RWE announces capital restructuring of Thames Water

Sep 12, 2006

Financing transactions to establish Thames Water as an independent entity

Following the announcement of its intention to divest RWE Thames Water, RWE AG announces that it is undertaking a capital restructuring of the RWE Thames Water group of companies ("Thames Water"), including the regulated entity Thames Water Utilities Limited ("TWUL") and its finance subsidiary Thames Water Utilities Finance plc ("TWUF"). This capital restructuring is an important step in preparation for the planned divestment of Thames Water by 2007, which still has to be approved by the RWE Supervisory Board.

RWE continues to evaluate the benefits of proceeding with either a private sale or a flotation of Thames Water. This capital restructuring is intended to create a more efficient capital structure and to establish stand-alone financing arrangements. It will not affect Thames Water’s investment programme.

The capital restructuring is being implemented in several steps. The first step, which commenced during August, entails the issuance by TWUF of GBP 300 million 1.6802% Guaranteed Index-Linked Bonds due 11th July, 2053 and GBP 300 million 1.6810% Guaranteed Index-Linked Bonds due 11th July, 2055, both of which are guaranteed by TWUL. This initial step also included the sale by RWE of GBP 425 million of existing bonds issued by TWUF and guaranteed by TWUL.

The next step of the capital restructuring, which is being announced today, is the planned issuance of further new bonds by TWUF, also guaranteed by TWUL. These bonds will be of benchmark size and in varying maturities. In addition to the issue of new bonds by TWUF, RWE will be selling a further GBP 450 million of existing bonds issued by TWUF.

TWUL will also be putting in place new revolving credit facilities in order to meet working capital requirements in preparation for the divestment of Thames Water from RWE.

In the event of a flotation of Thames Water rather than a private sale, further new debt obligations at Thames Water holding company level will be incurred. It is intended that this debt take the form of a new bank facility.

The proposed capital structure has been arrived at following a thorough review with the aim of providing an independent Thames Water with a stable and sustainable capital structure that maintains sufficient headroom to enable the business to fully deliver its regulatory obligations. For the current regulatory period ending March 2010, it is expected that the percentage of net debt to Regulatory Capital Value (RCV) will be no higher than the low 60's for TWUL, and the low 70's for Thames Water on a consolidated basis.

Thames Water's debt will continue to be rated by Moody's Investors Service Limited and Standard & Poor's Ratings Services, a division of The McGraw-Hill Companies Inc. Throughout the planning of the capital restructuring set out above, RWE and Thames Water have kept the UK water regulator Ofwat fully informed.

Press contact:
Julia Scharlemann ((international) Spokeswoman)
Group Press Relations
Tel: +49 (0)201 12 17402
Fax: +49 (0)201 12 15649





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