The ratings on Veolia Environnement S.A. (VE) reflect its leading positions worldwide in water, which represented 45% of consolidated first-half 2009 EBITDA; focus, except in waste, on public sector clients with whom VE derives about 70% of its consolidated sales, generally under long-term contracts providing stable and recurring earnings; and wide-ranging diversity by business, contract, and geography. Also supportive of the ratings is VE's recent shift toward a less capital-intensive and more credit-protective strategy. The strengths are, however, offset by declining earnings for the group's large and cyclical waste business (27% of first-half 2009 EBITDA). In addition, VE's financial profile, because of weaker earnings and its limited ability to generate free cash flow despite cuts in capital expenditures, is at
