Veolia

Introduction

Considering itself globally as the 'benchmark in environmental solutions' Veolia, formerly known as Vivendi and with many subsidiaries, provides services in four key areas. Water cycle management, waste recovery and recycling, energy efficiency and transportation of people and goods. Globally, in all sectors, they employ nearly 320000 people. Out of 32.6billion Euros of consolidated revenue, Water was the largest contributor with 34% of that revenue, Veolia Environmental Services (Waste) brought forth 28%, energy was 21% and transportation 17% . In water they are the second biggest supplier of water and wastewater services in the world. A vast global concern, they provide essential services in countries right across the globe. They were helped in their recent expansion by the unique system in France, which saw municipalities often outsource essential public services out to the private sector. Consequently they were in prime position to take advantage of the neo-liberal revolution that advocated and then practiced outsourcing from the public to private sector and partnership between the two. As an implicit and explicit consensus took hold: private was good and dynamic and the public was bad and stagnant.

In their annual report for 2007 Veolia are pretty pleased with the financial results borne from their expansionist strategy. Jérôme Contamine, Senior Executive Vice President said, “Our 2007 performance confirms our expansion strategy, which is based on the ability of Veolia Environnement’s teams to generate steady and sustainable organic growth in buoyant markets. This was complemented in 2007 by a policy of making selective acquisitions, which strengthen our leadership position.”. These aquisitions include buying out Thames Water stake in the joint venture Scottish Water Solutions and their PFI contracts for Wastewater Treatment Plants in Scotland.

In water Veolia advances the view that they are best placed to manage the diverse and increasing demands for water. They recognise that agriculture, industry and domestic needs - population growth and rapid urbanisation are both burgeoning - all have competing needs for water. In their annual report for 2007 Its implicitly clear they proclaim themselves as best placed to manage these competing interests, through their technolgical expertise, ability and resources . They dont mention costing as a mechanism to manage these interests. This is however the dominant policy prescription articulated by all the main actors in the water sector. The arguments goes that by placing in price adequate tariffs usage will be curbed and regulated. Moreover, by extension, water is categorised as a commodity like any other and one that they are fighting to win the right to supply or, more accurately, to sell.

Veolia has been plagued by controversy in recent times however. Prosecutions and convictions of employees on corruption charges have stained their name and accusations of environmental degradation and price-gouging persist . Veolia Water sector is clear that one of their top priorities is to pursue growth opportunities in Europe, Asia and the Middle East . Europe is where the vast majority of their business takes place: 44% in France itself and 36% elsewhere in Europe. Given that the bulk of their business is carried out in Europe its little surprise that Veolia lobbies so hard in and around the European Union.

Private Water companies providing the Poor: A Flawed Approach?

The policy deployed by Veolia to locate themselves in developed countries, such as in Europe, is evidence that the promotion of private business, mainly by governments and supra-national institutions, as the provider of water in the worlds poorest places is a flawed approach. Its clear that they are not motivated by notions of philanthrophy or altruism, rather they need to ensure they meet their legal obligation to provide their shareholders with a dividend from their investment. More often than not private companies cannot square the magic circle of increased investment, an increase in connections to the poor, appropriate and scaled progressive tariff systems that ensure access for the poor and the provision of dividends. For example, the model of Full-Cost Recovery designates that companies will only supply to those they believe can afford to pay them back. The worlds poorest do not fit that criteria. Indeed even the biggest companies recognies this fact, that water can be a risky business model and that they are not best placed to meet the needs of those without water and sanitation . Evidently, private water companies such as Veolia have acted within that context by looking for 'affarmage'contracts and relocating to what they perceive to be more stable, less turbulent and regulatory conducive countries. Only government and suprnational subsidies, grants, soft loans etc will placate, soothe and allay their concerns as recommended by the now famous Cammedessus Report. Effectively they are looking for monies from governments in a way that amounts to a form of corporate welfare. Achieving this goal requires time, effort and money into systematic lobbying efforts.

Serial and powerful Lobbyists

Political links

As befitting a company which requires a suitable and appropriate regulatory environment, as well as grants and 'soft' loans from governments and supra-national instutions Veolia has a formidable lobbying operation. As part of this strategy many members of their board have a history in politics. Therefore, people are employed who know the architecture of government, either national or the EU, thus placing Veolia in a strong position to exploit opportunities from policy initiatives. And, quite possibly much more importantly, gives Veolia the know how to influence policy affecting their business. The revolving door between politics and finance has saw various people from various political backgrounds recruited and then employed by Veolia. For instance Daniel Bouton is a former French Government official before entering into the private sector.

Controversy never far away

In the last 10 or so years Veolia, mainly as Vivendi, was forced to pull out of a plethora contracts they had across the world. Through various instances, of environmental degradation, instances of pollution, customer dissatisfaction, attacks on workers terms and conditions, reduction of staff cover, reduction in investments and higher tariffs have saw the forced withdrawal of Veolia from places as diverse as Argentina, the USA, Kenya, Puerto Rico and Brazil. While large fines have been accumulated in the UK for various prosecutions for incidents where there subsidiaries pollutted the wider environment . Its true to say that all of these practices have not happened at all places at all times, however they do indicate a general trend to maximise profit: an objective that often does not syncronise with social and environmental needs.

Again, as Vivendi multi-billion debts were accummulated a consequence of continual diversification and expansion into various sectors; a strategy that proved its undoing. An investigation in 2005 reported that 'the once-massive Vivendi Universal empire, of which Vivendi (now Veolia) Environnement was a part, was a maelstrom of corporate corruption and chaos, bribery convictions, raids on corporate offices by evidence-seeking securities investigators, class action suits filed by shareholders on both sides of the Atlantic, collapses in both its stock price and its credit rating, massive debt necessitating a fire-sale of assets, a discredited and ultimately ousted corporate chieftain, dizzying financial uncertainty, and an identity crisis' .

The perils of treating water like any other commodity is shown in the case of Vivendi. Providing an essential element for life is different from making and showing movies: yet water was part of the portfolio of a company that treated both equally: as a means to enhance their profit. To increase that profit they expanded their business in the entertainment industry; financed by money meant to upgrade vital infrastructure in France. This was described in the report by Public Citizen: 'As part of their contracts, Vivendi set aside a portion of revenues to be saved for maintenance and repair of the water system. A recent book by former Vivendi employee, Jean-Luc Touly, and investigative journalist, Roger Lenglet, reveals that by 1996 Vivendi’s “capital improvement” account added up to 27 billion Francs which were invested in a reinsurance company, General Re Financial Products. Lenglet and Touly claim that these funds were then used to finance Vivendi’s illfated end of the century buying spree. The French consumers’ 27 billion Francs, enough money to replace the entire water network of France, have gone down the drain, leaving Vivendi with a multi-billion dollar debt and the citizens of France with aging pipes in desperate need of rehabilitation . . Since then Veolia has spanned the globe for management contracts that enable them to profit without making any investment. Rather than them making the investment, the public does through higher tariffs, grants, subsidies, tax breaks etc.

Or, in other words

Veolia is seeking 'management contracts with clear cash flows and little in the way of capital commitment. These are contracts where the company can lease assets and collect revenue without being required to make any major capital investments in maintaining, expanding or rehabilitating the water system infrastructure. In other words, the public must pay for pipes, treatment plants and other infrastructure, and the company gets to make the money. The French term for the model is affermage, but several English phrases serve more than adequately to describe the arrangement; for instance, “corporate welfare,” “subsidy” or “consumer rip-off.”' . This is the type of deal that they have entered into in Scotland.

Corruption

In their pursuit of expansion of 'affermage' contracts Veolia, through Vivendi or Generale Des Eaux, has often stepped outside legal boundaries. Manifesting itself most prominently through the bribing of public officials in exchange for public contracts; happening so regularly that it seemed common practice.

Their were convictions of officials in the following places.

• Strasbourg, France, 1991
• St. Denis, Isle de La Reunion, France, 1996
• Angouleme, France, 1996
• New Orleans, Louisiana, USA, 2001
• Milan, Italy, 2001
• Bridgeport, Connecticut, USA, 2002

In recent times this litany of cases has increased. In Rockland, USA, a subsidiary of Veolia was recently made to pay the town $746000, $232500 fines and the rest legal fees for colluding with Rockland's former sewer superintendent in order to win a 1998 contract . Moreover, there is a lingering concern that in many of the places throughout the world where Veolia hold contracts that the regulatory and judicial environment is not as strong as where they have been prosecuted. Thus, making it easier to indulge in illegal activity if so inclined.

A Director of Veolia, Daniele Bouton, was under Judicial Investigation and placed under trial for apparent involvement in a multi- billion Euro money laundering scheme between France and Israel. Formerly Chief Executive of the bank Societie Generale he was forced to stand down after a banking scandal early in 2008 . Mr Bouton is still a Director of Veolia.

Veolia's transport section was also linked to a corruption case In Marbella, Spain. There officials were arrested on suspicion of bribery in connection with the renewal of the local transport concession granted by the Marbella local council .

Veolia and Israel

According to the French Embassy in Israel Veolia has been active in Israel since 1993 . Recently Veolia's links with Israel have provoked the ire of many groups concerned at the continued occupation of Palestinian land. As their most recent collaboration is for a tramline, to be constructed on occupied Palestinian territory in East Jerusalem. Other investments and interests they have in Israel include the Ashkelon desalination plant; the privatization and outsourcing of water and waste management services for local authorities;the government's energy savings tender for hospitals plus they have signed signed a cooperation agreement with the Israel Electric Company to provide electricity services for the Jerusalem Light Railway. Other projects include providing light railway lines in additional cities across the country; Veolia Transport already has won the tender to operate the Jerusalem Light Railway, which is expected to commence in 2009 . The investments by Veolia in Israel did inspire a response from the Dutch Bank ASN. They decided based on their ethical and social policy that it would end its relationship with Veolia Transport, and all companies that benefit from Israel's occupation of Palestinian territory .

People

Executive Team

• Henri Proglio, Chairman and Chief Executive Officer
• Jérôme Contamine, Senior Executive Vice President
• Olivier Barbaroux, Executive Vice President, Chairman of Veolia Energy-Dalkia
• Antoine Frérot, Executive Vice President, Chief Executive Officer of Veolia Water
• Denis Gasquet, Executive Vice President, Chief Executive Officer of Veolia Environmental Services
• Cyrille du Peloux, Executive Vice President, Chief Executive Officer of Veolia Transport
• Alain Tchernonog, General Secretary
• Véronique Rouzaud, Chief Human Resources Officer

The Board of Directors at March 31, 2008

• Jean Azema
• Daniel Bouton
• Jean-François Dehecq
• Augustin de Romanet de Beaune
• Jean-Marc Espalioux
• Paul-Louis Girardot
• Philippe Kourilsky
• Serge Michel
• Baudouin Prot
• Georges Ralli
• Paolo Scaroni
• Louis Schweitzer
• Murray Stuart

The Board of Directors for Veolia UK

• Frédéric Devos
• Richard Bienfait
• Michael Butcher
• The Rt Hon. John S. Gummer MP
• Philippe Guitard
• Etienne Petit
• David Alexander
• Jean-Claude Banon
• Jean-Dominique Mallet

Water: Key figures

• €10,927.4 million in revenue
• 60 operating countries
• 82,867 employees
• 78 million people provided with water service
• 53 million people provided with wastewater service
• More than 4,400 contracts managed around the world .