Kelda Group strategy review conclusions

• The benefits of separation, subject to regulatory approvals, of the ownership and operation of Yorkshire Water Services Limited's assets.
• The role of the non-water, diversified businesses.
• Returning to shareholders excess capital realised from the implementation of these strategic initiatives.
• The development of Kelda as a provider of operating services to the water industry and the development of business services generally.

1. Kelda will focus on its water and waste management operations with a planned disposal of its renewable energy and other environmental services businesses in the UK and Europe.
2. To create a community owned company (Registered Community Asset Mutual, or RCAM) which once established, would negotiate on an arms length basis, to acquire the shares and assets of Yorkshire Water Services Ltd. (YWS) for a total consideration which Kelda believes should be close to the regulated asset value.
3. Following the sale of YWS to the RCAM, the RCAM, acting independently, would implement a procurement strategy which would subject all contestable operational activities to competitive tendering.
4. Under this proposed procurement plan, Kelda expects that the RCAM would award initial operating contracts to Kelda to ensure continuity of service. It is expected that competitive re-tendering would take place over the lifetime of the current price determination in a phased manner.
5. There will be a substantial return of value to Kelda shareholders.
6. The simplification of the Kelda business profile will allow a significant corporate restructuring and reduction in overheads. It is planned that this should provide an opportunity to reduce overheads which, together with the net effect of the disposals, should generate a minimum of £10 million savings in a full year.