Re Contract

Pennon Group PLC
26 January 2007


PENNON GROUP PLC


FOR IMMEDIATE RELEASE

Viridor Selected as Preferred Bidder for Greater Manchester PFI Waste Contract

Pennon Group Plc is delighted to announce that the Greater Manchester Waste
Disposal Authority (GMWDA) today confirmed that it has selected the consortium
between Pennon subsidiary Viridor Waste Management and John Laing Infrastructure
(a division of John Laing plc) as preferred bidder for the PFI contract to
deliver long-term waste management solutions in Greater Manchester.  The
integrated waste management contract, with an investment value of around £300
million, with GMWDA is the largest such scheme in the UK.  Detailed negotiations
now commence with a view to the contract becoming operational later in 2007.

The Viridor/Laing consortium proposals will assist GMWDA with its obligations
under the EU Landfill Directive, achieving high levels of materials recycling
and recovery and radically reducing the proportion of waste sent to landfill. 
Viridor/Laing will provide a full range of waste management services through the
PFI mechanism, including waste reduction, recycling, composting, treatment,
energy recovery and disposal.

GMWDA currently operates and manages the UK's largest waste management contract,
covering the recycling and disposal of waste from across the Greater Manchester
area and dealing with over 1.4m tonnes of municipal waste each year.
Viridor/Laing's proposals cover the provision, redevelopment, refurbishment,
operation and maintenance of a number of essential facilities including
materials recycling facilities, mechanical/biological treatment plants, a new
and an existing thermal recovery facility, transfer loading stations and
household waste recycling centres, as well as the provision of landfill disposal
capacity for treated residues.

Commenting on the decision, Viridor Chief Executive Colin Drummond said: 'The
Viridor/Laing consortium is delighted to have been selected by GMWDA to deliver
a 'world class' waste management solution.  We are looking forward to finalising
our focused proposals aiming to deliver high levels of recycling and recovery
and best value waste services for Greater Manchester in the years to come.'

For further details please contact :

Colin Drummond, Chief Executive, Viridor Waste Management  - 07831 145 157
Jo Finely, Investor Relations Manager, Pennon Group - 01392 443401 or 
07785 904763

Additional information:

The UK is required under the EU Landfill Directive to reduce the amount of 
biodegradable municipal waste going to landfill sites as follows :

-    to 75% of 1995 level by 2010
-    to 50% of 1995 level by 2013
-    to 35% of 1995 level by 2020

Each waste disposal authority has been allocated an allowance of the amount of
biodegradable waste it may dispose of to landfill for the years 2005 to 2020. 
These allowances are designed to ensure that the UK as a whole achieves the
requirements of the EU Landfill Directive.

Viridor Waste Management is a leading provider of essential waste and recycling
services in the UK.  It has core competencies in waste disposal by landfill, the
generation of electricity from landfill gas and the operation of materials
recycling facilities.  It also operates waste transfer stations, civic amenity
sites and composting facilities in a number of regions of the UK and has a waste
collection fleet of around 470 vehicles, a liquid waste treatment plant, and a
clinical waste incinerator.  Its 25 year waste management PFI with West Sussex
County Council has been operating since April 2004 and it commenced a long term
waste management PPP contract with Somerset County Council in May 2006, combined
with the acquisition of Wyvern Waste Services from Somerset County Council.  The
Viridor/Grundon Waste Management joint venture is building a 400kt/32MW energy
from waste facility at Colnbrook west of London which is due to open in the
second half of 2008.

Viridor's stated strategy is to:

  •    capitalise on its leading position in waste disposal by landfill;
  •    exploit opportunities in renewable energy generation;  and
  •    pursue profitable opportunities arising from the UK Government's 
       developing waste strategy, including PFI/PPP contracts.

The company has total consented landfill capacity of approximately 91m cubic
metres.  This capacity is located particularly across the South, North West and
East of England, and the Central Belt of Scotland.

Gas produced from landfill sites (landfill gas) is increasingly used to generate
electricity.  It is a form of renewable energy and now represents around 30
percent of the UK's total renewable energy generation.  The UK Government's
strategy is to increase the percentage of electricity generated from renewable
sources from the current figure of around 4 percent to a target of 10 percent in
2010 and 15 percent in 2015, with an aspiration of 20 percent in 2020.  To meet
these targets, the UK Government has introduced premium pricing regimes, most
recently Renewable Obligation Certificates ('ROCs'), to encourage all eligible
forms of renewable energy including landfill gas.  Viridor has approximately 70
MW of capacity of which 46 percent is eligible for ROCs.

Viridor earned a profit before interest, tax and amortisation of intangibles
(PBITA) of £35.9m in 2005/ 06 on turnover of slightly less than £300m.  Its
PBITA has grown by more than 20% p.a. since 2000/01.

26 January 2007

www.pennon-group.co.uk

End transmission




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