Alstom : Registration Document – Annual financial report 2014/15

REGISTRATION DOCUMENT Annual Financial Report

2014/15

SUMMARY

REGISTRATION DOCUMENT 2014/15

MESSAGE OF THE CHAIRMAN 2

DESCRIPTION

OF GROUP ACTIVITIES AFR5

Transaction to sell the Energy businesses

to General Electric 6

Alstom Transport 6

Discontinued operations 19

Alstom Thermal Power 19

Alstom Renewable Power 30

Alstom Grid 39

MANAGEMENT REPORT ON CONSOLIDATED FINANCIAL STATEMENTS

FISCAL YEAR 2014/15 AFR49

Main events of fiscal year 2014/15 50

General comments on activity and results 54

Outlook 55

Operational analysis 56

Operating and financing review 61

FINANCIAL INFORMATION AFR71

Consolidated financial statements 72

Statutory Accounts 148

RISK FACTORS AFR173

Risks in relation to the economic

environment and Group activities 174

Operating risks 178

Financial risks 182

Risks in relation to acquisitions, disposals

and other external growth operations 186

Risks in relation to the transactions

contemplated with general electric 187

Legal and tax risks 188

Risk management policy and insurance 191

CORPORATE GOVERNANCE 193

Chairman's report AFR194

Executive Committee 238

Statutory Auditors' report prepared

in accordance with Article L. 225‑235

of the French Commercial Code on the report

prepared by the Chairman of the Board

of ALSTOM AFR239

Interests of the officers and employees

in the share capital 240

Related‑party agreements and commitments 248

Statutory Auditors AFR249

SUSTAINABLE DEVELOPMENT: ALSTOM'S SOCIAL RESPONSIBILITY AND INNOVATION 251

Alstom's contribution to sustainable development 252

Innovation 268

Environmental performance 270

Social performance 280

Relationships with external stakeholders 296

Methodology 305

Synthesis of indicators/key figures 2014/15 307

Report by one of the Statutory Auditors, appointed as an independent third party, on the consolidated environmental, labour and social information

presented in the management report 310

Table of Compulsory CSR Information AFR313

ADDITIONAL INFORMATION 315

Information on the Group and the holding Company 316

Information on the share capital AFR323

Simplified organisation chart as of 31 March 2015 337

Information on the Annual Financial Report 338

Information on the Registration Document AFR339

Table of reconciliation 340

The Content of the Annual Financial Report is identified in the summary table with the help of the pictogram AFR

Société anonyme with share capital €2,169,293,924

3, avenue André Malraux - 92300 Levallois‑Perret - RCS: 389 058 447 Nanterre

REGISTRATION DOCUMENT 2014/15

ANNUAL FINANCIAL REPORT

The original French version of this Registration Document was filed with the Autorité des marchés financiers (AMF) on 21 May 2015 in accordance with Article 212‑13 of its General Regulation.
It may be used in connection with an offering of securities if it is supplemented by a prospectus
('note d'opération') for which the AMF has issued a visa.
This document has been prepared by the issuer under the responsability of its signatories.
This Registration Document includes all elements of the Annual Financial Report specified by Article L. 451‑1‑2
of the Code monétaire et financier and Article 222‑3 of the AMF's General Regulation.
A table of reconciliation is provided on page 340.
This Registration Document is available on our website:
www.alstom.com.

ALSTOM - REGISTRATION DOCUMENT 2014/151

MESSAGE OF THE CHAIRMAN

PATRICK KRON - Chairman and Chief Executive Officer

How would you describe Alstom results

in fiscal year 2014/15?

It should be noted that these results are presented differently from previous years. Indeed, international accounting standards require that the discontinued energy operations - those corresponding to Thermal Power, Renewable Power and Grid - are separated from continued operations - those of Transport.
Alstom delivered a very strong commercial performance in its Transport activity in 2014/15, booking a record level of orders over €10 billion, resulting in a more than
€28 billion backlog corresponding to four and a half years of sales. We have set a solid base for growth in emerging markets with contracts in South Africa, Qatar, Australia or Mexico and we have strengthened our positions in our traditional markets. We achieved our
2014/15 targets with sales up 7% on a like‑for‑like basis while the operating margin improved from 4.7% to 5.2%, benefiting from good project execution and the strict implementation of our performance plan.
Following a very negative trend of the free cash flow during the first half, the situation improved in the second half, even if it remains negative for the full fiscal year.
Globally, we have achieved the targets we set for this fiscal year.

Following these good results in Transport activity,

what does the future of Alstom look like?

These results underline the strengths of Alstom focused on its Transport activities. Alstom is a world leader. It enjoys a growing market, led by urbanisation and environmental priorities. It benefits from global footprint and it is able to carry out major infrastructure projects, as illustrated by the €4 billion contract signed in South Africa.

2 ALSTOM- REGISTRATION DOCUMENT 2014/15

MESSAGE OF THE CHAIRMAN

Alstom will be reinforced with the acquisition of General Electric signalling and will benefit from financial strength as a result of the transaction with General Electric, since two thirds of the proceeds will be used to consolidate Alstom's balance sheet and make it debt‑free.
This is why we can confirm with these annual results our medium term guidance: an organic sales growth over 5% per year, a gradual improvement of the operating margin in the 5‑7% range and a free cash flow in line with net income.
The strategy remains unchanged:

yyseize growth opportunities thanks to our innovation and investment policy;

yycontinue efforts to improve our performance and to reduce our costs in a very competitive market.

What is the status of the project with General Electric? Can you give an update on the next steps towards the closing?

The project with General Electric is progressing. Key milestones were reached at the end of 2014. Consultation process with work councils was completed, the master agreement and all the related documentation were signed between Alstom and General Electric, the French Foreign Investment authorisation was obtained and, on 19 December 2014, the shareholders approved the transaction by a majority of 99.2%.
Competition and regulatory authorisations processes are underway. General Electric and Alstom are actively working to complete the process and achieve a closing in the coming months. After completion of the transaction, we plan to call a Shareholders' Meeting to vote on the amount of cash proceeds to be distributed to shareholders.

Alstom

achieved its targets and the project with General

Electric

is moving

ahead

ALSTOM - REGISTRATION DOCUMENT 2014/153

4 ALSTOM- REGISTRATION DOCUMENT 2014/15

DESCRIPTION

OF GROUP ACTIVITIES

TRANSACTION TO SELL THE ENERGY BUSINESSES

TO GENERAL ELECTRIC 6

ALSTOM TRANSPORT AFR6

Industry characteristics 6

Competitive position 9

Strategy 9

Offering 10

Research and development 16

DISCONTINUED OPERATIONS AFR19

ALSTOM THERMAL POWER AFR19

Industry characteristics 19

Competitive position 22

Offering 22

Research and development 29

ALSTOM RENEWABLE POWER AFR30

Industry characteristics 30

Competitive position 33

Offering 33

Research and development 37

ALSTOM GRID AFR39

Industry characteristics 39

Competitive position 41

Offering 41

Research and development 45

The Content of the Annual Financial Report is identified in the summary table with the help of the pictogram AFR

ALSTOM - REGISTRATION DOCUMENT 2014/155

DESCRIPTION OF GROUP ACTIVITIES

ALSTOM TRANSPORT

TRANSACTION TO SELL THE ENERGY BUSINESSES TO GENERAL ELECTRIC

On 20 June 2014, Alstom's Board of Directors unanimously recommended the offer from General Electric to acquire Alstom's Energy businesses (Thermal Power, Renewable Power and Grid activities, as well as corporate and shared services) and to set up three alliances under the form of joint‑ventures in some of these activities. After completion of this operation, the Group will focus on its rail transportation activities.
In this context, Thermal Power, Renewable Power and Grid activities were classified as Discontinued Operations.

ALSTOM TRANSPORT

Alstom Transport is one of the global leaders in rail transport equipment, systems, services and signalling for urban, suburban, regional and main line passenger transportation, as well as for freight transportation. It benefits from a growing market with solid fundamentals, driven by economicgrowth, growing urbanisation, environmental concerns and public spending. In this context, Transport has been able to develop both a local and global presence that distinguishes it from many of its competitors, while providing it with a real sense of proximity to its clients and greater industrial flexibility. Its products, which constitute one of the most complete and integrated product offerings on the market today, together with its position as a technological leader, place Alstom in a unique position through which it is able to benefit from the worldwide growth of the rail transport market. Lastly, in order to generate profitable growth, Transport focuses on operational excellence and continuous efforts toward improvement.

INDUSTRY CHARACTERISTICS

Main markets

Market evolution

According to UNIFE (Union of European Rail Industries, Union des industries ferroviaires européennes), the annual accessible worldwide

In € billion

140

121

market for the 2011‑2013 period is estimated at €102 billion. This market should grow to reach an annual average of €121 billion over the 2017‑2019 period, which corresponds to an average annual growth rate of +2.8% (source: 2014 UNIFE Report).

120

100

80

60

40

20

102

108

Regional trains

Urban trains

Main line trains

Freight trains

Services

Infrastructure

Signalling

0

2011-2013 2014-2016* 2017-2019*

Source: Alstom - UNIFE

* Forecasted data.

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DESCRIPTION OF GROUP ACTIVITIES

ALSTOM TRANSPORT

In € billion

140

market, which should grow from €22 billion to €27 billion per year from
2011‑2013 to 2017‑2019. The passenger transportation segment should

120

100

80

60

40

20

0

102

108

121

Middle East

& Africa

Asia-Pacific

Americas

Europe

remain a vehicle for growth, in particular with urban transportation
focusing on Light Rail Vehicle (LRV), metros and signalling. High‑speed
train projects should also be developed (for example with Amtrak).
More generally, opportunities in terms of maintenance services and
renovations are expected. Although less significant in terms of volume,
the Latin American market, dominated by Brazil, should continue to
grow and is expected to reach nearly €7 billion per year by 2017‑2019.
Demand for integrated solutions is in full expansion in several countries
of this region.
At the current accessible level of €19 billion, the Asia-Pacific marketshould grow again after a slowdown of investments in China to reach €24 billion in 2017‑2019. The Indian market should double in

2011-2013 2014-2016* 2017-2019*

* Forecasted data.

Source: Alstom - UNIFE

2017‑2019 as compared with 2011‑2013, driven by several integrated
solution urban transportation projects and investments in mainline
infrastructure. Other countries in the region, such as Australia, Thailand
and South Korea, should experience significant growth, driven by both
The European market, which is the leading accessible railway market in the world, should experience slower growth and rise from €49 billion to
€54 billion per year from 2011‑2013 to 2017‑2019, which corresponds to an average annual growth rate of +1.7%. The situation remains quite heterogeneous from one country to another. Germany represents the largest market and should stabilise around €8.3 billion per year. The French market remains attractive, driven by investments in urban and intercity transportation projects, especially as a result of projects to improve infrastructure and urban transportation systems, of which the 'Le Grand Paris' programme is the most significant example. In addition, sizeable renewal and expansion investments are expected. As such, the French market is expected to grow from €5 billion to €6.2 billion per year from 2011‑2013 to 2017‑2019, which corresponds to an average annual growth rate of +3.5%. The United Kingdom's market should exceed €5.7 billion per year in 2017‑2019, with major urban and regional projects. Investments continue to be made in regional segments in the Benelux and Scandinavian countries. Southern economies such as Spain are beginning to grow again now that the impact of the financial crisis has subsided. In Eastern Europe, Poland remains the leading market with over €2 billion per year in 2017‑2019. Signalling projects should be launched in Norway, Spain, United Kingdom and Benelux, and integrated solutions projects are expected in Denmark, Finland and Eastern Europe (thanks, in particular, to European Union financing). More generally, opportunities in the market for services are expected due to the modernisation and maintenance of trains that are already in operation, and to the opening of new services markets, particularly in Greece and Spain. The market growth for the Commonwealth of Independent States (CIS) will be associated with long‑term investments in Russia in order to renew and renovate its fleet of locomotives and urban transportation systems, as well as its signalling systems and services. Other CIS countries such as Kazakhstan will also contribute to the region growth over next years. Globally CIS market should reach approximately €13 billion per year in 2017‑2019.
Americas is the second largest region representing €26 billion per year in 2011‑2013. It is expected to grow to over €33 billion in 2017‑2019 at +4% growth per year. In North America, freight transportation is historically significant and represents approximately 70% of the local
urban and mainline transportation projects.
Middle East and Africa market should continue to grow and reach over
€9 billion per year in 2017‑2019. Growth should be fuelled mainly by
several integrated solution urban transportation projects in Saudi Arabia,
Qatar, Israel and the United Arab Emirates, as well as the continuation
of investments in South Africa. In addition, Algeria and Egypt are active
in railway networks projects.

Market drivers

In the long run, the main factors that have a positive effect on the evolution of the rail transportation market are associated with the economic and demographic growth in emerging countries, which creates a growing demand for infrastructure, trains (especially for integrated solutions) and signalling in these countries. Mature markets, on the other hand, are mainly supported by projects aimed at updating and modernising existing infrastructure, as well as by growing environmental concerns.

Demographic growth and urbanisation

The combination of both economic and demographic growth should entice a growing number of people to live in cities. By 2050, world population should exceed 9 billion inhabitants, of which nearly 70% will reside in urban areas (source: UNFPA, United Nations Population Fund). This trend towards urbanisation should be particularly strong in China, India and in the developing countries of Africa and Latin America.
This development triggers the growing saturation of airports, roads and existing railway infrastructure. In this situation, railways typically offer the easiest, safest and cleanest solution as a real and competitive alternative to road or air transportation.
Additionally, in developed countries, the population should be encouraged to leave behind individual methods of transportation such as the car and to favour public transportation, such as metros and tramways. This change will be supported via the active promotion of public transportation which is cheaper, more sustainable and more mindful of the environment. Therefore, people responsible for urban planning and development as well as urban populations themselves will be required

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DESCRIPTION OF GROUP ACTIVITIES

ALSTOM TRANSPORT

to find efficient, comfortable and intermodal urban transportation
the Climate Summit. The 2050 targets focus on reducing final energy
systems (1). In this context, rail transportation offers the ideal mobility
consumption and average CO
emissions from train operations by
solutions in terms of safety, comfort and respect of the environment for
urban and interurban transportation systems.
Moreover, the extension of suburban zones should promote this urban growth and require transportation solutions that are adapted to these areas. Innovations allowing to reduce the environmental impacts in urban zones, such as noise and pollution, as well as improving the energy efficiency of these transportation methods should then become major priorities.
The growing urbanisation should also lead to extending transportation networks that connect big cities to smaller ones. In this respect, it has already been proven that the high‑speed train is both much safer and consumes less energy than other transportation modes (source: CE Delft). An increase in high‑speed lines and the renewal of train fleets should take place in both mature and emerging markets, while the creation of new networks will create additional opportunities.

Environmental concerns

Greenhouse gas emissions, impact of air pollution on public health, climate change, recycling, recovery, energy efficiency and noise constitute some of the most significant environmental and sustainable development concerns currently voiced by populations and politicians. Based on these criteria, rail transportation offers higher performance levels than other transportation modes, which should have a positive impact on the evolution of the rail transportation market. However, some challenges will have to be faced in these various sectors in order to meet ambitious emission reduction goals within set time frames. In addition, if concerns regarding these matters are significant in mature markets, they are gradually gaining more clout in emerging countries.
The White Paper of the European Union advocate for a reduction of greenhouse gas emissions by 80% to 95% below 1990 levels by 2050. Transportation, which represents approximately 25% of these emissions, must contribute to this reduction. Among the set goals for transportation by 2050, the following should be noted:

yy60% reduction in emissions as compared with 1990 levels;

yy30% of road freight (for distances higher than 300 kilometres) must become rail freight and/or maritime freight by 2025;

yyover 50% of intercity passenger transportation via rail by 2050;

yyno more standard internal combustion engine cars by 2050.

On a global scale, the 2012 Rio Conference planned that, over the course of 10 years, $175 billion would be allocated towards the development of urban public transportation. More recently, in September 2014, the International Railway Association, (UIC: Union internationale des chemins de fer), representing 240 members on six continents, presented the UIC Low Carbon Rail Transport Challenge. This initiative responds to the United Nations Secretary General's call to bring bold pledges to
respectively 60% and 75%, relative to a 1990 baseline (source: UIC).
Alstom supports this initiative and contributes to the objectives by
developing and delivering railway solutions which are ever more energy
efficient and attractive.

Economic growth

Over the recent years, the global economy has experienced turbulence that has slowed down growth and increased public deficits. However the worldwide Gross Domestic Product (GDP) growth should remain positive: c. +4% per year forecasted between 2014 and 2020. GDP growth is driven by emerging regions such as China, India and South‑ East Asia (c. +6% per year) as well as Middle East/Africa (c. +5% per year) while advanced economies such as the Euro Zone and the USA are expected to experience a more moderate growth around +2.5% per year (source: IMF).
Besides, the rail transport industry has not significantly been affected by the latest economic downturn. Mainline passenger traffic in China and India has grown steadily +7% per year from 2007 to 2013 (source: Indian Railways; China Railway Corporation). In Europe, mainline passenger traffic has increased by +1.2% per year between 2007 and 2013 (source: Eurostat). Indeed, while the European growth remains behind emerging regions' growth, the tradition of public transport is strong and pushes operators to renew or renovate their fleets, contributing to the overall regular growth of the sector. In the future, world passenger traffic should grow by 4.8% per year until 2020 (source: SCI Verkehr).

Public funding and investment plan

Despite short‑term budgetary constraints, the railway industry remains strategic, with investment plans throughout the world:

yyIndian Railways has recently announced its plan to invest €120 billion over the next five years (2015‑2019), with the objective to increase daily passenger carrying capacity from 21 million to 30 million, to increase track length by 20%, and to grow annual freight carrying capacity from 1 billion to 1.5 billion tonnes (source: Indian Railways).

yyBy 2020, China will expand its urban rail transportation network by 6,000 kilometres, with a total investment of approximately

€400 billion (source: Global Times).

yyBy 2025, Brazil intends to invest over €60 billion to expand its rail transportation network by 10,000 kilometres (source: Railway Technology).

yyIn Europe, the 'Connecting Europe Facility' initiative allocates

€26 billion in investments in transportation infrastructure, notably in
railway infrastructure and signalling systems between 2014 and 2020
(source: European Commission).

yyPublic‑Private Partnerships (PPP) have been established in Europe, India and Brazil, in particular.

(1) Intermodal transportation corresponds to the use of several methods of transportation over the course of a single trip.

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DESCRIPTION OF GROUP ACTIVITIES

ALSTOM TRANSPORT

COMPETITIVE POSITION

By relying on its extensive experience, Alstom Transport offers a wide range of railway products, services and solutions which it produces and sells worldwide thanks to its complete commercial and industrial geographic market coverage. Transport is among the leaders in all the major segments of the railway industry: urban and main line transportation, signalling, services and integrated solutions (source: Alstom). In addition, Alstom Transport has reinforced its international presence through partnerships and joint ventures, in particular in the CIS and, more recently, in South Africa, which provide it with a competitive advantage in new high‑growth zones.
Alstom has a large variety of competitors in the railway industry: acting globally or locally and covering part of or the entire portfolio. Among which Bombardier offers a similar range of products and services and is also present on an international scale. Siemens is another competitor in

the rail transportation market, and is particularly reliant on its powerful
presence in its domestic market.
Some manufacturers with a less diversified portfolio of products and industrial sites that are more geographically concentrated (CAF, PESA, Rotem, Skoda, Stadler, Thales, etc.) are also in competition with Alstom Transport in specific market segments, such as trains or signalling.
In addition, some Japanese groups (such as Kawasaki, Mitsubishi and Toshiba) are also present in certain markets outside Japan, but to a lesser extent. Hitachi is investing in the signalling and train operations of Finmeccanica (Ansaldo STS and Ansaldo Breda) to become a global player.
The Chinese manufacturers CNR and CSR, who recently announced their merger, mainly benefit from the development of their significant domestic market, yet are expressing international ambitions.

STRATEGY

Alstom Transport has devised a strategy based on several principles that it intends to apply to each of its geographic markets, thus guaranteeing close proximity to its customers.

GROWTH: Optimise its worldwide and local presence close to customer

With a flexible industrial approach, Alstom Transport is uniquely positioned to tap global demand and respond to its customers' needs.
Transport plans to develop the presence of its commercial and industrial sites while adapting them to each of the regions in which it operates. As such, by reinforcing its local base close to customers, Transport's strategy is to benefit from the growth potential in each of these local markets. In this way, Alstom believes it can take advantage of more competitive pricing in all its local markets. This presence also enables Transport to benefit from the sharing of experiences as well as synergies for certain technologies that meet specific local needs ('winterisation', 'tropicalisation', etc.).
By offering solutions that are constantly better adapted to local specificities, Transport believes it can penetrate new growing markets. Transport considers that entertaining ever stronger local relationships with its customers promotes proximity. In addition, Alstom Transport limits its costs of expansion associated with its local development by adapting its approach to work directly or via partnerships (joint ventures, etc.).
Lastly, the establishment of new engineering centres outside Europe and the installation of new production sites must enable Transport to significantly reduce both its engineering costs and its production costs while maintaining its level of excellence. Its production platforms throughout the world should benefit from the planned improvement of its operating network, structured around centres of excellence.

PRODUCT PORTFOLIO: Accelerate

the transition toward a fully integrated range of solutions

Alstom Transport intends to increase the level of carryover toward its 'Systems', 'Services' and 'Signalling' business activities and, therefore, offer solutions that are even more innovative in order to continue to differentiate itself from its competitors. Through its 'Services' business activity, Transport plans to strengthen its relationship with its customers. Focusing on these business activities will also be a means of increasing profitability.
Since Alstom Transport already has a complete range of business activities, the determining strategy will be to develop train offers bundled with services or integrated solution offers. Transport intends to be prepared to accommodate all levels of integration its customers may seek by offering a full range of options - from a simple product offer, the offer of solutions integrated within a single market segment, the bundled offer of solutions for two market segments, up to the fully integrated solutions offer. With the help of adapted and innovative integration offers and the ability to propose customised solutions, Transport will have a significant competitive advantage in meeting the growing demand for integration. Alstom plans to develop its maintenance contracts linked to products by relying on its experience in optimising lifecycle costs.

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