As part of the consultation procedure that has been underway since the middle of 1998, OFWAT, the British regulator, has announced its intention to reduce water prices unilaterally in Great Britain from April 2000, and then peg them up to 2005. For the Northumbrian Water Group, a 70% subsidiary of Suez Lyonnaise des Eaux, the figures that have been announced would result, over a 5-year period and taking into account estimated inflation of 2.5% per annum, in water price reductions, in current money and on an annual average, of 1.8% for Essex & Suffolk and of 3.1% for Northumbrian Water Ltd.

A final phase of negotiations with OFWAT is planned, which will take place on 30 November 1999. If these prices are confirmed, Northumbrian Water will have to slow down its investments programmes, and will be unable to implement, within the prescribed time-limits, the facilities that will enable European environmental standards to be met. If OFWAT’s estimates were maintained, Suez Lyonnaise des Eaux would consider asking its subsidiary to appeal, as provided by the procedures, to the “Competition Commission”.

This announcement follows on OFWAT’s first publication dated the end of October 1998. As far as the resulting impact on the financial statements of the Suez Lyonnaise des Eaux Group is concerned, this announcement would automatically lead to an additional reduction of around FRF 130 million in net consolidated earnings for the Year 2000. This impact will be considerably mitigated by adjustment measures contemplated by the company. The 1999 Financial Year is unaffected by this decision.