SUEZ Sells 75 Percent of Northumbrian Water
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SUEZ

Company Reaches a New Milestone In the Implementation of the Action Plan 2003-2004

Suez has agreed to sell 75 percent of Northumbrian Water, its UK water and sewerage business, to a consortium of institutional investors, the transaction values Northumbrian Water at 2,212 million pounds (EUR 3.2 billion).

This transaction which forms part of the Action Plan 2003-2004 will contribute to

* Improving the average return on capital employed by the Group in European water, with a pro-forma return on capital employed (ROCE) of 13.5 percent, compared to 9 percent prior to the transaction. In 2002, Northumbrian accounted for 30 percent of capital employed but only 6 percent of revenues for SELS (Suez Environment Local Services), representing a capital intensity five times the Group average

* Improving the Group's cash flows, releasing it from the substantial ongoing investment programme required by the UK regulatory framework (approximately EUR 1.5 billion over five years)

* Reducing the Group's net debt by EUR 3.1 billion through cash receipts of EUR 1.3 billion and debt deconsolidation of EUR 1.8 billion

Following the divestitures of the Group's stakes in Axa, Total, Vinci and Fortis, this transaction is another key milestone in the implementation of the Action Plan that Suez announced on January 9, 2003. It confirms the rapid execution of the Action Plan, as the Group has disposed of more than EUR 5.4 Billion of assets since the start of 2003.

"This transaction . . . confirms the Group's determination to accelerate its refocusing on its most profitable activities in Energy and Environment, and on the activities that present the best balance between profitability/risk exposure and cash generation. This transaction also recognises the quality and know-how of the employees of Northumbrian, who remain a valuable partner for Suez in the UK. Suez maintains a strong foothold in the UK market while at the same time reducing its financial constraints," said Gerard Mestrallet, CEO of Suez.

The Group will be linked with the new owners through its 25 percent stake in the Company. The new business will be listed, in the first instance on the AIM on completion of the transaction within the next few days. Beyond Suez's retained capital investment, the Suez and Northumbrian teams will have the opportunity to continue the fruitful technical, commercial and personnel collaboration they have developed over the past years. Northumbrian operations are amongst the best performing in the UK water industry according to the Regulator's rankings.

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