Acquisition of GE Water Stepping up into the Industrial Water - - PowerPoint PPT Presentation

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Acquisition of GE Water Stepping up into the Industrial Water - - PowerPoint PPT Presentation

Acquisition of GE Water Stepping up into the Industrial Water Services Market March 8 th , 2017 Disclaimer Certain information included in this press release and other statements or materials published by SUEZ are not historical facts but are


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Acquisition of GE Water

Stepping up into the Industrial Water Services Market

March 8th, 2017

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Disclaimer

2 I

Certain information included in this press release and other statements or materials published by SUEZ are not historical facts but are forward-looking statements. These forward-looking statements are based on current beliefs, expectations and assumptions, including, without limitation, assumptions regarding present and future business strategies (including the successful integration of GE Water & Process Technologies within the Group and potential related synergies) and the environment in which SUEZ operates. They involve known and unknown risks, uncertainties and other factors, which may cause actual results, performance or achievements, or industry results or other events, to be materially different from those expressed or implied by these forward-looking statements. Forward-looking statements speak only as of the date of this press release and, subject to any legal requirement, SUEZ expressly disclaims any obligation or undertaking to release any update or revisions to any forward-looking statements included in this press release to reflect any change in expectations or any change in events, conditions or circumstances

  • n which these forward-looking statements are based. Such forward looking statements are for illustrative purposes only.

Forward-looking information and statements are not guarantees of future performances and are subject to various risks and uncertainties, many of which are difficult to predict and generally beyond the control of SUEZ. Actual results could differ materially from those expressed in, or implied or projected by, forward-looking information and statements. These risks and uncertainties include those discussed or identified under Chapter 4 “Risk factors” in the Registration Document (Document de Référence) of SUEZ which has been filed with the French Financial Markets Authority on April 4, 2016 under number D-16-027. This press release includes only summary information and does not purport to be comprehensive. No reliance should be placed on the accuracy or completeness of the information or opinions contained in this press release. Information related to GE Water & Process Technologies (including 2016 financial figures) set out in this press release are based on information provided to SUEZ by GE Water & Process Technologies within the context of the acquisition process. These financial figures have not been audited or subject to a limited review by the auditors of SUEZ. This press release does not contain or constitute an offer of securities for sale or an invitation or inducement to invest in securities in France, the United States or any other jurisdiction.

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Agenda

Introduction I Stepping up into the Industrial Water Services Market

Jean-Louis Chaussade, CEO

Section 1 I GE Water: Unparalleled Industrial Water Platform

Jean-Louis Chaussade, CEO

Section 2 I A Major Step Forward in Accelerating SUEZ’s Strategy

Jean-Louis Chaussade, CEO

Section 3 I A Value Enhancing Transaction

Christophe Cros, CFO

Conclusion I A Strategic Acquisition

Jean-Louis Chaussade, CEO

3 I

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Stepping up into the Industrial Water Services Market

Jean-Louis CHAUSSADE Chief Executive Officer

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 Transaction in line with group’s strategy, expanding offer for industrial

clients, reinforcing international footprint and boosting digital and innovation platform.

 All cash transaction, for an enterprise value of €3.2bn(2), with strategic

partner CDPQ

 A compelling value proposition for SUEZ shareholders: EPS accretive on

year 1, with strong revenue and cost synergies ; double-digit accretion based on run-rate cost synergies

 Unanimous support from the Board of Directors of SUEZ  Bridge financing fully secured, to be refinanced through a capital

increase, straight and hybrid debt

 SUEZ main shareholders, Engie, Criteria CaixaHolding and Caltagirone,

confirmed intention to participate in the capital increase

5 I

SUEZ to Acquire GE Water(1) and Become Major Player in Industrial Water Services

Notes: 1) “GE Water” stands for GE Water & Process Technologies 2) $3.4bn assuming EURUSD of 1.06

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GE Water: Unparalleled Industrial Water Platform

Jean-Louis CHAUSSADE Chief Executive Officer

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Unparalleled Industrial Water Platform

7 I

GE Water: Broadening an Unparalleled Industrial Water Solutions & Services Platform

1

Leading presence across the entire industrial water value chain GE Water enhances strong R&D and innovation capabilities An international and highly experienced management team

2 4 5

Operating in key growing industrial verticals with large blue-chip client portfolio

3

Complementary geographic footprint and strong go-to-market capabilities

6

A leading digital platform driving client retention

7

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Integrated chemical treatment solutions for utilities operations, hydrocarbon processing and industrial applications

Water Treatment Chemical Solutions Oil & Gas Process Chemical Treatment Industrial Process Chemical Treatment

  • Advanced cooling,

wastewater, boiler water, and membrane chemistry for all industries

  • Integrated solutions for

refining, oil & gas production chemicals

  • Dust control, fuel

treatment and scale control services

8 I

Systems c.$0.7bn Services c.$1.4bn

GE Water: Broadening an Unparalleled Industrial Water Solutions & Services Platform

Equipment and technology solutions for water and wastewater treatment, water reuse and outsourcing

Projects Analytical Instruments Products

  • Filters,

membranes, reverse osmosis equipment, electro- separation technologies

  • Technology,

products, and process engineering expertise

  • Total organic

carbon monitoring products and services for pharma, water and wastewater

Services

  • Water treatment
  • utsourcing and

mobile water solutions

  • Dedicated long-

term and spot service contracts

1

Integrated Digital Services Offering

Recurring Sales: 65% of Total Sales

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9 I

Leading Presence Across the Entire Industrial Water Value Chain

2

Present No/Limited Presence

Chemical Water Treatment and Related Services Operations & Maintenance Engineering, Procurement and Construction Equipment & Systems Monitoring / Analytics / Digital Services Instrumentation Industrial Water Solutions

Water

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10 I Market Dynamics Market Positioning

O&G Upstream O&G Downstream Mining Power Food & Beverage Pharma & Cosmetics Micro Electronics Expected average annual growth 2016 - 2020 12.3% 2.2% 5.9% 3.4% 4.3% 6.9%(1) 5.6%(1) Global Annual Expenditures 2016 (€bn) 14.0 5.0 6.2 12.3 17.4 0.8(1) 1.11) Solutions/ Services Offering

Key Clients

Operating in Key Growing Industrial Verticals with Large Blue-Chip Client Portfolio

3

WATER Source: Expected average annual growth from GWI

Longstanding relationship with a diversified and balanced portfolio of blue-chip clients

Note: 1) Based on total capex spend only

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GE Water Enhances Strong R&D and Innovation Capabilities

11 I

4

 ~350 scientists and engineers with strong domain expertise  Global optimised technology footprint with 12 R&D centers across four continents  Large portfolio of c.2,500 patents / applications  Current developments in:

  • Zero-liquid discharge solutions
  • Green cooling chemistry
  • New process membranes

 Highly recognized brands in the industry (Betz, Osmonics, Ionics…)

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A Leading Digital Platform Driving Client Retention

12 I

5

Value-add services

to increase efficiency

Asset optimisation,

real-time monitoring, and predictive maintenance

Data analytics

In-House Digital Solution: InSight

Cloud based asset management software

solutions

Integrated digital services

ranging from asset monitoring to developed digital customer service capabilities and digital sales

More than 4,000 customer sites served

globally with over 40,000 assets connected Strong value proposition to customers, strengthened customer relationships, drives growth and profitability

Analytics People InSight

Plant Optim. Asset Perf. Inventory SRC R&D Process Analysis Sensors Controllers Data

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13 I

Complementary Geographic Footprint and Strong Go-to-Market Capabilities

Europe

130 Countries

  • f operations

Presence in emerging markets

30%

29 manufacturing sites & service centres 12 R&D centres

  • c. 7,500

employees

€10.6bn €0.2bn €0.4bn

North America

€2.1bn €0.2bn €1.0bn

WATER WATER

East Asia Pacific

€1.9bn €0.4bn

WATER

€bn Combined (SUEZ + GE Water) 2016 Sales

GE Water Key Footprint Highlights

6

Global sales force with c. 3,000 sales, field service representatives and distributors

€1.2bn

Industrial Solutions Industrial Solutions

€0.5bn

Industrial Solutions €0.1bn

€0.5bn

MEA

€1.8bn

WATER

LATAM

€59m €118m €0.9bn

WATER

€14m €118m €177m

Industrial Solutions Industrial Solutions

€132m

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14 I

An International and Highly Experienced Management Team

7

Multicultural and international team 7 nationalities represented among the top 20 management team Key experienced managers of GE Water to join SUEZ 15 years of industry experience on average within the management team Strong expertise both in sales, supply chain and digital solutions Total team will include 7,500 employees from GE Water and 2,000 from SUEZ Smooth transition process Leverage strong awareness of SUEZ brand

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15 I

An Unparalleled Industrial Water Platform

3.6 2.7 2.5 2.4 2.0 2.0 1.9 1.6 1.1 1.0 0.5

WATER

+

Industrial Water Competitive Landscape (Sales in €bn(1))

WATER Note: 1) Financials converted at: 1.06 EURUSD exchange rate Ecolab: Global Energy division; Xylem: Based on Industrial Water and Public Utilities portions of Water Infrastructure and Applied Water divisions; Danaher: Water Quality; Solenis: latest available; Evoqua: latest available; Pentair: Industrial water focused divisions of the Flow & filtration solutions and Water quality systems segments

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A Major Step Forward in Accelerating SUEZ’s Strategy

Jean-Louis CHAUSSADE Chief Executive Officer

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A Major Step Forward in Accelerating SUEZ’s Strategy

17 I

Industrial Clients  International Development

Digital Services 

  • Global leader in water solutions to industrial clients
  • Expand suite of products and services
  • Access to large blue-chip customer base
  • From c. 34% to c. 40% of revenue generated with industrial clients
  • Market leadership in US and Europe
  • Strong complementarity in key growth geographies (e.g. Asia and

Latin America)

  • Rebalancing of geographic presence with c.40% generated outside

Europe

  • Full lifecycle management capabilities
  • InSight asset performance management system
  • Digital Service Centres and enhanced R&D

Enhances SUEZ’s long term profitable growth profile

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Industrial Water: a Dynamic €95bn(1) Market Driven By Strong Market & Regulatory Trends

18 I

Strong

  • utsourcing

trend

Strong outsourcing trend driven by the need for more cost effective solutions

Increased infrastructure spending

Tightened regulatory requirements regarding emissions and discharge limitations drive increase in infrastructure spending

Alternative water resources solutions

Growing need for water reuse solutions in industrial & municipal markets as a result of increasing water costs

Environmental Awareness

Supportive policy environment for circular economy and efficient resource management

Attractive growth prospects

Attractive global industrial water market expected to grow at a 5% p.a. until 2020, exceeding GDP growth

Mainly supported by population and industrial growth

Note: 1) As per GWI – 2016 data

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A Dedicated Industrial Water Business Unit with Strong Financial Partner

19 I SUEZ Industrial Solutions GE Water

+

70%

  • wnership

Industrial Water

30%

  • wnership

Water Europe Recycling & Recovery Europe International

27% 36% 21% 14% % of SUEZ’s proforma revenue by business unit

dedicated industrial water business unit

 CDPQ is an institutional investor with a strong track

record of delivering value through strategic partnerships

 Shared vision on the long-term prospects of the

industrial water market and SUEZ’s newly formed industrial water business unit

Strategic Partnership with CDPQ Creation of a Dedicated Industrial Water Business Unit

 Accelerate industrial water development with the

creation of a dedicated industrial water business unit

 SUEZ will combine its industrial solutions assets with

GE Water into a new business unit(1)

Geographic rebalancing towards international operations

Note: 1) Subject to work councils consultation

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A Value Enhancing Transaction

Christophe CROS Chief Financial Officer

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A Value Enhancing Transaction

21 I

Compelling valuation supported by solid cash conversion and synergies

1

Significant synergies to be derived from the transaction Strong value creation for SUEZ shareholders

2 4

Secured financing and solid proforma balance sheet

3

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€200m of revenues p.a. Cost Synergies Revenue Synergies Implementation Costs

Significant Synergies Identified

22 I

1 2 1- year of cost synergies over 2017-19

  • Significant revenue synergies

from cross-selling industrial water activities leveraging on SUEZ geographical footprint

  • Additional cross-selling
  • pportunities to be derived from

waste activities(1)

  • Manufacturing
  • Engineering
  • Service Operations
  • Purchasing
  • SG&A

€65m of EBITDA p.a. Run-rate identified Sources of synergies

Full benefit of costs & revenue synergies realized by year 5

  • c. 80% of cost synergies to be generated over the next 3 years

1

Note: 1) Not factored in synergy figures

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Compelling Valuation Supported by Solid Cash Conversion and Synergies

23 I

Strong and predictable cash flow generation

EBITDA Margin Cost Synergies Synergized EBITDA Margin

~13% ~3-4% ~16-17%

Cash Conversion Cost Synergies Synergized Cash Conversion

~72% ~6% ~78% 12.5x 10.0x

2016 EBITDA 2016 EBITDA + Cost Synergies

17.4x 12.8x

2016 Op CF 2016 Op CF + Cost Synergies

Synergies

(2)

Attractive Financial Profile(1) €3.2bn Consideration(1)

(3) (2) (2) (2)

2

WATER WATER Notes: 1) Based on 2016 estimated recurring EBITDA and capex excluding one-off implementation costs 2) Run-Rate Cost Synergies of €65m 3) (EBITDA – recurring capex) / EBITDA

Synergies

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Strong Value Creation for SUEZ Shareholders

24 I

Cash Conversion

Attractive cash conversion profile (> 70%)

FCF

Positive FCF from 2017 onwards

EPS

Double-digit accretion based on run- rate cost synergies EPS accretion as soon as 2017 without synergies

 Respect financial

discipline

 Maintain flexibility  Accelerated EPS growth

Value enhancing transaction fully consistent with SUEZ strict investment criteria

3

Topline Growth

Positioned in the fast-growing industrial water market Expected mid-single digit revenue growth in the industrial water market

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Secured Financing and Solid Proforma Balance Sheet

25 I

Parent Company

70% 30%

Envisaged Transaction Structure Key Financing Terms & Timing

 Bridge financing fully underwritten  Contemplated refinancing strategy designed to

preserve SUEZ strong investment grade rating profile

  • c. €0.7bn equity provided by CDPQ
  • c. €0.75bn capital increase
  • c. €0.6bn hybrid debt
  • c. €1.1bn senior debt

 Unanimous board approval and confirmed

intention from main shareholders to participate in the capital increase

 Closing expected by mid-2017 and subject

to customary regulatory approvals

4

WATER Industrial Solutions

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A Strategic Acquisition

Jean-Louis CHAUSSADE Chief Executive Officer

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27 I

A Strategic Acquisition

 Transaction in line with group’s strategy, expanding offer for industrial clients, reinforcing

international footprint and boosting digital and innovation platform.

 All cash transaction, for an enterprise value of €3.2bn, with strategic partner CDPQ  A compelling value proposition for SUEZ shareholders: EPS accretive on year 1, with strong

revenue and cost synergies ; double-digit accretion based on run-rate cost synergies

 Unanimous support from the Board of Directors of SUEZ  Bridge financing fully secured, to be refinanced through a capital

increase, straight and hybrid debt

 SUEZ main shareholders, Engie, Criteria CaixaHolding and Caltagirone,

confirmed intention to participate in the capital increase