Severn Trent Regulatory News (SVT)

Costain Group PLC

("Costain" or "the Group")

Costain and Severn Trent Announce New Joint Venture

Costain Group PLC and Severn Trent Plc have entered into a new Joint Venture ('JV') to provide complete business water and wastewater management services to high volume commercial and industrial water users.

The new entity, Severn Trent Costain, will combine the skills and experience of both Severn Trent Services and engineering solutions provider, Costain, to offer large multi-site water users a single expert supplier for all of their water and waste water requirements, from source to disposal. With a cohesive approach to water management Severn Trent Costain will help customers improve efficiencies, leverage cost savings, manage legal compliance and risk management issues, and resolve water efficiency challenges.

The UK water supply market is undergoing significant change as Government legislation drives increased business retail competition in the competitive UK water market. Severn Trent Costain will be at the forefront of these changes, helping to shape the emerging landscape, and enabling customers to combine their requirements for on-site water services with the opportunity to buy their water from a single national supplier.

Severn Trent Services and Costain have a proven track record in delivering improved efficiencies in water and waste water management through an existing joint venture to operate and maintain over 5,000 assets and 1,300 sites for the Ministry of Defence, one of the largest PFI contracts in Europe.

The two companies will combine parts of their existing operations within the JV (see Note 1 below), in which Costain will have an initial 40% shareholding.

Andrew Wyllie, Chief Executive of Costain, commented:

"Severn Trent Costain will help customers to manage their water and waste water usage in the most efficient, compliant and cost-effective way. Increasingly, customers are looking for a single expert provider who can help plan and manage their industrial water and waste water use across the full cycle.

"We are delighted to be working with Severn Trent to bring our combined expertise in consultation, construction and asset management to bear on this vital issue."

Tony Wray, Chief Executive of Severn Trent said:

 "We are delighted to be working with Costain on this new joint venture. Costain is a long-term partner of Severn Trent Services and together we have already established a track record for successful delivery in the UK.

"Severn Trent Services is one of the world's leading suppliers of water and waste water treatment solutions. Together with Costain we will take the initiative in opening up the UK market for business retail competition."

 Note 1: Costain will contribute the majority of its water hygiene testing business into the JV, comprising gross assets of £0.1 million. The business broke even in the last financial year.

Severn Trent will contribute its UK non regulated, asset operation & maintenance, water hygiene, developer services and Design Build Operate (DBO) business into the JV, comprising gross assets of £0.1 million. The business also made a breakeven PBIT in the last financial year (on revenues of £7.8M).

ENDS

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