Veolia Environnement SA (VIE) Earnings Call Transcript & Summary

Renaud. I really -- I apologize, but we hear you -- we're hearing you with a lot of difficulty. So I'm going to suggest that we stop here. I'm really sorry because I know that you made yourself available for us. Perhaps we can reconnect with you by phone? Have a look over there. The technical team see if there's any way that we can join him on the phone, maybe a little bit later on, so we can hear you properly. It makes no sense if we're talking to you and we can't hear the explanations that you're giving us. So again, apologies, and we hope to be with you again later on this morning. Renaud. Right. I hope that these real-world examples of Veolia's impact in the energy sector, spoke to you, nonetheless, even for the examples that you didn't hear completely correctly. Estelle, so now, we have a better understanding globally of the energy market. You've presented your solutions. Perhaps you can tell us about your ambitions.

And before that, I guess it's a bit frustrating. We haven't heard properly Renaud because the second part of his presentation was an AI real-life example, how with AI, you can have a 5% reduction on top of already what we've done in terms of energy consumption. So that's a summary of it. Hopefully, we'll try to post live on the Internet like the explanation because I can tell you it's quite impressive. AI real life to help reducing the impact on the planet. So I think that's what it could be helpful for. Talking about our ambition. And let me wrap up a little bit a few of the key elements that we've seen this morning so far. First things first, Veolia is really positioned and uniquely positioned in a market which is local decarbonizing energy, which is the market of EUR 500 billion. So a very, very large one. I guess, from bioenergy, ancillary services, district heating and cooling network through to energy efficiency of building and industries. That's what we do. EUR 500 billion market, fast growing. And in a way, I'd rather to talking gigawatts, as you understood, 400 gigawatt of untapped reservoir here waiting to be tapped into. The customer demand is high through decarbonization and security of supply, including in a geopolitical context like the one we see. And Veolia is the perfect missing link between the centralized and the B2C really in the middle and uniquely placed because we can bundle together the various activities we have to offer a unique solution to our customer to tackle a lot of their challenges at the same time and as Claude said, to kill two birds with just one stone. That's exactly what we do in Veolia in this local decarbonizing energy. Big ambition, plus 50% by the end of the decade of production of bioenergy, plus 50% of production of ancillary services capacity, so up to 8 gigawatts and up to 3 gigawatts. And that's a very, very big acceleration compared to what we've done already. So acceleration, I said from the introduction is a key word today. All that, I guess, wouldn't count if I was not ready to put our money where our mouth is. But I am, we are ready to put our money where our mouth is. So we already invest around EUR 2 billion on equivalent by the end of the decade on the equivalent actual rate. And I want -- I'm ready to go from EUR 2 billion to EUR 4 billion by the end of the decade to grow this business. So a really big acceleration of money from Veolia ready to be deployed on all the best projects, which could have the best impact, the more leverage. Why do I say leverage? Because when Veolia invests money, and as I said, sometimes you don't need specific investment, but sometimes you do. Actually, we usually have a lot of partners and co-investors ready and happy and knocking on our door to co-invest with us. So EUR 1 for Veolia can make another EUR 1, EUR 2, EUR 3 of investment. So we have a larger impact then only the money we put because our unique positioning is really the value added we bring, the project we built together to tap into this untapped reservoir. That's our value added. So very big ambition, very big acceleration. And I guess a very big impact altogether for our customer, for the planet as well as for the security of supply and the strategic autonomy. So it's time I'm like -- how is it possible that we're not going faster and we are in Veolia going faster into tapping into this resource. It's a great one, ticking a lot of boxes, again, green, affordable and secure because local. So really, really ticks a lot of boxes. Good ambition, ready to put money and put our money where our mouth is. And you know what, we could even do more. We can even do more if. If what? And I'm always asked the question, okay, what would be if we were to not only go from here to here, but to there. And actually, the answer is alignment of SA and unlock the potential of reservoir and unlock because you have a lot of locks or a lot of blockage already, and you've understood that the procedure to get the authorization and the pace is really the critical one. So in a way, I'm showing to you this reservoir and saying, "You know what, let's mobilize to go quicker and to tap into that." 30% in Europe of the imported fossil fuel could be replaced by reservoir we have just here. So let's go quicker and let's fight in a way, together, let's mobilize will be a better word to have this authorization delay to go quicker so we can even aim higher into this reservoir. Thank you very much.

Thank you so much, Estelle. Thank you. We -- yes, I think we can give some applause for her energy and implication. We are going to have a specific regional focus with Gavin Graveson, who is Senior Executive VP for Veolia, Northern Europe. Before we invite you on stage, Gavin, perhaps you can tell us Estelle, why you chose London for this deep dive. We haven't broached the topic actually.

Yes. A few people have asked me over the last few minutes, why London after all Estelle? I guess to answer to that one. Maybe it's a little bit close to my heart, London. It's fair to say. Always a pleasure to be in this wonderful city. But actually, whether it was a way to show you energy in a business which is not necessarily known as the largest energy business we have in Veolia, we are very good in waste typically in the U.K. We are #1 by far of the waste market and recycling and so on and so forth. But in a business unit like that one, you will see from now until this afternoon that we do a lot of energy. Energy from the nonrecyclable waste energy from waste water, energy from solar panel on landfill, energy from flexibility and all the rest of it, even district heating. So I guess that was a way to show in real life the synergies between our various business in a location like that one.

That's very clear. Can you have a seat, Estelle and Gavin, I hand over the microphone to you.

Well, good morning, ladies and gentlemen, and thank you, Estelle. And I'm glad you've come to London because the market is changing. What the government has seen, they've issued their energy security strategy. It's important what they see. We need to move away now to 95% of our electricity generated by low carbon, but also secure, stop importing and it suits us that's what we do. So we're in that, and that is by 2030. That's quick. That's fast. There's a lot of changes for us and it's good. But also our biggest emitters on our heat, because we have historically here gas boilers, small gas boilers, is our biggest emitter of CO2. So again, the strategy is about increasing district heating from 3% to 20%. So we have good leads. We have good passion there with decentralized, low-carbon electricity, changing our heat network -- sorry, electrification of our fleet and moving forward. So what we do, we've already tried to do that today. And I'll show what our ambition is, where the government, like has given us EUR 25 million funding to help us. It shows where we're changing away from an old business to a new. And let me show you some examples. So we do, as Claude mentioned before, take waste nonrecyclable, we burn it. We burned 2.4 million tons, but we also generate 1.4 terawatt hours, 7 days a week, every week of the year. And our energy team here dedicated sell that on the market in an advanced 3-year strategy. So we understand what's going to happen and maximize that to have the ability to provide a consistent and proper low-carbon electricity there. But when we do that, our old landfill business is declining, and we realized that, and we knew that. But as the landfills close, they are a great asset base. And what we're doing now is converting them to solar farms. We've just opened in the South, the third largest solar farm in the U.K., on one of our landfills. And this a landfill is still open. So when it closes, we'll have more capacity to do that. So we see using our assets to change the market and deliver those solutions our clients want. So we've reached it doing energy from waste, solar on our landfills, but when I go to waste treatment, water treatment, we see 1 plant here and we used to import power to manage the water treatment. We realized by using our in-house expertise at energy efficiency we could reduce that demand but also by using our biogas team, we could produce more biogas by treating the sludges better and agitating them. So from being an importer, we now export power from this site. So it's changed the locals understand now this is a power generation from the sewage slush. So it's all about from our clients, not just maximizing low carbon, but also minimizing and helping them through that journey. Whoever it's virtual power plants we learn or [ flexibility ] we learn from our colleagues in Northern Europe, but also the government is a target to decarbonize the fleet. So in London, we run 100 electric vehicles. And hopefully, you'll come this afternoon to see them at our biggest site. Well, we have 54 vehicles running out of there, low noise, low emissions. But it's not just that. They are fed from the waste they collect. So the waste they collect, goes to one our energy waste plants where we burn it, create heat and power. We put a private wire in there, and we charge these vehicles. And we do the charging ourselves because the management of the batteries is key, and they go out every day. But what we found out, they came back and they had so much power left in them. And we're now the first in the world to do this, depower them at 4:00 to 6:00. So the grid has peak demands. Industry is still going at 4:00. Homes are [ gearing ] up to 6:00. So the peak there. So what we've done now is connected the vehicles back into the grid and taking the power out of them. One vehicle will look after 100 homes at that peak demand between 4:00 and 6:00. And therefore, we discharge back into the grid then charge at night when there's lower demand and the pricing is cheaper. So the clients see us being able to use their waste to power their vehicles, but add value back at the right flexibility as the market is changing. And when we come to that, the heat network, we have 3 heat networks today. The EUR 25 million fund, we're going to start digging up London again, unfortunately, and put another 3,000 homes connected to it. And the demand is there, whether it's public buildings or industry. They see the benefits of the district heating network, the CO2 reduction, we're going to do that. And the demand is constant, and it's increasing because people want security. They want district heating. And we've seen that where we have a scheme in Sheffield, our oldest. The demand was maximized out. We had as much as we could handle. And we realized we had to improve. So we put and we learned. We put some AI technology in, and we've looked at the history because this is 50 kilometers of pipes underground. And it's going there. You can't change it in 10 minutes, not like electric heater you have to predict. So we looked at the demand in the past. We looked at the weather, tied into the weather forecast we looked at what's going on at the universe disk when the working and the classes are and we can see the peak in demand and what we didn't want to do is pre-heat the clients who didn't need it. By the ability of doing that and changing the flows, because we have 50 kilometers, you cannot change it, you have to change it the night before and get ready for the demand in the morning, the peak demands. So it's that the balance is changing, a lot more peaks and that's why we try and maximize it at the right times and work with the clients to save CO2 but also have the ability to connect to more properties at those demands. The peak in the morning, 6:00 till 10:00, then it goes quiet sometimes 4:00 till 8:00. So we manage that with the clients, the weather forecast and what they need. But also on industry, some of the industry have seen the vision and there's one site here that developers developed 155 acres brand-new greenfield site, just for food and beverage manufacturing. And what they've asked us to do, we have done, we've put in there a whole connected low-carbon heat and cooling network. So you're in the food and beverage, you come to this brand-new site, we provide the heating when you process and make the food. We also provide the refrigeration for them. So they see it connected on this site, future-proofed, saving 30,000 tons of CO2. So people are seeing the advance and the changes how we have to invest, and it's what we would like to do with our clients, local, decentralized heat, cooling and a vision. But when we come to energy efficiency. So we try to obviously maximize our power. We also try to educate and help our clients. We also try to reduce it. So we have a lot of hospitals here that need work on and the government of funding that. And we're working on 7 major hospitals at the moment. Our concentrator one in Eastbourne. So the easy thing is reclad the building, put new double glazing in, new lighting. And this we did this with a hospital that's full. It's still operated. But also what they wanted to do is reduce CO2. So we put air heat pumps in, water heat pumps in. But where they park the cars, we put 1,000 megawatt solar car park above the cars. You drive your cars in now, the solar panel is above. This is saving the client GBP 200,000 per year. It's saving them 23,000 tons of CO2. It's making it local. It's using their asset to insulate, advance it, but using the power of the sun and the heat to help them on that journey. And they understand that, and that's why we're accelerating on our decarbonization of the hospitals. But that is a summary of where we are of working with our clients on all aspects. So the market has changed. They need to go to this 95% low energy low, sorry, low-carbon electricity. They need to expand the district heating. So whether it's industry, public buildings we've worked with them. On the transportation side, would advance on that side and hopefully have time to come and see that actually working today. Thank you very much for your time.

Thank you, Gavin. Please join us. Come and have a seat with us. Full transparency, we have been debating whether we go back to Dubai or not, and we have chosen not to just in case we have the same technical difficulties, but they will be preparing a detailed video that's going to be available shortly for you on the Veolia website. Right, we are going to be opening to your questions in just a little bit -- you know the drill, very simple. [Operator Instructions] Before we move on to the Q&A session and to place -- replace Veolia's strategy in the context of -- the broader context of the domestic market, perhaps understand where we're heading to in the next 2 or 3 years in terms of regulations, among other themes. I'm going to welcome our guest speaker. Her name is Caroline Bragg, She's Caroline Bragg. She is the interim CEO of the Association of Decentralized Energy. Hello, and welcome.

Thank you very much, and good morning, everyone. So I'd like to round off this morning's presentations with a little bit of a look at the domestic market here in the GB and what we can expect for the energy system and decarbonized energy in the next few years. So first, I think let's take a step back and look at where we are today. There is no doubt that the approach that we've taken over the last few decades to energy in this country needs to change. We are in a situation at the minute where the electricity system operator, the controlling mind of our electricity system has gone from redispatching about 5% of our wholesale market and to more up to about 65% at some point of the year at the moment. It is doing that with no end in sight if the current arrangements stay as they are and without the tools that it needs to do that properly. The second thing that we have seen is the approach to network infrastructure, investment and build-out is creating unintended consequences that both frustrate where we need to be deploying faster with much more pace in the areas that we need it, particularly, for example, in the North Sea, but it's also creating vicious cycles of increasing demand and pressure on the application process in areas that we don't. And finally, if we look to our buildings and our offices, we are in a situation at the minute where the markets we have for heat decarbonization and energy efficiency are not driving the rate and the pace of decarbonization that we need. That means over the last 3 years, we have paid over the odds during this time of crisis than we should have done, and it means that our climate change ambitions risk being frustrated, both at the end of the 2020s and into the 2030s. So what's being done about it? The response that we are taking both in terms of government and industries such as Veolia is moving to a profoundly more regional system than we have at the moment. And we see that in terms of governance, infrastructure and markets. If we look first at governance. This year, we will have the introduction of a future system operator. And for the very first time, regional energy strategic planners and a significant role for local authorities in strategic energy planning. We will also have a dedicated market facilitator to bring forward local electricity markets. Let's look at infrastructure. We are also seeing the fragmentation of a homogenous national gas grid into much more regional approaches to heat decarbonization. We've talked a little bit about that already. The heat network market in the U.K. is planned to go from 2% to 3% of where it is right now to 20% and by 2050, an enormous increase in what we see so far. And we're seeing that elsewhere as well. In the hydrogen networks that we are building in the Northeast and the Northwest, as well as what we would do on electricity. And thirdly, let's talk about markets. In GB, we have some of the highest levels of contracted for and tendered local electricity flexibility anywhere in the world. More than that, we are already responding to the level of constraint that we see on our electricity system with new markets, and in particular, the local constraints markets that we see being trialed at the minute by the electricity system operator in [indiscernible] in the South of Scotland. Finally, we are in the process of an enormous overhaul in our electricity markets arrangements. Whether that's through the wholesale market, whether that's through local markets or even network charges, there is absolutely no way that we can emerge into the new system that we need without markets that are far more specific to place than they are at the minute. So it all feels a bit of a change. But as we've seen today, the size of the potential in GB is enormous. We have a situation where we could be meeting 95 terawatt hours, about 20% of domestic heating demand, if not more, though the vast reservoir that Estelle has already talked about. The U.K. government itself thinks that 90% of that 95 terawatt hours could be met with domestic sources of heat, whether that's ambient heat, heat from industry, from data centers that we currently completely ignore. More than that, if you look at the electricity system operator, we could be accessing up to 13 gigawatts purely from the latent flexibility that exists in the ways that we are going to use energy at household business and industrial level. And thirdly, we know that industrial decarbonization is one of the biggest challenges that we face, not only in the energy sector but more broadly for our climate change ambitions. The way in which we can look at dispersed sites and their local potential for decarbonization means we can make a real dent in millions of tons of CO2. So finally, I just wanted to give a few remarks on what we do to not only continue the progress that we've made and that you've heard about today. But as we've talked about how we accelerate that, how we go far further. From my perspective, on industrial energy, we've seen huge steps forward, particularly with the first track clusters for hydrogen being announced. But we need a much bigger vision and one that takes into account what we can really do in disperse sites and their local potential for decarbonization. Secondly, as we've talked about already, we've already seen connections reform. We are going to be connecting new generation quicker in the years to come, but that needs to go deeper, and it needs to think much more radically about what we are doing at the distribution side. And thirdly, we need an ongoing focus on industrial energy efficiency and highly efficient combined heat and power. On building decarbonization, as I said, there is absolutely no way that the U.K. meets its sixth carbon budget in particular, in the early 2030s without massively further strides in building decarbonization. What we have seen over the last couple of months, which we very strongly welcome is some of the regulations that will drive that progress in heat network zoning and in investment in heat decarbonization more broadly. But we need to make sure that we get the detail of that right. And this is driving investment from multinationals from big GB players into our cities and towns. Secondly, we need to go further and to move from commitments into implementation of the commitments that the government has already made to make sure that investment in heat decarbonization is markedly more attractive for investment than investments in gas. And finally, we need to keep going with the approach that we take to energy efficiency towards much stronger markets, a stronger market signal at local level for the benefits that energy efficiency can bring to a decarbonized generation system. And then finally, if I may, to leave you with the kind of broader picture of where we need to get to. Flexibility needs to keep pace with the renewable generation deployment that we are planning over the next few decades. And the only way that we do that is that the new electricity system market arrangements we are putting in place now are really bold about unleashing markets for flexibility and reducing our reliance on gas. Secondly, in all of this, the future system operator and its local offshoots are going to be sat in the center of a system that is far more strategically planned than the system that we have today. In its transformation from what it is today, the electricity system operator to the future system operator, we need an organization that is fundamentally IT-led and is driving forward public accountability for the decisions that it makes. And finally, we've talked so much about networks and the infrastructure that we need for decarbonization. We need to be really bold about no longer thinking about networks in their silos of hydrogen, of heat, of electricity, of gas. We need a system where companies such as Veolia can invest in networks that incentivize efficiency and resilience across them so that we're pulling on our different network infrastructures for the benefit of the whole. Finally, I think it would be remiss, particularly in GB, not to think as we close today about the stakes that are involved in this. We've seen over the last 3 years, the vulnerability of our current system and the consequences of a lack of ambition in the next decade. The stakes could not be higher to move towards a domestic unflinchingly efficient and smart use of domestic sources of heat. Thank you very much.

Thank you so much, Caroline Bragg. Our guest speaker today, right? We now open the floor to your questions. Perhaps we can start by a question right here. We'll get to you right after this question. I see your hand raised.

Alexandre Roncier Bank of America. A question maybe broadly on targets and maybe we need to wait a few weeks for that. But do you have ambition about top line, some growth if you need to add pace to the industry? And equally, I mean, it's a big market. You've got big ambitions. Can we talk perhaps a little bit about margin? Do you think you're going out there to grab market share? Do you think you're going to have expansion in terms of margin? And perhaps more, I would say, broadly, I mean, we saw a lot of pipes in Saclay. So can you talk perhaps about capital intensity for those businesses? Are you still going to have a capital-light approach? Are you going to keep ownership of your assets? And what does that mean in terms of contract renewals and such?

I will start and maybe Claude, you will complement. I guess top line growth, yes, we're ambitioning top line growth. Basically, we're talking here, plus 50% by the end of the decade, roughly, we're talking high single-digit type of growth, of course, with ups and minuses depending on the years, excluding the energy price because as you know, it's passed through. So in a way, that's exactly the reason why we don't set ourselves an objective in turnover because if the energy price is up or down, it doesn't change the dynamic for us in terms of margin. And in a way, I care more about the number of gigawatts we will deploy rather than just the revenue, which can be up and down depending on the energy price. That's just to give you an idea. Second thing is, are we here to grab market share and sacrifice our margin? The answer is no. We want both. And we will have both, as we've demonstrated in the past and that's something super important, I would say, margin and ROCE are critical. So it's really the 2 together. So it's profitable and good return growth that we are looking for. And I would say not only looking for, but we have already in this portfolio, as we've shown today. But maybe, Claude, you want to expand.

And in capital intensity to further discuss with you, Alexandre and answer your question. You know that Estelle explained that we will -- we are ready to invest more, but we will keep our discipline in terms of internal rate of return. As I explained, we are ready to invest in very good projects, and we have very good projects on the financial side. And on the carbon reduction side as well. So it's really the combination of the 2. We have also different business models. Some are more capital intensive. Some are less capital incentive because there are services. And we can also, as Estelle said, leverage the money of partners. This is what we have done, for example, in a couple of projects in France, where we are combining the project -- we have developed the project, and we have found financial partners, and we keep, in fact, the operation of the facility. And by leveraging this, we can, I would say, put -- develop more projects with the same amount of money of Veolia.

And if we want to elaborate on what Claude said, basically, the -- on the 3 subsegments, we've discussed the first and the latter are lower capital intensive the network one is a little bit more. But Claude showed you some figures of real examples in the last 3 or 4 years in Braunschweig, Chekhov, in Budapest and in Prague, where all of them, the IRR was above 10%. So I think that's a demonstration by example, of even the higher intensity one, we can create value when we are.

Figures that are all available in the booklets that you've been distributed. So grab one, if you haven't had one yet. Thank you so much Estelle and Claude. Let's see if we can take an online question before we come back to the room. I still see you, and I'm getting to you right after this question, try and distribute the questions a little bit. What is the overall impact of high energy prices? Did you benefit from these high energy prices at all? If so, what do you expect for 2024?

Interesting question. I guess, as I said, energy prices are basically passed through for Veolia. There is no impact on our margin. So they're up, they are down in a way we manage. There is a little bit of lag effect at times on tariff, as we explain every quarter on our release of results. I guess, over the mid-long term, of course, the higher the energy price, the more there is demand for service, which is energy efficiency and saving energy. So in a way, over the mid-long term, it helps. But don't forget that there is another trend, which is decarbonization. So it's not only saving energy because I want to reduce my bill. But because I have to get less carbon and there is a double push to our service here. And shall I say in a way we could have a look at the energy price, including CO2 pricing which in Europe exist and is around EUR 90 per ton. So that's what makes some return on projects for our customers to come and see us. So I guess short term, no impact roughly. Mid-, long-term, a positive one, altogether because there is more demand for service in the combined energy and CO2 together price.

Thank you so much, Estelle. Right. Hold on. I see all of you. I will get to all of you, but first thank you for your patience sir. Let's have your question, please.

This is Ahmed from Jefferies. I've got sort of 3 questions. Just firstly, could you give us some context of the historical track record of the 3 divisions. So in terms of historical revenue growth, EBITDA growth, what's been achieved organically over the last couple of years. Then secondly, if I just sort of go through sort of your bioenergy and just if you could just help unpack that a little bit more. So to go to 3 gigawatts or so to go to 8 gigawatts, what sort of CapEx would that require? What sort of is the construction time around that? And how do you source the revenue? Is there a sort of payback period do you have in mind and the long-term offtake contracts match that payback period? And then my final question is actually on the district heating network. Again, a similar sort of question, what is going to #1 position in district heating networks means? Is that sort of more customers? Is it more infrastructure? And again, a time period of where that opportunity is.

Thank you for your question.

So thank you very much. So altogether, the 3 different -- I wouldn't call them division, I call them subsegment, but anyhow, the 3 of them individually do grow. Altogether, the fastest-growing are I would say, probably the bioenergy as well as the energy efficiency. But we've seen reconnection and very growth in the district heating since the war in Ukraine. So in a way, it's difficult to answer in general terms to your question because it was a slower growing market and now it's a faster growing market because security of supply has become more paramount in the last 2 years compared to what it was as well as security of price over the midterm. Altogether, 5% CAGR, so growth per year, which is higher than the average of the group and the EBITDA you have them on the slide. In terms of how to think of bioenergy business plan in a way, which I'm trying to get to your question, each project is very different, sorry to say that because the first thing to say, it's usually a byproduct. Typically, when you use a wastewater treatment plant to produce biogas, the CapEx increase to put the biogas and the monetization units is limited. Of course, if you had to build the overall wastewater treatment plant, it would be higher. So how do you isolate one for the other? It's at times a little bit difficult because it's built on existing assets we've got. So it's not necessarily have a high CapEx because in a way, the big chunk, the wastewater treatment plant in my example is already built. So it doesn't need to be built again. Same applies with landfills, same applies with energy from wastes. So in a way, it's usually an additional CapEx to increase the efficiency and to produce small or to connect to the grid, it's the type of CapEx we're thinking about. Hence, my comment on the fact that it was relatively low intensity in CapEx for this type of business model. But again, it's an add-on built on together with other stuff. Construction time, I'm happy you are asking the question, too long. That's exactly my call to action or call to fight for momentum in my last remark in my closing remarks, 4 years to get to put solar panel on the closed landfill. It's 3.5 years too much for me. And I'm not talking about changing regulation. A lot of things have to be checked and it is perfectly normal. But just to give you an example, we -- it's -- we cannot ask to have the connection to the grid in France before we have the planning and the permits. We cannot do the 2 in parallel. We have to do them one after the other. Actually, I think in the U.K., it's the opposite were around. You cannot get the planning and the permit before you have the authorization of the connection to the grid. Don't know what's worse. But 2 together are crazy because it means that instead of having everything and having a one single point of entry of all the authorization, and you know what guys, try to be quick. We are into sequences and checking boxes and so on and so forth. I must say, drive me nuts at times. When I compare everything and honestly, I'm usually asked which is the worst or the best countries in Europe. We're all not very good, I must say, it's years, the answer Guess where I'm heading in the U.S. with the IRA, we are talking months to get the -- yes, I will get money. I think it's 3 months to get the -- yes, you will get support from the government. And in the fourth month, you even have the cash in the bank. So in a way, we have a wonderful untapped potential under our feet today. We need momentum, we need pace and it's not like to scrap legislation. It's just to have pace into streamlining all that and be quick and time is of the essence. I'm absolutely convinced by that. But you have to -- in a way, it's a call for action for all of us in this room, if all convinced by that. And I can tell you, I'm constantly keeping the fight, but I'm convinced and maybe you can convince yourself around you, I'm sure. District heating, how do we grow district heating roughly? So Claude explained it earlier on, but you have a few things, which combined do the growth of the district heating. One is connection to existing district heating. And the people, they look at the difference between the cost or the price of getting your electricity and your heat from the centralized source or from the district heating. And we've seen in the last 2 years, many, many connection, new connection to existing district heating in Europe since the war on Ukraine, let's be honest because people realized that you know what, it goes like that and suddenly it goes through the roof versus district heating, your secured for 10 to 15 years, you exactly know what your tariff is going to be like, which is saving and security. So connection to the grid is the first driver. The second one is extension of the grid -- of the network, as in new buildings, new hospitals, whatever, which you go a little bit of another further mile, and you will see that this afternoon, I think in Landmann Way. So progressively, you expand the network. That's another one. Then you have a third trend, which is privatization. District heating in Europe is 75% basically publicly owned, 20%, 25% privately owned and operated. It happens that, I guess, the operational performance are exactly the same -- not the same when you talk about Veolia, and we talk about other players. 90% of efficiency of the network in Basel is like, wow. The average thing is more 72% or 73%, something like that. So we have a leakage, if you want, of heat of a quarter. So in a way, efficiency in just the way you manage network is a big driver because it's energy savings and money savings. So it's a big driver for growth. So it's the 3 combined. And that time, you can buy network as well. But again, you have a lot of sources of growth in this business. Sorry, it was a long answer, but 3 questions in one.

Absolutely. Perhaps we can continue with this question, which is a little bit of an extension to this coming from online. Do you intend to grow your Energy business outside of Europe?

Yes is the answer, and we are already outside Europe and with opportunities. Claude mentioned Braskem, for instance, so in South America, we are very much more on the industrial energy part in Southern America. We are already #1 in the energy efficiency in the Middle East. So the Enova example that we've seen, superfast growing. In Asia, we operate the first district cooling -- microgrid cooling system in Hong Kong, for the last, I don't know, 6 months or a year or something like that. Claude, you may remember as well. We have a university campuses type of activities in the U.S. So we already are present. And of course, we will develop where our services are needed. Where is it? When you have an intention of being decarbonizing, be more local and where we can make a difference, plus we want to be big when you play. I said always being the top 3 in the market is really paramount for us because it drives the pricing power and the ability to be selecting to be selective in our [indiscernible], which is something very, very key to drive margins in the end and not just revenue.

Thank you for this answer. Shall we take your question. Right here, please. And then who else had raised their hand here, here, here and there. Thank you.

Hello Tancrede Fulop from Morningstar. Thank you for the presentation. I have 2 questions. The first one, you said before that 15% of the group's turnover can be seen as cyclical. Could you give us the figure for the Energy business, and maybe for the 3 subsegments? And the second question for the networks. I think it's not a regulated asset-based model. So you must have some volume exposure and if you could shed some color on this volume exposure? And if global warming and warmer winter is a risk for this business?

So we'll start, but I'm sure Claude will have a lot of -- so we didn't say 15%, we said the opposite around, which is 85% is immune to macro. But it gets to the same answer, but I think it's important. On the 15%, I don't have the precise on top of my head, but let me give you a qualitative answer. Roughly the district heating, which is the 54% of it is totally immune. As Claude said earlier in the day, it's an essential service. So whatever happens, you always need to heat your home. You can have a little bit of a 0.5 degree less if you cannot afford it, blah, blah, blah, which we've seen, and we not even have seen it, but we've implemented because energy efficiency goes as well into reducing the consumption individually. So essential service, no exposure to macro whatever. On the energy efficiency of buildings and industries, so the 3-point-something billion, I would say the building ones is mainly malls as well as more NHS in the U.K., so hospitals, very immune really. The little bit which is less will be the industrial part of that bid, which is limited because it's EUR 750 million out of the EUR 3 billion, so it's limited. And within that, you have industries which are very resilient, say pharma, just to give an example and some which are a little bit less say automotive. So it's very limited even within this spot. So that's the general answer, and maybe Claude has a very limited exposure would be the answer. Volume exposure, that's an interesting one. Volume exposure is mainly linked to weather, you're right and we have ups and downs in weather. But people don't talk about global warming. They talk about climate change -- sorry my French words are coming to me, climate change because it's not only warm on average, yes, it is, but it's colder and warmer, but not at the time you intend it to be. In a way, we -- it's, what, minus 1 or 2 degrees in London today. it was minus 20 in Scandinavia. It doesn't mean that climate change is not happening. It means that it's not just warming every single day. The plus and the minuses are more extreme. So there is no direct impact, therefore, on climate change on the volume but there will be plus and minuses depending on the season. So that's why we usually isolate it in our figures to say, okay, the heating season was very cold or not very cold. That's pretty much it.

The way it's working with the regulation on district heating. We have a discussion with the regulator on how much we will produce for the next winter. And as I said, the price I set are set with a projection of -- which is, of course, a specific projection of the next winter. And this is what is really basing the tariff. So in terms of volumes, and what you're talking about, there is no volume exposure after. We have the risk of the climate of the year. This is the exposure of Veolia. It can be colder and it can be warmer for the winter. This is a real exposure on a yearly basis. And this is the way the discussion are handled with our regulator. And also what is interesting they've benchmarks. And they look at the benchmarks. And in all the countries we are operating, we are always best in class. Which is very important to set the tariff for the next heating season, as you all can understand.

I'm negotiating for us to take as many questions as possible. Ma'am perhaps we can hand you the microphone.

Janet Wood from New Power Report and also a member of Scottish Power Networks independent NetZero Advisory Council. And it's about delivery in the U.K., so maybe specifically for Gavin. As we heard from Caroline, we're seeing a new framework set up in the U.K. now for local delivery with regional energy system planners, local energy plans and distribution system operators in the electricity networks. Is that framework going to work for a company like Veolia to bring forward these things into delivery? And that framework is being set up now. So what would be on your wish list for those organizations as regards to their scope, their powers and so on?

Well, I think the local framework suits us because we're more local and more decentralized. And I think it's just really consistency between them all. There's a tendency to be separate and go in different ways. So we look at national picture. I think we would like some consistency on that. On the local, the ability maybe to help us deliver quicker, connect quicker and balance with the flexibility as well. So I think we're going to watch that very closely to see how it develops. But I think at the moment we see is a positive coming because I think we'll be able to act quicker and work with them. And we just want it to be, in certain respects, local, but also consistency across the U.K. in all aspects.

But I do understand you have the ability to do your wish list, Gavin, if you want to be more precise better.

That maybe my wish list is that we welcome it, yes. And the dialogue and debate happening is about is that can we react to it quickly? Yes, but can we have consistency between the different areas? So it isn't because we border across different sectors. And I think that's where the only concern we have.

Right. I'm been told we can take 2 more questions. Perhaps we take questions from here, and then we'll take your questions afterwards. Right. While you're moving on to that side of the room, you're going to hate me for this -- it's going to be 3 extra questions. I'm going to take one from online. Okay. Yes. You have the microphone with you? Okay. You want on that one.

Roger Morgan from [ City AM ]. You've been talking about obviously how much you want to be moving at pace with this strategy and aggressive with it. To what extent does that factor into M&A strategy moving forward and possibly the rationale for how it fits into that as well, either for or against.

M&A can play a role, but we don't need M&A as in we have organic growth potential would be the headline of my answer. So typically, when I said we have -- we are ready to invest EUR 2 billion more by the end of the decade from EUR 2 billion to EUR 4 billion. It includes CapEx and it includes M&A. So it's really potentially both or one and the other. We are already doing a few tuck-ins in the energy. We've acquired, for instance, good multiple biogas from wasted organic waste, I guess, in Germany in the last few months. So we're talking a few dozens of millions of investment in M&A. We are already doing this size. But it can be -- it can increase the pace to go for M&A, but we don't need it as in, we already have a lot of projects on organic growth. So it's probably going to be a combination of the two.

Yes. And if I may add something. You have seen that we have done on M&A. The track record of Veolia is very good. I was talking about Prague and Budapest because when we did the business plan, we looked at the project and we knew that we could provide a lot of value. So it's also looking at opportunities one by one and see where we can add value and when we can add value because it can be synergies with the other business or it can be operational efficiencies, whatever, then we can go and move on M&A. So it's really this. So we don't do M&A just to do M&A. We new -- we do M&A where we see an opportunity where we can bring a lot of value.

And I guess to expand on what you said, still keep a lot of figure in our investment because an investment, meaning CapEx or M&A, the two, it's exactly the same rule, at least ARR of what plus 4%, and we have other criteria. But this one is quite central.

Thank you. All right. Sorry, I had already attributed the next question. Do you forgive me, ma'am, we're listening.

[indiscernible] Sorry, 2 questions about the incineration of nonrecyclable. There's a general effort to reduce waste. So how can this activity be sustainable over the long term, if there's eventually less ways to burn? And second, it's still incineration. So even if you don't burn if you don't incinerate the waste and the fossil fuel is still high CO2 emitting. So how to decarbonize this, do you plan on capturing the CO2?

Good question. I guess, waste reduction, and I would say even recycling and even eco-design. So everything which we are promoting and we are doing decreases, of course, and it's very good news. What needs to be potentially recovered in another way as in energy. But if you look at the -- the 2 go alongside and I would give the example of Scandinavia, which for me is quite the paramount example of what you do kind of best in the waste sector. And you almost have no landfill anymore. But for the rest, you have half basically energy production from what's not recyclable, and the other have been recyclable. So we still have room for manoeuvre more recycling and more reduction of waste. But even when you do that, you still have a place for energy recovery out of it. So it's typically -- when I say nonrecyclable or nonrecyclable by being positive in terms of impact because at times, you could recycle but it could consume more energy to recycle than the energy you save by recycling it in a way or the CO2, you save by recycling it. So I guess, the big effort in my opinion, should go into eco-design to try to avoid being a situation where things are so difficult to recycle that you have to consume a lot of CO2 to get to have the various layers of some packaging to be removed and peeled one by one, which is the reality of a lot of things you find in your grocery -- your department store. So it really goes alongside. So we still have a lot of potential for energy recovery out of nonrecyclable waste and it's probably less so in the landfill business in a way, just to my point. Incineration and ICO2. Yes and no. as in basically in the waste, it goes into energy from waste, you have 60%, which is coming from organic type of consent and 40%, which is not which means that the 60% we emit, what we call biogenic CO2, so I don't want to become too technical here, but the biogenic CO2 so the 60% is neutral global warming wise. So in a way, you have 60%, which is good and 40%, which is, yes, with CO2, bad C02, it's a bit like cholesterol, sorry for my metaphor, which is a stupid one. You have the good and the bad one. The same applies to CO2. You have the good CO2, which is the biogenic, which is, in a way, accelerating the natural cycle of trees emitting CO2 and then coming back. And then you have the bad CO2, which is the fossil fuel one typically. So that's why energy from waste is better CO2 wise than burning fossil fuel. Trying to be -- but I would be happy after that, too, if you want to have a little bit of a deep dive into that.

If it's immediately understandable, then I think it's a good metaphor. Okay. I'm going to take one final question and then unfortunately, we'll have to wrap up. But as Estelle has just noted, we're going to have a lunch break, and you can continue the discussion there.

Maybe on the Energy efficiency business because you were selling that you sell energy in that business. I was wondering if you have any volume commitment. So is there any risk that if for example, you produce less, you would have to buy energy on the market at high prices? And the follow-up, just on the bioenergy part, you were talking about 8 gigawatt and 3 gigawatt by 2030. Just want to know if these 2 are cumulative. So if it's 8 plus 3? And how much of that has already been secured and if we should expect EBITDA to grow in line with the increase in capacity?

So net efficiency, no exposure to what you said, basically, so it doesn't happen. So we buy the energy on behalf of the customer, and we have a type of penalty or incentive to deliver savings of energy but we are not in a situation like you said. So contracts are very protective for us. The 8 and 3 are cumulative, so it's 8 gigawatts of bioenergy, plus 3 gigawatt of flexibility on the market. In a way, you could not add them up. It's really a different type of pockets of industry. And you can make the max with the type of margin we already do. As I said, we're not here to grow and sacrifice the margin. So yes, it will grow the business and the bottom line as well. But maybe, Claude, do you want to add.

Yes. And what we see, we see a high demand. And yes, a large fraction of that is secured. We have projects. But as Estelle explained, the project, they will take some time to get developed. So some of them, they are now and they are really, I would say, starting into commissioning. And some of them, they will come later. For example, when we are talking about the capacity of what we can install in landfills in France that will take time to -- the pipeline is secured. But the time to develop, we'll have to wait a little bit after -- in order to see that in the P&L of Veolia.

So in a way, the 8s and the 3, there is a list of projects behind which are located in various geographies across the globe, from the Middle East, Australia. We have a few in U.S., we have in Europe. So it's a sum of existing projects already identified and therefore secured and I'm sure about. Why not earlier than 2030? Because of the procedures.

Ladies and gentlemen, I'd like to thank you for your attention this morning. If I'm not mistaken Estelle, Claude, Gavin, you remain available to talk with our audience during the upcoming lunch break. It's a lunch buffet and refreshments. I hope you enjoy it. And of course, do remember that we are hoping that you'll join us this afternoon to visit Landmann Way to see the solutions, experiment them, not just hear about them. Thank you so much.