BUSINESS REPORT

Our businessesDegrémont designs, builds and commissions facilities for drinking water production, desalination by reverseosmosis, wastewater treatment and biosolids processing.Customers also call upon Degrémont to operate theirfacilities and provide all the services required to keep them running smoothly, such as replacement parts andrepairs, plant upgrades and operator training.The company and its specialised subsidiaries also deliverhigh-performance processes for specific tasks such asdisinfection, thermal drying and incineration of biosolids.

Our identityDegrémont, as part of SUEZ Environment, is acknowledged as the worldwide specialist in watertreatment and a pioneer of high-performance treatmentprocesses and innovative solutions.

Our valuesUnderpinning Degrémont’s development is a rigoroussystem of ethical compliance and an unflaggingcommitment to customers, shareholders, employees,specialised subsidiaries, the community at large and theenvironment. Our core values are customer service, team spirit, technical excellence, commitment andentrepreneurship.

Our peopleDegrémont has been operating in over 70 countries for morethan 60 years. Its organisational model combines a sharpfocus on local needs with the power of a major internationalgroup. In Europe, the United States and around the world,the men and women of Degrémont live and work close totheir customers. Organised as a knowledge network andbenefiting from extensive opportunities for internationalmobility, they provide the same high quality of watertreatment expertise and know-how wherever they are in theworld. Degrémont is a cohesive global task force of motivatedprofessionals with a passion for water treatment and ashared objective: to satisfy the needs of their customers,wherever they may be.

PROFILEWater treatment specialists for local authorities worldwide

EDITORIAL

DEGRÉMONT, AS PART OF SUEZ ENVIRONMENT, pursued its developmentin 2004 with a particular focus on international markets.In Mexico, the city of San Luis Potosí selected Degrémont to design and builda wastewater treatment facility with a capacity of 90,000 m3/day, and to operateit for 18 years.In Moscow, the German company WTE chose Degrémont as its partner to installone of the world’s largest ultrafiltration units at a 275,000 m3/day drinking waterfacility.In Chile, mining company Minera Escondida selected us to build a45,000 m3/day desalination facility to supply process water for the Antofagastacopper mine.In Milan, outstanding teamwork and focused technological support from theGroup enabled us to deliver a wastewater treatment facility 86 days ahead ofschedule, and earned us the contract to operate the plant as well.In Valenton, France, as well as operating and maintaining the Seine-Amontplant, we were selected to develop a new approach to re-using and marketingbiosolids, and to design an occupational health and safety policy based onOHSAS 18000 standards.

THESE SUCCESSES ARE EXEMPLARY in several respects. First, they are all very large projects. The Milan facility serves the equivalentof 1 million people, Valenton the equivalent of 2.4 million.Second, they demonstrate the global reach of the Degrémont name amongwater authorities as well as industrial customers. The growth of our maintenancebusiness is also an endorsement of our long-term vision as builders ofsustainable water treatment solutions.Above all, they demonstrate Degrémont’s ability to serve the entire watertreatment community and maintain solid positions in the drinking water,wastewater, desalination and biosolids markets.

THE COMPANY’S SUCCESS is built on all three of our core businesses – notonly on designing and building water treatment plants and providing relatedservices, but also on our more recent involvement as an equipment supplier. Wehave set up a dedicated organisation to drive the growth of our specialisedequipment subsidiaries such as Innoplana, Ozonia, Aquasource and InfilcoDegremont Inc. In 2004, we recorded strong sales of ozone equipment andincinerators in North America, and of Innoplana dryers in Europe.

OUR CONFIDENCE IN THE FUTURE is based on more than past successes.It is based on observation of the world around us, with ever more demandinghealth standards and a pressing need to meet basic water treatment needsaround the world. As a result, our increasingly affordable reverse osmosisdesalination technology and our technologies for re-using treated wastewaterin industry and agriculture make perfect sense in both human and economicterms. With a proven capacity for innovation and continual processimprovement, we are in an ideal position to meet our customers’ demandsand to step up to the new challenges of sustainable development.

Thierry MALLETChief Executive Officer, Degrémont

WITH TURNKEY FACILITIES,EQUIPMENT AND SERVICESAS ITS THREE COREBUSINESSES, DEGREMONTCONSTANTLY STRIVES TOIMPROVE CUSTOMERSERVICE AND SUPPORT,WITH SOLUTIONS CLOSELYTAILORED TO THE NEEDS OFITS CUSTOMERSTHROUGHOUT THE WORLD.

DEGREMONT Business Report

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Revenues (in thousands of euros)

2004 2003 2002

Degrémont SA 173,435 214,490 304,950

French subsidiaries 256,093 244,938 196,483

Other subsidiaries 402,964 418,800 466,742

832,492 878,228 968,175

Of which international sales 583,619 648,506 761,214

Revenues decreased by almost €45.74 million (5.21%). On a like-for-like basis, i.e., excluding exchange rate fluctuations and changesin the scope of consolidation, revenues decreased by €36 million, representing negative organic growth of 4.1%. Changes in the scopeof consolidation led to a decrease of €5 million in consolidated revenues: Hydrea and Agrochem were fully consolidated in 2004, butAquasistema was fully consolidated until 30 June 2003, and proportionately consolidated thereafter, and Car and Tacsa were fullyconsolidated until 30 June 2004 and proportionately consolidated thereafter. Exchange rate fluctuations, mainly a weaker Mexican pesoand US dollar and, to a lesser extent, a weaker Argentinian peso and Indian rupee, led to a decrease of €15 million in revenues.

Revenues by sector of activity(in millions of euros)

2004

Design and build 520.6

Equipment 97.7

O & M 107.0

BOT 34.5

Civil engineering 72.7

Total revenues at 31 December 2004 832.5

FINANCIAL STATEMENTS

DEGREMONT IN FIGURES• One billion people around the world served by Degrémont facilities • 10,000 facilities built worldwide for drinking water production,desalination by reverse osmosis, municipal wastewater treatment and sludge treatment • 3,800 staff, predominantly engineers andtechnicians • Revenues of €832 million in 2004 • R&D expenditures of €12 million in 2004 • More than 100 researchers inchemistry, microbiology and engineering.

GEOGRAPHICAL BREAKDOWN• 70% of revenues in international markets • 30% of revenues in France.

MILESTONES• KEY DATES • 1939 Degrémont founded • 1967 Degrémont joins the Lyonnaise des Eaux group • 1997 Degrémont becomeswholly owned subsidiary of Lyonnaise des Eaux.

• KEY CONTRACTS • 1948 First drinking water production plant, in Cairo, Egypt • 1953 Drinking water plant in Jakarta, Indonesia• 1956 First application of the Pulsator® clarification process, in Lima, Peru • 1975 First reverse osmosis desalination facility, inRiyadh, Saudi Arabia • 1988 First ultrafiltration unit, at Amoncourt, France • 2001 La Farfana wastewater facility, Santiago, Chile• Fujairah reverse osmosis desalination facility, United Arab Emirates • 2002 South Milan wastewater facility, Italy • Mariborwastewater treatment facility, Slovenia • Chenchin Lake drinking water facility, Taiwan • Rivière Capot drinking water facility, Martinique• 2004 Ultrafiltration drinking water production unit, Moscow.

• TECHNOLOGIES • 1954 Pulsator® • 1983 Densadeg® • 1984 Biofor® • 1990 Nara • 1991 IC850 • 2001 Ultrafor™, Biolysis®,Rictor®, Heliantis™.

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CONSOLIDATED COMPANIESPercentage of capital held at 31 December 2004

Country (%) Group Holding

FULLY CONSOLIDATED SUBSIDIARIESDEGREMONT S.A. FranceCATPI S.A. France 100.0DEGREMONT S.A.S. France 100.0DEGREMONT EXPLOITATION S.N.C. France 100.0FRANCE ASSAINISSEMENT S.A. France 100.0HYDREA (2) France 100.0AGROCHEM (2) France 100.0AWS G.M.B.H. Germany 100.0DEGREMONT S.P.A. Italy 100.0DEGREMONT S.A. Spain 100.0DEGREMONT S.A. Portugal 100.0DEGREMONT S.A. Belgique 74.9AQUASOURCE S.A.S. France 99.9SCHILLING CHEMIE GMBH & CO K.G. Germany 100.0OZONIA INTERNATIONAL HOLDING S.A. (3) France 100.0NICE HALIOTIS S.A. France 100.0INNOPLANA UMWELTTECHNIK A.G. Switzerland 69.2DEGREMONT S.A. Switzerland 100.0DEGREMONT LIMITED United Kingdom 100.0DEGREMONT A.S. Denmark 100.0DEGREMONT A.S. Norway 100.0DEGREMONT LIMITEE Canada 100.0NOVA SCOTIA Ltd (2) Canada 100.0DEGREMONT S.A. (4) Mexico 100.0DEGREMONT S.A. Argentina 100.0DEGREMONT LTDA Chile 100.0DEGREMONT LTDA Brazil 100.0GUANGDONG DEGREMONT China 100.0WATER ENGINEERING COMPANY DEGREMONT WTS CO. China 100.0DEGREMONT LIMITED China (Hong Kong) 100.0DEGREMONT MACAO China (Macao) 100.0DEGREMONT CO. LIMITED South Korea 100.0DEGREMONT LIMITED India 50.9DEGREMONT PRIVATE PROJECTS LIMITED India 100.0PT DEGREMONT Indonesia 100.0SERVICIOS DE AGUAS DE SALINA CRUZ SA DE CV Mexico 50.1TRATAMIENTO DE AGUAS DE PUEBLA SA DE CV Mexico 93.7INFILCO DEGREMONT INC. United States 100.0ANDERSON WATER SYSTEMS Canada 100.0TRIOGEN United Kingdom 100.0OZONIA A.G. Switzerland 100.0OZONIA NORTH AMERICA United States 100.0OZONIA KOREA (2) Korea 100.0

PROPORTIONATELY CONSOLIDATED SUBSIDIARIESAQUASISTEMA DE SALINA CRUZ SA DE CV Mexico 50.0CONCESIONARIA DE AGUAS RESIDUALESDE JUAREZ SA DE CV (1) Mexico 50.0TRATAMIENTO DE AGUAS DE CULIACAN SA DE CV (1) Mexico 49.7AS SAMRA (2) Jordan 50.0EXPLOITATION SERVICE ASSAINISSEMENT S.N.C. France 50.0GROUPEMENT RHODANIEN D’EPURATION S.N.C. France 30.0SOCIETE DAUPHINOISE D’ASSAINISSEMENT S.N.C. France 50.0HREP Canada 50.0

SUBSIDIARIES CARRIED UNDER THE EQUITY METHODARTE Mexico 41.0MILANO DEPUR Italy 22.5BOGOTANA DE AGUAS Y SANAMIENTO Colombia 49.0

(1) Fully consolidated until 30 June 2004, proportionately consolidated thereafter.(2) Consolidated in 2004.(3) Subsequent to merger of Ozonia SAS with Ozonia International.(4) Subsequent to merger of Aguaprocess with Degrémont Mexico.

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DEGREMONT Business Report

The broad spectrum of technologies available from Degrémont isa major competitive advantage in a market with such varied needs:a basic supply of clean water is the top priority for emergingcountries with limited access to this vital resource, while demandin industrialised countries is shaped by ever-higher standards ofhealth, safety, taste and appearance.

Growth in the water market in developed countries is driven bynew public health standards introduced at the instigation of theWorld Health Organisation. This renewed momentum in a billion-dollar market is one of the factors behind Degrémont’s commitmentto continuous innovation. With its membrane, ultraviolet, adsorptionand oxidation technologies, Degrémont delivers maximum watersafety, whatever the quality of the raw water, to stay constantlyabreast or ahead of new regulations.

WATER TO STAUNCH EVERY THIRSTIn developing countries, Degrémont’s researchers find the bestsolution to local economic and environmental challenges.

The Keur Momar Sarr facility in Dakar, financed by the World Bank,had to supply a growing population while improving distributedwater quality and protecting vulnerable aquifers. With theDegrémont solution, the water is pumped from Lake Guiers, 200kilometres to the north, and pretreated before passing through twoPulsator® clarifiers and Aquazur V® high-speed filters.

To supply the growing population of Kaohsiung, Taiwan’s second-largest city, the authorities opted to rehabilitate the drinking waterplant at Chenchin Lake and apply more stringent water hardnessstandards. Degrémont completed the site work in record time,increasing the facility’s capacity by a third and improving waterquality in just two years. As the raw water is very hard, it undergoeslime softening followed by dual-medium filtration. The dissolvedorganic pollution is then greatly reduced by an ozonation-filtrationstage using Carbacor GH granular activated carbon filters.

One factor in the success of both these ambitious programmeswas Degrémont’s ability to forge the partnerships needed to setup project financing and complete construction work.

DRINKING WATERGuaranteed quality in line with stricter standards

The Cristal® process is anadvanced membrane filtrationtechnology that combinesactivated carbon withUltrazur® ultrafiltrationmodules. Manufactured byDegrémont subsidiaryAquasource, the systemguarantees finished water ofimpeccable quality. Cristal®

uses a physical barrier todisinfect and clarify by holdingback pollutants – an effectiveway to solve problems oftaste, odour and pesticidepollution without altering thesalinity of the water. This wasthe technology chosen by thewater authority of the Angersmetropolitan area tomodernise its facility at Île-au-Bourg. The facilityproduces 120,000 m3/day of

very high quality drinkingwater from the Loire river andthe alluvial aquifer, with theirhigh levels of algae andsuspended solids, organic andbacterial pollutants, andmanganese. Cristal®

technology has also beenchosen to upgrade drinkingwater treatment in Moscow,where the largest drinkingwater facility in Europe usingCristal® is to be built. It willhave 56 ultrafiltration racksand 1,344 Ultrazur 450®

modules, and will have anoutput capacity of up to275,000 m3 per day, despitewater temperatures that canfall to 0.2°C. Three similarfacilities are planned to meetlong-term demand fromMoscow’s population.

From Angers to Moscow, ultrafiltration leads the way

Drinking water facility, Chenchin Lake, Taiwan.

Drinking water production, desalination, wastewater treatment and sludge processing: Degrémont is setting worldwide standards of excellence in these fast-growing markets.

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DESALINATIONCustomised solutions

Successful efforts to optimise energy consumption have madereverse osmosis increasingly economical to install and operate.It is now the solution of choice for a market where the potentialis enormous: although desalination so far supplies water toonly 60 million people, 39% of the world’s population livewithin 100 km of the sea.

Minera Escondida Limitada,Chile’s second-largest copperproducer and exporter,commissioned Degrémont to design and build adesalination plant to supply its Antofagasta copper mine,located in high desert 9,200feet above sea level. The taskinvolves taking sea water fromthe Pacific and treating it byreverse osmosis to supply adaily 45,000 m3 of processwater. This is the first time theprocess has been used onsuch a scale for the miningindustry. For pretreatment, the usual screening and gritremoval stages are combinedwith Degrémont’s innovativeAquadaf-Rictor® fast flotation

system. This compact system,low in power and reagentconsumption, gives flotationspeeds of 20 to 30 m/h thanksto an innovative floor thatprovides a uniform flow ofwater and so makes itpossible to regulate a bubblebed 1-2 metres thick. As aresult, the bubbles rise fasterthan the downward current,facilitating separation of theclarified water from the floc,which is removed at thesurface. This process suppliesthe facility’s four reserveosmosis racks, quickly andefficiently, with water of therequired standard.

Minera la Escondida: desalinated sea water at 9,200 ft altitude

17,136 sea water membranes for the desalination plant at Fujairah, United Arab Emirates.

The world’s first hybrid facility, at Fujairah in the United ArabEmirates, employed Degrémont’s expertise to incorporate thereverse osmosis process. The facility combines thermal desalinationwith a 170,000 m3/day reverse osmosis unit – the largest in theworld. Degrémont built the plant in twenty months, compared tothe three years it would normally take for a project of this scale.Effective management of Degrémont’s pool of competencies madeit possible to combine the Spanish subsidiary’s reverse osmosisknow-how with French expertise in pretreatment to develop a high-performance solution in record time. Fujairah is now a showcasefor this technology: all the region’s current desalination projectsinclude a reverse osmosis unit.

Degrémont has been involved in desalination since the 1970s,particularly through its specialised Spanish subsidiary, and is nowamong the world leaders in reverse osmosis. The technology usessemi-permeable membranes as a barrier to salts in suspension.Efficient and reliable pretreatment of the sea water prolongsmembrane life and optimises the system’s performance byminimising the membrane fouling index (or silt density index, SDI).

PRETREATMENT IS THE KEYDegrémont offers a comprehensive range of pretreatment solutions:aeration to oxidise iron, coagulation-flocculation and settling forsuspended solids, flotation, filtration, microfiltration, etc. Buildingon its experience with 250 desalination facilities around the world,Degrémont designs solutions that are tailored to every type of saltwater, from “easy” water with a fouling index of 1 or 2 to watermuch harder to treat, with fouling indices as high as 30.

e standards of excellence in these fast-growing markets.

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As the world’s big cities grow and resources become ever morevulnerable, sustainable water management depends ontreating wastewater thoroughly enough to avoid anyenvironmental or health impact and allow the treated water tobe re-used. The water re-use market is estimated at €500million a year, divided equally between Europe, the UnitedStates and the rest of the world.

Degrémont offers unique expertise in treating water prior toits release into the environment. The group has built 2,500municipal wastewater facilities all over the world, withcapacities ranging from 1,000 to 3,500,000 PE. In Egypt, theGabal El Asfar plant treats the Cairo region’s wastewater andreduces pollution of the Nile. In Chile, the La Farfana planttreats half the wastewater from the city of Santiago. And inFrance, the facility at Roumiguières treats water to a very highstandard for release into a river classified as part of a sensitiveecosystem.

NEW HORIZONSBuilt in 2004, the Roumiguières plant uses the Ultrafor™

biological treatment process, which combines a bioreactor withsubmerged membranes that trap bacteria and micro-organismswhile letting mineral salts pass through. With a footprint onlyhalf the size of conventional systems, the Ultrafor™ site blendsharmoniously into its surroundings. This is a cutting-edgeprocess for urban wastewater treatment, releasing effluent waterof extremely high quality.

The water released is so clean that it can be re-used forindustrial or agricultural purposes, as for example at San LuisPotosí in Mexico, where the treated water will be used forfarmland irrigation and for cooling water at the Reyes thermalpower plant.

With Degrémont’s wide range of technologies – the Sedipac®

reagent-free lamellar settling tank, Densadeg® with injectedcoagulants and flocculants, the Cyclor® sequential biological reactorand the Biofor® biofiltration process – the right treatment can beselected to suit the end use of the effluent, and noise, odour andvisual pollution can be minimised.

MUNICIPAL WASTEWATEREnvironmental protection and water re-use

Bora Bora in French Polynesianeeded to limit consumptionof drinking water by hotels at the same time as protectingthe island’s highly vulnerablegroundwater resources. The Degrémont solution that was chosen is a self-contained mobileultrafiltration unit called

Skid ReUse, installed as a tertiary treatment stage at the Povai wastewatertreatment plant.The module uses submergedUltrafor™ membranes, with no biological process, as a physical barrier to holdsback all parasites, bacteriaand even the smallest virus,producing water with turbiditylevels of drinking waterquality. Before the newprocess was adopted, the island’s treatedwastewater could only be used for irrigation, but thewater now released from theplant can be used for wateringparks and gardens and for washing floors, cars and boats.

French Polynesia: ultrafiltration for water re-use

La Farfana, Chile: 3.7 million PE (population equivalent).

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SLUDGENew approaches

An increasingly important question in wastewater treatment is whatto do with the waste sludge. As volumes of wastewater to be treatedgrow and regulations require ever higher levels of treatment, theamount of waste sludge produced is also increasing. Degrémontaddresses sludge issues from the earliest treatment process designstage. By considering sludge as a product in its own right,Degrémont has turned a constraint into an opportunity.

Whether at the water treatment stage or in the sludge product chain,most sludge is biological sludge. The Biolysis® process, integratedinto the treatment line, reduces the amount of biological sludgeinitially produced by 70 to 80%. It uses either a chemical process(Biolysis® O) or an enzyme process (Biolysis® E). Either processcan be mounted on skids and linked up to a treatment line thatis temporarily overloaded, for example where seasonal variationsare high.

REDUCING SLUDGE VOLUME: TAILORED SOLUTIONS Taking the sludge question into account right from the facilitydesign stage also means producing sludge of the right quality forthe intended final treatment. As well as the usual processes– thickening, dewatering and stabilisation – Degrémont offerstreatments specially designed for the local situation. Examplesinclude the IC850® technology, which offers small communitiesthe possibility of co-incineration in household waste furnaces, andthe simple, low-cost solar drying system Heliantis™.

Infilco Degrémont, the Group’sAmerican subsidiary, is theAmerican market leader with25 Thermylis™ incineratorssold to date. InfilcoDegrémont has incorporatedtwo Thermylis™ incineratorswith a unit capacity of 53tonnes per day in thewastewater treatment plant inCobb County, Georgia.

The Thermylis™ incineratorsoffered two advantages forthe county’s long-term sludgemanagement plan: low fuelconsumption and low gas

emissions. The system isbased on sludge injection on abed of hot sand held insuspension by an upflow of air.It reduces 1,000 kg of drymatter to just 300 kg of ash.The first plant in the MiddleEast to use the Thermylis™

process is in Tripoli, Lebanon,where two 1.5 t/h unitstogether treat 72 tonnes ofdry matter per day.

Thermylis™, from Cobb County, USA,to Tripoli, Lebanon

Degrémont drying methods are geared to a range of end uses,and the group has sold more than 30 sludge drying facilities todate. The Innodry® two-stage process saves energy and producesvery dry granules that can be used in agriculture or for powergeneration; Naratherm™, an indirect drying process, producespellets that can be used as farm fertiliser or for heat.

Sludge pellets ready for use.

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DEGREMONT Business Report

CONTRACTS

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USA - LOS ANGELESSelected by the MetropolitanWater District of SouthernCalifornia for the Skinner facility,five ozone units including powergenerators, control systems,

residual ozone destruction units,and spare parts. The totalcontract value is $8 million.

CANADA - HALIFAXHalifax Regional Municipality,Nova Scotia, Canada,commissioned Degrémont tobuild three plants to treat thewaters of Halifax Bay – a total of640,000 m3/day for €80 million.

MEXICO - SAN LUIS POTOSIDegrémont won a €263 millioncontract to design, build andoperate a 90,000 m3/daywastewater treatment facility for the town of San Luis Potosí,Mexico. The water treated under this 18-year contract will be re-used for agriculture and as cooling water in a thermalpower station.

CHILE - ANTOFAGASTADegrémont won a contract to build a 45,000 m3/day reverseosmosis desalination facility, to turn sea water into process

water for the Escondida coppermine. Minera Escondida is the country’s largest miningcompany.

RUSSIA - MOSCOWThe German company WTEWassertechnik GmbH choseDegrémont to build one of thelargest membrane ultrafiltrationplants in the world at the South-West Moscow drinkingwater facility. The facility willproduce 275,000 m3/day of ultrafiltered water for 1 million people.

FRANCE - VALENTONFrance’s highest-capacity sludgeprocessing facility, at the Parisregion wastewater authority’sSeine-Amont facility in Valenton,will produce some 85,000 tonnesof dried sludge granules at 90% dry matter.

FRANCE - DIJONRehabilitation of the Dijon-Longvicwastewater facility (400,000 PE)for €45.4 million, andconstruction of a 30,000 m3

stormwater basin and a thermalsludge drying plant.

FRANCE - ACHERESA total of eleven Biofor®

units are planned for the Parisregion wastewater authority’supgraded Seine-Aval facility inAchères. By the end of 2005, the facility will treat 1,500,000m3/day, equivalent to thewastewater output from 4 to 5million people.

BRAZILA €4.8 million industrial contract with paper pulpproducer Veracel, to build a12,000 m3/day demineralisationfacility using reverse osmosis and ion exchange processes.

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DEGREMONT Business Report

FRANCE - BORDEAUXRehabilitation of the 400,000 PE wastewater facility at Clos deHilde, for €38 million. The treatment line includesclarification/ flocculation withDensadeg 4D (5 lines, 14,000 m3/h) and biologicalfiltration with Biofor® C (12 modules, 8,100 m3/h).

FRANCE - STRASBOURGRehabilitation of the Strasbourgwastewater facility (1 million PE),at a cost of €9 million forequipment.

LEBANON - TRIPOLITwo Degrémont Thermylis™

fluidised bed incinerators (unit

capacity: 1.5 t/h) worth a total of €10 million to treat 72 tonnesof dry matter per day.

KOREA - PUSAN - DONG BUConstruction of a wastewatertreatment facility for the country’ssecond-largest city. The 500,000PE facility will have a capacity of 135,000 m3/day and will cost €20 million. It will include 6 Densadeg 3D units, 6 Biofor® DN units and 16 Biofor® N units.

MEXICO - MEXICALI Contract to rehabilitate an existing wastewater facility and build a new turnkey drinking water facility to supply600,000 people. The contract, for the Mexicali Public Services Commission, is worth€13.9 million and includesoperation of the new facility for one year.

ITALY - GELAA joint venture betweenDegrémont and OIS won a €25 million contract with an oil company to treat andrecycle groundwater for the power station at one of itsrefineries. Throughput will be 300 m3/h, with a recycling rate of about 70%.

INDIA - SIPATIn June 2004, the NationalThermal Power Corporationsigned a turnkey contract withDegrémont India for the design,engineering, construction and commissioning of a142,000 m3/day process waterproduction plant for its 500 MWthermal power station in Sipat,Madhya Pradesh.

CHINA - XIAMEN42 Biofor® modules under acontract worth €9.5 million.

ARGENTINA - BUENOS AIRESContract to extend the BuenosAires Sudoeste wastewater facility,for €2.7 million. A pretreatmentstage is to be added.

POLAND - WARSAWSale of two Innodry 2E units for sludge drying in Warsaw, for €2.6 million. Output capacitywill be 9,705 tonnes of dry matter per year.

Degrémont has hired 400 new staff members in the last two yearsand now employs a total of 3,800 people, mostly engineers andtechnicians. Degrémont is committed to helping all its employeesdevelop their skills and achieve excellence as the key to providingcustomers with world-class service.

That objective underpins the Degrémont recruitment strategy,which hinges on a long-term investment in the potential of youngpeople. At any given moment, approximately 100 trainees in theGroup’s various businesses provide a permanent pool forsubsequent recruitment, while block-release arrangements helpyoung staff members to develop their potential.

DEGREMONT’S GREATEST ASSETTraining is one of the pillars of the Group’s human resourcespolicy and accounts for nearly 4% of its payroll, or more than€3 million a year. Today, Degrémont is developing newapproaches to training that can be transposed to all its areas ofbusiness so that all its operations around the world can draw ona solid basis of expertise.

Staff mobility is another important way of maintaining the levelsof expertise required. The company’s human resources staffdevelop learning roadmaps to enhance the expertise of each staffmember, while knowledge management and mentoringprogrammes ensure that Degrémont staff capitalise on the uniqueexperience of the Group’s operations around the world. Througha corporate culture that values knowledge-sharing andcontinuous improvement, Degrémont is constantly enhancing thecapabilities of its people and their ability to deliver high-qualityservices to its customers.

HUMAN RESOURCESCapability planning for the long term

Sustainable development andenvironmental protection arecentral to Degrémont’s corebusinesses in the watersector. In a context whereevery contract involves aparticular community of waterusers and a particularenvironment, values andprinciples are not emptywords. Environmentalprotection is as much aphilosophy as a business goal:only through strict ethicalpractices based ontransparent businessprocesses and compliancewith laws and regulations canDegrémont secure sustainable

growth. This is the approachthat underpins Degrémont’srelationships with all itsstakeholders – customers,shareholders, employees,suppliers and subsidiaries.Whatever their native countryand culture, all Degrémontpartners share the same setof strategic core values:customer service, teamwork,excellence, commitment andentrepreneurship.

Core values and principles

Across the entire water treatment value chain, Degrémont coordinates its capabilities in engineering, equipment and services to tailor its solutions to the needs of each customer

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DESIGN-BUILDExemplary expertise

Degrémont has been in the design-build business since 1939and now has 10,000 facilities to its name around the world.Drawing on this unique experience, Degrémont is in a positionto design and build the right plant for each situation and tomake firm commitments in terms of performance, cost anddelivery times.

Degrémont combines first-class project management methodswith unrivalled water treatment expertise to assume responsibilityfor every stage of the design and execution of turnkey facilities.Working quickly and efficiently, Degrémont engineers draw up allthe plans required for execution and a network of technical expertschecks, validates and guarantees the performance of the plant. Acontract manager – also an engineer – coordinates on-site teamsright through to the commissioning stage. As well as guaranteeingplant efficiency and reliability, Degrémont offers ergonomicallydesigned facilities that are easier to operate and maintain.

OUR FIRST CORE BUSINESSDegrémont’s engineers and technicians propose long-term waterand sludge treatment solutions. The facilities they design combinetechnical and economic efficiency with careful consideration forthe surroundings and natural environment.

SIAAP, the Paris regionwastewater authority, wantedits new Seine-Amontwastewater facility toincorporate a sludge recoveryunit. The plant designed andbuilt by Degrémont and itspartner produces 85,000tonnes of dried granulatedsludge at 90% dry matter,making it the largest plant ofits kind in France and thesecond-largest in Europe.Seine-Amont will be the firstwastewater facility in theworld to upgrade all thesludge it produces.Degrémont proposed a hybridapproach in which part of thesludge is dried by a thermalprocess and minerals are

added to make it a readilymarketable farm fertiliser.Sludge unfit for this purpose isused as fuel, either on-site orby cement works and powerstations. Transforming all thesludge produced fromunwanted waste into amarketable product, this plantis a showcase for Degrémont’sability to design andimplement ambitious projectsfor sustainable development.

Valenton: engineering aims high

Degrémont designs minimise the impact of the plant on the healthand safety of staff, customers, partners and public. For the newdrinking water polishing unit at the Saint-Cloud reservoir in France,for instance, Degrémont adopted the French HQE environmentalquality management approach. Noise pollution was reduced to aminimum by roofing in potentially noisy structures. And as the facilitywas build on a greenfield site, special attention was paid to blendingthe architecture with the surrounding landscape – the plant wassunk below ground and surrounded with a wall of vegetation tointegrate perfectly with its natural environment. Degrémont andits partner Architectes Associés pour l’Environnement (AAE)achieved such good results that the French environmental andenergy efficiency agency Ademe used the plant as a model forfine-tuning its HQE label.

s to tailor its solutions to the needs of each customer.

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For more than 30 years, Degrémont has drawn on its watertreatment expertise to offer an ever wider range of services. In additionto plant operation, which is one of its core businesses, Degrémonthas developed a wide array support services to ensure trouble-free operation of water treatment facilities.

In France, some 300 Degrémont staff work on a day-to-day basisin some fifty facilities around the country. Elsewhere in the world,Degrémont has no fewer than 70 services contracts under way,from Malaysia to Mexico and from India to Spain.

Plant operation often follows on from a design-build contract, andDegrémont’s design-build experience is one of the keys to itssuccess in the market for plant operation and support. Degrémontteams are immediately operational and benefit from the expertiseof the entire Group to provide customers with the type of supportthey need, from the commissioning stage onwards.

CUSTOMER SUPPORTAs well as operating the facility, Degrémont supports its customersin setting up their own operating teams and procedures, maintainingthe plant and optimising its processes, providing technical assistanceand designing the tools required for operation. At the Seine-Amontwastewater facility in Valenton, for example, Degrémont will beimplementing a marketing policy for biosolids and a safety policygeared to the OHSAS 18000 standards.

SERVICESPlant operation and support

In Milan, Degrémont built amunicipal wastewater facilitythat serves the equivalent of 1 million people and wasdesigned from the outset toimprove the city environment.Building work began inSeptember 2002 and wascompleted just 21 monthslater in June 2004, 86 daysahead of the contractschedule. To achieve this,Degrémont Italy workedclosely with Group’stechnological support teams

to gain access to the entireGroup’s experience. It was thiseffective teamwork thatearned Degrémont thecontract to operate the plant.The same commitment topartnership led to the contractto operate the Seine-Amontplant, which treats wastewaterfrom 2.4 million residents ofthe Paris region. Degrémontwill operate the facility fortwelve years through Sequaris,a joint subsidiary ofDegrémont Services and Eauet Force. As well as operatingthe plant and maintaining itselectro-mechanicalequipment, Sequaris and its130-strong workforce willdevelop product-orientedsludge reprocessing andimplement a safety policyunder the OHSAS 18000standards.

South Milan and Valenton: design, build and operate

Degrémont also offers customers a range of services to assist inrunning and optimising specific equipment or incorporating it intothe treatment line.Drawing on Degrémont’s experience and expertise in design-buildand plant operation, this range of services covers such productsas Ultrazur® membrane ultrafiltration, the Thermylis™ incinerator,Innodry® 2E sludge drying, the Biolysis® sludge reduction systems,Biofor® biological filtration, Densadeg® clarifiers and proprietaryozone and UV systems.

Responding to increased demand for operation support andequipment-related services, Degrémont is developing a network ofpartnerships hinging on a commitment to transparency andopenness that is a key factor of the success of the Degrémontapproach to service provision.

Grimonpont, France, one of the plants operated by Degrémont Services.

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EQUIPMENTStandardised, optimised solutions

Manufactured and marketedby Ozonia, the Aquaray® H2Oeliminates pathogens with apowerful dose of UV lightdelivered by medium-pressurelamps strategically placed in areactor. Engineered withadvanced modelling tools todetermine optimum lampspacing and deflectorplacement, the systemprovides consistent, reliable

disinfection. Doses deliveredare validated by bioassaysperformed by DVGW, thebenchmark laboratory for UVdisinfection. There are nowAquaray® H2O units in a rangeof sizes, for throughputs of 10m3/h to over 1,500 m3/h.

UV disinfection

Innoplana’s Innodry 2E® sludge dryer.

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One of the keys to the overall performance of a water treatmentfacility is the intrinsic efficiency of its processes. Degrémont providesthese processes, mainly through specialised subsidiaries such asOzonia, Aquasource and Innoplana, as high-performanceequipment that can be incorporated in any facility.

Degrémont technologies are standardised for industrial production,and this is the basis of its key equipment developments, includingDensadeg® high-rate clarifier/thickeners, Aquadaf-Rictor® fastflotation units and the Biofor® biological filtration system. Anotherexample of this approach, and a fine illustration of Degrémont’sinnovative flair, is Ecoskid®, a self-contained Aquasourcemembrane filtration unit mounted on a mobile skid. For disinfectionand oxidation, Ozonia has added the Aquaray® H2O, developedby Infilco Degrémont, to its range of UV wastewater disinfectionequipment (Aquaray® HO and Aquaray® 3X) and standard ozonegenerators.

EQUIPMENT FOR THE ENTIRE THE WATER CYCLEDegrémont’s positioning in the equipment market offers analternative to the turnkey design-build approach and improves theGroup’s visibility in countries where both industry models coexist.As a full-catalogue supplier of water treatment equipment,Degrémont is expanding its footprint in Asia, Europe and the UnitedStates – where Infilco Degrémont has become the leader inincineration, with over 25 Thermylis® incinerators installed.

To benefit from growth in the equipment market, Degrémont setup a new Equipment division on 1 January 2005. The new divisionleverages the entire Group network to provide the equipmentsolutions that meet customers’ requirements most closely.

Sustainable development lies at the very heart of Degrémont’sbusiness. With water resources becoming ever more scarce andpollution risks ever more worrisome, Degrémont’s goal is to providesolutions that are sustainable and economically viable so thatcustomers can achieve their social and environmental targets.

Degrémont has developed a set of environmental efficiencyindicators to improve its technologies and treatment lines. Theseinclude indicators for each of the priorities set by the sixth EuropeanAction Programme adopted by the European Parliament in July2002: output of greenhouse gases, number of fish species presentin rivers, use of fossil fuels, waste production, etc. The result is ascorecard for assessing treatment lines and products in terms ofsustainable development. Degrémont uses the scorecard to setpriorities for improving the environmental performance of each ofits process.

ECONOMIC, SOCIAL, ENVIRONMENTALDegrémont’s main research priorities in terms of sustainabledevelopment are public health, reduction of waste and by-products,preservation of water resources and fossil fuels, and reduction ofnoise, odour and visual pollution from treatment facilities. TheHeliantis™ sludge drying process is an example of a solution thatwas designed to take all these goals into account. Heliantis™ limitswaste output, reducing the volume of a facility’s biosolids by four-fifths. It also reduces fossil fuel consumption by using a renewableenergy source and combats global warming because it producesno greenhouse gases. Heliantis™ is emblematic of Degrémont’ssustainable development policy – a policy that has earned theGroup’s French research centre, Cerdeg, the renewal of its ISO14001 certification.

SUSTAINABLE DEVELOPMENTInternal sustainability reviews

Marbella: a touch of green in the city

Solar sludge drying with Heliantis™ in Brumath, France.

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The Marbella wastewaterfacility is located in an urbanarea, close to residentialareas and shopping streets.Degrémont produced acreative and innovative

architectural and landscapingdesign for the waterpretreatment and treatmentbuilding, combining greenery,sand effects, steel and wood.The building has a living“green roof” with openings toshed natural light on theinspection walkways andequipment. Outer walls aredressed with sand-blastedconcrete, giving them a verynatural textured look. Thebuilding’s technical dimensionis suggested by plain stainlesssteel studs, while doors andthe wall of the walkway areclad in exotic woods. And allbuildings that generate noiseor odour are roofed in, makingthe facility as unobtrusive aspossible.

INNOVATIONImmediate application of innovative processes

Process technology is the main focus for Degrémont’s innovationefforts, since proprietary, patented technologies set the Group apartfrom its competitors and bring added reliability and efficiency tothe facilities where they are installed.

Degrémont invests close to €12 million a year in innovation andemploys some 80 permanent staff members, mostly engineers andtechnicians, in its four research centres. Cerdeg, near Paris, is ageneral research centre, the Denard centre (Richmond, USA)works on UV rays and their applications, the Zurich centre focuseson drying and ozone and the Toulouse centre specialises inmembranes.

APPLIED RESEARCHOriginal ideas or adaptations of technologies from other fields aretaken to the industrial production stage by Degrémont industrialdevelopment teams. These teams find the best way to incorporateinnovations into the treatment lines of both new and existingfacilities.

Cerdeg, one of the Group’s R&D centres.

Industrial pilots are set up either at the research centres or atoperational facilities to fine-tune the processes and prepare themfor full-scale incorporation into treatment lines. This approachbrings the benefits of Degrémont research and development tousers in the field with minimum delay.

Degrémont is also involved in broader programmes, working inpartnership with public research institutes and universities andcontributing to international conferences on developments in watertreatment technology. Through this involvement in the broaderresearch community, the Group is a major player in a sector thatis crucial for the planet’s sustainable development.

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The Degrémont continuous improvement programme, Omega,builds on the core values of expertise, rigour and sharing to offercustomers ever more efficient products and services.

With the Alpha project, which formalises the principles oforganisation of the Group’s European operations, and the Sigmaproject for management control, Omega is the point where all theGroup’s performance improvement efforts converge.

To optimise Degrémont’s expertise, Omega relies on a completeinventory of technical skills available within Degrémont to makesure the right people are assigned to each task. The inventory alsoprovides a valuable tool for planning in-house training in line withGroup strategy, and to work with each staff member to developtheir career plans. Omega is one of the pillars of the Group’s policyof excellence in human resources.

COMMON METHODS AND SHARINGOmega’s second workstream focuses on design methods andquality. A Group-wide survey is being conducted to pinpointpotential sources of non-quality and identify best practices in designand engineering methods. The approach also offers a valuableway of assessing new tools and identifying cultural factors in thesuccess of the Group’s strategy of sustainable growth. Theworkstream is also an opportunity to redefine methods andprocesses to make fullest use of the Group’s collective expertise.

Sharing knowledge is the third Omega workstream, and involvesactively promoting feedback from Degrémont operations anddeveloping an effective knowledge management system. Through

QUALITYThe strategic dimension of quality management

The Eau de Paris waterauthority commissionedDegrémont to design and buildits new 100,000 m3/day waterpolishing unit in one of thesections of the Saint-Clouddrinking water reservoir. Thereservoir is located in thesuburbs of Paris, and is valuedby area residents as a hugearea of parkland with not abuilding in sight.Degrémont is taking greatcare to ensure that thestructures blend in with theirsurroundings. Vegetation willconceal the new buildings,

leaving the green expanseunbroken as before. And byapplying the French HQEenvironmental qualitystandard, Degrémont will beable to keep noise pollution toa minimum, in particular byroofing in potentially noisystructures.

Environmental quality standards for the Saint-Cloud facility

the feedback project, the entire Group is becoming involved inimproving performance, making sure that errors are not repeatedand that best practice is adopted Group-wide. Feedback issystematically incorporated in the knowledge managementapproach and will ultimately become part of the same system. Asstaff requirements in terms of subject matter and access toknowledge are identified more closely, the system will develop intoa unique resource that leverages the combined know-how of theentire Group.

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SAFETYA crucial factor of performance

Safety is a major issue in Degrémont’s line of business, andincludes not only the safety of Degrémont equipment and staffbut also that of our partners and the areas surroundingDegrémont facilities. Over recent years, Degrémont hasintroduced a safety and accident prevention policy covering allits operations as part of the Group’s continuous improvementstrategy,.

The Degrémont safety policy is part of a far-reaching approach.Underlying principles are laid down by corporate managementand translated into directives that must be applied at every levelof the organisation and in every country of operation in line withlocal regulations. Managers are responsible for implementingsafety policy and monitoring practices in their own areas ofresponsibility. The Group training programme emphasises theimportance of safety issues and provides managers with twodays’ safety training a year.

CONSTANT VIGILANCEAn improvement plan, updated every year, defines accidentprevention priorities and includes an accreditation procedure forall sites. The procedure is designed to improve work safety in fourcritical areas of risk: confined spaces, chlorination units, potentiallyexplosive atmospheres and electrical installation. Implementationis monitored by field audits, conducted at short notice by a leadingindependent auditing firm.

This rigorous accident prevention policy has led to measurableimprovements in safety performance: the severity of accidents issteadily declining, while the incident rate has stabilised inconstruction and is falling in operating activities.

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DEGREMONT Business Report

From 2005, Degrémont willfurther strengthen its safetymonitoring system. DNV (DetNorsk Veritas), a leadinginternational auditing body,will be making independent,transparent assessments ofhow the safety managementsystem is working in individualbusiness entities around the world.

The auditors will give only 48hours’ notice of their arrival.They will conduct theirinspections in the locallanguage, according to thecultural practices andregulations of the countryconcerned, and using theGroup-wide baseline drawn upby Degrémont’s SafetyDepartment.

Safety audits

Degrémont - 183, av. du 18 juin 194092508 Rueil-Malmaison Cedex FranceTél. : +33 (0)1 46 25 60 00 - Fax : +33 (0)1 42 04 16 99

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