Patrick Kron - Chairman and Chief Executive Officer

Fredric Stahl - UBS Andreas Willi - J.P. Morgan James Moore - Redburn Partners Andrew Carter - RBC Capital Markets William Mackie - Kepler Cheuvreux James Stettler - Barclays Capital Martin Wilkie - Citigroup Alfred Glaser - Oddo Securities Jessica Kaur - Goldman Sachs

Good morning, ladies and gentlemen. I am talking from Saint-Ouen, which used to be Alstom transport premises, and it is from now on the company’s headquarter. Present with me Marie-Jose Donsion, who is the CFO of the company; Selma Bekhechi, who runs the IR-wide team of Alstom; as well as Emmanuelle Chatelain that a few of you know, she is VP Communications; and then, Marie Pradoura [ph]. I will give you a few - I will not - I will give you a few information, for those of you don’t know, Marie-Jose has been in Alstom for a number of years. I will not give numbers, but she joined in 1997, and had a number of responsibilities, starting with corporate, then in the power businesses, led the grid finance team and is Finance Director of Alstom Transport since the beginning of this year. And Selma joined us as VP - as IR Director two to three years ago. Emmanuelle, no need to present, most of you know. I also want to tell that in addition to the classical analysis participation to this call, we also welcome a few journalists. So let’s go now please on the issue. We are going to talk about the presentation of the first-half results for the current fiscal year, accounts from April 1, 2015 till the end of September of the same year, as well as matters related to the transaction with General Electric, which closed on November 2 this Monday. We published yesterday evening a press release on the share buyback program that I’m going to talk about in more detail later in the presentation. And we published this morning a press release relating to the H1 numbers as well as governance matter. I remind you as classically, that all published element, presentation, financial reports, including MD&A and accounts as well, as the press releases are available on our website www.alstom.com. If we go on Slide 2, what are the main takeaways of this presentation, this publication, on H1 Alstom achieved sound operational performance in transport with order levels at €3.9 billion, and book-to-bill above 1 at 1.2. The sales are up 8% at €3.3 billion. The IFO after corporate costs reached €167 million, 10% above the €152 million that was recorded over the same period of last year. I remind you, as we did in the previous publications of our accounts, that in compliance with IFRS 5, Alstom energy businesses were classified as discontinued operations, and therefore they are not included in the lines on the order of sales IFOs and are only reported under the line net income discontinued operations, obviously, as in the free cash flow data. I think it has not been unnoticed, but we definitely closed the transaction with General Electric this Monday, on November 2. The Board of Directors, as published yesterday evening, subsequently decided in its meeting that was held yesterday, to launch a public offer to buy back 91.5 million of its share at a unit price of €35 per share, which amounts to €3.2 billion. And in order for this to happen, we will call for a shareholder meeting of Alstom shareholders, where we are going to submit the share buyback, the OPRA, with a French acronym, nothing to do with music, but with share buyback to the vote of the shareholders scheduled on the - which will happen on December 18, 2015. And you’d see the further in the presentation that we confirm our mid-term guidance. I suggest that we go now, please, on Slide 4, which summarizes our main KPIs for the first-half of the current fiscal year 2015-2016. As I just indicated, the orders were strong, were healthy, at close to €3.9 billion. They were fueled by small- and mid-sized contracts across all regions. And you see compared to the sales just below, that it gives a book-to-bill ratio of 1.2. I remind that the comparison with last H1 needs to take into account the fact that we had around €4 billion of contract with PRASA in South Africa, which obviously boosted last year’s number. Sales were up 8% at €3.3 billion. I think it’s a record level for sales over a half year. Income from operation, which includes the corporate costs linked to Alstom transport activity, as we have done in the previous publication, increased by 10%, with an operating margin of 5.1% after corporate costs. The net income from continued operation stands at €18 million. It’s clear that this number includes a number of specific elements, separation cost, high transitory financial expenses, as well as specific impairment charges. So it’s obviously much more difficult to comment on these lines rather than the previous ones, because again they include a number of specific and transitory elements. The free cash flow from continued operation, before tax and financial outlook was close to zero, slightly negative minus €5 million. It was a negative by €85 million last H1. Let’s go in some of the elements I just described, starting with the orders. As I just indicated, the Alstom booked €3.9 billion of orders in the first-half, compared to the €6.4 billion, which again included the €4 billion, book-to-bill 1.2. I globally consider this is very healthy, another half-year of healthy commercial performance with a number of successes in all geographies you have here. And interestingly with no big elephant just boosting the numbers, so it means that we had quite a sustained level of successes over the geographies in most of our product lines, as indicated in this slide. And obviously, the backlog at close to €28 billion gives us a visibility on future revenues, as it represents between four and five years of sales. On Slide - on the following slide, Slide 6, you see some example of our commercial successes that were in most of the cases, published when the customers allowed us to release the information. And you see here that, again both in geography and in type of businesses I think we had quite a nice flow of good news. And this allowed us to confirm that we are well positioned to capture opportunities in all continents, and as we had the opportunity to discuss earlier, both in developed economies and in emerging markets. Moving to the Slide 7, which goes now to the P&L, sales and operating income they both increased. As I mentioned, sales increased by 8%, 4% organically at €3.2 - sorry, €3.3 billion, with solid performance in Europe and continued growth in emerging countries. Without going into details, would say that the deliveries in Europe include a number of ongoing execution programs in France, in regional, suburban, and very high-speed trains in France, suburban trains in Italy, maintenance contract in the UK and in Sweden. In emerging markets, we executed metro and tramway contracts in Latin America and we are starting to ramp up the PRASA contract in South Africa. Income from operation is at €167 million; that’s up 10% volume impact as well as ongoing action for project execution and cost control. And it includes a share of the corporate costs, which represents negative amount of €17 million for the half-year. This is not surprising. We have guided towards - around 30% on a - €30 million, sorry, on a yearly basis. And this is more or less the 30% of the €100 million that we used to report for the global corporate numbers. If I go on the next slide, this I won’t detail much, just to say that we continue, obviously our R&D programs to continue to fuel innovation which is in Alstom DNA. We spent €58 million in R&D on H1, which is in line with the level of last year, where you have a few examples indicated here. We have basically the same focus on developing new products and technologies, and upgrading the range of existing ones. We also continue to invest in our - in CapEx for both the modernization of the existing footprint, as well as its expansion with a number that is in ballpark of €100 million. So with two half-years on average the €50 million on H1 is not a big surprise. Turning to the P&L on Page 9 and moving to the items below the IFO line, you see that we have restructuring expenses this semester around at €14 million. Last year it was substantially higher due to some restructuring ongoing in Alstom transport headquarters as well as some European facilities. And we said at that time that it should not be considered as nominative [ph]. This being said, when there is a need to restructure somewhere we definitely do. But we gave you an indication of €30 million, that’s in per year. It doesn’t mean that it won’t go higher at one point in time if necessary. But I mean this €14 million is not totally unexpected. The non-operating expenses at €52 million include some impairment losses on assets, notably on some R&D capitalized one that we considered as wise to readjust. All-in-all the EBIT is at slightly above €100 million up 60%. The net charges representing the cost of €86 million, and obviously this is by all means not representative of what will be Alstom’s future balance sheet, and therefore expenses, due to the stronger financial structure that we expect to beat. The share in net income and equity investees, also a line which has include some substantial numbers, most of this line is based on the contribution of TMH. You know that the first-half of last year of TMH was strong. We had more or less, €30 million out of the €39 million which were related to TMH. H2, as we guided and as we indicated was very low, was actually close to zero. And after the trough of Q4, we had from a kind of stabilization at the operation level, and the TMH contribution of the €13 million is at the level of €11 million, represents €11 million out of €13 million. So basically, the minus-€20-million-plus is related to the difference between H1 last year and H1 this year contribution from our Russian participation in TMH. As a result net income from continued operations amounted to €18 million, and again this includes a variety of non-recurrent elements. If we move now to the free cash flow on Slide 10, we try to - sorry, on the free cash flow on Slide 10, the free cash flow from continued operations was close to zero, had still over the period some negative impact of some - the ramp up of some projects. This is again and as I said repeatedly, there is some volatility in the cash flow, that we had a negative cash flow - substantially negative cash flow on the first-half of last year, which was more than offset by the performance of the second one. In this case, we are close to zero on H1 and will continue to strongly focus on cash management, all actions necessary being in place and continue to have a focus. I’m not going to comment the cash flow from discontinued operations, because as you know through the locked-box mechanism that was agreed with GE as part of our general transaction, the cash flow from discontinued operation from April 1, 2014 is covered by GE. Moving on Slide 11, I’d like to spend a few minutes on our financial structure, and give you a balance sheet as of September 30, knowing that September 30, is just before the closing of the GE transaction. And obviously, our liquidity situation has substantially changed over the weekend from Friday till Monday. You had the situation end of September, where the liquidity position was sound with €1.85 billion of gross cash and €1.35 billion of undrawn credit line. We though used the €1.6 billion facility, which was mobilized in order to allow the transition till the completion of the GE transaction. This was fully drawn at that time. I also told you that we obtained waivers on our financial covenants for all facilities, because obviously the covenants were no more reflecting the reality of the situation with a multi-billion closing expected in the near future. And again as I said, we are been negotiating new bonding and revolving credit facilities to replace existing one after the completion of the GE transaction. We go on the next slide which talks about debt and equity. You obviously on Slide 12 see the net debt standing at €4.8 billion and €3.1 billion over the previous closing period, March 31, 2015. Obviously, this increase being related to the free cash flow generated over the period, notably by the energy activities, as well as the finance and tax spending. On the right part of the Slide, you see that the equity decreased slightly at €3.7 billion, for the reasons which are mentioned in the bridge that you can see in the slide. Let’s go now after H1, if you don’t mind and obviously we will be happy to answer questions on the situation related to the General Electric transaction, and I’ll try to explain a little what happens in terms of proceeds. And I just go to Slide 14 if I may. You see that the first thing is that we have - and sorry, because a number of these lines include rounded numbers, so I’m sorry to not to be able to detail the €50 million within the €12.4 billion transaction. So we had the transaction, the sale of GE, as you know, €12.35 billion initial price, and this included €1.9 billion of cash transferred to GE as of again, March 31, 2014. And again, the evolution of the cash in the transferred entity is obviously taken into account by GE in its final price, but has no consequences for us as the locked-box mechanism offsets any variation in this perimeter, so this is what is proceeds for us. We had some ups and downs in the discussions with some commercial deals that we generated a positive €400 million. We had also to get a price reduction, as you remember last summer, of negative €300 million. All-in-all it makes a more positive delta slightly - a more slightly positive delta, 0.1. We include transaction costs of €0.3 billion. I indicated that these transaction costs include, among others, the direct costs of the transaction. We have to pay lawyers. We have to pay bankers. We have to pay a number of elements directly related to the execution. We have also a tax friction. I indicated when I started my communication on this deal, that this was around €0.5 per share, is €150 million, at the end of the day slightly below that level. So, all-in-all, and then, we had a number of separation costs, which include not among others IT and others. So again, the ballpark is €0.3 billion, as we assess it today, part of it being immediate down payments. And part of it, notably what relates to separation, being split over the period as we have to rebuild some IT systems coming from a transitory period to the final one. But because of this will be generated over - not over, a couple of weeks but over a longer period. That’s the money which comes in. We have the reinvestments - two reinvestments, one in the joint ventures with GE. The final amount is €2.4 billion; three JVs, you remember, grid, renewable, and nuclear. We have also the acquisition of GE Signaling, around slightly above €700million. And if you make the algebraic sum of all what is there, we get net proceeds of €7.1 billion. If you go to the next one, we indicated that we will return part of the cash to the shareholders. The board will propose to the shareholders’ meeting of December a share buyback of €3.2 billion, which is the low-end of the €3.2 billion to €3.7 billion bracket, that I gave you as an indicative element. This will be done through the repurchase and cancellation of 91 - subject to board - subject to shareholders’ approval obviously, this will be done through the repurchase and cancellation of 91.5 million of shares, which is slightly below 30% of the capital at the unit price of €35. This represents a premium of 17.6% over the closing price of November 3, which was the date preceding the decision of the board to move in this direction and propose to the shareholders, and 21% - 22% of last month’s weighted - volume-weighted average price. This will be filed to the AMF with a notice in the coming future. I’ll come back in indicative timetable and some meetings, as I said, to the shareholders’ approval through an AGM. Bouygues has the intention to tender a level - a number of shares, which will allow him to remain at its current level post OPRA. So Bouygues intends, through this operation to keep the same level as the one he holds today. What is the impact of all this on the balance sheet? Again, if you look at the pluses and minuses, so we start with these net proceeds of €7.1 billion. We had the net debt position, before this locked-box came into place of around €3 billion. We had what are the other elements which will impact the picture as we look at it on September 30, 2015, on a kind of pro forma, if I may, having all these elements coming into place. So we have the debt, €3 billion. We have the proceeds, €7.1 billion. We have the share buyback, assumed to be achieved immediately. As you know, we have accepted to bear the price - the consequences of the fine we got from the DOJ, which represents €0.9 billion. And the last one is the free cash flow of the continued operations, which is the only element which impacts basically the balance sheet from April 1, 2014, of transport, more specifically on the continued operations which is rounded at €0.2 billion. And this at the end of the day confirms my original statement that we will look for a company which will be fully deleveraged, again on this September 30 basis. And obviously, this deleveraging is after investment in - notably, after reinvestment in the JVs which as you know - in which as you know, Alstom has a put option with a guaranteed minimum price, which is our entry price, plus an escalation formula. So we are talking about a deleveraged company with potentially a reserve of cash, should Alstom decide in due time, that it makes sense for the company to exercise the put, the liquidity, and the minimum price being guaranteed by our agreements with GE. The indicative OPRA timetable this year we will file early next week, the note doperation [ph] to the AMF, the Financial Market Authority of France. We expect to - we’ll call for shareholders’ meeting to be conveyed on December 18. The offer will be opened from December 23 till January 20, with settlement and delivery scheduled by - for the January 28, 2016. And I indicated - just a personal note, I indicated that after this completion of the transaction, i.e., at the end of January, I will resign. And the Board will give the responsibility of running this company to Henri Poupart-Lafarge. So if we go on the current situation of Alstom refocused on rail the company is deleveraged, relies on the strong balance sheet. I just mentioned a few elements. We have seen and I think that the H1 number is another illustration that we have in Alstom the necessary ingredients to be successful because of our international position, because of our range of technologies, products, services, and systems. I also would like to say that the acquisition of GE Signaling will allow us to grow our signaling activities, something that as you know we were looking for a period of time, open the freight market to Alstom and strengthen our presence in North America. And I mentioned the order backlog. We had indeed a very nice set of successes and I’m expecting - we hope that more are going to come, a number of substantial projects, in which we are in the final conversations, if I may, with the customers. So I hope this will unlock and give also some substantial good news in different geographies. Again I mentioned that the company, this is not here and should, is benefiting from a skilled management team, led by Henri Poupart-Lafarge. I think that the transition will be done absolutely smoothly, seamlessly. And I think it’s another good news for the company and its shareholders. And the last slide, being on the outlook where on Slide 20, I confirm here the guidance. This concludes the presentation. And we are now, obviously, ready to answer any questions. Sorry, if I’ve been a little bit long, but I wanted to go through these elements in a little bit with some details. Thank you.

[Operator Instructions] We have a question from Mr. Fredric Stahl from UBS. Please go ahead.

Good morning, Patrick, everyone. It’s Fredric here from UBS. I was wondering if we could start maybe with GE Signaling. If you could help us with the - give us some pointers as to what we should put into our models for next year in terms of both sales and profitability, that would be good. And then, secondly, I was wondering if you had anything in the first-half in terms of Alstom transport, anything in the margin that we should consider if you had mix changes during the period or if you had any ramp-up costs in the first-half that we should think about when forecasting margins going forward.

Look, on the first one I’ve no intention to go into specific details on GE Signaling. I mean, the company has been integrated. We welcomed on Monday 1,200 new colleagues in Alstom. We are working with them on the next steps, on the way to successfully integrate and use all the complementary that exists. At the end of the day, Henri will undoubtedly organize with you a session in order to explain the situation of the company, give some views, et cetera. And it will be a good opportunity to detail the situation. But at the current stage, there is nothing new that I would add, so we will keep some elements for later in 2016. And on the IFO, I think the IFO is going up. So we had also - we had the margin going to 5% to 5.1%. It’s an increase. It’s a slight one. You have also and you have seen that in the past, to accept some volatility which is related to the mix on a specific quarter, depending on how much rolling stock we have, depending on what type of rolling stock we are trading, when you start a program, for instance in the Regiolis contract in France, in which we are moving from the development stage towards the execution stage. So I would not overreact when at one point in time for a specific quarter, or half-year in this case, there is a 0.1 delta up and down, because this is the type of things that we are not surprised to happen. So there is no specific element. I mean, the backlog is big. We have had a very, very, long period of book-to-bill above 1, where we have been building backlog. That has been the case for the many previous years. It’s also the case for H1. So the good news is that at one point in time, this big backlog is not a platonic [ph] backlog; it’s a backlog which turns into sales, and this is happening, and we see that growing. The sales, definitely has a positive impact on the IFO, because of the volume impact. But then, you have to take into account in addition, how the mix goes, et cetera, et cetera. So there is no specific warning, no specific elements that I need to add to make the numbers explainable, I think they are.

Very good. Thank you.

Thank you. The next question comes from Mr. Andreas Willi from J.P. Morgan. Please go ahead.

Yes, good morning. My first question is on the cash return. You opted to go for the lower end. Maybe you could give us some explanation for that also in terms of what your M&A ambitions are within transport, and whether the joint venture investments are also by the rating agencies seen as an asset you can kind of borrow against it. And, so how they see and how you see the scope for M&A? And the second question for you, Patrick, you signed a new four-year contract as Chairman and CEO in Q2 this year. Even though you kind of indicated before you are leaving, maybe you could give us a bit more background around that contract, and what that means now when you’re going to resign next year. And on free cash flow expectations in the continued operations, we have seen the outflow in the first-half of the year. Should we see a normal seasonal improvement in the second-half of the year? And maybe you could give us some indication where you see the free cash flow, including interest and tax, for the continued operations to end up for the year. Thank you.

On the first question, the cash return and the low-end of the bracket, it’s not a surprise. I guess, Andreas, you know us very well. In my former communication, I indicated that we bid low part of the bracket. So I think, again we could very well have been slightly above this level. But this gives the company a deleveraged situation. And again keeping too much money piling on the balance sheet doesn’t give the proper - is not the proper financial hygiene, leverage in the company is probably not good. So, I mean, the board considered that it was wise to be in the low end. It doesn’t mean that we have a pile of M&A activities in - that we have pile of M&A activities in the back door. This is not true. You know that our focus is for organic growth. We think that we have in hand whatever is necessary. We don’t exclude to - we don’t exclude to seize market M&A opportunities, if it allows us to grow - to boost our profitable growth strategy, but it’s absolutely not mandatory. And we are not in a must do, or whatever. And again, this is - that is the low end. If I were you, I will not speculate on some big M&A coming. This is the other way round actually. It doesn’t mean that we will not consider some small targets here and there. And we have done it and we’ll continue to do it. We’ll continue to do it if it’s possible and if it makes sense, if it’s good for our health. On my contract, and I saw in your note this morning that you were worried about that point. And I want to give you all comfort that you should not be worried. Basically, if the deal had been completed before the last AGM in June, I will have resigned and I would have left, because I said I’ll go to the end of this project with GE and then give the helm to Henri. The problem is that we were far from being at the end of the process in last June. I thought it was my duty not to leave the board in the middle of very active and complex position, but to keep it to the end. So it has not been a secret to any of the 99% of the shareholders which voted for my re-election that I will not use the four years, the other way round. And 99% again, decided that it was making sense for me to be renewed. They probably also knew, because I was clear there, that although you must by law be re-elected for a term, which in our company by law is four years. They knew and they were very happy for probably to know that that I gave up any termination package. And therefore, the company will not be liable versus me of anything when I will decide - when I will resign, noted - i.e., at the end of January 2016 if things moves as expected. So this is not a four years contract. I have no contract with the company, no labor contract with the company. And the day I resign, I leave smilingly and hoping that I’ve done a decent job over this 13 years in the company. If so no worries, so it’s not a big question mark, it’s no question mark at all. So, it’s neither big nor bigger question market. If I go on the last point, which is your question on the free cash flow of continued operation, I am not going to change the guidance that we gave. We expect this company to generate cash. We think that on average, it should generate cash in line with the net income. There is volatility over the period, and there is nothing special, I would say for H2 of this year. I burnt my fingers enough in the free cash flow forecast for a short period of time that I don’t try again. But again, you have seen last year. Last year, we had a substantially - we had a negative free cash flow before financial and tax over H1, and we had more than offset this with the double number positive on H2. So we’ll see what happens this year, but it’s more difficult to predict than the past.

Thank you very much, Patrick.

Thank you. Your next question comes from James Moore from Redburn. Please go ahead.

Yes. Good morning, everyone. Good morning, Patrick. I also have a few questions, if I could maybe one on the free cash flow, if I may. I think your 18 months conversion in transport before interest and tax is 14%, 15%. And I understand the volatility point and that the first half tends to be light. But do you have any concerns that the 100% conversion is going to prove a challenge? Do you see any change in the terms of trade within that or is it just timing and volatility? Secondly, now that the deal is finalized, could you, perhaps give us some idea of the GE joint venture net income, because obviously, disclosure on that has thinned a lot over the last year; and what we could expect in, say, the first 12 months, or the first full year to 2017, or some period? Some have talked about €120 million, some have talked about €180 million, just trying to get a sense for what magnitude that’s running at? And then finally, could you help us a little bit understand of the outstanding bonds in the company, what you might retire early? I guess you will asset and liability match later-dated bonds of the joint ventures, but if you were to retire some earlier bonds it might bring a cost of €100 million, or something, and I’m just wondering if you could help us with your plans on that.

Thank you very much. On the free cash flow conversion, you - it’s your 16%, 17%, this is fine, James. But, again, you know well us, you know that there is some volatility. Is the 100% conversion a challenge? Yes. When we gave the mid-term guidance I said that the free cash flow conversion is not the easiest part of the global picture. We have been - we are working for that. The only thing I can add, without being more specific on that point, James, is that we have not seen recently any element, which is changing our ability to do, or not to do. So I mean there is no deterioration, nothing that I have to report to you, because I’m not aware of any such. The second one is on the JVs. I’m not going to give a guidance on the net income of the JVs. We are working on the accounting of these JVs in Alstom’s account. We indicated that’s likely that will be an equity-based accounting. At the same time, as you know, we have something which is extremely valuable is both the liquidity and a minimum price. I mean, so this will have to be included in the way we will report on these JVs because the reality, the economic reality of these JVs is we are protected from any type of - if any - again, I’ve no reason to believe there will be underperformance, whatever, but for us, it’s clear that the floor of what the JVs will do has to take into account the fact that we have this minimum price given in the put option, so we have a put. We have a minimum price. This minimum price is escalated at 3% - close to 3% if we take the average of the different numbers, which escalates this minimum price, it’s 2.4% plus the escalation I just mentioned. So frankly, we’ll have to check the way we give the most fair representation of all this. But again, that these JVs are under GE’s operational management. We have, obviously, the rights associated to be participant in these JVs, but at the end of the day, GE runs the show. And it’s logical, and it was structured like that, that GE runs the show, we had no competitive. We were not the critical size in the energy business, that’s why we moved in this deal. Obviously, don’t imagine that we have the critical size by cutting something, which had not the critical size into pieces. So it’s important that these energy activities rely, are backed, by a strong group with all the necessary means to be successful. That’s the way it is, and again, the put is a formula, future EBITDA based classical formula, but with a floor. The EBITDA, I cannot give a guidance on something which basically is going to be run operationally by GE. But I know that I have this floor, which is in my view, something which is important in the balance sheet of Alstom as well, because I mean, this is something which is pledgeable, should we need to pledge, which obviously is not the case today. The questions on the bonds is the last one. At the end of the day, indeed post-OPRA, we will be with debt on our hand, debt that we got from the markets - financial markets on one hand, with not reasonable coupons. So that’s something which has been negotiated under the circumstances of the time. So we have these bonds, and at the other hand, we’ll have cash. So we will have, or my successors will have, to take a view on what is the best option and what is the consequences of buying - on the buying. And my intuition, and that this will not be based on theoretical concepts but on the economics, under which some bonds can be repurchased or not, if we get swept because of the terms that are suggested in order to be able to repurchase, and keep the bonds, if it makes sense, then maybe the situation will be looked at. That’s, more or less, what I can say on that. The way the agency, the rating agencies considered the JVs, they have different views on that. For me, it’s absolutely clear. We have put on these JVs. We have the full ability to exercise the put, should we decide to exercise it. So I don’t imagine that this will not be taken into account by rating agencies. At the same time, should we at one point in time, decide not to exercise then maybe the situation will change and the agencies will review. But currently, what we have is €2.4 million invested in JVs, with liquidity rights and minimum price guarantee. Now, I’m not a rating agency, I don’t understand necessarily all what they write, but you get a view and I will try to explain.

Thank you very much, Patrick.

Thank you. Your next question is from Andrew Carter from RBC. Please go ahead.

Yes, good morning, Patrick. It’s Andrew from RBC. I had three questions. One a sort of a big picture one, and then just two financial ones for which I apologize. Just, big picture, I wondered if you could just talk about how you sort to see the rail industry at the moment. And I wondered, I guess, sort of just big picture, do you think that some consolidation is required in the industry? And I guess, if you think it is - do you think it is actually likely with how the players are positioned at the moment? The second was just in terms of pensions, which wasn’t mentioned, I don’t think in the presentation. Are there any cash contributions required to any of the group’s pension funds following the transaction? And then just finally, I apologize for this one, but obviously not so aware of taxation in France. But is there any consideration when you’re receiving back the cash proceeds from the OPRA, is there any tax required to be paid by a French shareholder following that? Thank you.

Look, thank you very much. I will - thank you, Andrew. On the first questions, which is the general picture of the rail industry, I said that we have a company as Alstom, which is among the top players in this industry. We have the most international base; we have the broadest range of technology; we have the broadest range of product, services and systems; we have the experience of a partnership in different geographies; we have the ability to accompany the customers with the services, et cetera. So to cut a long story, Andrew, whether you trust that or not, we believe that we have a nice path ahead of us as we are. One. Two, there is no industry in the world, there is no company in the world, you see who can say that they will never look around. There will be at one point in time, some consolidations, possibly. Is it coming tomorrow? Not necessary. Are we going to be part of? I hope. If there are opportunities of consolidation which makes sense for us, why not consider it? But I will not speculate that this is going to come as a massive wave tomorrow. And again, it’s not necessary detrimental for us the other way round. But there were debate, look, the consolidation is ongoing, because the Chinese are combining. Yes, two Chinese companies are combining. Is it a threat? I never underrated the threats of Chinese competitors. CSR was a threat, CNR was a threat, the combination of them is a strong competitor. But they were already strong competitor in other terms. I mean, I don’t see why the combination of the two creates something which is a game changer compared to the situation before. Yes, they benefit from a very strong local market. Yes, they try to go aboard, yes, they do. They have been doing that for a long time. And the €28 billion of backlog that we got, we got it around all the competition of the planet, including the Chinese. That’s one. Yes, okay, yes, Hitachi has bought Ansaldo, but, at the end of the day, they are half of our size. So it’s not an earthquake at all and as you know, we know about Ansaldo. We looked at it, and considered that we were not in a position to give a future to these activities, if others do, great for them. Look, so that’s my point. I mean, yes, there are some small players. You know that this industry is composed of more or less pure players, but very different to the situation of the energy. If there are opportunities, we look, but we are absolutely not on a kind of must-do mode. There were speculations about Bombardier, and obviously, not going to comment about the strategy of a specific competitor, but we have no plan, no ongoing discussion with them. So if, one point in time, they want to explore their strategy and their options in rail then we’ll see, and if it makes sense, we’ll talk. But again, don’t - we are focused on developing organically. And we’ll only look at acquisitions and M&A if it’s a way to boost our strategy, and to boost our development, not at all in a do-or-die or a must-do mode. Second, on the pensions, Andrew, there is no specific - and from a - I am looking at Marie-Jose, who knows, and I don’t, but my - she confirms that there is no upcoming funding requirements that are in the horizon. And the third one, concerning the shareholders, I don’t think it’s the appropriate time to detail. We are going to publish the detailed note for - make public the detailed note on the operation next week. And this note include the 10s of pages which will relate to the tax situation of the various shareholders depending on their geography, their status, et cetera. So you will get the full understanding of that, rather than me giving you the partial view, and probably a not totally sound one. So, I ask a little bit of your patience on the third point.

Thank you.

You’re welcome.

Thank you. The next question comes from Mr. William Mackie from Kepler Cheuvreux. Please go ahead.

Good morning, Patrick. Thank you for the questions. A couple, please. Firstly, can you share with us your view on I come back to the market conditions. We’ve seen shifts in a number of emerging markets in terms of their behavior and propensity to spend on infrastructure projects, so how is the tender backlog evolving? And then, rolling on to the backlog, what soft discussion can you offer us, or color, with regard to the quality of that backlog. And how, as you execute the revenues and the volume, you mentioned the benefits of operational leverage, but how that may play out in terms of the margin rate? Because specifically, I guess, what I’d like to understand is, what are the necessary conditions that would drive the transport business margin in to the middle or towards the upper end of your 5% to 7% mid-term target band? And lastly, on a detailed question, you mentioned some volatility on the corporate expense. But can you give us a range of where we think, now you’ve got a visibility on the decoupled transport business, what the ongoing level of corporate expense should be? Thank you.

Look, first question on the activity - on the tender activity, I think that, yes, in some geographies there may be a shift of some projects because of some budgeting constraints. But don’t you think that it has happened over the last year in Europe, for instance, very substantially. Yes, overall, I think that we have had an incredible positive sequence in commercial activity. I think that the backlog - I mean, the pipeline remains active. We have a few elephants in the backlog - in the pipeline, which I hope will move from the backlog to - from the pipeline to the backlog. You heard some very high-speed stories in North America, you heard some new urban transportation stories in the Middle East, you may have heard also some substantial opportunities in Asia. So again, we are moving ahead, not only with the ongoing flow which remains active, but also with some big elephants that we hope we are going to capture and move from pipeline to backlog. So there are all the good reasons for bad news, but what we have been able to do is turn these good reasons for bad news into good news. And yes, there are budget constraints in a number of geographies, but this has not changed. And we have again, been able to keep the book-to-bill above one for more than five years, if I’m not totally wrong. So in my view, and in summary, it’s very difficult to give, because if I shift, but shift compared to what? It’s very difficult to give specific timing for prospects to turn into contracts, but we see the pipeline active as a greatest understatement. The backlog, yes, the backlog is healthy. Why wouldn’t we have an unhealthy backlog? Or what is the - assuming that we act logically, why would we take bad contracts, not to say [indiscernible] contracts on board. Is it because we need to fill our backlog? It’s a record level of backlog. If we don’t apply hygiene in our backlog today, in the order intake today, we never do. So assuming we have a minimal rationality, which I hope we are beyond the threshold, you should assume that we apply hygiene, and we have been applying hygiene for a long time, and therefore the quality of the backlog is improving, and has gradually improved. So the answer is, yes, the backlog is a good backlog. The backlog is going - is gradually improving as we take orders and we execute, and the backlog is consistent with our forecast statements in order, so that’s. And then, the improvement of margins, the improvement of margin - by the way, okay, the margin moved from 5% to 5.1%. You say limited, I’m disappointed, Patrick, that’s not good. But at the same time, the IFO is moving by 10% up. So that’s not totally negligible, as well. But again, looking at the income from operations and the way it would move forward, it would be a combination of volume, quality of the - backlog is backlog. So volume - I mean, what we’ll be able to continue to take to the backlog, because we can’t stop, then volume, then quality of execution, then continued accents on costs. And then, it includes some volatility. You know that if we increase the signaling, and if we increase the service part - the mix between the various categories of activities go up then it goes up. And within a given category, take rolling stock, the mix is not absolutely uniform. So on the period we can have some products executed in rolling stock. We are not exactly at the same level of life and, therefore, not necessarily the same level of performance. So, yes, it’s volume, mix, and performance; performance being execution and cost. Corporate expenses, I’m sorry if I said that there is volatility. In fact, there is no yearly volatility. We are - I told you that we were expecting corporate expenses. We guided around €30 million per year, we are at €17 million. So okay, you may have a debate for €2 million, last year it was €15 million, but I wouldn’t consider that as volatility, otherwise everything is volatile, including my humor.

Thank you very much. If I can just go back to the operations for one follow-up. You initiated a number of footprint related measures, a number of almost two years ago, some of which was related to transport in terms of direct cost reduction. How much of that is left to achieve? And when you look at the footprint of transport, supply versus demand across the various countries, is there additional need to make adjustments to the underlying production base?

Well, this is moving. It has been moving in transport, as well as elsewhere. We didn’t give a quantitative number this time. I think that this is an ongoing process, which is going to continue. There will be new action taken everywhere in order both at the level of the operation. In all the categories that I mentioned, which are the manufacturing performance, the optimization of the footprint, the overheads in general, notably in the operations, the corporate costs and the overheads at the simple level, et cetera., which we have been able to improve through the operation, what we call the d2e program, it’s on track, it’s moving ahead, and will continue. But again, we don’t need - our guidance doesn’t assume that the world starts spinning the other way around. We are on a continuous process rather than a revolutionary one, evolution, rather than revolution.

Thank you very much.

Thank you. The next question comes from Mr. James Stettler from Barclays. Please go ahead.

Yes, thank you. Good morning all. James Stettler from Barclays. Just following on, looking at the backlog, if we look at the mix development, what can you say over the next three years in terms of the percentage of service, and indeed signaling, with what you’ve got in the backlog? And just, any more color on what the key execution challenges are. And maybe talking about, for example, PRASA is a very large deal, how risky is that going to be to execute? Thank you.

Well, I think, obviously, when, James, first one, is when you look at the backlog, basically, you have a content of service, for instance, which is larger than what you may have on rolling stock, because, typically, the length of the service contract may be longer than the length of the rolling stock one. So this is not, per se, a pertinence to assume the mix of the sales, because they tend to be executed over a longer period, by nature. That’s what I said. What we think, what we want to do is basically grow the non-rolling stock area faster than the rolling stock one. That has been the stated strategy, and we keep there. And Henri, when he details what he intends to do, will probably come back more on that. GE Signaling will obviously give a boost of the signaling sales, and increase the mix in signaling. So this will - this move, we have not given a detailed guidance, and I’m not prepared to give one today, but that’s what we want to do. In terms of execution, what needs to be done in terms of execution is the - nothing real. I think, we are getting better in the execution compared to where we were a number of years, and expect to continue to improve, that in contracting business, and we have a contracting business. It’s important to execution is the key driver, given backlog can turn into very substantially different P&L, depending on the way it’s executed. So it’s remained a key focus of the company, and its management. You talked about PRASA. PRASA is the starting point. We already delivered some trains from Brazil as part of the contract, and now the work is to gradually transfer and ramp up in South Africa, it’s a large contract. It’s a contract, which is a difficult contract in terms of execution, because we basically have to build a factory, to train more than 1,000 workers to be able to ramp up this factory. We have to stabilize the supply chain. We have started already, because some of the trains we are delivering already include some local supply, because we need to go there. So this is - but you know this is the type of thing that it’s our job to do. Our job is to be able to do that. And if we have been able to successfully tender on this contract, which is a good contract for us, subject that it is properly executed, and your point is well taken, it’s because of our history in the country, our ability to meet all the black empowerment criteria’s, et cetera. So, in other terms, the experience we have. We have not been, at that time, when we took the contract, very exposed to rolling stock experience. But we have very broad energy one, which has been useful at that time, to help us ramp up in rail. So, look, this is something which will be scrutinized in the management of the coming period as a large contract, not necessarily a risky one. All large contracts, by nature, are risky because if they turn bad in bigger numbers, even though the program is to be executed over a long period. But, that’s a point I can make, if we are unable to take large contract, to have - we have a fundamental problem. Again, our ability is to be able to take a combination of contracts in all geographies, to be able to rely on local partners, to put an installed base, and that gives us a clear competitive advantage against a number of competitors, notably Chinese, who are unable to do so, so far. So again, and so, therefore, it should - we should turn that into opportunities. It’s - all large contracts are scrutinized. We have in place all the - I would say, the reporting and sensors that are needed to check, because indeed, they never go linear. So whenever there is a variation, we have to step in and correct. So, look, we’ll - we are moving in this contract, we are at the very initial stage. I think we are just at - it’s a long contract, as I said. And it will ramp up, so we will have the opportunity to talk about this contract regularly.

Thank you. The next question comes from Mr. Martin Wilkie from Citi. Please go ahead.

Hey, good morning. This is Martin Wilkie from Citi. Do you think I could come back to the free cash flow? I understand you don’t want to give guidance, but in your balance sheet impact you do talk about a negative transport free cash flow when you calculate the estimated net debt position, post transaction. I understand there’s probably a slightly definitional difference here because, obviously, the transport free cash you talk about is before interest and tax. I suspect this one is after interest and tax. But I just want to check that, that slide on slide…

Definitely. Definitely, it is.

So the difference in that slide is not implied guidance for the second half, is more interest and tax is bringing that down?

No, thank you for - I’m probably as I said in explaining this slide, we should have talked about continued operation rather than transport, because this definitely includes all what is not related to GE and not taken in the locked-box. And obviously, we are not talking about the future, but we are talking about the past, because we are giving a kind of pro forma picture on September 30, 2015. Last, but not least, this is rounding numbers, so don’t try to extrapolate. We have been trying to give the big picture, rather than the detailed number, to explain why the €3.2 billion was making sense. So it’s - sorry for this lack of clarity.

Good to clarify. So, thank you for that.

Thank you. The next question comes from Mr. Alfred Glaser from Oddo. Please go ahead.

Yes, good morning. I just wanted to follow-on GE disposal. Could you give us a more precise idea of the capital gain that you might book in the P&L this year at Alstom? And then, on the revenues reporting, you have now a clearly positive foreign exchange impact. What would be your guidance for the full year in terms of foreign exchange impact on revenues in transport?

Yes. I would be rich, if I were be able to answer you on the second part of your question, Alfred. No, look, I cannot disclose an accurate estimate of the ForEx as we move forward. So, that’s the second one. On the first one, yes, there will be a capital gain. We will communicate on the capital gain after all the accounting job has been done. And this will be done with the full year numbers, so I don’t want to give presently a figure. Hope it’s going to be substantial, but I don’t want to give a figure. There are a number of things that we have look. I give you an example, among others. We have tax assets, we need to make sure that these tax assets are fully valid and that the new perimeter will give us a fairer - because this is at the corporate level, this is at Alstom SA level. So we need to make sure that tax assets here and there, for instance, are giving - we have enough comfort that these are going to be used, otherwise, we may have an impairment issue. That’s the type of things we want to look at. And therefore, there is some work which is going to be done by the finance team, Marie-Jose and her team, and then we’ll come back with the numbers. The closing is done, so close to the half-year numbers we need some time to review, and we will comment with the full year.

Thank you. The next question comes from Mr. Jessica Kaur from Goldman Sachs.

Hi. I only have a couple of questions left. The first one is about your net debt. What do you consider as the ideal or the comfortable net debt level for your business over the medium term? And my second question relates to your M&A strategy, and apologies for coming back to this one. But I guess, I understand that you’re not in a must-do-more when it comes to M&A, but I wanted to clarify that you said you will still be looking at opportunities. So by that, do you mean you will be looking for opportunities that will be of the bolt-on nature? Secondly, is there any gap in your portfolio where you think those opportunities can arise? Thank you.

No. Thank you. Ideal that this is an issue that we have been addressing and lately, and there is no idea on that. I mean, that basically, we are somehow financed by our customers in the system business and we don’t want to have customers having headache on our balance sheet. This being said, with post-OPRA, we’ll still have one of the best balance sheets of the industry, so I don’t imagine anyone has a worry. So look, a company such as Alstom can be leveraged. It cannot be aggressively leveraged in my view. So I am not in a - I don’t think it’s appropriate to give that target. But again, by taking the conservative part of the OPRA in the board’s recommendation to the AGM, we get the signal that we don’t want to be crazy in terms of balance sheet of the company. On the M&A, you are fairly representing my point when you say that we are not in a must-do mode, that’s exactly my view. We are not in the must-do mode means that we believe that we have a sound portfolio. It doesn’t mean that there are not opportunity to boost the portfolio on bolt-on acquisitions. Typically, GE Signaling is a nice bolt-on acquisition because it covers some holes that we had. We are very much focused on passengers signaling, while GE allows us to be globally on freight signaling. If you look at our signaling business, we are quite broadly present. But I wouldn’t say that U.S. - I mean North America is a stronghold of our signaling activities. It boosts, therefore, our signaling activities in this geography. So that’s typically the type of acquisition we like. And we look for some, well, we have been. I mean, there is no - I mean we have been. We’ve a lot of money to do. So a little bit more contemporary than active, but we’ll continue with the idea that we’ll apply the toughest hygiene and make sure that we don’t do mistakes. But definitely, in my view, we are talking of bolt-on. And bolt-on means giving something in terms of cost base, giving something in terms of commercial presence, giving something in terms of technology additions, et cetera. That’s where we are. But again, there is nothing cooking. So we’ll have plenty of time to get that started.

Good. From the screen, I see that there are not so many additional questions. I’ve been with you a long time, so thank you for your interest. Selma is obviously at your disposal to give you additional elements, and cover your curiosity. And you know the next steps and as far as I’m concerned, in addition to the shareholders’ meeting, I look forward talking to you on January 14, on the Q3 orders and sales. So, thank you very much, and have a good day. Thanks.