Re Joint Venture

Pennon Group PLC
02 September 2005


2 SEPTEMBER 2005

PENNON GROUP PLC

PENNON GROUP EXPANDS ITS WASTE MANAGEMENT BUSINESS

Pennon Group Plc announces that its subsidiary, Viridor Waste Management
Limited, has joined forces with Grundon Waste Management Ltd and set up a joint
venture company, Lakeside Energy From Waste Limited, to build and operate an
energy from waste plant at Colnbrook near Slough.

The joint venture is in line with Viridor Waste's strategy of capitalising on
opportunities arising from the Government's developing waste strategy and will
assist local authority customers in meeting their landfill diversion targets.
Grundon is the largest family-owned waste management company in the UK.  Its
head office is in Wallingford, Oxfordshire and its mineral extraction and waste
management operations cover mainly the Home Counties and East Anglia.

The plant will have a capacity of 400kt per annum; investment is projected to be
£160m in the period to 2008.  Viridor and Grundon will each own 50% of the joint
venture and the investment will be financed within normal project finance
parameters.

The plant will assist local councils in meeting their landfill diversion targets
and avoiding penalties under the Landfill Allowance Trading Scheme (LATS).  A
number of these councils are existing waste disposal customers of Viridor or
Grundon.  It will also provide power generation capacity of 32 megawatts of
electricity which will be fed into the national grid.  The plant will be built
at Grundon's strategically located site at Colnbrook near Slough which has
relevant permissions and permits in place.  The plant is scheduled to be
commissioned mid-2008.

Commenting on the project, Colin Drummond Chief Executive of Viridor Waste said
'I am delighted to announce this joint venture and we are particularly looking
forward to developing the project with our new partners Grundon.  The
Government's landfill diversion targets impose a significant challenge on local
councils over the period to 2020.  This plant will enable us to assist our
customers in meeting their targets and avoiding costs under the Landfill
Allowance Trading Scheme'.

For further information:

Colin Drummond, Chief Executive, Viridor Waste Limited, 01823 721 435
Jo Finely, Investor Relations Manager, Pennon Group plc, 01392 443 401
James Murgatroyd, Finsbury, 0207 251 3801

Additional information:

Viridor Waste Management is one of the UK's leading waste management companies
and a market leader in recycling.  It currently operates 22 regional landfill
disposal sites, numerous recycling facilities and over 150 waste processing
sites UK-wide.

Viridor provides a full range of waste and recycling services including advanced
composting, glass reprocessing, materials recycling, waste to energy, transport,
site restoration, and safe and efficient landfill disposal.  Viridor also
generates 61 megawatts of renewable energy and has recently won UK industry
awards for the best-run landfills in three out of five years.

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.

The company's sites are accredited to the ISO14001 Environmental Management
System, the highest recognised international standard, which ensures continuous
improvement in environmental performance, and provides assurance to customers
and communities alike.

Landfill Allowances Trading Scheme (LATS):

Article 5(2) of the EC Landfill Directive requires the UK to reduce the amount
of biodegradable municipal waste (BMW) it sends to landfill.  The Government has
introduced the LATS (under the Waste and Emissions Trading Act 2003) as a means
of achieving the Directive landfill diversion targets.  These targets are: by
2010 to reduce the amount of BMW going to landfill to 75% of that produced in
1995, 50% by 2013 and 35% by 2020.  Landfill allowances have been allocated for
each local authority.  This will require a substantial increase in capacity for
alternative treatment processes to landfill, an important alternative being
energy from waste.  A fixed penalty of £150 per tonne in England will be
incurred if an authority breaches its landfill allowances in a scheme year;
flexibilities in trading, banking and borrowing allowances will assist waste
disposal authorities in meeting their obligations.  As a result local
authorities are now actively seeking solutions to achieve their landfill
diversion targets.

                        
2 September 2005

www.pennon-group.co.uk

End transmission


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