Demerger Announcement

Stock Exchange Announcement

13 September 2006 @0700

THIS ANNOUNCEMENT IS AN ADVERTISEMENT AND NOT A PROSPECTUS AND INVESTORS SHOULD
NOT PURCHASE ANY BIFFA ORDINARY SHARES REFERRED TO IN THIS ANNOUNCEMENT EXCEPT
ON THE BASIS OF INFORMATION IN THE PROSPECTUS EXPECTED TO BE PUBLISHED TODAY BY
BIFFA PLC IN CONNECTION WITH THE ADMISSION OF THE ORDINARY SHARES OF BIFFA PLC
TO TRADING ON THE LONDON STOCK EXCHANGE'S MAIN MARKET FOR LISTED SECURITIES. 
COPIES OF THE PROSPECTUS WILL, FOLLOWING PUBLICATION, BE AVAILABLE FROM BIFFA
PLC'S REGISTERED OFFICE AND ON ITS WEBSITE (WWW.BIFFA.CO.UK)

Severn Trent announces details of Biffa demerger and return of value

Severn Trent announced earlier this year that it intended to demerge its
subsidiary, Biffa, and to make a return of capital to Shareholders.

Severn Trent will shortly be posting a circular to its Shareholders giving
details of the Demerger and return of value as well as certain other corporate
arrangements relating to them, including a share consolidation. A prospectus
prepared in connection with the admission of Biffa Ordinary Shares to the
Official List and to trading on the London Stock Exchange is expected to be
published today.

The Circular also seeks Severn Trent Shareholders' approval of the Demerger at
an Extraordinary General Meeting to be held at 2.30 p.m. on 6 October 2006.

The Demerger

The Demerger is proposed to be effected by payment of a dividend in specie of
Biffa Ordinary Shares to Severn Trent Shareholders on the Register at the
Record Time (that is, 6.00 p.m. on 6 October 2006) on the following basis:

For each Existing Severn Trent Ordinary                  1 Biffa Ordinary Share
Share held at the Record Time                                                  

The Demerger is expected to be completed on 9 October 2006, at which time it is
intended that the Biffa Ordinary Shares will be admitted to the Official List
of the FSA and to trading on the London Stock Exchange's main market for listed
securities.

For information on Biffa please refer to the Appendix.

Capital Structure, Special Dividend and Share Consolidation

As announced on 6 June 2006, the Board 's strategy is to increase the level of
leverage in the Group to achieve a target debt to Regulatory Capital Value
ratio (excluding the pension deficit which, on an IAS 19 basis, was £221.9
million at 31 March 2006) of circa 60%.

The Board believes this level of leverage provides appropriate financial
efficiency for a focused water company, whilst being prudent with respect to
regulatory developments into the next AMP period.

Subject to the Demerger becoming effective, Severn Trent will return a total of
approximately £576 million to Severn Trent Shareholders by means of the Special
Dividend. Severn Trent Shareholders on the Register at the Record Time will
receive the Special Dividend of 165 pence per Existing Severn Trent Ordinary
Share which will be paid on 20 October 2006.

It is proposed that, upon the Demerger and following the declaration of the
Special Dividend, Existing Severn Trent Ordinary Shares will be consolidated to
try to ensure that (subject to normal market fluctuations) the share price of
one New Severn Trent Ordinary Share immediately after the Demerger and
declaration of the Special Dividend is approximately equal to the share price
of one Existing Severn Trent Ordinary Share immediately beforehand. The Share
Consolidation should allow the comparability of historic and future financial
statistics of the Severn Trent Ordinary Shares both before and after the
Demerger and declaration of the Special Dividend. The Share Consolidation will
also avoid the need to change the number and exercise prices of options and
awards outstanding under the Severn Trent Employee Share Schemes.

As a result of the Demerger and the Share Consolidation, and subject to
rounding down fractional entitlements, Shareholders will receive:

For every 3 Existing Severn Trent            2 New Severn Trent Ordinary Shares
Ordinary Shares held at the Record Time                                        

Base Dividend

On 6 June 2006, the Board of Severn Trent announced its intention, following
Demerger, to adopt a new dividend policy to increase dividends by 3% above
inflation, as measured by movements in RPI, until March 2010. The Board intends
to apply this new dividend policy to a base dividend of 57 pence per New Severn
Trent Ordinary Share which represents broadly the final dividend per share that
Severn Trent would have paid for the year ended 31 March 2006, had the Demerger
and the Share Consolidation occurred and the Special Dividend been paid in that
financial year. See note 6 for an explanation of how the Base Dividend is
arrived at.

Timetable

Dealings in Biffa Ordinary Shares and New Severn Trent Ordinary Shares are
expected to commence on 9 October 2006. A completion timetable is set out in
note 8 below.

Board Recommendation

The Board, which has received advice from Citigroup Global Markets Limited,
considers the Proposals to be in the best interests of the Company. In
providing advice to the Board, Citigroup Global Markets Limited has relied on
the Board's commercial assessment of the Proposals.

The Board considers the Proposals to be in the best interests of the
Shareholders as a whole and recommends that Shareholders vote in favour of the
Resolutions to be proposed at the Extraordinary General Meeting as each of the
directors intends to do in respect of their own beneficial holdings, which
amount in aggregate to 87,705 Existing Severn Trent Ordinary Shares,
representing approximately 0.025 per cent. of the Existing Severn Trent
Ordinary Shares in issue.

Mr Colin Matthews, Group Chief Executive, Severn Trent, said:

"These strategic changes, particularly the demerger of Biffa, will support a
more efficient balance sheet and will enable me and my management team to
concentrate our efforts on providing the highest level of service and quality
to our water customers and generating value for Shareholders.

"Severn Trent Water is one of the country's largest water and sewerage
companies. The company has great experience and strengths, along with important
plans for improvement. By concentrating our efforts on raising standards across
the entire business, customers will receive the benefits of reliable, high
quality and cost effective services for clean water and sewerage.

"Raising standards in this way will, the Board believes, satisfy customers,
meet Ofwat's expectations and achieve the best financial returns to
shareholders over a sustained period of time."

For further information contact:

Analysts:

Jonathan Davies

Head of Investor Relations, Severn Trent Plc 0207 353 4200 (13 September)

0121 722 4295 (after 13 September)

Media:

Peter Gavan

Director of Corporate Affairs, Severn Trent Plc 07901 517447 (13 September)

0207 353 4200 (13 September)

0121 722 4310 (after 13 September)

Tulchan

David Trenchard 0207 353 4200

Peter Hewer

Citigroup Global Markets Limited, which is regulated in the United Kingdom by
the Financial Services Authority, is acting exclusively for Severn Trent Plc
and Biffa Plc. Citigroup Global Markets Limited is not acting for any other
person in connection with the proposed Demerger and Admission (including any
recipient of this announcement) and Citigroup Global Markets Limited will not
be responsible to any person other than Severn Trent Plc and Biffa Plc (as
applicable) for providing the protections afforded to clients of Citigroup
Global Markets Limited or for providing advice in relation to the Demerger,
Admission or any other matter referred to herein.

Notes:

1. A conference call for analysts will be given at 9.00 a.m. today by Mike
McKeon, Group Finance Director, Severn Trent Plc. The dial in details are

UK Freephone 0800 358 2705

Outside UK [phone]

PIN Code 735735#

This call will be recorded and available immediately after the live call has
concluded for playback for 30 days and can be accessed using the following dial
in details:

UK Access Number [phone]

Conference Reference 151614#

 2. A presentation on Biffa for analysts will be given today at 11.00 a.m. by
    Bob Davies, Chairman, Martin Bettington, Chief Executive Officer and Tim
    Lowth, Finance Director of Biffa Plc at Herbert Smith LLP, Exchange House,
    Primrose Street, London EC2A 2HS. The dial in details are:
   
Tel: [phone]

PIN Code 688100

Replay details:

Tel: [phone]

PIN Code 688100

3. Severn Trent intends to give its normal trading update on Tuesday 3 October
2006 and to announce half year results on Thursday 7 December 2006.

4. Following Colin Matthews' appointment as Chief Executive of the Group in
February 2005, the new management team carried out a review of the Group's
business. The review of the water and waste businesses demonstrated that the
growth and regulation drivers of the two businesses are very different, and
that few operational synergies would be lost through separate ownership.

5. On 4 April 2006, the Board of Severn Trent announced the proposed Demerger
of Biffa. Biffa is a leading integrated waste management business in the UK
which operates across the breadth of the waste management value chain. It
provides waste collection, treatment and recycling, and disposal services to
around 80,000 local and national customers in the industrial, commercial and
municipal sectors.

6. The Base Dividend of 57 pence per Severn Trent Ordinary Share is calculated
by:

(i) taking the dividend of 51.13 pence per Severn Trent Ordinary Share in
respect of the year ended 31 March 2006 (equivalent to an aggregate dividend of
approximately £177.6 million);

(ii) deducting 5 to 6 pence per Severn Trent Ordinary Share, representing an
amount the Board believes Biffa would have paid as a dividend to its own
shareholders had it been independent from the Severn Trent Group at the time;

iii. deducting a further 7 to 8 pence per Severn Trent Ordinary Share,
    representing an adjustment in respect of the payment of the Special
    Dividend after having taken into account the impact of the Demerger; and
   
iv. adjusting the resulting dividend per Severn Trent Ordinary Share of
    approximately 38 pence, as calculated above, to 57 pence per New Severn
    Trent Ordinary Share to reflect the impact of the Share Consolidation
    (equivalent to approximately £133 million based on approximately 233
    million New Severn Trent Ordinary Shares which it is anticipated will be in
    issue immediately following the Share Consolidation).
   
Therefore the Board intends to apply its new dividend policy to the Base
Dividend of 57 pence per New Severn Trent Ordinary Share.

7. It is intended that on Demerger all pension liabilities will be allocated to
the relevant employing group. It has therefore been agreed with the trustees of
the Severn Trent Pension Scheme, the Severn Trent Senior Staff Pension Scheme
(these schemes together being the "Severn Trent Schemes"), and the UK Waste
Pension Scheme that on Demerger all liabilities in the Severn Trent Schemes
which relate to Biffa employees (both past and current) will transfer to the UK
Waste Pension Scheme.

In order to facilitate the transfer on the agreed basis it has been agreed with
the trustees of the Severn Trent Schemes that certain payments will be made to
these schemes by Severn Trent and Biffa. With respect to the Severn Trent
Pension Scheme, it has been agreed that a payment will be made to top up the
transfer payment to the IAS 19 level and it has been agreed between Severn
Trent and Biffa that this payment will be split on the basis that they will
each pay an amount estimated to be £8 million and £12 million, respectively.

It has also been agreed that at or shortly after Demerger, Severn Trent and
Biffa will each make a funding payment to the Severn Trent Senior Staff Pension
Scheme (estimated to be £3 million and £1 million, respectively), in order to
fully fund the liabilities on an IAS 19 basis. Severn Trent will thereafter
make additional contributions to maintain this scheme at fully funded level (on
the scheme specific funding basis) in accordance with a basis agreed with the
trustee of this scheme, up to an aggregate amount of approximately £8 million
(including the estimated £4 million funding payments made by Severn Trent and
Biffa.)

In addition to the payments referred to above, it has been agreed that at, or
shortly after Demerger, an additional funding payment of £80 million will be
made to the Severn Trent Pension Scheme, of which £72 million will be paid by
Severn Trent and £8 million will be paid by Biffa.

As part of the wider discussions with the trustee of the UK Waste Pension
Scheme regarding the Demerger, agreement has been reached regarding the future
funding arrangements for that scheme and various other ancillary matters. This
includes a permanent restriction on the ability of the UK Waste trustee to
trigger a wind up of the UK Waste Pension Scheme (subject to their retention of
this power for 7 years from Demerger should Biffa cease accrual), and the
provision by Biffa of a guarantee to the trustee of the UK Waste Pension Scheme
in respect of the participating employers' liability to make contributions to
the scheme. Biffa's liabilities under the guarantee will be capped at a maximum
of £105 million.

Clearance has been obtained from the Pensions Regulator in relation to various
aspects of the Demerger. In particular, the Regulator has confirmed that it
would not be reasonable to impose a Contribution Notice as a result of the
agreement with the trustees to apportion to Severn Trent any debt liabilities
under Section 75 and 75A of the Pensions Act 1995 arising on the withdrawal of
Biffa Waste Services Limited or Island Waste Services Limited from the Severn
Trent Pension Scheme or on the withdrawal of Biffa Waste Services Limited or
Biffa Plc from the Severn Trent Senior Staff Pension Scheme. In relation to the
UK Waste Pension Scheme, the Regulator has confirmed that it would not be
reasonable to impose a contribution notice in respect of the Demerger. Further,
the Regulator has confirmed that it would not in the future be reasonable to
impose a financial support direction on any entity within the Severn Trent
Group in respect of the UK Waste Pension Scheme, or on any entity within the
Biffa Group in respect of either the Severn Trent Pension Scheme or the Severn
Trent Senior Staff Pension Scheme.

8. Expected timetable 2006

Latest time and date for dealings in Existing              5.00 p.m. on 3
Severn Trent Ordinary Shares in uncertificated form               October
on T+3 settlement basis in order for the transferee                      
to be registered by the Record Time*                                     
                                                                         
Latest time and date for receipt of Proxy Forms,           2.30 p.m. on 4
Combined Proxy and Election Forms or CREST Proxy                  October
Instructions for the Extraordinary General Meeting                       
                                                                         
Extraordinary General Meeting                              2.30 p.m. on 6
                                                                  October
                                                                         
Record Time for entitlement to the Demerger                6.00 p.m. on 6
Dividend and Special Dividend and for the Share                   October
Consolidation                                                            
                                                                         
Effective time and date of Demerger and Share              8.00 a.m. on 9
Consolidation and CREST accounts credited with New                October
Severn Trent Ordinary Shares and Biffa Ordinary                          
Shares                                                                   
                                                                         
Commencement of dealings in New Severn Trent               8.00 a.m. on 9
Ordinary Shares                                                   October
                                                                         
Commencement of dealings in Biffa Ordinary Shares          8.00 a.m. on 9
                                                                  October
                                                                         
Posting of cheque with proceeds of sale of Biffa            on 16 October
Ordinary Shares pursuant to the free share sale                          
service described in the Circular                                        
                                                                         
Payment date for the Special Dividend to                    on 20 October
uncertificated holders or holders with a bank                            
mandate in respect of dividend payments                                  
                                                                         
Posting of share certificates for New Severn Trent          on 20 October
Ordinary Shares to certificated holders together                         
with cheques in respect of the Special Dividend and                      
any fractional entitlements                                              
                                                                         
Posting of share certificates for Biffa Ordinary            on 20 October
Shares                                                                   

If any of the above times and/or dates change, the revised times and/or dates
will be notified to Shareholders by announcement through a Regulatory
Information Service.

All times shown in this announcement are to the time in London, United Kingdom

*It is likely that transfers of Existing Severn Trent Ordinary Shares in
certificated form will need to take place earlier than this date in order for
the transferee to be on the Register at the Record Time but this will depend on
Shareholders' individual dealing arrangements.

The contents of this announcement, which have been prepared by and are the sole
responsibility of Severn Trent Plc, have been approved solely for the purposes
of section 21(2)(b) of the Financial Services and Markets Act 2000 by Citigroup
Global Markets Limited of Citigroup Centre, Canada Square, London E14 5LB.

This document contains certain "forward-looking statements". Forward-looking
statements are sometimes, but not always identified, by their use of a date in
the future or such words as "anticipates", "aims", "due", "could", "may",
"should", "expects", "believes", "intends", "plans", "targets", "goal" or
"estimates". By their very nature forward-looking statements are inherently
unpredictable, speculative and involve risk and uncertainty because they relate
to events and depend on circumstances that will occur in the future.

There are a number of factors that could cause actual results and developments
to differ materially from those expressed or implied by these forward-looking
statements. These factors include, but are not limited to, changes in the
economies and markets in which Severn Trent and Biffa operate; the impact of
legal or other proceedings against or which affect Severn Trent; and changes in
interest and exchange rates.

All written forward-looking statements made in this document or verbal
forward-looking statements made subsequently, which are attributable to Severn
Trent or Biffa or any other member of the Severn Trent Group or persons acting
on their behalf are expressly qualified in their entirety by the factors
referred to above. Neither Severn Trent nor Biffa intends to update these
forward-looking statements.

This announcement does not constitute or form part of any offer of securities
or any invitation to sell or issue securities or constitute an invitation or
solicitation of any offer to purchase or subscribe for any securities of Biffa
or Severn Trent and any acquisition of any shares of Biffa should be made
solely on the basis of the information contained in the Biffa Prospectus and
any supplement or amendment thereto. The Biffa Prospectus will contain certain
detailed information about Biffa Plc and its management, as well as financial
information and other financial data.

This announcement does not constitute an offer or invitation, or the
solicitation of an offer to any person to buy or subscribe for, or to sell,
exchange or transfer any securities in Biffa or Severn Trent in any
jurisdiction. Securities may not be offered, sold or transferred in the United
States absent of registration or an applicable exemption from the registration
requirements or the US Securities Act of 1933 (as amended) (the "Securities Act
").

The New Severn Trent Ordinary Shares and the Biffa Ordinary Shares have not
been, and will not be, registered under the Securities Act nor have they been
approved or disapproved by the U.S. Securities and Exchange Commissions (the "
SEC") or any U.S state securities commission or any other US regulatory
authority, nor have such authorities passed upon or determined the accuracy or
adequacy of this announcement. Any representation to the contrary is a criminal
offence in the U.S.

                                   APPENDIX                                    

                           INFORMATION ON BIFFA PLC                            

 1. Overview of Biffa
   
Biffa is a leading integrated waste management business in the UK which
operates across the breadth of the waste management value chain. It provides
waste collection, treatment and recycling, and disposal services to around
80,000 local and national customers in the industrial, commercial and municipal
sectors.

Biffa's business is grouped into four operating divisions:

Collection: Biffa has one of the largest waste collection networks in the UK,
with 86 depots and over 1,500 vehicles which collected over four million tonnes
of waste last year from around 80,000 industrial and commercial customers and
over one million households, including through two fully integrated waste
management contracts under the Private Finance Initiative with Isle of Wight
Council and Leicester City Council

Special Waste: Biffa provides a range of specialised services for the
collection, treatment and recycling, and disposal of solid and liquid hazardous
waste for industrial and commercial customers. The special waste division
operates from over 20 locations in the UK including two specialist transfer
stations, and three liquid treatment plants and has a dedicated fleet of over
80 specialised vehicles

Landfill: Biffa is one of the top three operators of landfill services in the
UK and in the year ended 31 March 2006 handled approximately 7.5 million tonnes
of waste at its operational landfill sites. Biffa's 37 operational landfill
sites comprise approximately 73 million cubic metres of Consented Void (of
which approximately 63 million cubic metres is Operational Void), in addition
to which Biffa leases approximately ten million cubic metres
of Consented Void, all of which is Operational Void, to another landfill
operator. Biffa also controls approximately 22 million cubic metres of
Potential Void. The landfill division's customers include Biffa's collection
division, local authorities and most other major waste collection businesses
operating in the UK

The division also incorporates Biffa's dry waste treatment and recycling
business. This comprises 19 transfer stations for the bulking up of waste and
15 facilities for the sorting of recyclable materials such as paper, card,
metal, plastics and glass

Power Generation: Biffa is a significant provider of renewable energy in the
UK, with approximately 63 MW of installed capacity at its own sites, and
interests in approximately 45 MW of installed capacity through joint venture
and royalty arrangements. In the year ended 31 March 2006, Biffa generated
approximately 380 GWh of electricity at its own sites.

 2. Biffa's Strategy
   
The cornerstone of Biffa' s strategy is the provision of high quality
integrated waste management services to industrial, commercial and municipal
customers across the entire waste management value chain of collection,
treatment and recycling, and disposal.

Biffa intends to continue to develop this integrated offering by growing its
business organically to exploit existing and developing market opportunities in
the following ways:

Grow industrial and commercial accounts - Biffa intends to capitalise upon the
scale and reach of its existing collection network to grow industrial and
commercial accounts by providing improvements in service delivery and quality,
vehicle utilisation, customer account management and administration;

Increase presence in the municipal market - Biffa intends to continue to build
upon its good reputation in the municipal market to selectively secure new
contracts, and capitalise on existing customer relationships to extend the
services provided to such customers;

Expand treatment and recycling capabilities - Biffa intends to encourage and
meet growing demand for these services by developing sorting facilities,
securing more municipal waste management contracts which include the provision
of treatment and recycling services and building more relationships with
processors of recyclable materials;

Capitalise upon existing strengths in landfill - Biffa intends to employ a
strategy to maximise the returns achievable from this finite resource,
capitalising upon Biffa' s integrated model (which gives the Company an
advantage in managing waste inputs), increasing Biffa's Consented Void by
extending Biffa's existing landfill sites where possible and securing new
landfill sites in strategic locations and on attractive terms;

Maximise power generation opportunities - Biffa plans to establish new or
additional capacity at its existing landfill sites, increasing the proportion
of capacity for which Biffa receives Renewable Obligation Certificates; and
evaluating opportunities for alternative sources of renewable energy
generation; and

Make selective and complementary acquisitions - Biffa expects to make selective
and complementary `bolt-on' acquisitions that the directors of Biffa consider
would accelerate growth within Biffa's business divisions and complement the
Biffa strategy.

 3. Biffa Summary Financial Information
   
Summary Consolidated Income Statements under IFRS

££mn                                             FY 04/05        FY 05/06
                                                                         
Revenue                                             629.7           712.3
                                                                         
Operating profit(1)                                  77.1            86.3
                                                                         
Profit before tax                                    35.7            65.5

Note:

(1) "Operating profit" under IFRS excludes the Group's share of operating
profit of joint ventures and associates.

Summary Balance Sheets under IFRS

£mn                                               FY04/05        FY 05/06
                                                                         
Assets                                                                   
                                                                         
Non-current assets                                1,060.9         1,072.6
                                                                         
Current assets                                      156.1           173.9
                                                                         
Liabilities                                                              
                                                                         
Current liabilities                               (162.9)         (349.6)
                                                                         
Non-current liabilities                           (716.6)         (236.7)
                                                                         
Net assets                                          337.5           660.2

Summary Cash Flows Under IFRS

£mn                                              FY 04/05        FY 05/06
                                                                         
Net cash from operating activities                   93.2            99.1
                                                                         
Net cash used in investing activities              (64.4)          (72.9)
                                                                         
Net cash used in financing activities              (14.7)          (18.4)
                                                                         
Net increase in cash and cash equivalents            14.1             7.8

 4. As at 31 March 2006, the gross assets of Biffa under IFRS were £1,246.5
    million.
   
 5. Based on Biffa's financial performance since 1 April 2006, Biffa continues
    to trade in line with the Directors' expectations. The Directors of Biffa
    have confidence in Biffa's prospects for the current financial year.
   
 6. It is expected that for the financial period ending 30 March 2007, Biffa
    will have an effective tax rate in the range of 30 to 35 per cent. This
    comprises both current and deferred tax.
   
 7. The Directors' of Biffa believe that the net additional costs of operating
    as an independent company will be in the region of £2 million per annum.
   
 8. On 30 August 2006, Biffa Corporate Holdings Limited, a wholly owned
    subsidiary of Biffa, entered into a £460 million unsecured dual tranche
    credit facility (comprising £310 million term loan facility and a £150
    million revolving credit facility) for the general corporate purposes of
    the Biffa Group (the "Facility Agreement"). Prior to the Demerger becoming
    effective, Biffa Corporate Holdings Limited is expected to draw two amounts
    under the Facility Agreement, as follows:
   
(i) approximately £111 million, which will be used to make a loan to Biffa
Waste Services Limited, an indirect subsidiary of Biffa Corporate Holdings
Limited, such that Biffa Waste Services Limited can repay an outstanding loan
from Severn Trent; and

(ii) approximately £197 million, which will be used to pay a dividend to Biffa,
such that Biffa can repay an outstanding loan from Severn Trent.

Following this, but before the Demerger becomes effective, a further dividend
of £65.3 million will be paid by Biffa to Severn Trent. This dividend will be
comprised partly from existing cash within the Biffa Group of approximately £39
million and partly from a further amount of approximately £26 million drawn
under the Facility Agreement.

In addition, after completion of the Demerger, Biffa is expected to make
certain contributions to the Severn Trent Pension Schemes (estimated to be an
aggregate amount of £21 million) further details of which are set out in note 7
above.

Taking into account all of these payments and including certain finance leases
and cash balances being retained by Biffa, Biffa's pro forma net debt at 31
March 2006 would have been approximately £401 million.

 9. Following Admission, the directors of Biffa intend to adopt a progressive
    dividend policy which will take into account the profitability of the Biffa
    Group's businesses and underlying growth, as well as its capital
    requirements and cash flows, while maintaining an appropriate level of
    dividend cover. The directors of Biffa may review Biffa's dividend policy
    from time to time.
   
The directors of Biffa believe that had the Demerger been effective and the
Biffa Group's post Demerger capital structure been in place throughout the year
ended 31 March 2006, a dividend in the range of £18.0 million to £19.5 million
for the full year would have been appropriate.

Following Admission, the directors of Biffa intend to adopt a dividend policy
targeting a dividend cover range of 2.1 to 2.3 times earnings.

10. The executive directors of Biffa, Martin Bettington and Tim Lowth, have
    been with the Biffa Group for 17 and 15 years respectively. Martin leads an
    experienced management team that includes divisional heads Nick Gregg
    (Collection), David Knott (Landfill) and Bob Tate (Special Waste and Power
    Generation). The executive directors and senior management team have an
    average of 17 years' experience in the waste management industry and a
    depth of industry knowledge. Martin Bettington will resign from his
    position as a director of Severn Trent on completion of the Demerger.
   
                                  DEFINITIONS                                  

Admission              the admission of the Biffa Ordinary Shares to the       
                       Official List and to trading on the London Stock        
                       Exchange's main market for listed                       
                                                                               
                       securities                                              
                                                                               
AMP                    Asset Management Plan, the five year periodic review    
                       process set by Ofwat in relation to water companies     
                                                                               
Base Dividend          a base dividend of 57 pence per New Severn Trent        
                       Ordinary Share                                          
                                                                               
Biffa                  Biffa Plc, a company registered in the England and Wales
                       with registered number 04081901                         
                                                                               
Biffa Group            Biffa and its subsidiary undertakings                   
                                                                               
Biffa Ordinary Shares  ordinary shares of 10 pence each in the capital of Biffa
                                                                               
Biffa Prospectus       the prospectus expected to be published by Biffa on 13  
                       September 2006                                          
                                                                               
Biffa Shareholders     the holders of Biffa Ordinary Shares                    
                                                                               
Board or Directors     the board of directors of Severn Trent                  
                                                                               
certificated or in     recorded on the Register without reference to the CREST 
certificated form      system                                                  
                                                                               
Circular               the circular to Shareholders expected to be published by
                       Severn Trent on 13 September 2006                       
                                                                               
Company or Severn      Severn Trent Plc, a company registered in the England   
Trent                  and Wales with registered number 02366619               
                                                                               
CREST                  the system of paperless settlement of trades in         
                       securities and the holding of uncertificated securities 
                       operated by CRESTCo Limited in accordance with the      
                       Uncertificated Securities Regulations 2001 (SI 2001/    
                       3755) (as defined in the CREST Regulations) in respect  
                       of which CRESTCo is the Operator (as defined in the     
                       CREST Regulations)                                      
                                                                               
Demerger               the proposed demerger of Biffa from the Severn Trent    
                       Group to be effected by means of the Demerger Dividend  
                                                                               
Demerger Dividend      the dividend in specie of Biffa Ordinary Shares proposed
                       to be paid to Shareholders to effect the Demerger, as   
                       more fully described in this document                   
                                                                               
Demerger Effective     the date on which the Demerger becomes effective,       
Date and/or Time       expected to be 8.00 a.m. on 9 October 2006              
                                                                               
Existing Severn Trent  the existing ordinary shares of 65 5/19 pence each in   
Ordinary Shares        the capital of Severn Trent                             
                                                                               
Extraordinary General  the extraordinary general meeting of Severn Trent and   
Meeting or EGM         any adjournment thereof, convened for 2.30 p.m. on 6    
                       October 2006 at the National Motorcycle Museum, Coventry
                       Road, Bickenhill, Solihull, B92 0EJ                     
                                                                               
Facility Agreement     the £460 million unsecured dual tranche credit facility 
                       (comprising £310 million term loan facility and a £150  
                       million revolving credit facility) entered into by Biffa
                       Corporate Holdings Limited on 30 August 2006 and        
                       arranged by Barclays Capital and The Royal Bank of      
                       Scotland plc, with Barclays Bank plc as Agent, for the  
                       general corporate purposes of the Biffa Group           
                                                                               
FSA                    the Financial Services Authority                        
                                                                               
IAS                    International Accounting Standard                       
                                                                               
IAS19                  International Accounting Standard 19: Employee Benefits 
                                                                               
London Stock Exchange  London Stock Exchange plc                               
                                                                               
New Severn Trent       the new ordinary shares of 97 17/19 pence each in the   
Ordinary Shares        capital of Severn Trent arising from the Share          
                       Consolidation                                           
                                                                               
Official List          the Official List of the FSA                            
                                                                               
Ofwat                  the Water Services Regulation Authority, the economic   
                       regulator of the water and sewerage industry in England 
                       and Wales                                               
                                                                               
Record Time            6.00 p.m. on 6 October 2006 (or such other time and date
                       as the Directors (or any duly authorised committee of   
                       them) may determine), being the date on which           
                       Shareholders are required to be on the Register in order
                       to be entitled to the Demerger Dividend and/or the      
                       Special Dividend and by reference to which the Share    
                       Consolidation is calculated                             
                                                                               
Register               the register of members of Severn Trent                 
                                                                               
Regulatory Capital     the value of the capital base of a water company, as    
Value                  determined by the water regulator                       
                                                                               
RPI                    Retail Prices Index                                     
                                                                               
Severn Trent Group or  Severn Trent Plc and its subsidiary undertakings (as    
the Group              defined in the Act), including, prior to the Demerger,  
                       the Biffa Group                                         
                                                                               
Severn Trent           Severn Trent Plc                                        
                                                                               
Severn Trent Employee  the Severn Trent Long Term Incentive Plan 2005, the     
Share Schemes          Severn Trent Plc Long Term Incentive Plan, the Severn   
                       Trent Share Incentive Plan, the Severn Trent Share      
                       Option Scheme and the Severn Trent Sharesave Scheme     
                                                                               
Severn Trent Ordinary  prior to the Share Consolidation, Existing Severn Trent 
Shares                 Ordinary Shares, and on or after the Share              
                       Consolidation, New Severn Trent Ordinary Shares         
                                                                               
Share Consolidation    the proposed consolidation of Severn Trent Ordinary     
                       Shares to be achieved by consolidating every 3 Existing 
                       Severn Trent Ordinary Shares into 2 New Severn Trent    
                       Ordinary Shares                                         
                                                                               
Shareholders or Severn the holders of Severn Trent Ordinary Shares             
Trent Shareholders                                                             
                                                                               
Special Dividend       the interim cash dividend of 165 pence per Existing     
                       Severn Trent Ordinary Share proposed to be paid on 20   
                       October 2006 to Shareholders on the Register at the     
                       Record Time, conditional on the Demerger proceeding     
                                                                               
uncertificated or in   in CREST and title to which, by virtue of the CREST     
uncertificated form    Regulations, may be transferred by means of CREST       
                                                                               
United Kingdom or UK   the United Kingdom of Great Britain and Northern Ireland
                                                                               
United States or US    the United States of America                            

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