* EDF, Veolia to split their Dalkia energy services venture
* Energy to become core Veolia business besides water, waste
* Deal a milestone in fast-growing energy services industry
* Asset-light services model offers growth for struggling
(Adds detail on energy services business, quotes)
By Geert De Clercq
PARIS, Nov 7 Energy services will become a core
business at French water and waste group Veolia Environnement
after it takes over the international activities of its
Dalkia joint venture with France's state-controlled utility EDF
Veolia said on Thursday that if discussions with EDF result
in an agreement, the utility would take over all of Dalkia's
French activities while Veolia would assume control of its
Dalkia had 2012 revenue of 8.9 billion euros ($11.9
billion)- 4.1 billion euros in France and the rest abroad - and
employed 49,800 employees in 35 countries.
The expansion of Dalkia, which is 66 percent owned by Veolia
and 34 percent by EDF, had been held up by a tug of war between
the shareholders. EDF chief executive Henri Proglio - who moved
to the utility from Veolia in 2009 - was keen to boost his
influence in Dalkia.
"Energy services are clearly and definitively a core
activity for Veolia, on the same level as our waste and water
business," Veolia chief executive Antoine Frerot told an
earnings news conference.
Veolia's adjusted operating income in the first nine months
of the year rose 20.4 percent to 621 million euros due to cost
cuts and higher prices at Dalkia.
It also confirmed its financial outlook. Veolia's objectives
beyond 2013 include organic revenue growth of more than three
percent per year and growth in adjusted operating cash flow of
more than five percent per year.
Frerot said that as Veolia acquires 100 percent ownership of
Dalkia's foreign operations, energy services will represent 21
percent of Veolia's turnover, while water will account for 44
percent and waste and environment services 33 percent.
Frerot also said he saw more growth in energy services.
"In the years to come, energy services outside France will
probably present more opportunities than other sectors," he
MAN IN A VAN
The Dalkia deal is set to be a milestone for the
fast-growing energy services business, in which French utilities
have played a leading role.
While most German and southern European peers have stuck
with a traditional asset-heavy, people-light business model,
French utilities like EDF and GDF Suez and water and
waste groups like Veolia and Suez Environnement have
built billion-dollar businesses more oriented to services.
Energy services embrace relatively asset-heavy district
heating and cooling networks to combined heat and power plants
(CHP) in apartment buildings, office blocks and factories.
More labour-intensive energy services include sales and
maintenance of heating and air conditioning systems for homes
and offices, insulation and energy efficiency advice, which all
involve a man in a van visiting customer sites.
The market leader in energy efficiency is GDF Suez, whose
energy services business had 2012 turnover of 14.7 billion euros
and employed 78,000 staff in 30 countries, mainly via its Cofely
GDF's unit claims the number one position in energy services
in France, the Benelux and Italy, is among the top players in
the UK, Germany and Spain and has activities in Asia, Russia and
other emerging market countries.
From running technical facilities at Starbucks stores to
energy management at Dubai's Burj Khalifa tower, the world's
tallest, the unit generated one billion euros of earnings before
interest, tax, depreciation and amortisation (EBITDA) in 2012,
seven percent of group total.
GDF expects energy efficiency revenues to grow 40 percent
between 2011 and 2018.
Utilities analyst Martin Young at Royal Bank of Canada
Capital Markets said that while asset-intensive models need
higher margins because they have to amortise facilities, the
more labour-intensive models hold plenty of promise.
"You can get a return on capital that is as good as
or even better than what you get from asset-heavy activities,"
($1 = 0.7472 euros)
(Reporting by Geert De Clercq; editing by Mark John and Anthony