Macquarie European Infrastructure Fund leads consortium to acquire the Wales & the West Gas Distribution Network

31 August 2004

LONDON - A consortium of investors led by the Macquarie European Infrastructure Fund has announced that it will acquire the Wales & the West Gas Distribution Network (Wales & the West DN) from National Grid Transco (NGT), for a purchase price of 1.1 times regulated asset value including actual levels of investment.

The consortium, which also includes Macquarie Bank, Macquarie Global Infrastructure Fund II, Industry Funds Management, AMP Capital Investors on behalf of AMP Life, The Northwestern Mutual Life Insurance Company, Canada Pension Plan Investment Board and Challenger Financial Services Group, today signed documentation to acquire the Wales & the West DN from NGT. The sale is expected to be completed in second quarter 2005.

Macquarie Bank acted as financial adviser, lead underwriter and debt and equity arranger. Acquisition facilities have been provided by Barclays, Dresdner Kleinwort Wasserstein and Royal Bank of Scotland.

The Wales & the West DN is a regulated gas distribution business comprising approximately 34,000km of gas distribution pipelines located in Wales and the South West of England. The DN's catchment area has a population of 7.4m. The acquisition includes the highly experienced management and workforce of the Wales & the West DN, with approximately 1,200 full-time employees and 500 contractors.

According to Mr Jim Craig, Managing Director of the Macquarie European Infrastructure Fund, the Wales & the West DN is an outstanding asset with highly attractive investment characteristics.

“We are very pleased to acquire the Wales & the West DN on behalf of our investors. The high quality of the assets and the experience of DN management and staff make this a unique opportunity. The DN provides a strong match with the Fund's investment criteria – a stable, essential-service business generating strong and sustainable cash yields and operating in a mature regulatory environment,” he said.

“Our ability to acquire quality assets such as the Wales & the West DN reflects the Macquarie Group's position as a global leader in the infrastructure sector, with an unrivalled combination of infrastructure advisory, funding and asset management capabilities,” Mr Craig said.

The Macquarie European Infrastructure Fund is a wholesale fund that invests in infrastructure and related assets located in European OECD countries. The Fund caters to pension funds and other investors with a long-term outlook. It aims to deliver sustainable cash yields and moderate capital growth from a diversified portfolio of quality infrastructure assets, such as electricity and gas transmission and distribution networks, water and sewerage companies, rail, airports, communications infrastructure and toll roads.

The Wales & the West DN will be the third investment for the Fund, which raised initial commitments of €427m in April this year. Existing investments are 50.1% of UK utility South East Water and 100% of Arlanda Express, the high speed rail service linking Sweden's Arlanda Airport to Stockholm city centre.

According to Mr Craig, the Fund is continually looking for attractive investment opportunities, and expects to announce further acquisitions in the next 12 – 18 months.

“The European infrastructure sector is generating a strong and growing pipeline of interesting opportunities,” Mr Craig said. “Macquarie is uniquely placed to access outstanding opportunities for our investors. We see this as a key strength of the Fund,” he said.

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NOTES TO EDITORS:

The Macquarie Bank Group

The Macquarie Bank Group is a diversified international provider of specialist investment banking and financial services, with over 5700 employees in 22 countries. Macquarie's European base is London where it has over 300 people, with additional offices in Dublin, Frankfurt, Geneva, Munich, Paris and Vienna. Macquarie manages over €8bn in infrastructure equity around the world, through a range of listed and unlisted vehicles. Infrastructure investments managed by Macquarie include assets in transportation, water, telecommunications and energy sectors in the UK, Germany, Spain, Portugal, Italy, Sweden, Canada, US, Chile, Australia, Korea, Japan and South Africa. Macquarie brings the benefits of global resources, relationships and expertise to its infrastructure activities and the communities they serve.

Macquarie Global Infrastructure Fund II (MGIF II)

MGIF is a Macquarie-managed investment vehicle that provides investors with exposure to an international portfolio of unlisted infrastructure investments. The Fund is based in Australia and targets infrastructure investments in OECD countries outside Australia, as well as Hong Kong and Singapore.

Industry Funds Management

Industry Funds Management (IFM) is the wholly-owned funds management subsidiary of Industry Fund Services, a financial services company specialising in the not-for-profit superannuation fund sector in Australia. IFS is owned by nine superannuation funds. IFM manages $A5.7bn (€3.3bn) across a range of investment sectors, including $A1.3bn (€760m) in infrastructure. IFM's flagship infrastructure product is DAF Infrastructure which was established in August 1995 and now has more than $A1bn (€583m) invested in a diversified portfolio of airports, toll roads, energy networks and power stations. IFM's clients are some of Australia's largest superannuation/pension funds.

AMP

AMP Life is the life insurance subsidiary of the listed Australian company AMP Limited. AMP is a leading wealth management company, providing products and services to both retail and corporate clients through AMP Financial Services and AMP Capital Investors.

• AMP Capital Investors is one of the largest investment managers in Australia and the largest investment manager in New Zealand, offers equities, fixed income, property and private capital products and services to AMPFS, as well as to individual and institutional clients. AMPCI is also specialises in infrastructure investments with $A2bn (€1.2bn) of infrastructure equity funds under management.
• AMP Financial Services provides wealth management products and services in Australia and New Zealand, offers financial planning, retirement savings and income, risk and general insurance and select banking products to both individual and corporate clients.

The Northwestern Mutual Life Insurance Company

The Northwestern Mutual Life Insurance Company is the fifth largest life insurance company in the US and is the largest direct provider of individual life insurance. At 31 December 2003 Northwestern had total admitted assets of $US113.8bn (€94bn). In addition to its life insurance products, Northwestern Mutual, its subsidiaries and affiliates also provide annuities, mutual funds, long-term care insurance and disability insurance. These products and services are distributed through the Northwestern Mutual Financial Network and its almost 7,900 financial representatives.

Canada Pension Plan Investment Board

The CPP Investment Board manages the reserve fund of the national pension plan in Canada, which currently stands at more than C$73bn (€46bn). It invests in capital markets the funds not needed by the Canada Pension Plan to pay current pensions. Cash flows are currently invested in equities, real estate and infrastructure to balance the legacy cash and bond portfolio of the Canada Pension Plan. By increasing the long-term value of funds, the CPP Investment Board will help the Canada Pension Plan to keep its pension promise to 16m Canadians. Based in Toronto, the CPP Investment Board is governed and managed independently of the Canada Pension Plan and at arm's length from governments. For more information about the CPP Investment Board, visit www.cppib.ca .

Challenger Financial Services Group

Challenger is a financial services group that comprises three core product groups: Challenger Life, Challenger Wholesale Finance and Challenger Wealth Management. At 30 June 2004, Challenger's funds under management, administration and and advice from all of these activities exceeded $A24bn (€13.9bn). Challenger is listed on the Australian Stock Exchange.

Macquarie European Infrastructure Fund – existing investments

SOUTH EAST WATER

South East Water is the second largest of 12 water only companies in the United Kingdom. It supplies 400 million litres of water per day to approximately 1.5m people in the South East of England, in a catchment area that covers some 3607km 2 of Kent, Sussex, Surrey, Hampshire and Berkshire. South East Water services a prosperous catchment area with 2002 GDP of £140 billion, the second largest regional economy in the UK, marginally behind London. The region accounts for almost 16 per cent of the UK's GDP and 15 per cent of the total business base. Over the next five years the population of the region is expected to grow at a rate of 0.9 per cent per annum, faster than the UK average of 0.7 per cent per annum.

ARLANDA EXPRESS

Arlanda Express is the express rail service linking Stockholm's main international and domestic airport at Arlanda and Stockholm Central Station, a distance of 42kms by road. The Arlanda Express was established to improve transport links to Arlanda Airport and reduce anticipated levels of traffic congestion arising from air traffic and associated passengers. The high speed service travels at up to 200km per hour, providing a journey time of 20 minutes each way. Six trains run per hour during peak hours and Arlanda Express operates 19 hours per day.

Alison Jefferis
Corporate Communications
Macquarie Group (London)
Tel: (44) (0)20 7065 2335
Mobile: (44) (0)79 1938 2958

Caroline Hancock
Financial Dynamics
Tel: 44 (0)20 7269 7244
Mobile: 44 (0) 7711 050533