Proposed Disposal

Shanks Group PLC
25 May 2004

                                SHANKS GROUP PLC

         PROPOSED DISPOSAL OF UK LANDFILL AND RELATED POWER OPERATIONS
                              FOR GBP227.5 MILLION

Summary

Shanks Group plc announces that it has agreed to sell its UK landfill and related power operations ('Disposal
Activities') to Terra Firma for a total cash consideration of GBP227.5 million. 
 
Completion of the Disposal is conditional upon, inter alia, the approval of the ordinary shareholders of Shanks. 
 
Commenting, Ian Clubb, Chairman of Shanks said: 
 
'This disposal gives Shanks the financial flexibility to pursue opportunities in its continental businesses as well
as integrated municipal waste contracts in the UK. The technologies assembled by the Group are particularly suited to
these markets and will allow it to capitalise on opportunities created by the Landfill Directive and the increasing
level of Landfill Tax.'  
 
Guy Hands of Terra Firma Capital Partners said: 
 
'The acquisition of Shanks' UK landfills, in conjunction with Terra Firma's purchase of Waste Recycling Group for
GBP531 million in June 2003, reflects the team's continued interest in the UK waste industry. We are delighted to
have the opportunity to expand our presence in the sector. The combination of Shanks' UK landfills with Waste
Recycling Group will bring added operational and strategic focus to the business. This acquisition is good news for
its employees and its customers. It also confirms our position as one of the leading producers of green energy in
Europe.' 


Enquiries

Shanks Group plc                                   Tel:  [phone]
Ian Clubb, Chairman
Michael Averill, Group Chief Executive
David Downes, Group Finance Director
John Shaughnessy, External Relations               Tel:  [phone]

Lazard                                             Tel:  [phone]
Nicholas Jones
Sarah Hedger

Hoare Govett Limited                               Tel:  [phone]
Neil Collingridge
John Stocks

For Terra Firma
Andrew Dowler - Financial Dynamics                 Tel:  [phone]



Lazard & Co., Limited which is regulated by the Financial Services Authority is acting exclusively for Shanks Group
plc and no one else in connection with the Disposal and will not regard any other person as its customer nor be
responsible to any other person for providing the protections afforded to its customers or for providing advice to
any other person in connection with the arrangements described in this document. 
 
Citigroup Global Markets Limited and Gleacher Shacklock Limited, which are regulated by the Financial Services
Authority are acting exclusively for Terra Firma Investments (GP) II Ltd and no one else in connection with the
Disposal and will not regard any other person as their customer nor be responsible to any other person for providing
the protections afforded to their customers or for providing advice to any other person in connection with the
arrangements described in this document. 
 
Note to Editors 
 
Terra Firma Capital Partners is a leading European private equity firm with offices in London and Frankfurt. The
Group was formed by Guy Hands in 1994 as the Principal Finance Group of Nomura International in London. Terra Firma
now advises on two funds totalling assets of USD4.5 billion, having become independent from Nomura in 2002. The first
fund (TFCPI) is made up of assets acquired on behalf of Nomura when the Group was part of the Japanese investment
bank. The second fund recently celebrated its final close, with slightly over EUR2.0 billion targeted for
acquisition. 


                                SHANKS GROUP PLC
         PROPOSED DISPOSAL OF UK LANDFILL AND RELATED POWER OPERATIONS
                              FOR GBP227.5 MILLION


Introduction

Shanks announces that on 25 May 2004 it agreed to sell the Disposal Group which (following a pre-sale reorganisation)
will hold all its UK landfill and related power operations to Terra Firma for GBP227.5 million in cash payable upon
completion. Due to the relative size of the Disposal, it is a requirement of the Listing Rules of the UK Listing
Authority that Shareholder approval be obtained.  
 
Background to and reasons for the Disposal 
 
In recent years Shanks has been developing its continental European businesses and pursuing integrated local
authority waste disposal contracts. The technologies assembled by the Group are particularly suited to these markets
and will allow it to capitalise on opportunities created by the Landfill Directive and the increasing level of
Landfill Tax. The Board of Shanks has noted that technological and regulatory changes have increased the capital
intensity of all segments of the waste management industry and believes that as a result, consolidation in the UK
landfill sector is inevitable. Shanks has concluded that it has insufficient capital resources to pursue a
consolidation strategy of its own or to be able to maximise the potential of all its activities in the absence of
additional capital resources. In this context, the Board has conducted a strategic review of the Group's portfolio of
assets to determine how the interests of Shareholders may be best served in the future.  
 
Shanks believes that, whilst the Group will require access to landfill in future, it does not need to own the assets
and that a strategic long term trading arrangement with a partner would be attractive. As part of the agreement
announced today, Shanks has secured continued access to landfill sites, including those of which it is disposing.  
 
Following completion of the Disposal the Retained Group's principal activities will comprise the continental European
businesses and, in the UK, PFI projects, Chemical Services and the Waste Collections business. The improved financial
strength will allow the Group to maximise the potential of its remaining activities.  
 
Information on the Disposal Group 
 
Shanks is currently one of the largest landfill operators in the UK, with approximately 72 million cubic metres of
consented void across 15 current landfill sites and 7 transfer stations. The current landfill sites are located in
the northern Home Counties, Scotland, northern England and Wales. It is also responsible for 9 closed landfill sites
which it will be selling as part of the Disposal. In addition to its landfill operations, Shanks also generates
electricity from landfill gas operations at 11 sites with an installed capacity of approximately 74 MW. The
electricity generated is sold under the UK Government's premium pricing regimes for renewable energy, 21 per cent.
under the ROC regime and 79 per cent. under NFFO contracts.  
 
The Disposal Group will not own Shanks' minor facilities at Bunny and Boughton or Shanks' interests in its two small
joint venture landfill operations. Subject to existing pre-emption rights, Shanks intends to negotiate the sale of
the joint venture interests following completion of the Disposal and Terra Firma has expressed interest in purchasing
them. The Disposal Group is effectively being sold free of cash and debt.  
 
In the year ended 31 March 2004, the Disposal Activities had total sales of GBP154 million, comprising GBP130 million
of external sales and GBP24 million of inter-group sales, and operating profits of GBP18 million. As at 31 March
2004, the Disposal Activities had net assets of GBP120 million, before debt. 
 
Principal terms and conditions of the Disposal 
 
The Disposal is conditional upon the approval of the ordinary shareholders of Shanks and the approval of ELWA and the
funders to the ELWA PFI project. Subject to satisfaction of such conditions, the Disposal is expected to complete by
mid-Summer 2004. 
 
Financial effects of the Disposal 
 
The effect of the Disposal on Shanks' profit and loss account for the year ending 31 March 2005 will be to generate
an exceptional profit on disposal of approximately GBP56 million. A pro forma statement of net assets illustrating
the effects of the Disposal on the Group's net assets had the Disposal taken place on 31 March 2004 will be set out
in the document to be posted to shareholders shortly. This will show a pro forma uplift in net assets of
approximately GBP63 million to approximately GBP200 million. 
 
Following completion of the Disposal the Group will restructure its UK operations, for which a GBP10 million
exceptional charge will be taken (including GBP3 million of asset write downs). The immediate effect of the Disposal
is therefore expected to be earnings dilutive in the year ending 31 March 2005. However, the Group's financial
flexibility will be substantially improved because the Disposal proceeds will be used to repay debt. The syndicated
bank loan, of which GBP206 million was drawn-down as at 31 March 2004, and the long term private placement facility
with PRICOA, under which GBP87 million was drawn-down as at 31 March 2004, will be repaid in proportion to the
amounts outstanding under each facility. This will leave on a pro forma basis GBP68 million outstanding on the
syndicated bank loan and GBP36 million under the PRICOA facility. There will be a make-whole payment under the terms
of the facility with PRICOA, which will be approximately GBP12 million. 
 
Extraordinary General Meeting 
 
A circular convening an Extraordinary General Meeting to approve the Disposal and giving further information on the
Disposal will be posted to the shareholders shortly. 
 


Enquiries

Shanks Group plc                                   Tel:  [phone]
Ian Clubb, Chairman
Michael Averill, Group Chief Executive
David Downes, Group Finance Director
John Shaughnessy, External Relations               Tel:  [phone]

Lazard                                             Tel:  [phone]
Nicholas Jones
Sarah Hedger

Hoare Govett Limited                               Tel:  [phone]
Neil Collingridge
John Stocks

For Terra Firma
Andrew Dowler - Financial Dynamics                 Tel:  [phone]



Lazard & Co., Limited which is regulated by the Financial Services Authority is acting exclusively for Shanks Group
plc and no one else in connection with the Disposal and will not regard any other person as its customer nor be
responsible to any other person for providing the protections afforded to its customers or for providing advice to
any other person in connection with the arrangements described in this document. 
 
Citigroup Global Markets Limited and Gleacher Shacklock Limited, which are regulated by the Financial Services
Authority are acting exclusively for Terra Firma Investments (GP) II Ltd and no one else in connection with the
Disposal and will not regard any other person as their customer nor be responsible to any other person for providing
the protections afforded to their customers or for providing advice to any other person in connection with the
arrangements described in this document. 

                                   APPENDICES

                                   APPENDIX I

                FINANCIAL INFORMATION ON THE DISPOSAL ACTIVITIES



Basis of preparation

The financial information on the Disposal Activities set out in this Appendix I has been extracted without material
adjustment from the underlying accounting records of the Group, as used to prepare the audited consolidated statutory
accounts of Shanks Group plc for the three years ended 31 March 2004. This extraction relates only to the Disposal
Activities. 
 
Profit and loss accounts and net assets 
 
The profit and loss accounts of the Disposal Activities for the years to 31 March 2002, 31 March 2003 and 31 March
2004 were as follows: 


                                                             Year to 31      Year to 31      Year to 31
                                                                  March           March           March
                                                                   2002            2003            2004
                                                          -------------   -------------   -------------
                                                                   GBPm            GBPm            GBPm

External turnover                                                 131.0           125.6           129.6
Intergroup turnover                                                29.2            25.9            24.5
                                                          -------------   -------------   -------------
Total turnover                                                    160.2           151.5           154.1
                                                          -------------   -------------   -------------
On-going cost of sales                                          (119.8)         (123.3)         (128.3)
Exceptional cost of sales                                             -           (3.2)               -
                                                          -------------   -------------   -------------
Total cost of sales                                             (119.8)         (126.5)         (128.3)
                                                          -------------   -------------   -------------
Gross profit                                                       40.4            25.0            25.8
                                                          -------------   -------------   -------------
Administrative expenses                                           (6.5)           (6.5)           (6.1)
Goodwill amortisation                                             (1.5)           (1.5)           (1.5)
                                                          -------------   -------------   -------------
Operating profit                                                   32.4            17.0            18.2
Net interest payable and similar charges                          (4.0)           (4.7)           (5.6)
                                                          -------------   -------------   -------------
Profit on ordinary activities before taxation                      28.4            12.3            12.6
Tax on profit on ordinary activities                             (10.3)           (3.6)           (5.3)
                                                          -------------   -------------   -------------
Profit on ordinary activities after taxation and profit            18.1             8.7             7.3
for the financial year
                                                          -------------   -------------   -------------



The Disposal Group and its subsidiaries form part of Shanks' Waste Services division, and has historically contained
activities which are to be retained by the Group. The combined historical capital and financing structure covers all
these activities. The above combined profit and loss accounts for the Disposal Activities include an apportionment of
the net interest payable and the related tax credit, based on capital employed. 
 
The net assets of the Disposal Activities for the year to 31 March 2004 were as follows: 

                                                                                                      31

                                                                                                   March

                                                                                                    2004
                                                                                         ---------------
                                                                                                    GBPm

Fixed assets
Intangible assets                                                                                   23.6
Tangible assets                                                                                    153.5
                                                                                         ---------------
                                                                                                   177.1
                                                                                         ---------------
Current assets
Stocks                                                                                               1.2
Debtors - due within one year                                                                       31.3
                                                                                         ---------------
                                                                                                    32.5
Creditors: amounts falling due within one year                                                    (29.6)
                                                                                         ---------------
Net current assets                                                                                   2.9
                                                                                         ---------------
Total assets less current liabilities                                                              180.0
Creditors: amounts falling due after more than one year                                            (8.3)
Provisions for liabilities and charges                                                            (51.5)
                                                                                         ---------------
Net assets                                                                                         120.2
                                                                                         ---------------



                                  APPENDIX II



In this announcement, the following expressions shall have the following meaning, unless the context otherwise requires:


'Board' or 'Directors'                  the directors of Shanks as at the date of this announcement;

'Completion'                            completion of the disposal agreement in accordance with its
                                        terms;

'Disposal'                              the proposed disposal of Shanks' UK landfill and related power
                                        operations;

'Disposal Activities'                   the UK landfill and related power operations, held by the
                                        Disposal Group and its subsidiaries;

'Disposal Agreement'                    the conditional sale and purchase agreement dated 25 May 2004
                                        entered into between Shanks and Terra Firma relating to the
                                        disposal of the Disposal Group;

'Disposal Group'                        Shanks and McEwan (Waste Services) Limited and Caird
                                        Environmental Limited which (following a pre-sale
                                        reorganisation) will hold all Shanks' UK landfill and related
                                        power operations excluding Bunny and Boughton and Shanks' joint
                                        venture interests;

'ELWA'                                  East London Waste Authority;

'Lazard'                                Lazard & Co., Limited;

'PFI'                                   Private Finance Initiative;

'PRICOA'                                Prudential Insurance Company of America;

'Shanks' or the 'Company'               Shanks Group plc;

'Terra Firma'                           Terra Firma Investments (GP) II Ltd;

'Waste Recycling Group'                 Waste Recycling Group Limited, whose ultimate parent is Terra
                                        Firma;

'UK Listing Authority'                  the Financial Services Authority acting in its capacity as the
                                        competent authority for the purposes of Part V of the Financial
                                        Services and Markets Act 2000.




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