.9
      2010 and thereafter...............................      101.7

      Total.............................................      371.3

Note 18. Financial instruments and counterparty risks
-----------------------------------------------------

The Group uses various financial derivative instruments to manage its exposure
to fluctuations in interest rates and foreign currency rates.

The Group does not anticipate any third-party defaults, which could have a
significant impact on its financial position and the results of its
transactions.

Interest rate and foreign currency agreements

The contractual amounts stated below are outstanding as of December 31, 2004,
2003 and 2002. These amounts represent the levels of involvement by the Group
and are not indicative of gains or losses. The amounts are in millions of euro.

<PAGE>

<TABLE>
                                                                            As of December 31, 2004

                                                                  Total      Less          1 to 5         More
                                                                             than           years         than
                                                                            1 year                       5 years
                                                              -----------  -----------  ------------  -----------
<S>                                                           <C>          <C>          <C>           <C>
Interest rate hedging activity
Interest rate swaps-payable at fixed rate / receivable at
---------------------------------------------------------
variable rate
-------------

Nominal amount...............................................   2,044.7         32.7       1,377.3        634.7

Weighted average received rate (evaluated on December, 31)...     2.43%

Weighted average paid rate (evaluated on December, 31).......     4.92%

Interest rate swaps-payable at variable rate / receivable at
------------------------------------------------------------
fixed rate
----------

Nominal amount...............................................   4,765.2        740.7       1,872.9      2,151.7

Weighted average received rate (evaluated on December, 31)...     5.18%

Weighted average paid rate (evaluated on December, 31).......     3.00%

Interest rate swaps-payable at variable rate / receivable at
------------------------------------------------------------
variable rate
-------------

Nominal amount...............................................     342.8        154.4         188.4            -

Weighted average received rate (evaluated on December, 31)...     1.66%

Weighted average paid rate (evaluated on December, 31).......     1.83%

Swap-cross currency
-------------------

Nominal amount...............................................     534.2            -         534.2            -

Weighted average received rate (evaluated on December, 31)...     2.28%

Weighted average paid rate (evaluated on December, 31).......     1.60%

Interest caps, floors and collars  (a)
--------------------------------------

Nominal amount...............................................   2,005.3        161.4         950.2        893.7

Average guarantee rate.......................................     4.16%

Interest rate swap option....................................

Nominal amount...............................................     183.5            -         183.5            -

Weighted average received rate when exercised................     2.81%

Weighted average paid rate when exercised....................     2.56%

Foreign currency hedging activity
Forward exchange contracts (b)
------------------------------

Nominal amount...............................................   1,547.7      1,528.1          15.3          4.3
</TABLE>

------------------
(a)  Interest caps are used to protect the group from interest fluctuations that
     affect variable debt, so as to limit the interest paid. On December 31,
     2004, the cap portfolio is made up of the following:
     o    covering exposure to Euribor 3 months, with a notional of
          (euro)1,314.6 million. The weighted average rate is 4.49%
     o    covering exposure to Libor USD 3 and 6 months, with a notional of $850
          million. The weighted average rate is 3.48%
     o    covering exposure to Pribor CSK 12 months, with a notional of CZK2,000
          million. The weighted average rate is 4.00%

(b) The use of forward exchange contracts is linked to foreign currency
    borrowing.



On December 31, 2004, the exchange operation portfolio is as follows:

(in millions of foreign currency)

          Currency                                  Forward buy   Forward sale
          --------                                  -----------   ------------
          USD...................................        47.9          586.7
          GBP...................................        32.5          313.8
          AUD...................................        72.6           0.3
          Other currency ((euro) equivalent)....        32.9          515.9


<PAGE>

<TABLE>
                                                                            As of December 31, 2003
                                                                  Total      Less          1 to 5         More
                                                                             than           years         than
                                                                            1 year                       5 years
                                                              -----------  -----------  ------------  -----------
<S>                                                           <C>          <C>          <C>           <C>
Interest rate hedging activity
Interest rate swaps-payable at fixed rate / receivable at
---------------------------------------------------------
variable rate
-------------

Nominal amount.................................................  1,602.5         49.9      1,171.1        381.5

Weighted average received rate (evaluated on December, 31).....    1.87%

Weighted average paid rate (evaluated on December 31)..........    5.38%

Interest rate swaps-payable at variable rate / receivable at
------------------------------------------------------------
fixed rate
----------

Nominal amount.................................................  5,145.9        531.3      2,507.6      2,107.0

Weighted average received rate (evaluated on December, 31).....    5.12%

Weighted average paid rate (evaluated on December 31)..........    2.88%

Interest rate swaps-payable at variable rate / receivable at
------------------------------------------------------------
variable rate
-------------

Nominal amount.................................................  1,132.3        768.4        363.9            -

Weighted average received rate (evaluated on December, 31).....    1.30%

Weighted average paid rate (evaluated on December 31)..........    1.37%
Swap-cross currency
-------------------
Nominal amount.................................................  2,716.6        198.8      2,254.6        263.2

Weighted average received rate (evaluated on December, 31).....    2.78%

Weighted average paid rate (evaluated on December 31)..........    1.93%
Interest caps, floors and collars
---------------------------------
Nominal amount.................................................  2,271.8        633.4      1,216.0        422.4

Average guarantee rate.........................................    3.96%

Interest rate swap option......................................
-------------------------

Nominal amount.................................................    197.9            -        197.9            -

Weighted average received rate when exercised..................    2.81%

Weighted average paid rate when exercised......................    1.15%

Foreign currency hedging activity
Forward exchange contracts
--------------------------

Nominal amount.................................................  1,389.8      1,361.0         23.1          5.7


                                                                            As of December 31, 2002
                                                                  Total      Less          1 to 5         More
                                                                             than           years         than
                                                                            1 year                       5 years
                                                              -----------  -----------  ------------  -----------
Interest rate hedging activity
Interest rate swaps-payable at fixed rate / receivable at
---------------------------------------------------------
variable rate
-------------

Nominal amount.................................................  1,382.1        255.6        866.8        259.7

Weighted average received rate (evaluated on December, 31).....    2.29%

Weighted average paid rate (evaluated on December 31)..........    5.50%

Interest rate swaps-payable at variable rate / receivable at
---------------------------------------------------------
fixed rate
----------

Nominal amount.................................................  2,707.6            -        507.6      2,200.0

Weighted average received rate (evaluated on December, 31).....    5.63%

Weighted average paid rate (evaluated on December 31)..........    3.06%

Interest rate swaps-payable at variable rate / receivable at
------------------------------------------------------------
variable rate
-------------

Nominal amount.................................................  1,573.0        238.4      1,334.6            -

Weighted average received rate (evaluated on December, 31).....    1.60%

Weighted average paid rate (evaluated on December 31)..........    1.61%

Swap-cross currency
-------------------

Nominal amount.................................................    775.9         78.9        183.8        513.2

Weighted average received rate (evaluated on December, 31).....    2.23%

Weighted average paid rate (evaluated on December 31)..........    4.74%

Interest caps, floors and collars (a)
-------------------------------------
Nominal amount.................................................  2,052.7        238.4      1,791.9         22.4

Average guarantee rate.........................................    4.11%

Foreign currency hedging activity

Forward exchange contracts (b)
------------------------------

Nominal amount.................................................  1,242.6      1,227.6         15.0            -
</TABLE>

Note 19. Fair value of financial instruments
--------------------------------------------

On December 31, 2004, 2003 and 2002 Veolia Environnement used for financing:
notes receivable, as well as derivative financial instruments used to manage
interest rate risk, foreign currency risk and equity risk. These were
characterized by investments, invoices, loans and advances, short and long-term
borrowings.

The fair value of financial instruments detailed below, is generally determined
using quoted prices. When no quoted prices are available, fair value is based on
estimates using discounted future cash flows or other estimates.


<TABLE>
                                                                 At December 31,
                                   -----------------------------------------------------------------------------
           ((euro) millions)                      2004                     2003                      2002
                                   -----------------------------------------------------------------------------
       Assets (liabilities)         Carrying     Estimated    Carrying    Estimated    Carrying     Estimated
                                     amount     fair value**   amount     fair value    amount      fair value
                                   -----------------------------------------------------------------------------
<S>                                 <C>         <C>           <C>         <C>          <C>          <C>
Investments*.......................    2,646.8      2,646.8      2,580.6     2,610.3      1,600.8      1,514.3
Long-term debt.....................  (10,801.4)   (11,155.1)   (12,586.4)  (12,768.0)   (12,913.0)   (13,125.0)
      Treasury management
Interest rate swaps................                    55.4                     32.9                     139.5
Cross currency interest rate swaps.                    77.7                    257.3                     117.2
Forward exchange contracts.........                     0.3                     22.7                      16.5
Interest caps, floors and collars..                    16.3                     14.4                      (5.8)
Interest rate swap option..........                    (5.8)                   (10.0)                        -
</TABLE>

------------------

* Excluding treasury shares held for stock option purposes.
** Clean market value.

Financial instruments including cash and cash equivalents, accounts receivable,
short-term loans, accounts payable and bank overdrafts and short-term borrowings
are excluded from the table above. For these instruments, fair value was
estimated to be the carrying amount due to the short maturity.

Note 20. Pension benefits
-------------------------

The pension benefits were disclosed in the previous financial statement in the
US GAAP sections. From 2004 onwards, this information is given in the French
sections.


((euro) millions)                                                  2004
                                                                Pension
                                                               benefits
Benefit obligation at beginning of year....................     1,023.9
   Service cost............................................        75.5
   Interest cost...........................................        49.8
   Plan participants' contributions........................         4.8
   Business combinations...................................         3.2
   Disposals...............................................      (35.1)
   Curtailments............................................       (4.8)
   Actuarial loss (gain)...................................        46.0
   Benefits paid...........................................      (49.1)
   Special termination benefits............................        20.8
   Others (foreign currency translation)...................        10.4
------------------------------------------------------------------------
   Benefit obligation at end of year.......................     1,145.4
------------------------------------------------------------------------
Change in plan assets
Fair value of plan assets at beginning of year.............       668.5
   Actual return on plan assets............................        60.2
   Group contributions.....................................        39.9
   Plan participants' contributions........................         4.8
   Acquisitions............................................           -
   Disposals...............................................      (27.5)
   Curtailments............................................       (0.3)
   Benefits paid...........................................      (28.6)
   Others (foreign currency translation)...................       (2.7)
------------------------------------------------------------------------
   Fair value of plan assets at end of year................       714.2
------------------------------------------------------------------------
Funded status of plan......................................     (431.2)
   Unrecognized actuarial loss and profit..................       197.1
   Unrecognized actuarial prior service costs..............        44.0
   Others..................................................       (0.5)
------------------------------------------------------------------------
   Accrued benefit cost....................................       (190.6)
------------------------------------------------------------------------
   Accrued benefit liability...............................     (316.7)
------------------------------------------------------------------------
   Prepaid benefit cost ...................................       126.1
------------------------------------------------------------------------

The plan assets are invested as follows:

                                         --------------------------------
((euro) millions)                                                2004
                                                               Assets

-------------------------------------------------------------------------
Shares.....................................................       42%
Bonds......................................................       36%
Insurance risk free funds..................................       12%
Cash.......................................................        8%
Others (included real estate)..............................        2%
-------------------------------------------------------------------------


The assumptions are the following:

                                         --------------------------------
((euro) millions)                                                2004
                                                     Pension benefits

-------------------------------------------------------------------------
Discount rate....................................................5,0%
Expected return on plan assets...................................6,5%
-------------------------------------------------------------------------


Note 21. Commitments and contingencies
--------------------------------------

Commitments related to the cooperation agreement between Vivendi Universal and
Veolia Environnement are detailed in note 24.

Specific Commitments

Southern Water Put
------------------

In 2003, the company refinanced its investment in Southern Water. As a result,
the company signed a first contract with Societe Generale Bank Trust ("SGBT") on
June 30, 2003 and a second contract with CDC Ixis on July 18, 2003. The terms
are as follows:

o    SGBT and CDC Ixis each subscribed for (pound)110 million of preferred
     shares without voting rights issued by Southern Water and previously
     acquired by Veolia Water UK,

o    SGBT and CDC Ixis each hold a put option, maturing in 5 years, allowing
     them to sell the preferred shares without voting rights to Veolia
     Environnement at an average exercise price based on a price adjusted by an
     annual yield of 5.5%.

FCC Put
-------

The sale of FCC on September 15, 2004 cancelled all commitments related to the
FCC shareholding.

EDF agreements
--------------

EDF entered into a call option with the Group on Dalkia shares in case of a
takeover bid on the Group by a competitor of EDF.

Furthermore, the Group entered into a call option with EDF on its Dalkia shares
in case of a change in EDF's status or a takeover bid on EDF by a competitor of
Veolia Environnement. The share price is to be determined by an independent
expert if there is no agreement. EDF and Veolia Environnement each hold call
options and put options which would allow, in case of exercise by one of the
parties, EDF to own 50% of equity and voting rights of Dalkia. Exercise of these
options is subject to the liberalization of the electricity market in France.

Replacement engagement
----------------------

The Group and its water distribution and energy services subsidiaries, as part
of their contractual obligations through public services contracts and in return
for the revenue they receive, assume responsibility for the replacement of fixed
assets in the publicly owned utility networks they manage. The Group forecasts
the expenditures required in this regard over the remaining duration of the
relevant contracts. The accumulated expenditure forecast is estimated at
(euro)2.3 billion ((euro)1.8 billion for water and (euro)0.5 billion for
energy). These expenditures will either be expensed or amortized over the
shorter of the estimated useful lives of the assets or the contract period,
according to the contract terms.

Performance bonds issued for US subsidiaries
--------------------------------------------

Insurance companies have issued performance guarantees in connection with the
activities of the Group's US subsidiaries (operational guarantees, guarantees of
site restoration), which have been underwritten by Veolia Environnement SA up to
a maximum amount of $1.4 billion ($0.2 billion used at December 31, 2004).

Specific Berlin contract engagement
-----------------------------------

Under the Berlin water contract, the Group may be obligated to pay approximately
(euro)610 million (at 50%) to previous land owners, not indemnified by the
Berlin government, who present claims for payments.

Fee obligations with local authorities
--------------------------------------

As described in note 25, under certain public service contracts, the Group has
assumed fee obligations with local authorities. At December 31, 2004, the
minimum future payments of these commitments are (euro)144 million, of which two
thirds of the amount is to be paid within five years.

The breakdown by maturity of specific commitments is as follows:

<TABLE>
                (in millions of euro)                  At December            At            Maturity
                                                               31,      December
                                                              2003           31,
                                                                            2004
                                                                                   ------------------------------
                                                                                   Less      1 to 5     More
                                                                                   than       years    than 5
                                                                                  1 year                years

<S>                                                           <C>           <C>     <C>        <C>        <C>
Southern Water Put...................................         312           312        -        312         -

FCC Put..............................................         995             -        -          -         -

Water replacement engagement ........................       2,010         1,756      340        672       744
Energy Services replacement engagement...............         521           530       62        245       223

Performances bonds issued by VE for US subsidiaries..         550           147       15          -       132

Specific Berlin contract engagement (50%)............         610           610        -          -       610

Fee obligations with local authorities ..............         183           144       32         81        31

-----------------------------------------------------------------------------------------------------------------
Total................................................       5,181         3,499      449      1,310     1,740
-----------------------------------------------------------------------------------------------------------------
</TABLE>


Other commitments and contingencies



Other commitments and contingencies include neither collateral given in
guarantee of banking loans (see note 16) nor specific commitments and
contingencies described above.
Other commitments and contingencies are detailed below (in millions of euro)


<TABLE>
                                       At December      At December                    Maturity
                                               31,             31,
                                              2003            2004
                                                                     --------------------------------------------
                                                                       Less than        1 to 5     More than 5
                                                                          1 year         years           years

<S>                                       <C>             <C>             <C>         <C>               <C>
     Operational guarantees........       3,081.3         2,575.7         470.1       1,195.3           910.3
     Financial guarantees
Debt guarantees....................         259.1           154.7          15.5          99.7            39.5
Warranty obligations given.........         140.0           488.7          73.2         114.6           300.9
     Commitments given
Obligations to buy ................         150.6           101.0          15.8          64.0            21.2
Obligations to sell ...............          51.8            41.2          28.5          12.7               -
     Other commitments given
Letters of credit..................         249.4           578.4         209.8         318.2            50.4
Other commitments given............         569.4           807.0         157.2         226.9           422.9
-----------------------------------------------------------------------------------------------------------------
Total..............................       4,501.6         4,746.7         970.1       2,031.4         1,745.2
-----------------------------------------------------------------------------------------------------------------
</TABLE>

Operational guarantees (performance bonds): In the course of their normal
activities, the Group's subsidiaries give guarantees to their customers. If the
company does not reach its specified targets, it may have to pay penalties.

This commitment is often guaranteed by an insurance company, a financial
institution, or the parent company of the Group. These guarantees included in
the contract are performance commitments. The insurance company or the financial
institution often requires counter guarantees from the parent company. The
commitment is the amount of the guarantee anticipated in the contract and given
by the parent company to the customer or the counter guarantee given by the
parent company to the insurance company or to the financial institution.

Debt guarantees: These relate to guarantees given to financial institutions in
connection with the financial debt of non-consolidated companies, companies
accounted for under the equity method, or companies consolidated through
proportional consolidation.

Warranty obligations given: These include guarantees linked to the sale of Water
activities in the United States for (euro)319 million, the sale of Bonna for
(euro)65 million and the sale of Connex Transport UK Ltd for (euro)24 million.

Letters of credit: The amount of the credit line given by a bank or financial
institution which has not been drawn against.

The Group's contingent liabilities relating to certain performance guarantees by
business segment are as follows (in millions of euro):

                                            At December 31,
                             -----------------------------------------------
                                  2004               2003            2002
                             ------------     --------------  --------------
Water.......................   2,334.4            1,563.6         1,783.0
Waste Management............     645.2              586.0           347.2
Energy Services.............     497.7              584.4           466.2
Transportation..............     229.4              106.9           114.4
FCC/Proactiva...............      12.9            1,013.9           748.7
Holding.....................     993.0   (1)        645.2           794.0
Others......................      34.1                1.6            17.3
                             ------------     --------------  --------------
Total.......................   4,746.7            4,501.6         4,270.8
                             ============     ==============  ==============

(1)  of which (euro)455 million of operational guarantees: (euro)348 million for
     the Water business and (euro)107 million for the Waste business.

Capital Leases and Operating Leases

The Group uses capital leases in order to finance certain operating assets and
investment properties. As stated in Note 2 to the consolidated financial
statements, the Group has capitalized these assets (see note 5) and recorded the
principal portion of the related capital leases as long-term debt at its present
value ((euro)815.7 million) (see note 16). Payments under these capital lease
obligations at December 31, 2004, 2003 and 2002 represent (euro)1.1 billon,
(euro)1.3 billion and (euro)1.2 billion, respectively. Furthermore, the Group
uses operating leases (mainly for transportation equipment and treatment
plants).

Veolia Environnement has concluded capital and operating leases. As of December
31, 2003, minimum future payments for these contracts amounted to (in millions
of euro):

<TABLE>
                                                                               Operating leases    Capital leases
                                                                                                      (balance
                                                                                                       sheet)
                                                                              ------------------  ---------------
<C>                                                                                <C>              <C>
2005.........................................................................            346.6            170.5
2006.........................................................................            329.5            146.4
2007.........................................................................            315.3            132.9
2008.........................................................................            290.5            110.3
2009.........................................................................            196.4             97.9
2010 and thereafter..........................................................            299.4            473.3
                                                                              ------------------  ---------------
Total minimum future capital lease payments..................................          1,777.7          1,131.3
Less amounts representing interest...........................................                             193.5
                                                                              ------------------  ---------------
Present value of net minimum future capital lease payments...................                             937.8
                                                                              ==================  ===============
</TABLE>

Litigation (other than those accounted for)

The Group is subject to various litigation in the normal course of its business.
Although it is not possible to predict the outcome of such litigation with
certainty, based on the facts known by the Group and after consultation with
counsel, management believes that such litigation will not have a material
adverse effect on the Group's financial position or results of operations.

Commitments received

((euro) millions)                                 2004           2003
                                            ---------------------------
Commitments received.......................    1,031.3        1,215.0
Debt guarantees............................      101.8          154.9
Warranty obligations given.................       30.2            2.4
Other engagements received *...............      899.3        1,057.7

------------------
         * Including (euro)760.5 million on behalf of EDF's electric contracts
           commitments.

Note 22. Tax reviews
--------------------

In the normal course of their business, the Group's subsidiaries are subjected
to regular tax reviews in France and abroad.

In 2004, most of the tax reviews carried out in the French companies of the four
divisions were finalized. Significant claims were resolved in the Group's favor.
Reviews leading to additional tax expenses were adequately provided for.

The Group operates in 80 countries outside France and is regularly reviewed. Tax
reviews are presently in progress in Germany and in the United States of
America, two significant markets for the Group. For entities involved in claims
in 2004, the tax review is monitored by local tax advisors. In some cases,
claims may be adequately provided for and based on best knowledge of the Group.

Note 23. Segment information
----------------------------

In accordance with the provisions of SFAS 131, the Group has identified four
reportable segments: Water, Waste Management, Energy Services and
Transportation. These segments constitute the basis on which management
evaluates investments and results.

The Water segment integrates water and wastewater activities such as water
distribution, water and wastewater treatment, industrial process water,
manufacturing of water treatment equipment and systems.

The Waste Management segment collects, processes and disposes of household and
trade and industrial waste.

The Energy Services segment includes energy optimization and related services.

The Transportation segment focuses on the operation of passenger transportation
services, both road and rail networks.


<TABLE>
Revenue From External Customers
((euro) millions)                                                    For the year ended at December 31,
                                                    -------------------------------------------------------------
                                                          2004       2003 Proforma        2003           2002
                                                    --------------  ----------------  -------------  ------------
<S>                                                      <C>               <C>           <C>           <C>
Water...............................................     9,804.8           9,585.1       11,339.8      13,293.7
Waste management....................................     6,220.0           5,909.3        5,971.5       6,138.8
Energy services.....................................     5,035.0           4,654.0        4,654.0       4,570.9
Transportation......................................     3,613.0           3,673.1        3,673.1       3,422.2
FCC.................................................           -                 -        2,964.6       2,653.1
                                                    --------------  ----------------  -------------  ------------
Total...............................................    24,673.3          23,821.5       28,603.0      30,078.7
                                                    ==============  ================  =============  ============



Revenue Between Segments
((euro) millions)                                                            For the year ended at December 31,
                                                                    ---------------------------------------------
                                                                          2004            2003           2002
                                                                    --------------  --------------  -------------
Water..............................................................          6.4             5.5            9.0
Waste management...................................................         37.5            49.0           42.1
Energy services....................................................         27.3            17.4           13.5
Transportation.....................................................          5.0             5.3            4.4
FCC................................................................            -             0.2            0.5
Other..............................................................            -               -              -
                                                                    --------------  --------------  -------------
Total..............................................................         76.2            77.4           69.5
                                                                    ==============  ==============  =============


Amortization Expense
((euro) millions)                                                            For the year ended at December 31,
                                                                   ----------------------------------------------
                                                                          2004            2003           2002
                                                                   --------------  --------------  --------------
Water.............................................................        505.0           602.9           573.2
Waste management..................................................        522.2           510.2           564.3
Energy services...................................................        233.6           231.0           230.7
Transportation....................................................        278.5           206.4           189.7
FCC/Proactiva.....................................................          5.8           155.3           126.8
Other.............................................................         17.9            18.7            14.6
                                                                   --------------  --------------  --------------
Total.............................................................      1,563.0         1,724.5         1,699.3
                                                                   ==============  ==============  ==============

EBIT
((euro) millions)                                                       For the year ended at December 31,
                                                          -------------------------------------------------------
                                                               2004            2003         2003          2002
                                                                             Proforma
                                                          -------------  --------------  ----------  ------------
Water.....................................................      830.6           743.2       783.9       1,024.3
Waste management..........................................      456.6           382.5       380.0         385.2
Energy services...........................................      295.8           274.4       274.4         244.0
Transportation............................................      103.3            92.6        92.6         115.6
FCC.......................................................          -               -       275.3         250.3
Other.....................................................     (69.4)          (55.3)      (55.3)        (48.1)
                                                          -------------  --------------  ----------  ------------
Total.....................................................    1,616.9         1,437.4     1,750.9       1,971.3
                                                          =============  ==============  ==========  ============

Total Assets
((euro) millions)                                                                   At December 31,
                                                                   ----------------------------------------------
                                                                         2004            2003           2002
                                                                   --------------  --------------  --------------
Water.............................................................      7,512.3        11,257.4        16,095.1
Waste management..................................................      4,762.2         4,826.5         5,280.0
Energy services...................................................      5,169.0         4,863.1         4,950.7
Transportation....................................................      2,632.1         2,695.1         2,631.3
FCC/Proactiva.....................................................         19.8         3,305.6         3,191.8
Other.............................................................     16,169.2        11,972.7         9,869.5
                                                                   --------------  --------------  --------------
Total.............................................................     36,264.6        38,920.4        42,018.4
                                                                   ==============  ==============  ==============

Expenditures for Long Lived Assets
((euro) millions)                                                          For the year ended at December 31,
                                                                   ---------------------------------------------
                                                                         2004            2003           2002
                                                                   --------------  -------------  -------------
Water.............................................................      1,003.5        1,015.4        1,086.3
Waste management..................................................        720.4          691.2          739.5
Energy services...................................................        305.3          322.1          342.2
Transportation....................................................        163.1          184.3          154.7
FCC/Proactiva.....................................................        109.9          239.2          278.9
Other.............................................................         12.8            3.6            1.8
                                                                   --------------  -------------  -------------
Total expenditures................................................      2,315.0        2,455.8        2,603.4
                                                                   ==============  =============  =============

Long-term Assets

((euro) millions)                                                                    At December 31,
                                                                   ---------------------------------------------
                                                                         2004            2003           2002
                                                                   --------------  -------------  -------------
Water.............................................................     10,427.9       11,079.0       13,945.4
Waste management..................................................      4,926.3        4,884.4        5,245.4
Energy services...................................................      2,801.0        2,781.4        2,867.5
Transportation....................................................      2,014.7        2,132.3        1,967.5
FCC/Proactiva.....................................................         81.4        1,534.3        2,130.4
Other.............................................................        204.4          809.4          411.8
                                                                   --------------  -------------  -------------
Total long-term assets............................................     20,455.7       23,220.8       26,568.0
                                                                   ==============  =============  =============
</TABLE>

<TABLE>
Equity Method Investments
                                                               At December 31,
                           ------------------------------------------------------------------------------------------
((euro) millions)                          2004                           2003                           2002
                           -----------------------------  -----------------------------  ----------------------------
                               Investment     Share in        Investment     Share in       Investment     Share in
                                                   net                            net                           net
                                              earnings                       earnings                      earnings
                           ---------------  ------------  --------------- -------------  --------------  ------------
<S>                                <C>             <C>            <C>             <C>           <C>            <C>
Water.....................         126.9           5.8            122.4           5.7           140.9          11.8
Waste management..........          62.5           9.1             57.1           6.5            57.1           6.5
Energy services...........          10.2           4.0             10.6           1.5             9.9         (0.4)
Transportation............           4.9         (1.5)              2.4         (5.8)             5.7         (2.1)
FCC.......................             -             -            217.8          30.7           205.2          19.6
Other.....................          20.7           5.0             35.4           5.8            29.2           3.6
                           ---------------  ------------  --------------- -------------  --------------  ------------
Total.....................         225.2          22.4            445.7          44.4           448.0          39.0
                           ===============  ============  =============== =============  ==============  ============
</TABLE>


<TABLE>

Geographical Breakdown of Net Sales

((euro) millions)                                              At December 31, 2004
                             -----------------------------------------------------------------------------------
                                France      Germany     United     Rest of     United      Rest of      Total
                                                        Kingdom     Europe   States of      world
                                                                              America
                             -----------------------------------------------------------------------------------
<S>                             <C>           <C>         <C>         <C>        <C>       <C>         <C>
Water........................   6,095.5       747.3       410.0       833.5      466.3     1,252.2     9,804.8
Waste management.............   2,802.4       143.8       747.4       675.2    1,099.5       751.7     6,220.0
Energy services..............   3,074.7        50.6       338.5     1,487.2          -        84.5     5,035.5
Transportation...............   1,466.5       363.6        37.4     1,197.1      263.7       284.7     3,613.0
FCC..........................         -           -           -           -          -           -           -
                             -----------------------------------------------------------------------------------
Total........................  13,439.1     1,305.3     1,533.3     4,193.0    1,829.5     2,373.1    24,673.3
                             ===================================================================================


((euro) millions)                                                At December 31, 2003
                             -----------------------------------------------------------------------------------
                               France      Germany     United     Rest of     United      Rest of      Total
                                                       Kingdom     Europe    States of     world
                                                                              America
                             -----------------------------------------------------------------------------------
Water........................   6,115.7       708.0       453.5       900.2    1,892.5     1,269.9    11,339.8
Waste management.............   2,648.1       143.9       680.2       633.4    1,130.5       735.4     5,971.5
Energy services..............   2,912.6        52.8       293.8     1,323.4          -        71.4     4,654.0
Transportation...............   1,346.2       288.4       571.1     1,134.8      186.6       146.0     3,673.1
FCC..........................       6.7         4.4        33.1     2,803.0       96.8        20.6     2,964.6
                              -----------------------------------------------------------------------------------
Total........................  13,029.3     1,197.5     2,031.7     6,794.8    3,306.4     2,243.3    28,603.0
                             ===================================================================================


((euro) millions)                                                At December 31, 2002
                             -----------------------------------------------------------------------------------
                               France      Germany     United     Rest of     United      Rest of      Total
                                                       Kingdom     Europe    States of     world
                                                                              America
                             -----------------------------------------------------------------------------------
Water........................   6,201.2       828.1       654.9       841.5    3,378.7     1,389.3    13,293.7
Waste management.............   2,543.4       165.6       708.5       628.9    1,306.0       786.4     6,138.8
Energy services..............   2,972.8        64.0       302.4     1,162.8        0.4        68.5     4,570.9
Transportation...............   1,268.0       255.9       661.1     1,010.5       83.5       143.2     3,422.2
FCC..........................      10.4         4.5        33.8     2,483.4      102.0        19.0     2,653.1
                             -----------------------------------------------------------------------------------
Total........................  12,995.8     1,318.1     2,360.7     6,127.1    4,870.6     2,406.4    30,078.7
                             ===================================================================================



Geographical Breakdown of Long Lived Assets
((euro) millions)
                             -----------------------------------------------------------------------------------
                               France      Germany    United       Rest of     United    Rest of       Total
As of December 31,                                     Kingdom     Europe     States of    world
                                                                               America
                             -----------------------------------------------------------------------------------
2004.........................   7,226.4      4,166.9    2,234.7     2,878.4     1,839,8    2,109.5    20,455.7
2003.........................   7,442.9      3,792.0    2,113.6     4,594.9     3,297.2    1,980.2    23,220.8
2002.........................   7,304.6      3,824.0    2,136.2     4,628.1     6,568.3    2,106.6    26,568.0
</TABLE>

Note 24. Related party transactions
-----------------------------------

The main transactions with related parties (principally Vivendi Universal, its
subsidiaries and some minority shareholders in Veolia Environnement
subsidiaries) and amounts receivable from and payable to them were as follows
(in millions of euro):

<TABLE>
                                                                              At December 31,
                                                             ----------------------------------------------------
                                                                   2004                2003             2002
                                                             ---------------     ---------------  ---------------
<S>                                                                 <C>                 <C>              <C>
Call option/shares of Veolia Environnement..................             -                 7.6              7.6
Treasury shares purchased from Vivendi Universal............         194.8                   -             73,9
Vivendi Universal / Veolia Environnement swap cancelled.....             -                   -             75.8
Receivables.................................................
   Trade accounts (1).......................................          33.2                53.4             37.6
   Loans (2)................................................             -                 5.8             54.6
Payables....................................................
   Vinci convertible bonds..................................             -                   -            120.0
   Trade accounts...........................................             -                 6.9             19.6
   Loans....................................................             -                   -              1.3

                                                                                At December 31,
                                                                 ------------------------------------------------
                                                                         2004              2003            2002
                                                                 --------------    --------------  --------------
Sales............................................................                           9.9            10.8
Operating income (expense).......................................                          25.8            17.0
Interest expense ................................................                          (1.1)          (58.8)
Interest income..................................................                           0.8            58.5
</TABLE>

------------------

(1)  Includes (euro) 33.2 million payable by Vivendi Universal associated with
     the maintenance or replacement of equipment. (see guarantees)

(2)  Includes (euro) 4.4 million relating to receivables in connection with
     Water contracts transferred

Veolia Environnement shares held by Vivendi Universal
-----------------------------------------------------

Veolia Environnement acquired 3,624,844 Veolia Environnement shares from Vivendi
Universal at the end of 2002. For each share, Vivendi Universal issued a call
option allowing Veolia Environnement to acquire 3,624,844 Veolia Environnement
shares by 23 December 2004 for a unit share price of (euro)26.5. The purchase
price of the calls amounted to (euro)7.6 million ((euro)2.1 per share). At the
end of 2004, Veolia Environnement acquired 8,128,440 Veolia Environnement shares
from Vivendi Universal for (euro)194.8 million. The purchase price of treasury
shares amounts to (euro)73.9 million ((euro)20.4 per share). The call options
are accounted for as a reduction of the Group shareholder's equity. The treasury
shares are booked under "Cash, cash equivalents and marketable securities", the
purpose of the shares being to cover employee stock purchase plans.

At the end of 2004, Vivendi Universal owned 5.3% of the capital of Veolia
Environnement.

Financial agreements between Vivendi Universal and Veolia Environnement
-----------------------------------------------------------------------

Following different refinancing operations and in order to take advantage of low
interest rates, the notional interest rate swap with Vivendi Universal was
reduced in 2001, then cancelled in 2002.

Veolia Environnement paid Vivendi Universal (euro)75.8 million in 2002, related
to the fair value of the swap that had been cancelled. The payment was expensed
over the life of the swap.

Agreement between Vivendi Universal and Veolia Environnement

In order to finalize the separation of Veolia Environnement from Vivendi
Universal, Veolia Environnement and Vivendi Universal reached an agreement on
December 20, 2002.

Counter-Guarantee Agreement
---------------------------

Vivendi Universal and Veolia Environnement agreed that Vivendi Universal would
be replaced by Veolia Environnement for some guarantees given to Veolia
Environnement by Vivendi Universal. The maximum amount of the commitments not
yet transferred equaled approximately (euro)110.5 million at the end of 2004.

Guarantees
----------

In connection with the formation of the Group and Vivendi Universal's
contribution or sale to the Group of its interests in its water and energy
services, the Group has replaced Vivendi Universal as managing partner (associe
commandite) of substantially all Vivendi Universal's historic water and energy
services subsidiaries. As managing partner of these subsidiaries, the Group has
agreed, or will agree, to reimburse these subsidiaries for expenses related to
the maintenance and replacement of equipment.

Under the guarantee agreement dated June 2000 and modified on 20 December 2002,
Vivendi Universal will pay us for any loss that we suffer as a result of our
undertaking to reimburse the subsidiaries for expenses associated with
maintenance or replacement of equipment.

On 21 December 2004, Vivendi Universal delegated its obligations under the
guarantee agreement to Societe Generale in respect of the 2004 fiscal year and
onward, which the Group accepted. At the time of such delegation, the parties
took note of the guarantee limits already in place, and set forth the maximum
amounts that the Group could seek from Societe Generale under the guarantee
agreement in respect of the 2004 fiscal year and subsequent fiscal years. In
2004 value, the total maximum amount guaranteed by Societe Generale was
(euro)207.26 million. The Group may draw on this guarantee annually in an amount
of up to (euro)34.66 million per year (which amount shall increase by 4.5%
annually). The last fiscal year in respect of which the Group may claim
reimbursement under the guarantee agreement is 2011.

Vinci bonds
-----------

The Group indirectly took part in the issuance of Vivendi Universal bonds
convertible into Vinci shares or repayable in cash in March 2001. Vivendi
Universal lent the Group (euro)120 million against 1,552,305 shares of Vinci
held by the Group through Dalkia France. On 30 September 2003, Veolia
Environnement reimbursed the loan in advance for an amount of (euro)128.8
million.

FCC agreement
-------------

The sale of FCC has terminated the shareholders' agreement of October 6, 1998
between the Company and its partner as well as the put option of Ms. Esther
Koplowitz regarding her 51% interest in the holding company B 1998 SL.

Note 25. Income statement
-------------------------

Employees and personnel charges


Personnel charges including profit sharing amounted to (euro)7,4 billion in 2004
compared with (euro)8.6 billion in 2003 and (euro)8.7 billion in 2002.

<TABLE>
     ((euro) millions)                                                    For the year ended at December 31,
                                                              ---------------------------------------------------
                                                                     2004              2003             2002
                                                              ----------------  ---------------   ---------------
<S>                                                                    <C>              <C>               <C>
     Personnel costs.........................................          7,372            8,519             8,654
     Profit sharing..........................................             52               50                39
                                                              ----------------  ---------------   ---------------
                                                                       7,424            8,569             8,693
                                                              ================  ===============   ===============

Weighted-average number of employees

     By category                                                     For the year ended at December 31,
                                                              ---------------------------------------------------
                                                                     2004              2003             2002
                                                              ----------------  ---------------   ---------------
     Executives..............................................         25,350           31,245            34,393
     Employees...............................................        210,171          225,773           222,784
                                                              ----------------  ---------------   ---------------
                                                                     235,521          257,018           257,177
                                                              ================  ===============   ===============

     By segment                                                      For the year ended at December 31,
                                                             ----------------------------------------------------
                                                                     2004              2003             2002
                                                             -----------------   ---------------  ---------------
     Water..................................................          58,801           65,669            74,223
     Waste management.......................................          66,923           67,418            65,007
     Energy.................................................          36,767           35,101            34,075
     Transportation.........................................          54,726           51,437            48,389
     Proactiva..............................................           3,755            8,851             9,876
     FCC....................................................          14,148           28,295            25,408
     Other..................................................             401              247               199
                                                             -----------------   ---------------  ---------------
                                                                     235,521          257,018           257,177
                                                             =================   ===============  ===============

     By method of consolidation *                                   F  or the year ended at December 31,
                                                             ----------------------------------------------------
                                                                    2004              2003             2002
                                                             ----------------    ---------------   --------------
     Full consolidation......................................        191,579          207,561          206,359
     Proportionate consolidation.............................         43,942           49,457           50,818
                                                             ----------------    ---------------   --------------
                                                                     235,521          257,018          257,177
                                                             ================    ===============   ==============
</TABLE>

*     In 2001 and 2002, entities consolidated by the multi-proportionate
      consolidation method were included in the line "proportionate
      consolidation", and in 2003, they were included in the line "full
      consolidation".

Research and development costs

Research and development costs amounted to (euro)62.7 million, (euro)95.3
million and (euro)92.5 million for 2004, 2003 and 2002 respectively.

Depreciation and Amortization

<TABLE>
                                                              ---------------------------------------------------
                  ((euro) millions)                                              At December 31, 2004
                                                              ---------------------------------------------------
                                                     Notes        Additions        Utilization/           Net
                                                                                     Reversal
<S>                                                    <C>          <C>               <C>             <C>

In the statement of cash-flows

Amortization
   Goodwill........................................    3            (203.3)                 -         (203.3)
   Tangible assets.................................    5          (1,377.9)               8.8       (1,369.1)
   Intangible assets...............................    4            (265.1)               0.5         (264.6)
Depreciation of financial assets
   Investments accounted for using the cost method.    7             (17.5)              16.6           (0.9)
   Long term loans.................................    8              (0.8)               6.5             5.7
   Other financial assets..........................    8             (84.0)               0.5          (83.5)
   Short term loans................................   10              (4.4)               6.5             2.1
   Cash, cash equivalent and other marketable         11
      securities...................................                   (8.1)              11.5             3.4
   Other portfolio investments.....................                   (2.3)                 -           (2.3)
Reserves and allowances (1)........................   15            (826.7)             784.5          (42.2)
Valuation allowances on differed taxes.............   17             (82.6)              50.9          (31.7)
                                                              ---------------------------------------------------
                                                                                                    (1,986.4)
                                                                                                 ----------------
Renewal expenses (2)...............................                                                   (321.6)
                                                                                                 ----------------
                                                                                                    (2,308.0)
                                                                                                 ----------------
Valuation allowance on current assets

                                                              ---------------------------------------------------
Inventories and work in progress...................    9             (11.7)               8.2           (3.5)
                                                              ---------------------------------------------------
Trade accounts receivables.........................    9            (128.5)             121.8           (6.7)
                                                              ---------------------------------------------------
Other accounts receivables.........................                  (22.5)              12.8           (9.7)
                                                              ---------------------------------------------------
                                                                                                       (19.9)
                                                                                                 ----------------
</TABLE>

------------------

(1)  Operational, financial and others

(2)  All renewal costs for publicly-owned utility networks are considered in the
     cash flow statement as investments, whether the utility network was
     originally financed by the concessionary or not. In addition, in the
     passage from net income (loss) to net cash provided by operating
     activities, all renewal costs are eliminated under adjustments for
     depreciation and amortization.

Amortization and depreciation of goodwill and intangible assets with indefinite
life

Details are as follows:

<TABLE>

((euro) millions)                                                   For the year ended at December 31,
                                                      ------------------------------------------------------
                                                               2004               2003                2002
                                                      ---------------     --------------     ---------------
<S>                                                         <C>                <C>                 <C>
Goodwill amortization................................       (146.9)            (209.6)             (250.2)
Impairment of goodwill...............................       (106.4)  *       (2,214.9)  **          (77.0)  ***
                                                      ---------------     --------------     ---------------
     Total...........................................       (253.3)          (2,424.5)             (327.2)
                                                      ===============     ==============     ===============
</TABLE>

------------------
*Including (euro)(70,0) million of Scandinavia market shares in Transportation.

** Including (euro)(2,091.3) million of US Filter goodwill impairment.

*** Including (euro)(40.0) million of Latin America goodwill impairment.

Amortization and depreciation charges relating to goodwill and intangible assets
with indefinite lives decreased from (euro)(2,424.5) million in 2003 to
(euro)(253.3) million in 2004. Amortization and depreciation charges in 2004
broke down as follows:

o    (euro)(146.9) million in recurring amortization expense, compared to
     (euro)(209.6) million in 2003, and

o    (euro)(106.4) million in non-recurring amortization expense, compared to
     (euro)(2,214.9) million in 2003.

Recurring amortization expense decreased in 2004, due primarily to the write-off
as of June 30, 2003 of goodwill relating to USFilter, and the allocation of
goodwill amortization relating to FCC to a separate line item of the income
statement for discontinued operations.

Non-recurring amortization charges in 2004 consisted primarily of a write-off of
(euro)(70.0) million of market share for the transportation division related to
the Scandinavian operations. Other non-recurring amortization charges (amounting
to (euro)(36.4) million) involved the waste management ((euro)(19.0) million)
and energy services ((euro)(14.9) million) divisions, in light of the market
environment in 2004 and future prospects in these markets.

In 2003, amortization and depreciation charges relating to goodwill and
intangible assets with indefinite lives amounted to (euro)2,424.5 million,
principally due to a write-off in the first half of 2003 of (euro)2,091.3
million of goodwill recorded in connection with the acquisition of USFilter and
several trademarks held by USFilter (which are recorded as intangible assets
with an indefinite life). The write-off related to the reorganization of the
U.S. water activities and the contemplated divestment of several of these
activities. In addition, in light of the market environment in 2003 and our
prospects for our markets, in 2003 we wrote-off goodwill amounting in the
aggregate to (euro)123.6 million, of which (euro)36.0 million was recorded in
several engineering subsidiaries of our water division, (euro)21.6 million in
our German waste management operations and (euro)18.8 million in our energy
services activities. This (euro)123.6 million write-off of goodwill also
included a charge of (euro)9.7 million in the transportation division due to the
termination of the Connex South Eastern license, and charges of (euro)24.2
million relating to FCC, notably with respect to its cement activities in the
U.S.

Financial income and expenses

Net financial income for 2004, 2003 and 2002 amounts to a loss of (euro)(635.0)
million, (euro)(749.9) million and (euro)(648.1) million, respectively.

It includes interest expenses, foreign exchange income and provisions.

<TABLE>
((euro) millions)                                                          For the year ended at December 31,
                                                                -------------------------------------------------
                                                                        2004              2003             2002
                                                                --------------   ---------------  ---------------
<S>                                                                  <C>               <C>              <C>
Interest expense...............................................      (602.1)           (623.7)          (680.9)
Other financial income (expense)...............................         12.9               7.9            142.2
Provisions.....................................................       (45.8)           (134.1)          (109.4)
                                                                --------------   ---------------  ---------------
     Financial income (expense)................................      (635.0)           (749.9)          (648.1)
                                                                ==============   ===============  ===============
</TABLE>

Veolia Environnement incurred net financial expense of (euro)(635.0) million in
2004, compared to net financial expense of (euro)(749.9) million in 2003. The
decrease in net financial expense was partially due to a continued decline in
financing costs, from (euro)(623.7) million in 2003 to (euro)(602.1) million in
2004. It was also due to a reduction in net accruals of reserves, which fell
from (euro)(134.1) million in 2003 to (euro)(45.8) million in 2004.

The decrease in financing costs is principally attributable to a reduction in
outstanding indebtedness, which offset an increase in the average cost of debt
from 4.31% in 2003 to 4.63% in 2004. The increase in the average cost of debt
results from an extension in the maturity of debt, the implementation of
fixed-rate hedges in 2004 and the investment of proceeds resulting from asset
sales into short-term money market instruments (to be used for the redemption of
VE's outstanding OCEANEs on January 3, 2005).

Excluding the impact of financing costs, Veolia Environnement recorded net
financial expense of (euro)32.9 million in 2004, compared to net financial
expense of (euro)(126.2) million in 2003. The principal components of financial
income and expense in 2004 were the following:

o    a one-time capital gain of (euro)44.4 million from the sale of shares of
     Vinci, as well as a one-time capital gain of (euro)7.8 million from the
     sale of shares of Rome Vendome (compared to a capital gain of (euro)30.5
     million in 2003 from the sale of shares of Vinci),

o    a non-recurring write-back of reserves of (euro)3.6 million relating to
     shares of Veolia Environnement held as treasury stock (compared to net
     accrual of reserves of (euro)(61.1) million in 2003, including a
     (euro)(69.8) million reserve accrued in connection with several financial
     credits held by USFilter),

o    the amortization of (euro)(34.7) million in redemption premium (stable
     compared to (euro)34.1 million in 2003), a substantial part of which
     corresponds to redemption premium on Veolia Environnement's convertible
     bonds, or OCEANEs ((euro)30.2 million),

o    the amortization of (euro)(18.8) million in borrowing costs, a slight
     increase compared to 2003 ((euro)(14.0) million),

o    commissions paid to financial institutions amounting to (euro)(9.6) million
     (compared to (euro)(13.0) million in 2003), and

o    a net foreign exchange loss of (euro)(19.9) million (compared to
     (euro)(7.8) million in 2003).

Other income (expenses)
<TABLE>

((euro) millions)                                                            For the year ended at December 31,
                                                                   ----------------------------------------------
                                                                           2004            2003            2002
                                                                   --------------  --------------  --------------
<S>                                                                      <C>               <C>           <C>
Capital gains and losses..........................................       (47.7)            22.0          (31.4)
Losses, reserves and impairment of assets.........................          2.8          (86.6)          (30.4)
Other.............................................................       (12.4)             2.2             2.1
                                                                   --------------  --------------  --------------
                                                                         (57.3)          (62.4)          (59.7)
                                                                   ==============  ==============  ==============
</TABLE>

Non-recurring income and charges are recorded as "other income (expense)".
Non-recurring income and charges are defined as those resulting from
extraordinary events that are not likely to reoccur in the ordinary course of
Veolia Environnement's operations, including capital gains and losses recorded
in connection with the sale of Veolia Environnement's subsidiaries and assets.
Veolia Environnement recorded net other expense of (euro)(57.3) million in 2004,
compared to (euro)(62.4) million in 2003.

Net other expense in 2004 principally resulted from:

o    a (euro)(55.2) million capital loss recorded in connection with the sale by
     Berlin Water of telecommunications operator Berlikomm,

o    a (euro)(13.8) million settlement paid to resolve a dispute relating to a
     failed acquisition in Italy,

o    other insignificant charges.

Net other expense in 2003 resulted from the (euro)(65.0) million in capital
losses recorded in connection with the sale of several of USFilter's activities
(including the impact of fluctuations in exchange rates on the sales proceeds)
and reserves accrued in respect of USFilter activities in the process of being
sold, a (euro)(28.3) million reserve accrued in respect of companies in the
United Kingdom to be sold following Connex's strategic decision to withdraw from
the U.K. transportation market, and a (euro)(21.6) million reserve accrued by
FCC in respect of the sale of Grubar Hotels. These capital losses and reserves
more than offset net capital gains of (euro)52.5 million from various
divestments in 2003. These net capital gains resulted primarily from a
(euro)30.8 million gain on the sale of Veolia Environnement's interest in Wyuna
and a (euro)40.8 million gain on the sale by FCC of Compania de Energia
Hydroelectrica de Navarra, which more than offset several insignificant capital
losses on other sales in 2003.

<PAGE>

Income from discontinued activities

(in (euro) million)                                Water       FCC      Total
                                           United States

Net income / discontinued activities......           0.2      36.0       36.2
Capital gains and losses..................        (47.2)      36.1     (11.1)
Taxes.....................................       (201.7)    (31.2)    (232.9)
------------------------------------------------------------------------------
Income from discontinued activities.......       (248.7)      40.9    (207.8)
------------------------------------------------------------------------------

Income (loss) related to USFilter ((euro)0.2 million) was heavily impacted by
the tax consequences of the U.S. asset sale, asset included:

o    A capital loss on USFilter assets mainly due to the price adjustment
     negotiated with buyers.

o    A (euro)63.5 million tax charge relating to its use of deferred tax assets
     in connection with the sale. Thanks to the sale structure, this charge is
     considerably lower than the charge in excess of (euro)200 million
     anticipated in Veolia Environnement's 2003 20F.

o    Moreover, as a result of tax regulation in France, currency gains and
     losses on loans and debts are taxed without taking into account the effects
     of currency fluctuations on equity. Consequently, a French tax charge of
     approximately (euro)138 million was imposed on the sale of U.S. assets. In
     previous fiscal years, this tax charge has been deducted directly from a
     currency transaction adjustments reserve in accordance with consolidation
     rules relating to net foreign investments. This (euro)138 million tax
     charge therefore has no impact on shareholders' equity, as indicated in
     Veolia Environnement's semi-annual report of June 30, 2004.

Regarding FCC, it contributed to net income for a 9-month period. The sale of
FCC yielded a consolidated capital gain of (euro)36 million. Further, Veolia
Environnement paid (euro)31.2 million to Spanish tax authorities during 2004
relating to the sale of FCC, in accordance with a tax treaty between France and
Spain.

The net income from U.S. businesses sold (USFilter) included the effect of
restructurings related to the sale of these assets.

The main indicators on the profit and loss accounts of the discontinued
operations are the following:
<TABLE>

(in millions of (euro))                                            Water             FCC             Total
                                                               United States

<S>                                                                <C>             <C>             <C>
Revenues...............................................            878.3           1,488.7         2 367,0
EBIT...................................................             26.0             131.6           157,6
Operating income.......................................             25.2             111.6           136,8
Financial income (expense), Net........................            (5.0)             (4.3)           (9,3)
Other income (expense).................................                -            (19.2)          (19,2)
Income tax expense.....................................            (7.9)            (37.4)          (45.3)
Share in net earning of companies accounted
for by the equity method...............................           (12.1)              29.5            17,4
Minority interests.....................................                -             -44,2          (44,2)
-----------------------------------------------------------------------------------------------------------------
Consolidated net income (loss).........................              0.2              36,0            36,2
-----------------------------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
2004 Bank ratio                                            2004                     Reference
                                                           ----                     ---------
"EBITDA" bank definition
<S>                                                     <C>           <C>
   EBIT.............................................    1,616.9                 Income statement
   +   Operational amortization.....................    1,563.0       Note 23 Depreciation and amortization
   +   Operational valuation allowance on long                                        idem
       term assets...............................             -
   +   Profit sharing...............................       52.0      Note 25 Employees and personnel charges
                                                     --------------
(a) "EBITDA" bank definition......................      3,231.9
                                                     --------------
"Net interest expenses" bank definition
   Interest expenses................................      602.1       Note 25 Financial income and expenses
   Other financial incomes (expenses)...............     (12.9)                       idem
                                                     --------------
(b) Net interest expenses bank definition.........        589.2
                                                     --------------
Debt
   long-term financial debt.........................   10,801.4                   Balance sheet
   short-term financial debt........................    5,120.2                   Balance sheet
   Total gross debt.................................   15,921.6
   Short-term financial loans.......................      394.7                   Balance sheet
   Long-term financial loans........................      417.2           Note 8: Other financial asset
   Marketable securities............................    1,678.1                   Balance sheet
   Cash and cash equivalent.........................    3,635.1                   Balance sheet
   Total financial assets...........................    6,125.1
                                                     --------------
(c) Total net financial debt........................    9,796.5
                                                     --------------

(d) Interest coverage ratio = (a) / (b).............        5.5                   5.7 for 2003
(e) Debt payout ratio = (c) / (a)...................        3.0                   3.3 for 2003
</TABLE>

Note 26. Investments accounted for using the proportionate consolidation method
-------------------------------------------------------------------------------

Investments accounted for using the proportionate consolidation method represent
companies in which the Group and other shareholders have agreed to exercise
joint control over significant financial and operating policies.

Summarized financial information for major subsidiaries consolidated under the
proportionate consolidation method is as follows (in millions of euro):

<TABLE>
                                                                                At December 31,
                                                                -------------------------------------------------
Balance sheet data                                                    2004             2003             2002
                                                                ---------------  ---------------  ---------------
<S>                                                                   <C>              <C>              <C>
Non-current assets.............................................       7,532.6          8,813.3          9,185.5
Current assets.................................................       2,927.5          5,004.0          4,655.0
                                                                ---------------  ---------------  ---------------
Total assets                                                         10,460.1         13,817.3         13,840.5
                                                                ===============  ===============  ===============
Shareholders' equity...........................................       4,295.7          5,507.8          5,435.4
Minority interests.............................................        (15.4)             11.4              5.0
Financial debt.................................................       2,711.8          2,920.1          3,093.2
Reserves and other liabilities.................................       3,468.0          5,378.0          5,306.9
                                                                ---------------  ---------------  ---------------
Total liabilities and shareholders' equity                           10,460.1         13,817.3         13,840.5
                                                                ===============  ===============  ===============

                                                                      2004             2003             2002
                                                                ---------------  ---------------  ---------------
Income statement data
Net sales......................................................       4,945.7          5,796.2          5,569.8
Operating income...............................................         496.2            514.1            464.3
Net income*....................................................          70.6            103.4            204.3

Cash flow data
Operating cash flow............................................         592.0            927.9            590.9
Investing cash flow............................................        (707.8)          (494.3)          (849.6)
Financing cash flow............................................         263.2           (254.3)           145.0
</TABLE>

* Contribution of the companies to Group share net income.

In 2004, FCC exited the consolidation scope on June 30, 2004 and Proactiva was
accounted for using the proportionate consolidation method.

The Berlin Water contract is 50% consolidated and generated revenues of
(euro)573 million, an operating profit of (euro)188 million in 2002. Total
balance sheet is (euro)4.3 billion. Financial indebtedness is (euro)1.7 billion
of which (euro)1.1 billion was generated by the operating companies and
(euro)600 million guaranteed or funded by Veolia Environnement and RWE. The
economic interest of Veolia Environnement is 25%.

Note 27. Listing of main companies included in consolidated financial
---------------------------------------------------------------------
statements in 2004
------------------

In 2004, the Group consolidated or accounted for a total of 1,986 companies, of
which the principal companies are:

<TABLE>
Group and Address                                                               Consolidation       % holding
-----------------                                                               -------------       ---------
<S>                                                                               <C>              <C>
Veolia Environnement SA
     36-38, avenue Kleber - 75116 Paris                                                Full         100.00

Sense SAS
     rue Annette Bloch - 25200 Montbeliard                                             Prop         33.83

WATER

Veolia Water
     52, rue d'Anjou - 75008 Paris                                                     Full         100.00

Generale des Eaux and its subsidiaries
     52, rue d'Anjou - 75008 Paris                                                     Full         100.00

Of which in France :

Compagnie des Eaux et de l'Ozone
     52, rue d'Anjou - 75008 Paris                                                     Full         99.99

Compagnie des Eaux de Paris
     7, rue Troson-du-Coudray - 75008 Paris                                            Full         99.99

Societe Francaise de Distribution d'Eau
     7, rue Troson-du-Coudray - 75008 Paris                                            Full         99.60

Compagnie Fermiere de Services Publics
     3, rue Marcel Sembat - Immeuble CAP 44 - 44100 Nantes                             Full         99.11

Compagnie Mediterraneenne d'exploitation des Services d'Eau
     12, boulevard Rene Cassin - 06100 Nice                                            Full         99.70

Societe des Eaux de Melun
     Zone Industrielle - 198/398, rue Foch - 77000 Vaux Le Penil                       Full         99.22

Societe des Eaux de Marseille and its subsidiaries
     25, rue Edouard Delanglade - BP 29 - 13254 Marseille                              Prop         48.83

Societe des Eaux du Nord
     217, boulevard de la Liberte - 59800 Lille                                        Prop         49.54

Societe des Eaux de Versailles et de Saint-Cloud
     145, rue Yves le Coz - 78000 Versailles                                           Prop         50.00

Sade-Compagnie Generale de Travaux d'Hydraulique and its subsidiaries
     28, rue de la Baume - 75008 Paris                                                 Full         98.60

Veolia Water Systems (previously OTV)
     l'Aquarene - 1, place Montgolfier - 94417 St Maurice Cedex                        Full         100.00

Sainte-Lizaigne SA
     52, rue d'Anjou - 75008 Paris                                                     Full         99.75

Prague Water CGE AW
     52, rue d'Anjou - 75008 Paris                                                     Full         99.76

Of which outside France :

Veolia Water UK Plc and its subsidiaries
     37-41 Old Queen Street, London SW1H 9JA (United Kingdom)                          Full         100.00

Veolia Water North America
     14950 Heathrow Forest Parkway - Suite 200
     Houston TX77032 Texas (United States)                                             Full         100.00

Berliner Wasser Betriebe
     Neue Judenstrasse 1 - D10179 Berlin Mitte (Germany)                               Prop         24.95

Servitec KFT (Veolia Water Hungary)
     Lovas UT 131b - 1012 Budapest (Hungary)                                           Full         100.00

OEWA Wasser und Abwasser
     Walter Kohn Strasse 1 - 04358 LeipzFull (Germany)                                 Full         100.00

Southern Water Investments Limited
     Southern House Yeomen Road Worthing - West Sussex BN13 3 NX
     (United-Kingdom)                                                                  ME           19.90

Veolia Water Shenzhen
     n(degree)1019 Shennan Zhong Road - Shenzhen 518031 (China)                        Prop         25.00

ENERGY

Dalkia - Saint-Andre
     37, avenue du Mal de Lattre de Tassigny - 59350 St Andre les Lille                Full         66.00

Dalkia France
     37, avenue du Mal de Lattre de Tassigny - 59350 St Andre les Lille                Full         65.94

Cogestar - Saint Andre
     37, avenue du Mal de Lattre de Tassigny - 59350 St Andre les Lille                Full         65.86

Cogestar 2 - Saint Andre
     33, place Ronde Quartier Valmy - 92800 Puteaux                                    Full         65.91

Crystal S.A. - Saint Andre
     37, avenue du Mal de Lattre de Tassigny - 59350 St Andre les Lille                Full         65.94

Citelum
     37, rue de Lyon - 75012 Paris                                                     Full         65.94

Dalkia Morava AS
     28 Rijna 152 - 70974 Ostrava (Czech Republic)                                     Prop         49.20

Dalkia PLC and its subsidiaries
     Elizabeth House - 56-60 London Road - Staines TW18 4BQ
     (United Kingdom)                                                                  Prop         50.02

Clemessy and its subsidiaries
     18, rue de Thann - 68200 Mulhouse                                                 Full         65.68

Siram, SPA and its subsidiaries
     Via Bisceglie, 95 - 20152 Milano (Italy)                                          Prop         50.02

ZTO (Dalkia Ostrava)
     Pivovarska, 84/1 PSC - Ostrava (Czech Republic)                                   Prop         46.74

Dalkia Poznan
     UL Gdynska 54 - 60-960 Poznan (Poland)                                            Prop         21.92

WASTE MANAGEMENT

ONYX
     Parc des Fontaines - 163 / 169, avenue Georges Clemenceau
     92000 Nanterre                                                                    Full         100.00

Societe d'Assainissement Rationnel et de Pompage and its subsidiaries (S.A.R.P.)
     162/16 Energy Park IV - 162/166, boulevard de Verdun
     92413 Courbevoie Cedex                                                            Full         99.52

SARP - Industries and its subsidiaries
     427, route du Hazay - Zone Portuaire Limay-Porcheville-78520 Limay                Full         99.81

Onyx Environmental Group Plc
     Onyx house - 401 Mile end Road - E34 PB - London (United Kingdom)                 Full         100.00

Onyx North America Corp.
     3225 Aviation Avenue - 4th Floor - 33133 Miami (United States)                    Full         100.00

Onyx Waste Service
     One Honey Creed Corporate Center - 125 South - 84th Street - Suite 200
     WI 53214 Milwaukee (United States)                                                Full         100.00

Collex Waste Management Pty Ltd
     280 Georges Street - Level 12 - P.O. Box H126 Australia Square - NSW 1215
     Sydney (Australia)                                                                Full         100.00

Marius Pedersen - Danemark
     rbaekvej 49 5863 Ferritslev (Denmark)                                             Full         65.00

TRANSPORTATION

CONNEX
     Parc des Fontaines - 163 / 169, avenue Georges Clemenceau
     92000 Nanterre                                                                    Full         100.00

Connex Transport AB
     Englundavagen 9 - Box 1820 - 17124 Solna (Sweden)                                 Full         100.00

Connex Transport UK Ltd
     Waterloo Business Center - 117 Waterloo Road - London SE1 8UL
     (United Kingdom)                                                                  Full         100.00

Connex Verkher GmBh
     Rodelheimer Bahnweg - 60489 Francfort (Germany)                                   Full         100.00

Connex Group Australia Pty Ltd
     Level 3, Flinders St Station, 223 Flinders St - Melbourne, Victoria 3000
     (Australia)                                                                       Full         100.00

Connex Nort America (CNA)
     2100 Huntingdon Avenue - MD 21211 Baltimore (United States)                       Full         100.00

C.F.T.I. (Compagnie Francaise de Transport Interurbain)
     Parc des Fontaines - 163 / 169, avenue Georges Clemenceau
     92000 Nanterre                                                                    Full         99.53

C.G.F.T.E. (Compagnie Generale Francaise de Transports et d'Entreprises) Parc
     des Fontaines - 163 / 169, avenue Georges Clemenceau
     92000 Nanterre                                                                    Full         100.00

Connex GVI Inc
     720 rue Trotter - St-Jean-sur-Richelieu, QC, J3B 8T2 (Canada)                     Full         100.00

PROACTIVA
     216 Paso de la Castellana - 28046 Madrid (Spain)                                  Prop         50.00
</TABLE>


Full: Full consolidation
Prop: Proportionate consolidation
ME: Equity method

<PAGE>

AUDITORS' REPORT ON THE CONSOLIDATED FINANCIAL STATEMENTS (TRANSLATION)

--------------------------------------------------------------------------------
This is a free translation into English of the statutory auditors' report issued
in the French language and is provided solely for the convenience of English
speaking readers. The statutory auditors' report includes for the information of
the reader, as required under French law in any auditor's report, whether
qualified of not, explanatory paragraphs separate from and presented below the
audit opinion discussing the auditors' assessments of certain significant
accounting and auditing matters. These assessments were considered for the
purpose of issuing an audit opinion on the consolidated financial statements
taken as a whole and not to provide separate assurance on individual account
caption or on information taken outside of the consolidated financial
statements. Such report should be read in conjunction and construed in
accordance with French law and French auditing professional standards.
--------------------------------------------------------------------------------


To the Shareholders of Veolia Environnement,

In compliance with the assignment entrusted to us by your shareholders' annual
general meetings, we have audited the accompanying consolidated financial
statements of Veolia Environnement, as of and for the year ending December 31,
2004.

These consolidated financial statements are the responsibility of the Company's
Board of Directors. Our responsibility is to express an opinion on these
financial statements based on our audit.

I - Opinion on the consolidated financial statements

We conducted our audit in accordance with professional standards applied in
France. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statements presentation. We believe that our audit provides a reasonable basis
for our opinion.

In our opinion, the consolidated financial statements give a true and fair view
of the group's financial position and of its assets and liabilities as of
December 31, 2004, and of the results of its operations for the year then ended
in accordance with accounting principles generally accepted in France.

Without qualifying the above opinion, we draw your attention to the change in
accounting method described in note 2 "Summary of significant accounting
policies" to the consolidated financial statements, regarding the consolidation
of certain entities in accordance with the provisions of CRC Regulation 04-03 of
May 4, 2004.

II - Justification of assessments

Pursuant to the provisions of Article L.225-235, Paragraph 2, of the French
Commercial Code (Code de commerce) relating to the justification of our
assessments, we draw your attention to the following items:

Note 2 "Summary of significant accounting policies" to the consolidated
financial statements sets out the accounting principles relating to the
presentation of discontinued operations in accordance with the provisions of
paragraph 23100 of CRC Regulation 99-02 of April 29, 1999. In connection with
our assessment of the accounting principles applied by your company, we verified
the appropriateness of the above-mentioned accounting principles and of the
information presented in the notes, and checked their proper implementation.

As set forth in Note 2.4 of the notes to the consolidated financial statements,
the management of Veolia Environnement is required to make estimates and
assumptions that impact the amounts reported in its financial statements and the
accompanying notes. Note 2.4 also specifies that actual results may differ
significantly from these estimates. In connection with our audit of the
consolidated financial statements as of December 31, 2004, we concluded that
among the items that are subject to significant accounting estimates, the
following elements related to long-term tangible and intangible assets, deferred
tax assets and provisions for risks could be open to our assessment:

     o    With respect to depreciation of long-term tangible and intangible
          assets as set forth in Notes 2.14 and 2.15 of the notes to the
          consolidated financial statements, we evaluated the data and
          assumptions on which their estimates were based, examined the
          company's approval procedure for these estimates and reviewed the
          calculations made by the company and explained in Notes 3 and 4 of the
          notes to the consolidated financial statements,

     o    Regarding deferred tax assets, the terms of which are set forth in
          Note 2.18 of the notes to the consolidated financial statements, we
          evaluated the data and assumptions on which their estimates were
          based, specifically their recovery estimates as set by the company's
          financial and tax departments, and reviewed the calculations made by
          the company and explained in Note 17 of the notes to the consolidated
          financial statements,

     o    With respect to provisions for risks, the terms of which are set forth
          in Notes 2.21 and 2.25 of the notes to the consolidated financial
          statements, we evaluated the data and assumptions on which these
          provisions were based and reviewed the appropriateness of the
          information presented in Note 15 of the notes to the consolidated
          financial statements.

 Based on our assessments, we checked that these estimates are reasonable.

 The assessments we conducted were undertaken in connection with our audit
 processes of the consolidated financial statements, taken as a whole, and
 therefore contributed to the formation of our unqualified opinion as disclosed
 in the first part of this report.

 III - Specific Check

 We also performed the verification of the information given in the management
report of the group.

 We have no comment as to its fair presentation and its conformity with the
consolidated financial statements.

 We draw your attention to paragraphs 5.1.3.9 and 5.1.3.10 of the management
 report that address the group migration program to international accounting
 principles - IFRS.

 French original signed in Paris and La Defense, on March 30, 2005 by the
Statutory Auditors.

                             The Statutory Auditors

           SALUSTRO REYDEL                      BARBIER FRINAULT & CIE
                                                    ERNST & YOUNG

 Bernard Cattenoz Bertrand Vialatte         Jean Bouquot Patrick Gounelle

<PAGE>

STATUTORY FINANCIAL STATEMENTS

Available in the French version of the reference document (page 184).



GENERAL REPORT OF THE AUDITORS ON THE ANNUAL FINANCIAL STATEMENTS

Available in the French version of the reference document (page 208).

<PAGE>

                                   CHAPTER 6
                              CORPORATE GOVERNANCE

6.1      FUNCTIONING OF BOARD OF DIRECTORS, MANAGEMENT AND SUPERVISORY BODIES

         The Company has been a societe anonyme a conseil d'administration since
         its general shareholders' meeting held on April 30, 2003, which is a
         French corporation with a single board of directors. Its shares are
         quoted on the Eurolist of Euronext and on the New York Stock Exchange
         (NYSE). The Company is subject to French and American regulations
         relating to corporate governance.

6.1.1    Functioning of Board of Directors and Management

6.1.1.1  Board of Directors

         At its meeting on April 30, 2003, the board of directors adopted a
         charter aimed at following the recommendations of the report of a
         French blue ribbon panel presided over by Mr. Daniel Bouton for the
         improvement of corporate governance in French public companies.

         Composition

         The Company's board of directors must have between 3 and 18 members,
         subject to applicable law. Each director must own at least 750 of the
         Company's shares in registered form. Each director is elected by the
         shareholders at an ordinary general meeting of the shareholders for a
         renewable six-year term, based on proposals made by the board of
         directors, which itself receives proposals from the nominations and
         compensation committee. The board of directors elects a chairman and,
         if necessary, one or two vice-chairmen, for a term not exceeding the
         length of such persons' terms as directors.

         The Company's directors can be removed from office by a majority
         shareholder vote at any time.

         The board of directors does not include any members elected by
         employees or any deputy directors (censeurs), but a representative of
         the Company's works council attends board of director meetings in a
         consultative role.

         The terms of half of the Company's directors (or, if the Company has an
         uneven number of directors, half plus one additional director) will
         come up for renewal every three years on a rolling basis. Accordingly,
         the terms of seven pre-selected directors will be subject to renewal or
         replacement in 2006. Thereafter, the terms of board members will come
         up for renewal or replacement every three years based on seniority of
         appointment.

         The board of directors currently consists of 14 members, who were all
         elected at the ordinary general meeting of shareholders on April 30,
         2003 for six year terms, except for 7 directors whose terms will end in
         2006 at the end of the general shareholders' meeting which will approve
         the Company's financial statements for fiscal year ended on December
         31, 2005, in order to establish the rolling renewal mechanism described
         above. These directors are Serge Michel, Daniel Bouton, Jean-Marc
         Espalioux, Jacques Espinasse, Paul-Louis Girardot, Georges Ralli and
         Murray Stuart.

         Evaluation of the independence of Directors

         To qualify as "independent" under the board of directors' charter, a
         director must not have any relations with the Company, its subsidiaries
         or management that could impair his objective judgment. The board of
         directors' charter sets forth in detail the independence criteria that
         each director must satisfy, which are based on the recommendations of
         the Bouton report for the improvement of corporate governance.

         Nevertheless, the board of directors' charter provides a certain
         measure of flexibility in applying these independence criteria: the
         board of directors may deem that one of its members is independent in
         light of the specific facts and circumstances of that member, his share
         ownership or any other reason, even if that member fails to meet all of
         the independence criteria set forth in the charter; on the contrary,
         the board may consider that one of its members should not be declared
         independent even though he meets the charter's independence criteria.

         The board of directors' charter provides that the board must annually
         evaluate the independence of each of its members prior to publication
         of the Company's annual report. This evaluation must take into account
         the independence rules set forth in its charter, the particular facts
         and circumstances involved and the conclusions of the Company's
         nominations and compensation committee.

         On March 30, 2004, the Company's nominations and compensation committee
         conducted an evaluation of the independence of the Company's directors
         and submitted its conclusions to the board of directors. On April 5,
         2004, the board of directors qualified Messrs. Jean Azema, Daniel
         Bouton, Jean-Marc Espalioux, Philippe Kourilsky, Arthur Laffer, Francis
         Mayer, Beaudoin Prot, Georges Ralli, Louis Schweitzer and Murray Stuart
         as independent directors under the independence criteria set forth
         above and the particular facts and circumstances involved. Regarding
         Messrs. Bouton, Prot and Ralli in particular, they were deemed to
         satisfy the Company's independence criteria, despite the banking
         relationship the Company maintains with Societe Generale, BNP Paribas
         and Banque Lazard, respectively. The board of directors concluded so on
         the basis of the Company's financial situation, its independence with
         regard to bank financing and the limited nature of the Company's
         commitments with these banks. On March 29, 2005, the board of directors
         conducted a new evaluation of board members' independence, which
         reaffirmed its earlier conclusions, except with respect to Mr. Georges
         Ralli, whom the board deemed no longer independent due to the nature of
         the banking relationship between Veolia Environnement and Banque Lazard
         during 2004. As a result, the board of directors currently contains
         nine independent directors.

         Compensation

         Director compensation may take two forms: directors' fees paid for
         attending meetings of the board of directors (jetons de presence),
         which is set by the Company's annual shareholders' meeting and modified
         at subsequent meetings if necessary, and exceptional compensation,
         which may be awarded by the board of directors under conditions set by
         law.

         In 2004, the nominations and compensation committee recommended that
         the total amount of directors' fees for the 2004 fiscal year and their
         allocation between the members of the board be maintained at the same
         level as in 2003 (cf. ss.6.3.1.1 infra) and the board of directors
         followed this recommendation. Allocation of fees between directors
         takes into account individual workload and participation in the work of
         board committees, if any. At its meeting of March 29, 2005, the board
         of directors decided that the total amount of directors' fees for the
         2005 fiscal year would be maintained at the same level as in 2004 (cf.
         ss.6.3.1.1 infra). No exceptional compensation was awarded to directors
         in 2004.

         Functioning

         Under French law, the chairman of the board of directors organizes and
         supervises the work of the board, on which he reports to shareholders.
         The chairman is also responsible for supervising the Company's
         corporate bodies and, in particular, ensuring that directors are
         capable of fulfilling their duties.

         Directors may participate in board deliberations through
         videoconference. They are deemed present for purposes of calculating
         quorum and majority requirements when participating through such means,
         except when certain important decisions are made as set forth under
         applicable law. In 2004, no director participated in board
         deliberations through videoconference.

         The charter of the board of directors calls for the board to meet at
         least four times per year. During the 2004 fiscal year, the board of
         directors met nine times including two special meetings devoted to a
         discussion concerning Vivendi Universal's reduction of its shareholding
         in the Company and the repurchase by the Company of a portion of its
         shares from Vivendi Universal, and to a discussion of the Company's
         2004 stock option plan, respectively.

         Board meetings last approximately 2 hours on average, which allows for
         thorough examination and discussion of items on the agenda. The average
         attendance level at board meetings in 2004 was approximately 85%.

         In 2004, in addition to providing legal and financial authorizations,
         the board of directors primarily addressed the following subjects,
         among others: corporate governance (evaluation of board members'
         independence and evaluation of the board's functioning), annual and
         half-year financial statements, analysis and implementation of IFRS,
         sale of FCC and U.S. activities, Group strategy and operations,
         employee savings plans and share capital increase reserved for
         employees (Group Savings Plan), stock option plans and the "Veolia
         Environnement 2005" efficiency plan.

         In addition, the board of directors must devote at least one meeting
         per year to a review of the Group's strategy. In 2004, one such meeting
         of the board of directors occurred on September 16, 2004.

         Board Evaluation

         Under its charter, the board of directors is required to evaluate its
         work and procedures each year, verify that important matters are
         adequately prepared and discussed within the board and measure the
         contribution to its work and the participation in its debates by each
         of its members. An evaluation occurred during the first quarter of
         2004, with the preliminary analysis being conducted under the
         supervision of the chairman of the nominations and compensation
         committee. A detailed questionnaire and individual interviews with
         directors served as the basis for the preliminary analysis, the results
         of which were presented in detail by the committee and debated at the
         board of directors' meeting held on June 22, 2004. During the same
         meeting, the board of directors also evaluated the performance of
         Company management on the basis of the nominations and compensation
         committee's report.

         The functioning of the board of directors, its committees and executive
         management was considered to be satisfactory as a whole by the
         Company's directors. However, certain areas were targeted for
         improvement. These areas included developing more presentations
         regarding the Group's operating activities, expanding information
         related to competition, corporate strategy and research and
         development, and increasing the frequency of information concerning
         cash flows, off-balance sheet commitments and risk management. At this
         stage, the board of directors decided not to create any new committees
         or restructure its existing committees; however, it retained the
         possibility of restructuring the accounts, audit and commitments
         committee in the future.

         At its meeting of March 15, 2005, the board of directors appointed Mr.
         Girardot as a member of the accounts, audit and commitments committee,
         and decided that Mr. Bouton would replace Mr. Girardot on the
         nominations and compensation committee(36).

         Information Available to Directors

         Each director can request trainings to allow him to better understand
         the Company and the Group. The chairman supplies directors with timely
         information allowing them to fully exercise their duties, and
         communicates to directors in a continuous manner all significant
         information concerning the Company. In continuation of the effort to
         keep directors informed, in 2005 Veolia Environnement expects to
         provide directors with a detailed update on the Company's and the
         Group's activities at least twice per year.

         Management strives to deliver documents to be used in board meetings in
         a timely fashion to directors, as well as communicating to directors
         without delay any material information concerning the Company.

         In 2004, the board of directors was periodically informed of the
         Company's financial situation, cash flows and off-balance sheet
         commitments primarily through reports by the accounts, audit and
         commitments committee. The board of directors pre-approved all material
         financing transactions in accordance with its charter.

         In order to perform their duties, directors may meet with the Company's
         principal executive officers upon prior notice to the chairman of the
         board of directors. At the request of the chairman or a director, an
         executive officer may be invited to a meeting of the board of
         directors. In December 2004, the board of directors invited the head of
         the water division to participate in one of its meetings, at which he
         gave a detailed presentation on this division's operating activities,
         strategy and competitors. It is expected that the heads of Veolia
         Environnement's other divisions will give similar presentations at
         board meetings scheduled for 2005.

         Finally, a part of the board's agenda at its meeting in June 2004 was
         reserved for a discussion of social policy.

         Duties of Directors

         The charter of the board of directors provides that each of the
         Company's directors is bound by a number of duties and obligations,
         such as: (i) a duty to act in the corporate interest of the Company,
         (ii) an obligation to inform the board of directors of any existing or
         potential conflict of interest and to abstain from voting in any
         situation where such a conflict of interest exists, as well as an
         obligation to inform the chairman of the board of any agreement entered
         into by the Company or on its behalf in which he has any direct or
         indirect interest, (iii) a duty of professional secrecy, and (iv) an
         obligation to comply with the Company's insider trading policy.

         Each director receives a "Director's Guide" containing the following
         documents: the Company's articles of association, the list of powers of
         the chairman and chief executive officer, the charter of the board of
         directors, the charters of the accounts, audit and commitments
         committee and the nominations and compensation committee, a model form
         to be used by directors for reporting trades in the Company's shares,
         and a copy of the Company's ethics brochure entitled "Ethics,
         Commitment and Responsibility". The ethics brochure in particular was
         significantly updated in 2004 (cf. ss.4.1.8 supra). Further, the
         "Director's Guide" is updated on an annual basis and more often if
         necessary.

-----------------------


36       These appointments, as well as the termination of Mr. Girardot's duties
         as a member of the nominations and compensation committee, took effect
         on April 1, 2005.

<PAGE>

         Regarding insider trading, directors must adhere to the provisions of
         article L.621-18-2 of the Code monetaire et financier, the terms of
         which were further elaborated in the AMF's new general regulation, and
         must periodically report such trades (cf. ss.6.3.5 infra).

         Powers of the Board of Directors

         Under French law and the Company's articles of association, the board
         of directors has broad powers to act on behalf of the Company to
         further its corporate purposes and to define and implement the
         Company's policies, subject to those powers expressly granted by law or
         the Company's articles of association to shareholders.

         In addition to the powers that the board of directors has under law,
         its internal charter provides that certain significant decisions made
         by the chief executive officer must first be pre-approved by the board
         of directors. These limits on the chief executive's powers are
         described below in the paragraph discussing management.

6.1.1.2  Management

         Following the board of directors' decision on April 30, 2003,
         management functions are overseen by the chairman of the board of
         directors, who acts as chief executive officer for the Company.

         The chief executive officer has the broadest powers to act on behalf of
         the Company in all circumstances. He must exercise this power
         consistently with the Company's corporate purpose and subject to those
         powers expressly reserved by law to the Company's shareholders and its
         board of directors.

         In addition, the board of directors' charter provides that decisions of
         the chief executive officer on any of the following matters are subject
         to the prior authorization of the board of directors: (i) strategic
         orientation of the Group, (ii) transactions in line with the Company's
         strategy in excess of (euro)300 million per transaction or, if these
         transactions are not part of the budget, in excess of (euro)150
         million, (iii) transactions not in line with the Company's strategy in
         excess of (euro)100 million per transaction, (iv) financing
         transactions (whatever their terms) representing an amount in excess of
         (euro)1.5 billion per transaction, and (v) transactions involving the
         Company's shares representing an amount in excess of 1% of total
         outstanding shares.

6.1.2    Functioning of Supervisory Bodies

6.1.2.1  Board Committees

         Following the Company's transformation into a societe anonyme a conseil
         d'administration on April 30, 2003, its existing accounts, audit and
         commitments committee and nominations and compensation committee were
         retained and their charters adapted to the needs of the new board of
         directors of the Company.

         o   Accounts, audit and commitments committee

         The accounts, audit and commitments committee consists of three to five
         members appointed by the board of directors based on the recommendation
         of the nominations and compensation committee. As of the date of filing
         of this reference document, the committee consists of four members,
         three of whom are independent(*): Murray Stuart* (chairman), Jean
         Azema*, Jean-Marc Espalioux* and Paul-Louis Girardot, the latter
         appointed by the board of directors at its meeting of March 15, 2005.

         According to the committee's charter, members must be selected on the
         basis of their financial or accounting skills. At its meeting of March
         5, 2004, the board of directors determined that Messrs. Murray Stuart,
         Jean Azema and Jean-Marc Espalioux qualified as "audit committee
         financial experts" within the meaning of the U.S. Sarbanes-Oxley Act,
         taking into account their experience and skills.

         The accounts, audit and commitments committee meets at least five times
         per year at the request of its chairman or the chairman of the board of
         directors in order to review the semi-annual and annual financial
         statements before their presentation to the board of directors. In
         2004, the committee met six times. The average attendance level at
         meetings in 2004 was approximately 72%.

         Duties

         The accounts, audit and commitments committee principally performs the
         following functions:

         Regarding accounting matters, the committee reviews with the auditors
         the appropriateness and consistency of the accounting methods adopted
         to prepare the financial statements and examines whether significant
         transactions have been adequately treated, provides an opinion on
         accounting methods and on the draft semi-annual and annual financial
         statements and examines significant commitments, and meets, if
         necessary, with the auditors, management and financial officers to
         discuss various issues, the committee being entitled to meet with such
         persons outside of the presence of management.

         Regarding internal auditing and risk control, the committee is informed
         of the procedures established to identify significant risks, examines
         the internal audit plan and receives a periodic summary of the Group's
         internal audit reports. The committee meets as necessary with the
         internal audit director to discuss the organization of internal audit.

         Regarding the supervision of the Company's independent auditors, the
         committee examines the auditors' work plan and meets as necessary with
         the auditors and the Company's management, including its accounting and
         treasury officers. The committee is entitled to meet with such persons
         outside the presence of the Company's management. Any permissible
         non-audit services to be performed by the auditors require the prior
         approval of the committee, which also reviews the fees the Company pays
         to the auditors for all of their services and assures that the portion
         of revenue of the audit firm and its network represented by such fees
         does not call into question the independence of the auditors. The
         committee also supervises the procedure for selecting the statutory
         auditors.

         Activities during 2004

         During 2004, in addition to examining the Company's semi-annual and
         annual financial statements, the committee completed important work
         within the framework of a 12-month program, which included a review of
         the Company's transition to IFRS and its liquidity and financing
         capacity. The committee oversaw the audit program and internal controls
         program's implementation, and approved the duties and fees of the
         Company's auditors. Finally, the committee oversaw the process for
         renewing the term of Barbier Frinault & Cie Ernst & Young, one of
         Veolia Environnement's statutory auditors, which is due to expire at
         the end of the general shareholders' meeting of May 12, 2005.

         The committee may meet with individuals and experts outside the Company
         if necessary. It may also meet with the Company's financial officers or
         auditors outside the presence of the chairman and chief executive
         officer. Accordingly, during 2004 the committee communicated on several
         occasions with the Company's chief executive officer, the director of
         control and synergies, the budget and planning director, the internal
         audit director and the auditors. The committee did not however consult
         with any outside consultants.

         o   Nominations and compensation committee

         The nominations and compensation committee's charter provides that the
         committee must consist of three to five members appointed by the board
         of directors upon the recommendation of the then current members of the
         nominations and compensation committee. As of the date of filing of
         this reference document, the committee consists of three members, two
         of whom are independent(*): Serge Michel (chairman), Louis Schweitzer*
         and Daniel Bouton*, the latter appointed by the board of directors at
         its meeting of March 15, 2005.

         The nominations and compensation committee meets at least two times per
         year at the request of its chairman or the chairman of the board of
         directors. In 2004, the committee met twice. The average attendance
         level at meetings in 2004 was 100%.

         Duties

         The nominations and compensation committee principally performs the
         following functions:

         Regarding compensation, the committee studies and makes annual
         recommendations on the compensation of directors and executive officers
         and with respect to retirement and other benefits. The committee also
         proposes a total amount and breakdown for the fees paid to directors,
         and advises the board of directors on stock option policy and awards.
         The committee is also informed of the compensation policy for the
         principal executive officers of the Company's subsidiaries, and
         examines all share capital increases reserved for employees.

         The committee may hire specialized consultants in connection with
         senior management compensation issues.

         Regarding nominations, the nominations and compensation committee makes
         recommendations on the Company's directors and senior managers and
         arrange for their succession. It also recommends the nomination of
         members and a chairman for each of the Company's committees. The
         committee's choices must strive to reflect a diversity of experience
         and points of view and assure that the board remains objective and
         independent with respect to a shareholder or group of shareholders. The
         committee also strives to ensure that independent directors represent
         at least half of the members of the board of directors, two-thirds of
         the members of the accounts, audit and commitments committee and half
         of the members of the nominations and compensation committee (cf.
         ss.6.1.1.1 supra).

         Each year, the nominations and compensation committee performs an
         evaluation on a case-by-case basis of the independence of each director
         in light of the criteria for independence mentioned in the board of
         directors' charter and submits its findings to the board of directors.
         It also organizes and coordinates the required evaluation of the
         board's functioning, and submits its opinion regarding the performance
         of executive management.

         Activities during 2004

         In 2004, the nominations and compensation committee's work was
         principally dedicated to providing recommendations and proposals to the
         board relating to the policy on employee shareholding, the award of
         stock options in 2004, the directors' fees for the board, and
         compensation for the chairman and chief executive officer and members
         of Veolia Environnement's executive committee (fixed and variable
         portions thereof).

         In 2004, the division and distribution of the annual amount of
         directors' fees followed the same guidelines established in 2003, which
         take into account a director's individual workload and participation in
         the work of board committees, if any.

         In April 2004, the board of directors approves the recommendation of
         the nominations and compensation committee to base the award of
         variable compensation for fiscal year 2004 for the chief executive
         officer and other members of the executive committee on the following
         criteria: the level of return on capital employed (ROCE), net recurring
         income and improvement in net financial debt. The chairman and chief
         executive officer's variable compensation for 2004 was definitively
         determined by the board of directors at its meeting of March 29, 2005
         (cf. ss.6.3.1.1 and 6.3.1.2 infra).

         Finally, in 2004 the committee submitted to the board of directors its
         findings and recommendations concerning the independence of directors,
         and also provided its opinion regarding the performance of executive
         management (cf. ss.6.1.1.1 supra).

6.1.2.2  Committees Created by Management

o        Disclosure committee

         In addition to the committees above, the Company's chief executive
         officer and chief financial officer created a disclosure committee
         (comite de communication), which was presented to the Company's former
         management board on December 11, 2002. The chief executive officer or,
         in his absence, the senior executive vice president presides over
         meetings of the disclosure committee. In addition to the chief
         executive officer and the senior executive vice president, the
         permanent members of the committee include the heads of each of the
         Company's divisions (water, energy services, waste management and
         transportation) and the principal executive officers of the Company's
         corporate departments.

         Pursuant to its charter, the disclosure committee principally: (i)
         oversees the implementation of internal procedures to collect
         information about the Company that will be disclosed to the public;
         (ii) defines the process for preparing the Company's reports and other
         communications; (iii) examines the information to be disclosed and
         approves the final version of reports or communications, in particular
         the U.S. Form 20-F, which are filed with French and American regulatory
         authorities; and (iv) approves the procedures for publication or filing
         of documents.

         The disclosure committee reports on its work to the chief executive
         officer and the senior executive vice president. It meets as often as
         necessary to assure the accomplishment of its mission, but at least two
         times each year, including (i) once before the end of each year to
         organize the drafting of the Company's French document de reference and
         annual report on Form 20-F, and (ii) prior to the filing of the annual
         report on Form 20-F with the U.S. Securities and Exchange Commission to
         evaluate and validate the report. The disclosure committee may also
         meet before the announcement of any significant event, in particular
         the Company's half-year results, to evaluate and validate the form and
         content of the communications relating thereto.

         The disclosure committee met twice in 2004. During its May 14, 2004
         meeting, it evaluated and validated the Company's annual report on Form
         20-F as well as the certifications required to be furnished by its
         chief executive officer and senior executive vice president in
         accordance with U.S. regulatory provisions. At its November 8, 2004
         meeting, the disclosure committee principally reviewed regulatory
         developments relating to reports and other communications designed for
         public disclosure. It also launched the process of collecting
         information and preparing for drafts of its annual reports for the 2004
         fiscal year required by regulatory authorities.

o        Ethics committee

         In March 2004, the Company's executive committee created an ethics
         committee (cf. ss.4.1.8 supra) to help ensure compliance with the
         values and principles set forth in the "Ethics, Commitment and
         Responsibility" program and adopted its charter. The ethics committee
         must act independently with respect to matters it treats and hold the
         information relating thereto confidential. Each year, the ethics
         committee prepares a report on the Group's compliance with ethical
         norms, including any difficulties encountered and suggested
         improvements, if any.

6.2      MEMBERS OF BOARD OF DIRECTORS, MANAGEMENT AND SUPERVISORY BODIES

6.2.1    Members of board of directors, management and supervisory bodies

6.2.1.1  Directors

         All positions and offices of the Company's directors indicated below
         are given as of January 31, 2005. Board members may be contacted at the
         Company's headquarters, located at 36/38 avenue Kleber, 75116 Paris.

         Henri PROGLIO (Chairman and Chief Executive Officer), 55, French
         nationality. Director and Chairman-Chief Executive Officer since April
         30, 2003. His term expires on the date of the general shareholders'
         meeting called to approve the Company's financial statements for
         fiscal year 2008.

         Other positions and offices held:

             In France:
                                  - director of Thales;
                                  - member of the supervisory board of Elior;
                                  - director of EDF;
                                  - director of Casino, Guichard-Perrachon;
                                  - deputy on the supervisory board of the
                                    Caisse Nationale des Caisses d'Epargne;
                                  - member of the supervisory board of
                                    Lagardere;
                                  - manager of Compagnie Generale des Eaux;
                                  - chairman of the board of directors of Veolia
                                    Water;
                                  - chairman of the board of directors of Onyx;
                                  - chairman of the board of directors of
                                    Connex;
                                  - member of supervisory boards A and B(37) of
                                    Dalkia (SAS);
                                  - member and vice-president of the supervisory
                                    board of SARP;
                                  - director of SARP Industries;
                                  - director of Dalkia International;
                                  - member and president of the supervisory
                                    board of Dalkia France;
                                  - director of Societe des Eaux de Marseille;
                                  - permanent representative of CSP on the board
                                    of directors of Onyx;
                                  - chairman of Campus Veolia Environnement
                                    (SAS);
                                  - director of GIE Anjou Recherche;
                                  - director of GIE CREED.

------------------------


37   In recognition of the special function of EDF, representatives of EDF are
     not present on supervisory board A, which deals exclusively with Dalkia's
     energy services activities in France.

<PAGE>

              Outside France:     - director of Onyx North America Corp. (U.S.);
                                  - director of Connex Transport AB (Sweden);
                                  - director of Onyx Environmental Group Plc
                                    (United Kingdom);
                                  - director and vice-president of Onyx Asia
                                    Holdings (Singapore);
                                  - director of Collex Pty (Australia).


         Jean AZEMA, 52, French nationality (independent director).
         Director since April 30, 2003. His term expires on the date of the
         general shareholders' meeting called to approve the Company's financial
         statements for fiscal year 2008.

         -   Principal position held outside the Company: Chief Executive of
             Groupama SA

         -   Other positions and offices held:

             In France:           - chief executive of Groupama Holding and
                                    Groupama Holding 2;
                                  - director of Societe Generale;
                                  - director of the ACMA association;
                                  - permanent  representative of Groupama SA on
                                    the board of directors of Bollore
                                    Investissement.
             Outside France:      - director of Mediobanca.

         Daniel BOUTON, 54, French nationality (independent director).
         Director since April 30, 2003. His term expires on the date of the
         general shareholders' meeting called to approve the Company's financial
         statements for fiscal year 2005.

         -   Principal position held outside the Company: Chairman and Chief
             Executive Officer of Societe Generale.

         -   Other positions and offices held:

              In France:          - director of Total SA;
                                  - director of Schneider Electric SA;
                                  - chairman of the Federation Bancaire
                                    Francaise.

         Jean-Marc ESPALIOUX, 53, French nationality (independent director).
         Director since April 30, 2003. His term expires on the date of the
         general shareholders' meeting called to approve the Company's financial
         statements for fiscal year 2005.

         -   Principal position held outside the Company: President of the
             management board of Groupe Accor.

         -   Other positions and offices held:

              In France:          - director of Air France-KLM;
                                  - deputy of the  supervisory  board of
                                    Caisse Nationale des Caisses  d'Epargne;
                                  - member of the supervisory board of Club
                                    Mediterranee;
                                  - permanent  representative of Accor on the
                                    supervisory board of Groupe Lucien Barriere
                                    SAS.
              Outside France:     - director of Accor UK.

         Jacques ESPINASSE, 61, French nationality.
         Director since April 30, 2003. His term expires on the date of the
         general shareholders' meeting called to approve the Company's financial
         statements for fiscal year 2005.

         -   Principal position held outside the Company: Executive vice
             president and chief financial officer of Vivendi Universal.

         -   Other positions and offices held:

              In France:          - permanent representative of Vivendi
                                    Universal on the board of directors of UGC;
                                  - chairman of Light France Acquisition (SAS);
                                  - director of SFR-Cegetel Groupe;
                                  - member of the supervisory board of Groupe
                                    Canal+;
                                  - director of Multithematiques; - director of
                                    Vivendi Universal Net;
                                  - director of Vivendi Universal Publishing.

              Outside France:     - permanent representative of Vivendi
                                    Universal on the board of
                                    directors of SOGECABLE (Spain);
                                  - member of the supervisory  board and audit
                                    committee of Maroc Telecom
                                    (Morocco);
                                  - Vice-president of Vivendi Communications NA
                                    (United States);
                                  - President of Vivendi Universal Canada Inc.
                                   (Canada);
                                  - Chairman and Chief Executive Officer of
                                    Vivendi Universal Exchangeco Inc. (Canada);
                                  - Chairman and Chief Executive Officer of
                                    Vivendi Universal Holdings Cy (Canada).

         Paul-Louis GIRARDOT, 71, French nationality.
         Director since April 30, 2003. His term expires on the date of the
         general shareholders' meeting called to approve the Company's financial
         statements for fiscal year 2005.

         -   Principal position held outside the Company: Chairman of the
             Supervisory Board of Compagnie Generale des Eaux.

         -   Other positions and offices held:

              In France:          -  member of the supervisory board of
                                     Dalkia France;
                                  -  director of Connex and Onyx;
                                  -  director of Veolia Water;
                                  -  director of Societe des Eaux de Marseille;
                                  -  member of the supervisory board of
                                     Compagnie des Eaux et de l'Ozone;
                                  -  chairman of the supervisory board of
                                     Compagnie des Eaux de Paris.

         Philippe KOURILSKY, 62, French nationality (independent director).
         Director since April 30, 2003. His term expires on the date of the
         general shareholders' meeting called to approve the Company's financial
         statements for fiscal year 2008.

         -   Principal position held outside the Company: Chief Executive
             Officer of l'Institut Pasteur.

         -   Other positions and offices held:

              In France:          - director of l'Institut Curie;
                                  - director of l'Institut Pasteur de Lille;
                                  - permanent representative of l'Institut
                                    Pasteur on the board of
                                    directors of Aventis Pasteur;
                                  - member of the board of directors of l'Ecole
                                    Polytechnique;
                                  - member of the board of directors of College
                                    International de Philosophie;
                                  - member of the board of directors of LEEM
                                    Recherche.

              Outside France:     - director of l'Institut Pasteur de Montevideo
                                    (Uruguay);
                                  - director of l'Institut Pasteur de Hong Kong
                                    (China);
                                  - director of l'Institut Pasteur de
                                    Shangai (China);
                                  - director of l'Institut
                                    Pasteur de Seoul (South Korea).

         Arthur LAFFER, 63, U.S. nationality (independent director).
         Director since April 30, 2003. His term expires on the date of the
         general shareholders' meeting called to approve the Company's financial
         statements for fiscal year 2008.

         -   Principal position held outside the Company: Chairman and Chief
             Executive Officer of Laffer Associates and Laffer Investments.

         -   Other positions and offices held:

              Outside France:     - founding  member of the Policy Consultative
                                    Committee of the U.S.Congress;
                                  - member of the Council of Economic Advisors
                                    of Governor Schwartzenegger;
                                  - member of the board of directors or
                                    consultative  councils of Oxigene
                                    Inc., Nicholas-Applegate Growth Equity Fund,
                                    Petco Animal Supplies, Provide Commerce and
                                    MPS Group.

         Francis MAYER, 54, French nationality (independent director).
         Director since April 30, 2003. His term expires on the date of the
         general shareholders' meeting called to approve the Company's financial
         statements for fiscal year 2008.

         -   Principal position held outside the Company: Chief Executive
             Officer of Caisse des Depots et Consignations.

         -   Other positions and offices held:

              In France:          - member of the supervisory board of CNP
                                    Assurances;
                                  - member of the supervisory board of Ixis
                                    Capital Investment Bank;
                                  - member of the supervisory board and
                                    vice-president of Caisse
                                    Nationale des Caisses d'Epargne;
                                  - director of Accor;
                                  - director of Casino-Guichard-Perrachon;
                                  - director of Dexia.

         Serge MICHEL, 77, French nationality.
         Director since April 30, 2003. His term expires on the date of the
         general shareholders' meeting called to approve the Company's financial
         statements for fiscal year 2005.

         -   Principal position held outside the Company: Chairman of Soficot
             SAS.

         -   Other positions and offices held:

              In France:          - chairman of CIAM SAS;
                                  - chairman of SAS Carre des Champs Elysees;
                                  - chairman of the supervisory board of SEGEX;
                                  - member of the supervisory board of Compagnie
                                    des Eaux de Paris;
                                  - director of SARP Industries;
                                  - permanent representative of EDRIF on the
                                    supervisory board of Compagnie Generale
                                    des Eaux;
                                  - member of the supervisory board of Societe
                                    des Eaux de Trouville Deauville et
                                    Normandie;
                                  - permanent  representative of CEPH on the
                                    board of directors of SEDIBEX;
                                  - director of Vinci;
                                  - director of Eiffage;
                                  - director of LCC and Infonet Services.
              Outside France:     - member of the supervisory board of G+H
                                    Montage (Germany).

         Baudouin PROT, 52, French nationality (independent director).
         Director since April 30, 2003. His term expires on the date of the
         general shareholders' meeting called to approve the Company's financial
         statements for fiscal year 2008.

         -   Principal position held outside the Company: Director and Chief
             Executive Officer of BNP Paribas.

         -   Other positions and offices held:

              In France:          - member of the supervisory board of
                                    Pinault-Printemps-Redoute;
                                  - permanent representative of BNP Paribas on
                                    the supervisory board of Accor.
              Outside France:     - member of the board of directors of Pargesa
                                    Holding SA (Belgium);
                                  - member of the supervisory board of ERBE
                                   (Belgium).

         Georges RALLI, 56, French nationality.
         Director since April 30, 2003. His term expires on the date of the
         general shareholders' meeting called to approve the Company's financial
         statements for fiscal year 2005.

         -   Principal position held outside the Company: Executive Vice
             President of Lazard Freres SAS.

         -   Other positions and offices held:

              In France:          - executive vice president and managing
                                    partner of Lazard Freres SAS;
                                  - executive vice president and managing
                                    partner of Maison Lazard SAS;
                                  - president of Lazard Freres Gestion;
                                  - chairman and chief executive officer of
                                    Lazard Freres Banque;
                                  - director of Fonds Partenaires Gestion;
                                  - director of V.L.G.I.;
                                  - director of Chargeurs and of Silic;
                                  - deputy of Eurazeo.
              Outside France:     - deputy chairman of Lazard LLC (U.S.);
                                  - member of the executive  committee of Lazard
                                    Strategic  Coordination Company LLC (U.S.).

         Louis SCHWEITZER, 62, French nationality (independent director).
         Director since April 30, 2003. His term expires on the date of the
         general shareholders' meeting called to approve the Company's financial
         statements for fiscal year 2008.

         -   Principal position held outside the Company: Chairman and Chief
             Executive Officer of Renault.

         -   Other positions and offices held:

              In France:          - director of Renault Credit International -
                                    Banque;
                                  - director of Electricite de France;
                                  - director of BNP Paribas;
                                  - member of the consulting board of Banque de
                                    France.
              Outside France:     - chairman of the management board of
                                    Renault-Nissan BV;
                                  - member of the supervisory board of Philips
                                    (Netherlands);
                                  - director of AB Volvo (Sweden);
                                  - chairman of the board of directors of Astra
                                    Zeneca (United Kingdom);
                                  - member of the consulting board of Allianz
                                   (Germany).

         Murray STUART, 71, British nationality (independent director).
         Director since April 30, 2003. His term expires on the date of the
         general shareholders' meeting called to approve the Company's financial
         statements for fiscal year 2005.

         Other positions and offices held: None

6.2.1.2  Biographical information of directors

         Henri PROGLIO is a graduate of the HEC business school in Paris. He
         joined Compagnie Generale des Eaux in 1972 and was appointed President
         and Chief Executive Officer of CGEA in 1990. He was appointed Executive
         Vice President of Vivendi Universal and President and Chief Executive
         Officer of Vivendi Water in 1999. He became Chairman of the Company's
         Management Board in 2000 and Chairman of its Board of Directors and
         Chief Executive Officer in April 2003.

         Jean AZEMA holds an engineering degree from the Ecole Superieure
         d'Agriculture de Purpan (ESAP) as well as a degree from the Centre
         National d'Etudes Superieures de Securite Sociale (CNESS). He began his
         career at Caisse Regionale des Pyrenees Orientales from 1975 to 1978,
         and later worked at Caisse Regionale de l'Allier from 1979 to 1987.
         From 1987 to 1995, Mr. Azema served as director of account management
         and consolidation at Caisse Centrale des Assurances Mutuelles Agricoles
         (CCAMA) and director of insurance at CCAMA. In 1996, he was appointed
         Chief Executive Officer of Groupama Southwest and, in 1998, of Groupama
         South. In June 2000, Mr. Azema was appointed Chief Executive Officer of
         CCAMA. He has been the President of the French Federation of Mutual
         Insurance Companies (Federation Francaise des Societes d'Assurance
         Mutuelles) since December 2001. He has been the Chief Executive Officer
         of Groupama SA and of Federation Nationale Groupama since June 2000.

         Daniel BOUTON holds a degree in political science and is a graduate of
         the Ecole Nationale d'Administration (ENA). As part of the French
         financial controllers' civil service corps, he occupied a number of
         different positions in the French Ministry of Economy, Finance and
         Industry, including that of Budget Director, between 1988 and 1991.
         Since 1991 he has worked at Societe Generale, serving as Managing
         Director from 1993 to 1997, and as President from 1997 to the present.

         Jean-Marc ESPALIOUX holds degrees in political science, law and
         economics, is an alumnus of ENA and served in the French financial
         controllers' civil service corps from 1978 to 1983. In 1984 he joined
         Compagnie Generale des Eaux, where he served as Chief Financial Officer
         from 1987 to 1996 and as Deputy Managing Director from 1996 to 1997.
         Having been a director of Accor from 1987 to 1996, he was appointed to
         his current position as President of the Management Board of Accor in
         1997.

         Jacques ESPINASSE holds an MBA degree from the University of Michigan.
         Since 2002, Mr. Espinasse has served as Executive Vice President and
         Chief Financial Officer of Vivendi Universal. Prior to 2002, Mr.
         Espinasse was the Chief Executive Officer (from 1999) and a Director
         (from 2001) of TPS - Television Par Satellite. Before joining TPS, he
         held several senior positions within large French companies, including
         CEP Communication, and Groupe Larousse Nathan, where he was appointed
         Executive Vice President in 1984, and Groupe Havas, where he was
         appointed Chief Financial Officer in 1985 and, at the time of the
         privatization of Havas, served as Executive Vice President from 1987 to
         1994.

         Paul-Louis GIRARDOT was a Director and the Chief Executive Officer of
         Vivendi Universal until 1998. He was a member of the Company's
         supervisory board from October 2000 to April 2003, and has been serving
         as the Chairman of the Supervisory Board of Compagnie Generale des Eaux
         since 2001. His work is principally focused on developing the Company's
         outsourcing business in its water division.

         Philippe KOURILSKY is a graduate of the Ecole Polytechnique in France.
         He joined the Institut Pasteur in 1972, which he currently presides
         over as chief executive officer.

         Arthur LAFFER, PhD holds degrees in economics from Yale and Stanford
         Universities. He has a long and distinguished career in academia as
         well as in public service. He has held professorships at the
         Universities of Chicago, Southern California and Pepperdine. He has
         been Economic Director of the Federal Office of Management and Budget
         (1970), special advisor to the Secretary of the Treasury and to the
         Secretary of Defense (1972-1977) and a member of the Presidential
         Council of Economic Advisors (1981 to 1989). In 1979, he founded Laffer
         Associates, an economic research and consulting firm, of which he is
         currently the chairman and chief executive officer. He is also the
         founder, chairman and chief executive officer of Laffer Investments.

         Francis MAYER is a graduate of ENA and a tenured university professor.
         He joined the French Finance Ministry in 1979 where, after holding
         several positions, he became Deputy Director in 1994. In October 1997,
         Mr. Mayer was appointed President of the Paris Club, and in October
         1999 Vice President of the European Investment Bank. Mr. Mayer has been
         the Chief Executive Officer of the Caisse des Depots et Consignations
         (CDC) since October 2002.

         Serge MICHEL has spent his entire career in the construction and public
         works business, having served as Deputy Managing Director and President
         of SOCEA, President of S.G.E. until 1991, President of CISE until 1997
         and Deputy Managing Director of Compagnie Generale des Eaux (which
         became Vivendi Universal) until 1992. He is currently President of
         Soficot, founded in 1997.

         Baudouin PROT is a graduate of the HEC business school in Paris and
         ENA. From 1974 to 1983, Mr. Prot was successively the Deputy Prefect of
         the Franche-Comte region of France, French General Inspector of
         Finance, and the Deputy Director of Energy and Raw Materials of the
         Ministry of Industry. He joined Banque Nationale de Paris (BNP) in
         1983, where he served in various positions before becoming Executive
         Vice-President in 1992 and Chief Executive Officer in 1996. After
         having been a director and executive vice president of BNP Paribas
         since March 2000, he was named a director and chief executive officer
         of BNP Paribas in June 2003.

         Georges RALLI holds degrees in finance, political science (from the
         Paris Institute of Political Science (IEP)) and business. He began his
         banking career at Credit Lyonnais (1970-1981) and later headed the
         department of financial negotiations at Credit du Nord. In 1982 he
         served as Secretary of the Commission for the Development and
         Protection of Savings. In 1986, Mr. Ralli rejoined Lazard, becoming a
         managing partner in 1993 and then co-head of mergers and acquisitions
         at Lazard LLC in 1999. Since 2000, Mr. Ralli has been deputy chairman
         and a member of the executive committee of Lazard LLC (U.S.) and an
         executive vice president of Lazard Freres (Paris).

         Louis SCHWEITZER is a graduate of the Institut d'Etudes Politiques de
         Paris and ENA. He has served as Inspector of Finances and, from 1981 to
         1986, as Chief of Staff of Mr. Laurent Fabius, who over the same period
         was Deputy Minister of Budget, Minister of Industry and Research and
         Prime Minister of France. In 1986, Mr. Schweitzer joined Renault's
         senior management as Director, and later served as Director of Planning
         and Management Control, Chief Financial Officer (in 1989) and Executive
         Vice President. He became Chief Executive Officer of Renault in 1990
         and Chairman and Chief Executive Officer in May 1992.

         Murray STUART holds degrees in literature and law from the University
         of Glasgow, and is also trained as an accountant. He has pursued a
         career in industry, commerce and financial services. Mr. Stuart has
         worked for International Computers Plc (as Chief Financial Officer and
         Deputy Director), Metal Box plc and Carnaud Metalbox (as
         Vice-President) and Scottish Power Plc (as President from 1992 to
         2000). Until May 2002, he also served as Executive Vice President of
         the Audit Commission for Public Services in the UK, as President of
         Trust Hammersmith Hospitals NHS, an important public health education
         and research center in London, and as a director of Royal Bank of
         Scotland Group plc.

6.2.1.3  General Organization of the Company

         None of the Group's senior managers owns 1% or more of the Company's
         shares.

         The Company is organized into four operating divisions, each of which
         is represented at the level of the executive committee. Divisional work
         is also centralized at the Group level. This organization is designed
         to favor coherent development by reinforcing employee solidarity and
         cohesion, maximizing economies of scale and encouraging professionalism
         thanks to implementation of best practices across the Group.

         Following the change of the Company's corporate form on April 30, 2003,
         and in application of its governance principles, the Company's chairman
         and chief executive officer created an executive committee composed of
         seven members (all of whom, with the exception of Mr. Eric Marie de
         Ficquelmont, were members of the Company's former management board
         until April 30, 2003):

         -   Henri Proglio (Chairman and Chief Executive Officer),
         -   Jerome Contamine (Senior Executive Vice President),
         -   Eric Marie de Ficquelmont (Executive Vice President - Human
             Resources),
         -   Olivier Barbaroux (Executive Vice President, Head of Energy
             Services Division),
         -   Antoine Frerot (Executive Vice President, Head of Water Division),
         -   Denis Gasquet (Executive Vice President, Head of Waste Management
             Division), and
         -   Stephane Richard (Executive Vice President, Head of Transportation
             Division).

         The executive committee meets approximately every fifteen days, and is
         chaired by Mr. Henri Proglio. It helps to determine the principal
         strategy of the Group.

6.3      DIRECTOR AND EXECUTIVE OFFICER COMPENSATION

6.3.1    Compensation of Directors and Executive Officers

6.3.1.1  Compensation of the Chairman and Chief Executive Officer and of
         Directors

         Set forth below is the total compensation(38) (including benefits) paid
         during fiscal year 2004 to directors and the chairman and chief
         executive officer by the Company and by its subsidiaries as defined in
         article L.233-16 of the French Commercial Code (Code de commerce).

         o   Chairman and Chief Executive Officer's Compensation

         Compensation paid to Mr. Proglio in 2004 was determined according to
         terms proposed by the nominations and compensation committee and
         approved by the board of directors.

         During 2004, Mr. Proglio received the fixed portion of his compensation
         for 2004 as well as the variable portion of his compensation for the
         2003 fiscal year paid in early 2004, which was determined at the board
         of directors' meeting of April 5, 2004. He also received other
         benefits, as well as the directors' fees to which he was entitled as a
         director of Veolia Environnement and certain of its subsidiaries.

         Fixed Portion of 2004 Compensation

         The board of directors left the fixed portion of Mr. Proglio's
         compensation for the 2004 fiscal year unchanged from the prior year,
         equal to (euro)900,000.

         Variable Portion of the Compensation

         70% of the variable portion of compensation is based on the
         satisfaction of various performance criteria that have been
         pre-determined by the board of directors, while 30% is based on
         qualitative performance as determined by the board.

--------------------

38   With the exception of the chairman and chief executive officer, the members
     of the board of directors did not receive any compensation in 2004 other
     than the fees paid in connection with their participation in board or
     committee meetings (jetons de presence). The figures below therefore
     represent such persons' compensation for serving as directors only.

<PAGE>

         Variable compensation for 2003: At Mr. Proglio's request, given the
         losses that Veolia Environnement suffered in 2003, the qualitative
         portion of variable compensation to which he was otherwise entitled for
         fiscal year 2003 ((euro)202,980) was not awarded to him by the board of
         directors. The remaining 70% of variable compensation to which he was
         entitled was paid to him on April 30, 2004, in the amount of
         (euro)473,620.

         Variable compensation for 2004: The amount of Mr. Proglio's variable
         compensation in respect of the 2004 fiscal year was determined by the
         board of directors at its meeting of March 29, 2005, based on the
         recommendation of the nominations and compensation committee. This
         amount will be paid during the first half of 2005. The performance
         indicators used by the board to determine this amount, based on the
         objectives of the 2004 budget, were: the level of return on capital
         employed (excluding FCC), net recurring income and the improvement in
         net financial debt, with each indicator carrying a 1/3 weighting. Since
         each of these indicators had reached the desired level during 2004, the
         board of directors awarded Mr. Proglio variable compensation of
         (euro)850,000 for fiscal year 2004, including the qualitative part of
         the variable compensation.

         Other Benefits

         In addition to the fixed and variable compensation described above, Mr.
         Proglio received benefits in 2004 totaling (euro)3,898, relating to use
         of a company car.

         Directors' fees paid by Veolia Environnement and its subsidiaries

         In 2004, Mr. Proglio received net directors' fees from Veolia
         Environnement totaling (euro)24,517, which were paid in respect of the
         first three quarters of 2004 (fees due for the last quarter of 2004
         were paid in January 2005). This net amount of (euro)24,517 takes into
         account a CSG/RDS deduction for 2003 of (euro)1,733 that was recorded
         in December 2004.

         Mr. Proglio also received directors' fees from Veolia Environnement's
         subsidiaries in both France and abroad totaling (euro)70,395.

         Variation between Mr. Proglio's Compensation in 2003 and 2004

--------------------------------------------------------------------------------
              Total Gross Compensation in 2003:           1,613,143.00 euros
--------------------------------------------------------------------------------
              Total Gross Compensation in 2004:           1,472,430.00 euros
              Change 2003/2004:                           (-8.72%)

         The table below sets forth total gross compensation paid to Mr.
         Proglio in 2003 and 2004 (including fixed and variable compensation,
         directors' fees and benefits):

<TABLE>
                                                                        Directors'
                                                                       fees paid by                  Total gross
                                         Various compensation          subsidiaries    Benefits*    compensation
                                   ----------------------------------  ---------------------------------------------
                                   Fixed      Variable    Directors'
                                                         fees paid by
                                                              VE
     ---------------------------------------------------------------------------------------------------------------
<S>                               <C>         <C>           <C>           <C>            <C>         <C>
     Compensation paid in 2003    900,000     493,000       23,333        165,924        1,558       1,613,143**
     ---------------------------------------------------------------------------------------------------------------
     Compensation paid in 2004    900,000     473,620       24,517         70,395        3,898       1,472,430
     ---------------------------------------------------------------------------------------------------------------
</TABLE>
             * Related to a company car.
             ** In addition to fixed and variable compensation paid in 2003,
             this amount includes a corporate and tax reinstatement in respect
             of gross compensation paid in 2003 and a remaining balance of
             16,733 euros due in respect of fixed compensation for 2002.

         Retirement Plan

         Mr. Proglio benefits from a supplementary retirement plan that Veolia
Environnement provides to its senior management.

o        Board of Directors' Compensation

         Directors' Fees Paid in 2004

         The table below sets forth the amount of the fees paid to board
         directors during 2004 by both Veolia Environnement and its
         subsidiaries:

<TABLE>
     ---------------------------------------------------------------------------------------
                              Directors' fees paid by Veolia   Directors' fees paid by
                  Director             Environnement                Subsidiaries
                                        (in euros)                   (in euros)
     ---------------------------------------------------------------------------------------
<S>                                 <C>                           <C>
     Jean Azema                           35.625                         0
     ---------------------------------------------------------------------------------------
     Daniel Bouton                        26,250                         0
     ---------------------------------------------------------------------------------------
     Jean-Marc Espalioux                  35,625                         0
     ---------------------------------------------------------------------------------------
     Jacques Espinasse                    26,250                         0
     ---------------------------------------------------------------------------------------
     Paul-Louis Girardot                  35,625                      45,829
     ---------------------------------------------------------------------------------------
     Philippe Kourilsky                   26,250                         0
     ---------------------------------------------------------------------------------------
     Arthur Laffer                        19,687*                        0
     ---------------------------------------------------------------------------------------
     Francis Mayer                        26,250                         0
     ---------------------------------------------------------------------------------------
     Serge Michel                         48,750                      11,268
     ---------------------------------------------------------------------------------------
     Baudouin Prot                        26,250                         0
     ---------------------------------------------------------------------------------------
     Georges Ralli                        26,250                         0
     ---------------------------------------------------------------------------------------
     Louis Schweitzer                     35,625                         0
     ---------------------------------------------------------------------------------------
     Murray Stuart                        36,562*                        0
     ---------------------------------------------------------------------------------------
                * After withholding tax.
</TABLE>

         Total Amount and Division of Directors' Fees

         The shareholders' meeting of April 30, 2003 set the total annual amount
         of fees to be paid to the Company's directors at (euro)600,000. At its
         meeting of April 5, 2004, the board of directors followed the
         recommendation of the nominations and compensation committee and
         decided that the total amount of directors' fees for the 2004 fiscal
         year and the division thereof would be maintained at the same level
         paid in 2003. Accordingly, the (euro)600,000 total amount of directors'
         fees for the 2004 fiscal year was allocated as follows:

         o   Total amount: (euro)600,000

         o   Person acting in role of board member only: (euro)35,000 (fixed and
             not variable)

         o   Person acting in role of board member and committee member:
             (euro)47,500 (fixed and not variable)

         o   Person acting in role of board member and chairman of a committee:
             (euro)65,000 (fixed and not variable)

         The distribution of directors' fees proposed by the nominations and
         compensation committee and approved by the board of directors takes
         into account the individual workload and responsibilities of each board
         member and his or her participation in the work of board committees, if
         any.

         At its meeting of March 29, 2005, the board of directors decided not to
         propose to the combined general shareholders' meeting of May 12, 2005
         an increase in the total annual amount of fees to be paid to directors.

6.3.1.2  Compensation of Executive Committee Members

         In 2004, the aggregate amount of compensation paid to members of Veolia
         Environnement's executive committee for services in all capacities was
         (euro)3,328,800, of which (euro)2,280,000 represented the fixed portion
         of 2004 compensation and (euro)1,048,800 represented the variable
         portion of compensation relating to the 2003 fiscal year which was paid
         in the first quarter of 2004.

         The table below sets forth the total gross compensation (including
         fixed and variable compensation) paid to members of Veolia
         Environnement's executive committee (excluding the chairman and chief
         executive officer) in 2003 and 2004:

<TABLE>
                                       ----------------------------------------------------------------------
                                       Fixed compensation   Variable compensation      Total compensation
 ------------------------------------------------------------------------------------------------------------
<S>                   <C>                   <C>                    <C>                     <C>
 Compensation paid in 2003*                 2,208,874              810,000                 3,018,874
 ------------------------------------------------------------------------------------------------------------
 Compensation paid in 2004**                2,280,000             1,048,800                3,328,800
 ------------------------------------------------------------------------------------------------------------
</TABLE>
              *  Includes the variable compensation due in respect of the 2002
              fiscal year and paid in 2003.
              ** Includes the variable compensation due in respect of the 2003
                 fiscal year and paid in 2004.
6.3.2    Stock Option Plans

6.3.2.1  Stock options granted to the chairman and chief executive officer in
         2004 and options exercised during 2004
<TABLE>

------------------------------------------------------------------------------------------------------------------

                                                      Number of stock    Exercise Price  Expiration Date   Plan
 Stock options granted to each executive             options awarded /     (in euros)                      Number
director during 2004 and number of options           Number of shares
        exercised during 2004                        subscribed for or
                                                         purchased
------------------------------------------------------------------------------------------------------------------
<S>                                                       <C>                <C>         <C>               <C>
Options granted to the chairman and chief                 110,000            24.72        December 24,     Plan
executive officer during 2004 by VE and any other                                             2012         No. 5
company within the Group
------------------------------------------------------------------------------------------------------------------
Options exercised in 2004 by the chairman and                   0
chief executive officer
------------------------------------------------------------------------------------------------------------------
</TABLE>


6.3.2.2  Stock options granted to executive officers and employees in 2004 and
         options exercised during 2004
<TABLE>

------------------------------------------------------------------------------------------------------------------
  Stock options granted to non-director employees      Number of stock options    Average Weighted   Plan
 during 2004 and number of options exercised during  awarded / Number of shares    Exercise Price    Number
                        2004                         subscribed for or purchased
------------------------------------------------------------------------------------------------------------------
<S>                                                            <C>                     <C>          <C>
Options granted during 2004 by VE and any other
company within the Group to the 10 employees                   350,000                 24.72        Plan No. 5
receiving the highest number of options
------------------------------------------------------------------------------------------------------------------

Options exercised in 2004 by the 10 employees                     0
exercising the highest number of options
------------------------------------------------------------------------------------------------------------------
</TABLE>


6.3.3    Information concerning transactions entered into with members of the
         board of directors, management and supervisory bodies or with companies
         having directors in common with the Company

         Agreements were entered into or continued during the 2004 fiscal year
         with companies holding interest in the Company, or which are
         subsidiaries of the Company, having directors in common with Veolia
         Environnement.

         Agreements Authorized During the 2004 Fiscal Year

         See the special report of the statutory auditors attached as an annex
         to this reference document(39).

         Agreements Authorized During the Prior Fiscal Year and Executed During
         the 2004 Fiscal Year

         See the special report of the statutory auditors attached as an annex
         to this reference document(40).

6.3.4    Loans and Guarantees Granted in Favor of the Board of Directors,
         Management or Supervisory Bodies

         None.

6.3.5    Purchases, Sales or Transfers of the Company's Shares by Members of
         the Board of Directors or Any Person Having a Personal Relationship
         with the Latter

         In accordance with the procedure adopted by the Company in order to
         follow COB recommendation number 2002-01 and the provisions of Article
         L.621-18-2 of the Code monetaire et financier, directors disclosed to
         the Company transactions they had conducted in the Company's shares
         during fiscal year 2004. These disclosures indicated that during the
         first half of 2004, one director acquired 2,750 VE shares at an average
         price of 29.58 euros per share, and that no transactions occurred
         during the second half of 2004.

         Since the AMF's adoption of new rules regarding the Company's
         obligation to disclose transactions conducted by its directors in the
         Company's shares in application of Article L.621-18-2 of the Code
         monetaire et financier, directors have not conducted any purchase or
         sale of VE shares(41).

         Total transactions in VE shares conducted by directors in 2004
         therefore represent less than 0.0007% of the Company's share capital at
         December 31, 2004.

         Each director is subject to French and U.S. regulation relating to
         insider trading and the use or disclosure of inside information.
         Directors are also required to adhere to the Company's policy regarding
         trading in its shares (cf. ss.4.1.9.1 supra). Under this policy, the
         Company considers board members to be permanent insiders. Accordingly,
         directors may only effect purchases or sales of the Company's shares,
         directly or through an intermediary, under certain conditions and
         during certain limited time periods, notably after publication of the
         Company's annual and semi-annual results.

         As of the date of this reference document, directors held a total of
         14,614 VE shares, representing approximately 0.0036% of its outstanding
         share capital.

-----------------------

39   Available in the French version of the reference document (annexe 1, page 3
     of annexes).

40   Available in the French version of the reference document (annexe 1, page 3
     of annexes).

41   Based on director declarations.

<PAGE>

6.4      EMPLOYEE INTERESTS

6.4.1    Profit-Sharing Contracts and Participation Contracts

         Given the nature of its activities, the Company is unable to allocate
         any funds to a participation reserve, and therefore has not entered
         into any participation contracts. However, a profit-sharing plan
         applies to all Company employees, which aims to align employees'
         interests with those of the Company in terms of achieving defined
         earnings growth objectives over a three-year period.

         Generally, the Group favors expanding profit-sharing plans so as to
         give employees a vested interest in the progress made in the specific
         division in which they are employed. The measurement of such
         progress--and hence the level of profit-sharing--would be based on
         criteria specifically adapted to the work activity involved.

6.4.2    Stock Option Plans

         Pursuant to an authorization granted by the general shareholders'
         meeting of May 12, 2004 and in accordance with its 2004 stock option
         plan (Plan No. 5), on December 24, 2004 the board of directors awarded
         3,341,600 options to subscribe for shares, corresponding to
         approximately 0.82% of share capital on the day the stock option plan
         was authorized (which represents slightly more than half of the total
         amount authorized by the general shareholders' meeting of May 12,
         2004). These options were awarded to three categories of beneficiaries
         (for a total of 1,087 people):

              o    Category 1: Group senior executives (including members of
                   the executive committee), who received 32% of the options
                   awarded;

              o    Category 2: Group officers, who received 39% of the options
                   awarded; and

              o    Category 3: Group employees who distinguished themselves
                   through exceptional performance, who received 29% of the
                   options awarded.

         The exercise price of the options has been set at (euro)24.72 per
         share, which reflects the average of the 20 opening share prices of a
         VE share in the days preceding the board of directors' decision. Such
         exercise price does not include any discount.

         The board of directors also decided that all or part of the award of
         options to beneficiaries falling into categories 1 or 2 above was
         conditioned upon Veolia Environnement's having achieved a certain level
         of return on capital employed (ROCE) by the end of its 2005 fiscal
         year. Accordingly, these options will be awarded/not awarded as
         follows:
<TABLE>

        ---------------------------------------------------------------------------------------------------------------------
                     ROCE
                                (less than) 7.50%   (greater than    7.50% and (Less than) 8.50%   (greater than  8.50%
        % of options                                  or equal to)                                   or equal to)
        awarded
        ---------------------------------------------------------------------------------------------------------------------
<S>             <C>                           <C>                          <C>                                    <C>
                Category 1                    0%                           between 50% and 100%                   100%
        ---------------------------------------------------------------------------------------------------------------------
                Category 2                   50%                           between 75% and 100%                   100%
        ---------------------------------------------------------------------------------------------------------------------
</TABLE>

         For ROCE levels that fall between 7.50% and 8.50%, options will be
         awarded pro rata and increase linearly in 0.10% increments based on the
         level of ROCE achieved.

         In connection with the transition to IFRS, ROCE may be recalculated
         under the supervision of the nominations and compensation committee.
         Further, under the 2004 stock option plan, ROCE (whether recalculated
         or not) is defined as the profitability indicator bearing such name in
         Veolia Environnement's annual financial statements reviewed by its
         auditors, as set forth in its annual report filed annually with the
         AMF.

<TABLE>
     -------------------------------------------------------------------------------------------------------------------
                                 Subscription       Subscription      Subscription      Subscription       Purchase
                                    Options            Options           Options           Options          Options
                              ------------------------------------------------------------------------------------------
                                    2004 Plan          2003 Plan         2002 Plan         2001 Plan        2000 Plan
                              ------------------------------------------------------------------------------------------
                                     No. 5               No. 4              No. 3             No. 2             No. 1
     -------------------------------------------------------------------------------------------------------------------
<S>                             <C>               <C>                 <C>               <C>             <C>
     Date of shareholders'
     meeting                     May 12, 2004      April 25, 2002     June 21, 2000     June 21, 2000    June 21, 2000
     -------------------------------------------------------------------------------------------------------------------
     Date of management
     board meeting or board
     of directors' meeting     December 24, 2004   March 24, 2003   January 28, 2002  February 8, 2001   June 23, 2000
     -------------------------------------------------------------------------------------------------------------------
     Total number of options
     originally awarded            3,341,600          5,192,635         4,413,000         3,462,000         780,000
     -------------------------------------------------------------------------------------------------------------------
     Total number of shares
     originally granted            3,341,600          5,192,635         4,413,000         3,462,000         780,000
     -------------------------------------------------------------------------------------------------------------------
     Total number of shares
     after legal adjustments       3,341,600          5,192,635        4,418,959*        3,526,446*        784,201*
     -------------------------------------------------------------------------------------------------------------------
     Number of directors
     receiving awards                  1                 6                 5                 6               29
     -------------------------------------------------------------------------------------------------------------------
     Number of employees
     receiving awards                1,087              1,740             1,400             1,500             30
     -------------------------------------------------------------------------------------------------------------------
     Number of options
     remaining to be
     exercised at December         3,341,600          5,016,173**       4,374,744**       3,358,870**       692,370**
     31, 2004
     -------------------------------------------------------------------------------------------------------------------
     Beginning date for
     exercise                  December 25, 2007   March 25, 2006   January 29, 2005  February 9, 2004   June 24, 2003
     -------------------------------------------------------------------------------------------------------------------
     Expiration date           December 24, 2012   March 24, 2011   January 28, 2010  February 8, 2009   June 23, 2008
     -------------------------------------------------------------------------------------------------------------------
     Exercise price               24.72 euros        22.50 euros     37.25 euros***    41.25 euros***   31.92 euros***
     -------------------------------------------------------------------------------------------------------------------
     Options exercised                 0                  0                 0                 0             10,000
     -------------------------------------------------------------------------------------------------------------------
</TABLE>
           * Number of shares after subtraction of exercised options, adjusted
           to take into account transactions affecting the Company's share
           capital (issuance of stock warrants on December 17, 2001 and share
           capital increase with preferential subscription rights occurring on
           August 2, 2002).

           ** Number of shares after subtraction of cancelled options (departure
           of beneficiaries).

           *** Adjusted exercise prices to take into account transactions
           affecting the Company's share capital (issuance of stock warrants on
           December 17, 2001 and share capital increase with preferential
           subscription rights occurring on August 2, 2002). For memory, the
           original exercise prices for plans 1, 2 and 3 were 32.50 euros, 42
           euros and 37.53 euros, respectively.

6.4.3    Company Savings Plan and Employee Share Ownership Policy

         In connection with Vivendi Universal's gradual divestiture of its
         interest in Veolia Environnement, a group savings plan (PEG) was
         created in 2002 in order to allow employees of Veolia Environnement to
         transfer savings previously invested in Vivendi Universal savings plans
         to new savings plans established by Veolia Environnement.

         Group employees thereby had the possibility of investing in various
         instruments including monetary funds, VE shares and structured
         investment funds that guaranteed the preservation of capital and
         allowed for growth potential upon any increase in the price of VE
         shares.

         Veolia Environnement conducted a share capital increase in December
         2002 that was reserved for employees of the Group's French
         subsidiaries.

         Given conditions during 2003, no share capital increase reserved for
         employees was conducted that year.

         In 2004, Veolia Environnement decided to reinvigorate its strategy of
         encouraging employee shareholding by allowing non-French as well as
         French employees to participate in the PEG, with the objective of
         having its employees hold at least 5% of outstanding share capital in
         the future. Employees of Veolia Environnement's French subsidiaries as
         well as employees of subsidiaries located in 6 countries other than
         France thus had the possibility of investing in two different
         investment funds that hold interests in VE shares: a "classic" fund
         whose value fluctuates with the price of VE shares, and a "secured"
         fund that protects investors from a decline in the price of VE shares
         below the original subscription price.

         The share capital increase conducted on December 6, 2004 resulted in
         the issuance of 1,351,468 new shares and a corresponding increase in
         the Company's share capital of 6,757,340 euros, bringing Veolia
         Environnement's total share capital to 2,032,109,915 euros.

         Currently, given the share capital increases that occurred during 2002
         and 2004, approximately 30,000 employees own 0.62% of Veolia
         Environnement's share capital. More generally, 48,500 employees have
         active accounts in Veolia Environnement's PEG managed by Sequoia, i.e.,
         more than 1 in 3 employees in the seven countries in which the PEG is
         available.

<PAGE>

                                   CHAPTER 7
                         RECENT DEVELOPMENTS AND OUTLOOK

7.1      RECENT DEVELOPMENTS

Water

At the end of 2004, Veolia Water acquired a majority interest in the water
services company Stadtwerke, which manages municipal water services for the city
of Braunschweig in Lower Saxony, Germany, for a price of (euro)372.5 million.
This acquisition forms part of Veolia Water's strategy to pursue further
development in Europe, in particular Germany. The effects of the acquisition on
the water division's results (expected revenue to amount to approximately
(euro)270 million) will begin to be felt in the 2005 fiscal year.

Waste Management

At the beginning of 2005, the French Vice-Minister of Industry retained Onyx to
collect and recover biogas emissions emanating from waste located at a landfill
in Claye-Souilly, near Paris. This landfill, which has an annual capacity of one
million tons of waste on 214 hectares, is the largest in France in terms of
tonnage received. Onyx expects to begin operating at the site at the end of
December 2006 pursuant to a 15-year contract. Electricity produced at the site
(which is resold to EDF) is expected to grow from the 11 megawatts per year
produced currently to 27 megawatts per year in 2007, representing estimated
growth in revenues from sales of (euro)160 million over a 15-year period. In the
future, the electricity produced at the site should be able to satisfy the needs
of households in a city of 80,000 inhabitants within the Ile-de-France region,
which is a heavy importer of electricity.

Energy Services

Having signed a first contract in October 2004 for energy and fluid management
in the Lazio region of Rome, Siram, a subsidiary of Dalkia, won a second public
tender in the region of Ligurie involving 30 hospitals and approximately 8,000
beds. The 10-year contract, expected to generate revenues of approximately
(euro)440 million during this period, is being managed through a consortium of
companies. Siram's share in the contract amounts to approximately (euro)130
million over 10 years.

Dalkia has also just signed a framework agreement with the Nexans group, a
worldwide leader in cables and cabling systems. The agreement involves
maintenance and management of industrial utilities and overall building
management on six primary sites in France. The agreement aims to optimize the
relationship between quality and cost and to simplify the current management of
the sites.

Finally, Edenkia, a joint subsidiary of Dalkia and EDF, won a contract with
German brake manufacturer Continental to supply electrical energy and related
services at its site in Sarreguemines (Moselle). This 9-year contract includes
the supply of electrical energy (approximately 70GWh per year) and an evaluation
of the internal electrical network, followed by its renovation, expansion,
maintenance and operation. Edenkia has chosen EDF as its supplier of electricity
under the contract for the first three years and Dalkia as the on-site operator.
It is also overseeing work on the internal electrical network that is being
conducted by Clemessy (a subsidiary of Dalkia).

Transportation

In November 2004, Connex signed an agreement to acquire the 50% of the share
capital of Eurolines that it did not already own, for a price of (euro)22.6
million. This acquisition was finalized on March 9, 2005.

In Germany, Connex Cargo Logistics GmbH signed an agreement in January 2005
pursuant to which it will acquire 65% of DE Transport GmbH, a company
responsible for rail freight transport on the sites of Thyssen-Krupp and other
industrial clients in the port area of Dortmund. The agreement also calls for
Connex Cargo Logistics GmbH to acquire a 19% interest in DE Infrastruktur GmbH,
which is the owner of infrastructure relating to these activities. Completion of
the acquisition is conditioned upon approval by German competition authorities
(Bundeskartellamt). The annual revenues generated by the two companies in which
Connex Cargo Logistics GmbH intends to acquire an interest are estimated to be
approximately (euro)25 million.

In the United States, Connex won a public tender in February 2005 for the
management, operation and maintenance of a regional bus network in the Denver
area. The 3-year contract is expected to generate approximately (euro)25 million
in revenue.

7.2      OUTLOOK

The successful completion of Veolia Environnement's strategic refocusing on its
long-term, environmental service contracts and the sustained improvement in its
operating performance should enable the company to pursue further development
while enhancing profitability.

Based on its results and the market outlook, Veolia Environnement has set the
following objectives for itself for 2005: revenue growth of between 5% and 7%, a
double-digit rise in operating income and a further increase in free cash flow
(before major new expansion projects and after payment of the dividend).

In the medium-term, Veolia Environnement will seek further growth and higher
profitability (ROCE after-tax objective of over 10% in 2008). Veolia
Environnement also continues to have an objective of (euro)300 million in annual
recurring savings beginning in 2006 from the "Veolia Environnement 2005"
efficiency plan (cf. ss.4.1.4 and ss.5.1.1.5 supra).

--------------------------------------------------------------------------------
The objectives summarized above are based on data, assumptions and estimates
considered to be reasonable by Veolia Environnement. These data, assumptions and
estimates may change or be modified due to uncertainties relating to the
economic, financial, competitive and regulatory environment. Moreover, the
occurrence of certain risks described under "Risk Factors" in paragraph 4.7
above may have an impact on the Group's activities and its ability to realize
its objectives. In addition, the realization of its objectives is based upon the
assumption that Veolia Environnement successfully executes its commercial
strategy described under "Strategy" in paragraph 4.1.3 above. Veolia
Environnement provides no assurance that the objectives described in this
section will be realized, and it expressly disclaims any obligation or
undertaking to publish any updates or revisions to these objectives.
--------------------------------------------------------------------------------

<PAGE>

                                   SIGNATURES

         Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.

Dated:  April 19, 2005

                                         VEOLIA ENVIRONNEMENT


                                         By: /s/ Jerome Contamine
                                             ---------------------------
                                             Name: Jerome Contamine
                                             Title: Senior Executive President
                                                    and Chief Financial Officer