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                                                         EXHIBIT 10.17

                               Dated 30 April 2004

                         MACQUARIE LEASING (UK) LIMITED

                                       and

                             MACQUARIE BANK LIMITED

                                       and

                         MACQUARIE LUXEMBOURG WATER SARL

                            SHARE PURCHASE AGREEMENT

Linklaters

One Silk Street
London EC2Y 8HQ


Telephone (44-20) 7456 2000
Facsimile (44-20) 7456 2222


Ref  John Goodwin


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                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
CONTENTS                                                                                             PAGE
<S>                                                                                                  <C>
1        Interpretation........................................................................        1

2        Agreement to Sell the Shares..........................................................        4

3        Consideration.........................................................................        5

4        Closing...............................................................................        5

5        Warranties............................................................................        6

6        Limitation of Seller's Liability......................................................        7

7        Claims................................................................................        9

8        Guarantee and indemnity...............................................................       10

9        Confidentiality.......................................................................       13

10       Other Provisions......................................................................       14

Schedule 1        The Company and the Subsidiaries.............................................       22

Schedule 2        The Seller's Closing Obligations (Clause 4)..................................       23

Schedule 3        Warranties given by the Seller under Clause 5.1..............................       24

Schedule 4        (Clause 5.1.4)...............................................................       29

Schedule 5        (Clause 5.2).................................................................       30

Schedule 6        (Clause 5.7) Warranties given by the Purchaser...............................       31

Schedule 7        Warranties given by the Seller under Clause 10.15............................       32
</TABLE>

                                       i
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                            SHARE PURCHASE AGREEMENT

THIS AGREEMENT is made on 30 April 2004

BETWEEN:

(1)      MACQUARIE LEASING (UK) LIMITED a company incorporated in England whose
         registered office is at Level 30, 1 Ropemaker Street, London EC2Y 9HD
         (the "SELLER");

(2)      MACQUARIE BANK LIMITED a company incorporated in Australia (acting
         through its London branch at Level 30, CityPoint, 1 Ropemaker Street,
         London EC2Y 9HD) (the "GUARANTOR"); and

(3)      MACQUARIE LUXEMBOURG WATER SARL a company incorporated In Luxembourg
         whose registered office is at 5, rue Guillaume Kroll - BP2501, L-1025
         Luxembourg (the "PURCHASER").

WHEREAS:

(A)      The Seller has agreed to sell the Shares (as defined below) and to
         assume the obligations imposed on the Seller under this Agreement.

(B)      The Purchaser has agreed to purchase the Shares and to assume the
         obligations imposed on the Purchaser under this Agreement.

(C)      The Guarantor has agreed to guarantee the Seller's obligations under
         this Agreement.

IT IS AGREED AS FOLLOWS:

1        INTERPRETATION

         In this Agreement, unless the context otherwise requires, the
         provisions in this Clause 1 apply:

1.1      DEFINITIONS

         "BARCLAYS CONSENT" means the consent dated 6 April 2004 of Barclays
         Bank PLC, pursuant to the Bridge Facility, in relation to the issue by
         the Company of the New Loan Notes and related matters;

         BRIDGE FACILITY means the facility agreement dated 1 October 2003 made
         between inter alia, Barclays Bank PLC and the Company for the loan of
         (pound)359,000,000 on the terms referred to therein for the purposes
         therein mentioned;

         "BUSINESS DAY" means a day which is not a Saturday, Sunday or a public
         holiday in England or Luxembourg;

         "CALL OPTION" has the meaning given in Clause 10.15;

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         "CLOSING" means the completion of the sale of the Shares pursuant to
         Clause 4;

         "CLOSING DATE" means the date Closing occurs;

         "CLOSING DOCUMENTS" has the meaning given in Schedule 2;

         "COMPANY" means Macquarie Water (UK) Limited, details of which are set
         out In Schedule 1;


                                       1

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         "DEED OF SUBORDINATION" means the deed of subordination to be entered
         into by the Purchaser, the Company and Barclays Bank PLC, relating to
         the New Loan Notes;

         "DISCLOSURE SCHEDULE" means Schedule 5 to this Agreement;

         "ENCUMBRANCE" means any claim, charge, mortgage, lien, option, equity,
         power of sale, hypothecation, retention of title, right of pre-emption,
         right of first refusal or other third party right or security interest
         of any kind or an agreement, arrangement or obligation to create any of
         the foregoing;

         "EXISTING LOAN NOTE INSTRUMENT" means the loan note instrument dated 1
         October 2003 pursuant to which the Company issued the Existing Loan
         Notes;

         "EXISTING LOAN NOTES" means the loan notes issued by the Company to the
         Guarantor pursuant to the Existing Loan Note Instrument;

         "GROUP" means the Group Companies, taken as a whole;

         "GROUP COMPANIES" means the Company and the Subsidiaries and "GROUP
         COMPANY" means any one of them;

         "LOAN NOTE REPAYMENT" means the proposed repayment by the Company to
         the Guarantor of (pound)41,680,500 nominal of the Existing Loan Notes
         on the Closing Date;

         "LOSSES" means all losses, liabilities, costs, charges, expenses,
         actions, proceedings, claims and demands;

         "NEW LOAN NOTE INSTRUMENT" means the instrument to be entered into on
         or about Closing between the Company and the Purchaser for the issue of
         the New Loan Notes;

         "NEW LOAN NOTES" means (pound)41,680,500 nominal of loan notes to be
         issued by the Company to the Purchaser on Closing in accordance with
         Clause 4.2.2 and Schedule 2 and on the terms of the New Loan Note
         Instrument;

         "PRE-CLOSING DIVIDEND" means the dividend of(pound)2.6 million paid by
         the Company on 7 April 2004;

         "PURCHASER'S GROUP" means the Purchaser, its subsidiaries and
         subsidiary undertakings, any holding company of the Purchaser and all
         other subsidiaries or subsidiary undertakings of any such holding
         company from time to time;

         "RETAINED SHARES" means the 13,819,500 ordinary shares in the capital
         of the Company legally and beneficially owned by the Seller and not
         being sold by the Seller to the Purchaser pursuant to this Agreement;

         "SELLER'S GROUP" means the Seller, its subsidiaries and subsidiary
         undertakings, any holding company of the Seller and all other
         subsidiaries or subsidiary undertakings of any such holding company
         from time to time (but excluding members of the Group);

         "SELLER'S WARRANTIES" means the warranties and representations given by
         the Seller pursuant to Clause 5 and Schedule 3 and, if applicable,
         pursuant to Clause 10.15.7 and Schedule 7 and "SELLER'S WARRANTY" means
         any one of them;

         "SHARES" means 41,680,501 ordinary shares of(pound)1 each in the
         capital of the Company;

         "SUBORDINATED LOAN AGREEMENT" means the subordinated loan agreement
         dated 7 April 2004 between the Company and the Guarantor in respect of
         the funds required to pay the Pre-Closing Dividend;


                                       2

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         "SUBSIDIARIES" means the subsidiaries listed in paragraph 2 of Schedule
         1 and "SUBSIDIARY" means any one of them;

         "TAXATION" or "TAX" means all forms of taxation whether direct or
         indirect and whether levied by reference to income, profits, gains, net
         wealth, asset values, turnover, added value or other reference and
         statutory, governmental, state, provincial, local governmental or
         municipal impositions, duties, contributions, rates and levies
         (including without limitation social security contributions and any
         other payroll taxes), whenever and wherever imposed (whether imposed by
         way of a withholding or deduction for or on account of tax or
         otherwise) and in respect of any person and all penalties, charges,
         costs and interest relating thereto;

         "TAX AUTHORITY" means any taxing or other authority competent to impose
         any liability in respect of Taxation or responsible for the
         administration and/or collection of Taxation or enforcement of any law
         in relation to Taxation; and

         "VAT" means United Kingdom Value Added Tax.

1.2      MODIFICATION ETC. OF STATUTES

         References to a statute or statutory provision include:

         1.2.1    that statute or provision as from time to time modified,
                  re-enacted or consolidated whether before or after the date of
                  this Agreement;

         1.2.2    any past statute or statutory provision (as from time to time
                  modified, re-enacted or consolidated) which that statute or
                  provision has directly or indirectly replaced; and

         1.2.3    any subordinate legislation made from time to time under that
                  statute or statutory provision,

         except to the extent that any statute, statutory provision or
         subordinate legislation made or enacted after the date of this
         Agreement would create or increase a liability of the Seller or the
         Purchaser under this Agreement.

1.3      SINGULAR, PLURAL, GENDER

         References to one gender include all genders and references to the
         singular include the plural and vice versa.

1.4      REFERENCES TO PERSONS AND COMPANIES

         References to:

         1.4.1    a person include any company, partnership or unincorporated
                  association (whether or not having separate legal
                  personality); and

         1.4.2    a company shall include any company, corporation or any body
                  corporate, wherever incorporated.

1.5      REFERENCES TO SUBSIDIARIES AND HOLDING COMPANIES

         The words "HOLDING COMPANY" and "SUBSIDIARY" and shall have the same
         meaning in this Agreement as their respective definitions in the
         Companies Act 1985.


                                       3

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1.6      CONNECTED PERSONS

         A person shall be deemed to be connected with another if that person is
         connected with such other within the meaning of Section 839 of the
         Income and Corporation Taxes Act 1988 and "Connected Person" shall be
         construed accordingly.

1.7      SCHEDULES ETC.

         References to this Agreement shall include any Recitals and Schedules
         to it and references to Clauses and Schedules are to Clauses of, and
         Schedules to, this Agreement. References to paragraphs and Parts are to
         paragraphs and Parts of the Schedules.

1.8      HEADINGS

         Headings shall be ignored in interpreting this Agreement.

2        AGREEMENT TO SELL THE SHARES

2.1      AGREEMENT

         On and subject to the terms of this Agreement, the Seller agrees to
         sell, and the Purchaser agrees to purchase, the Shares.

2.2      FREE FROM ENCUMBRANCE

         The Shares shall be sold by the Seller with full title guarantee free
         from Encumbrances and together with all rights and advantages attaching
         to them as at Closing (including, without limitation, the right to
         receive all dividends or distributions declared, made or paid on or
         after Closing).

2.3      PRE-EMPTION ETC.

         The Seller shall procure that on or prior to Closing any and all rights
         of pre-emption over the Shares are waived irrevocably by the persons
         entitled thereto.

3        CONSIDERATION

3.1      AMOUNT

         The consideration for the purchase of the Shares under this Agreement
         shall be an amount in cash equal (pound)41,680,501.

3.2      REDUCTION OF CONSIDERATION

         If any payment is made by the Seller to the Purchaser in respect of any
         claim for any breach of this Agreement, including pursuant to any of
         the Seller's Warranties, the payment shall so far as practicable be
         made by way of adjustment of the consideration paid by the Purchaser
         for the Shares (and, if the Call Option is exercised, the Retained
         Shares) under this Agreement and the consideration shall be deemed to
         have been reduced by the amount of such payment.

4        CLOSING

         Closing shall take place immediately following execution of this
         Agreement. On Closing:

4.1      the Seller shall comply with its obligations In Schedule 2; and

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4.2      the Purchaser shall (against compliance by the Seller with Clause 4.1):

         4.2.1    pay to the Seller the consideration specified in Clause 3.1;

         4.2.2    subscribe at par for(pound)41,680,500 in nominal amount of New
                  Loan Notes; and

         4.2.3    enter into the Deed of Subordination.

5        WARRANTIES

5.1      THE SELLER'S WARRANTIES

         5.1.1    Subject to Clause 5.2, the Seller warrants and represents to
                  the Purchaser that the statements set out in Schedule 3 are
                  true and accurate and not misleading as of the date of this
                  Agreement.

         5.1.2    The Seller acknowledges that the Purchaser has entered into
                  this Agreement in reliance upon the Seller's Warranties.

         5.1.3    Each of the Seller's Warranties shall be separate and
                  independent and shall not be limited by reference to any other
                  paragraph of Schedule 3 (or, as applicable, Schedule 7) or by
                  anything in this Agreement.

         5.1.4    Any Seller's Warranty qualified by the expression "to the best
                  of the Seller's knowledge, information and belief" or any
                  similar expression shall, unless otherwise stated, be deemed
                  to refer to the knowledge of the persons whose names and
                  addresses are set out in Schedule 4 who shall be deemed to
                  have knowledge of such matters as they would have discovered,
                  had they made reasonable enquiries of the Managing Director,
                  the Director of Finance and Investment, the Company Secretary
                  and the Legal Manager of Southern Utilities (Holdings)
                  Limited.

5.2      SELLER'S DISCLOSURES

         The Seller's Warranties are subject to the matters fairly disclosed in
         the Disclosure Schedule.

5.3      THE SELLER'S WAIVER OF RIGHTS AGAINST THE GROUP

         Save in the case of fraud, the Seller undertakes to the Purchaser for
         itself and as trustee for the Group Companies and their respective
         directors, officers and agents to waive any rights, remedies or claims
         which it may have in respect of any misrepresentation, inaccuracy or
         omission in or from any information or advice supplied or given by the
         Group Companies or their respective directors, officers or agents in
         connection with assisting the Seller in the giving of any Seller's
         Warranty or the preparation of the Disclosure Schedule.

5.4      EFFECT OF CLOSING

         The Seller's Warranties and all other provisions of this Agreement, to
         the extent that they have not been performed by Closing, shall not be
         extinguished or affected by Closing, by completion of the transfer of
         any Retained Shares pursuant to Clause 10.15 or by any other event or
         matter, except by a specific and duly authorised written waiver or
         release by the Purchaser.

                                       5

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5.5      BREACH OF ACQUISITION DOCUMENTS


                                       6

<PAGE>
         In the event that the Purchaser or any holding company or subsidiary of
         the Purchaser becomes aware of any contravention or non-compliance by
         any Vendor Party of any Acquisition Document (each such term as defined
         in paragraph 7.2 of Schedule 3) or of any matter or circumstance which
         could entitle a claim to be made against a Vendor Party pursuant to the
         Acquisition Documents, then the Purchaser or (as applicable) its
         holding company or subsidiary shall be entitled, in its absolute
         discretion, to take such action as it shall deem necessary to pursue
         such claim but shall, so far as practicable, consult with the Seller
         before taking any such action.

5.6      PURCHASER'S WARRANTIES

         The Purchaser warrants and represents to the Seller that the statements
         in Schedule 6 are true and accurate and not misleading as of the date
         of this Agreement.

6        LIMITATION OF SELLER'S LIABILITY

6.1      TIME LIMITATION FOR CLAIMS

         The Seller shall not be liable in respect of any claim for breach of
         any Seller's Warranty in respect of any claim unless a notice of the
         claim is given by the Purchaser to the Seller within, in the case of
         the Seller's Warranties in Schedule 3, two years of the Closing Date
         and, in the case of the Seller's Warranties in Schedule 7, two years of
         the date of the relevant transfer of Retained Shares pursuant to Clause
         10.15. Any claim notified by the Purchaser to the Seller pursuant to
         this Clause shall specify the matters set out in Clause 7.2.

6.2      MINIMUM CLAIMS

         6.2.1    The Seller shall not be liable in respect of any individual
                  claim (or a series of claims arising from substantially
                  identical facts or circumstances) for breach of any Seller's
                  Warranty where the liability agreed or determined
                  (disregarding the provisions of this Clause 6.2) in respect of
                  any such claim or series of claims does not exceed
                  (pound)50,000.

         6.2.2    Where the liability agreed or determined in respect of any
                  such claim or series of claims exceeds (pound)50,000, subject
                  as provided elsewhere in this Clause 6, the Seller shall be
                  liable for the amount of the claim or series of claims as
                  agreed or determined.

6.3      AGGREGATE MINIMUM CLAIMS

         6.3.1    The Seller shall not be liable in respect of any claim for
                  breach of any Seller's Warranty unless the aggregate amount of
                  all claims for which the Seller would otherwise be liable for
                  breach of any Seller's Warranty (disregarding the provisions
                  of this Clause 6.3) exceeds (pound)500,000.

         6.3.2    Where the liability agreed or determined in respect of all
                  claims referred to in Clause 6.3.1 exceeds (pound)500,000
                  subject as provided elsewhere in this Clause 6, the Seller
                  shall be liable for the aggregate amount of all claims as
                  agreed or determined.

6.4      MAXIMUM LIABILITY

         The aggregate liability of the Seller in respect of all breaches of the
         Seller's Warranties shall not exceed the aggregate of the consideration
         paid for the Shares pursuant to Clause

                                       7

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         3.1 and, if the Call Option is exercised pursuant to Clause 10.15, the
         consideration paid for the relevant Retained Shares pursuant to Clause
         10.15.

6.5      MATTERS ARISING SUBSEQUENT TO THIS AGREEMENT

         The Seller shall not be liable for breach of any Seller's Warranty in
         respect of any matter to the extent that the same would not have
         occurred but for:

         6.5.1    any matter or thing done or omitted to be done pursuant to and
                  in compliance with this Agreement or otherwise at the request
                  in writing or with the approval in writing of the Purchaser;

         6.5.2    the passing of, or any change in, after Closing, any law,
                  rule, regulation or administrative practice of any government,
                  governmental department, agency or regulatory body including
                  (without prejudice to the generality of the foregoing) any
                  increase in the rates of Taxation or any imposition of
                  Taxation or any withdrawal of relief from Taxation not
                  actually (or prospectively) in effect at the date of Closing;

         6.5.3    any change after Closing of any generally accepted
                  interpretation or application of any legislation; or

         6.5.4    any change in accounting or Taxation policy, bases or practice
                  of the Purchaser or any of the Group Companies introduced or
                  having effect after Closing.

6.6      RECOVERY FROM THIRD PARTIES FOLLOWING RECOVERY FROM THE SELLER

         If the Seller has paid an amount in discharge of any claim for breach
         of any Seller's Warranty and the Purchaser or any Group Company is
         entitled to recover (whether by payment, discount, credit, relief,
         insurance or otherwise) from a third party a sum which indemnifies or
         compensates the Purchaser or Group Company (in whole or in part) in
         respect of the loss or liability which is the subject matter of the
         claim, the Purchaser shall, or shall procure that the relevant Group
         Company shall, pay to the Seller as soon as practicable after receipt
         an amount equal to (i) any sum recovered from the third party less any
         costs and expenses incurred in obtaining such recovery less any
         Taxation attributable to the recovery after taking account of any tax
         relief available in respect of any matter giving rise to the claim or
         if less (ii) the amount previously paid by the Seller to the Purchaser
         less any Taxation attributable to it.

6.7      MITIGATION OF LOSSES

         The Purchaser shall procure that all reasonable steps are taken and all
         reasonable assistance is given to avoid or mitigate any Losses which in
         the absence of mitigation might give rise to a liability in respect of
         any claim for breach of any Seller's Warranty.

6.8      FRAUD

         None of the limitations contained in this Clause 6 shall apply to any
         claim which arises or is increased, or to the extent to which it arises
         or is increased, as the consequence of, or which is delayed as a result
         of, fraud or wilful concealment by the Seller or any of its directors,
         officers, employees or agents.

7        CLAIMS

7.1      NOTIFICATION OF POTENTIAL CLAIMS


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         If the Purchaser becomes aware of any fact, matter or circumstance that
         may give rise to a claim against the Seller for breach of any Seller's
         Warranty, the Purchaser shall as soon as reasonably practicable give a
         notice in writing to the Seller setting out such information as is
         available to the Purchaser as is reasonably necessary to enable the
         Seller to assess the merits of the claim and shall use its reasonable
         endeavours to preserve such evidence as the Seller may consider
         necessary. Failure to give notice within such period shall not affect
         the rights of the Purchaser except to the extent that the Seller is
         prejudiced by the failure.

7.2      NOTIFICATION OF CLAIMS UNDER THIS AGREEMENT

         Notices of claims for breach of Seller's Warranty shall be given by the
         Purchaser to the Seller within the time limits specified in Clause 6.1,
         specifying in reasonable detail the legal and factual basis of the
         claim and the evidence on which the Purchaser relies and, if
         practicable, an estimate of the amount of Losses which are, or are to
         be, the subject of the claim (including any Losses which are contingent
         on the occurrence of any future event).

7.3      COMMENCEMENT OF PROCEEDINGS

         Any claim notified pursuant to Clause 7.2 shall (if it has not been
         previously satisfied, settled or withdrawn) be deemed to be irrevocably
         withdrawn twelve months after the notice is given pursuant to Clause
         7.2 or, in the case of any contingent liability, twelve months after
         such contingent liability becomes an actual liability and is due and
         payable unless legal proceedings in respect of it have been commenced
         by being both issued and served.

7.4      INVESTIGATION BY THE SELLER

         In connection with any matter or circumstance that may give rise to a
         claim against the Seller for breach of any Seller's Warranty:

         7.4.1    the Purchaser shall allow, and shall procure that the relevant
                  Group Company allows, the Seller and its financial, accounting
                  or legal advisers to investigate the matter or circumstance
                  alleged to give rise to a claim and whether and to what extent
                  any amount is payable in respect of such claim; and

         7.4.2    the Purchaser shall disclose to the Seller all material of
                  which the Purchaser is aware which relates to the claim and
                  shall, and shall procure that the relevant Group Company
                  shall, give, subject to their being paid all reasonable costs
                  and expenses, all such information and assistance, including
                  access to premises and personnel, and the right to examine and
                  copy or photograph any assets, accounts, documents and
                  records, as the Seller or its professional advisers may
                  reasonably request subject to the Seller agreeing in such form
                  as the Purchaser may reasonably require to keep all such
                  information confidential and to use it only for the purpose of
                  investigating and defending the claim in question.

7.5      CONDUCT OF THIRD PARTY CLAIMS

         If the matter or circumstance that may give rise to a claim against the
         Seller for breach of any Seller's Warranty is a result of or in
         connection with a claim by or liability to a third party then the
         Purchaser or other member of the Purchaser's Group shall, subject to
         the next sentence, be entitled, in its absolute discretion, to take
         such action as it shall deem necessary to avoid, dispute, deny, defend,
         resist, appeal, compromise or contest such claim or liability
         (including, without limitation, making counterclaims or other claims
         against third parties) but shall, so far as practicable, without
         prejudice to the rights of the insurers

                                       9

<PAGE>
         of the Purchaser's Group, consult with the Seller and with the
         Guarantor before taking any such action. No such claim shall be settled
         by the Purchaser without the prior written consent of the Guarantor.

8        GUARANTEE AND INDEMNITY

8.1      In consideration of the Purchaser entering into this Agreement, the
         Guarantor irrevocably and unconditionally:

         8.1.1    guarantees to the Purchaser the due and punctual performance
                  and discharge by the Seller of all its obligations and
                  liabilities (including without limitation the obligation to
                  pay money) under this Agreement and the Closing Documents
                  (together, the "GUARANTEED OBLIGATIONS") and agrees to pay on
                  demand from time to time each sum which the Seller is liable
                  to pay under this Agreement and the Closing Documents; and

         8.1.2    agrees, as an additional and independent obligation, that if
                  any of the Guaranteed Obligations are not recoverable from the
                  Guarantor under the guarantee in Clause 8.1.1 for any reason
                  the Guarantor will be liable to the Purchaser as a principal
                  debtor by way of indemnity for the same amount as that for
                  which it would have been liable had those Guaranteed
                  Obligations been recoverable and further agrees to discharge
                  that liability on demand from time to time.

8.2      The guarantee in Clause 8.1.1 shall be a continuing security until the
         performance and discharge in full of the Guaranteed Obligations.

8.3      The Guarantor's obligations to the Purchaser shall not be reduced,
         discharged, impaired or adversely affected by reason of:

         8.3.1    any time, indulgence, waiver or other concession which the
                  Purchaser may grant to the Seller or any other person;

         8.3.2    the insolvency, incapacity, lack of authority, death or
                  disability of the Seller or the Guarantor or of any person
                  purporting to act on behalf of either of them;

         8.3.3    any termination, amendment, variation, release, novation or
                  supplement of or to this Agreement or the terms of any of the
                  Guaranteed Obligations;

         8.3.4    any variation, extension, discharge or compromise of any right
                  or remedy which the Purchaser may now or hereafter have from
                  or against the Seller and any other person in respect of any
                  of the obligations and liabilities of the Seller and any other
                  person under and in respect of this Agreement;

         8.3.5    any act or omission by the Purchaser or any other person in
                  perfecting or enforcing any security, guarantee, assurance
                  against loss or indemnity present or future from or against
                  the Seller and any other person or any such security,
                  guarantee, assurance against loss or indemnity being
                  defective, void or unenforceable;

         8.3.6    any claim or enforcement of payment from the Seller and any
                  other person;

         8.3.7    any defect, irregularity, unenforceability, invalidity,
                  illegality, frustration or discharge by operation of law of
                  any of the obligations of the Purchaser or the Guarantor;

         8.3.8    any change of control of the Seller or the occurrence of any
                  circumstance affecting the liability of the Seller to
                  discharge any Guaranteed Obligations;


                                       10

<PAGE>
         8.3.9    any security given or payment made to the Purchaser by the
                  Seller or any other person being avoided or reduced under any
                  law (whether English or foreign) relating to bankruptcy,
                  liquidation or analogous circumstances in force from time to
                  time;

         8.3.10   any change in the Seller's or the Guarantor's constitution or
                  any statutory or other compromise or arrangement with
                  creditors affecting the Seller; or

         8.3.11   any act or omission which would not have discharged or
                  affected the obligations of the Guarantor had it been a
                  principal debtor instead of a guarantor.

8.4      The obligations and liabilities expressed to be undertaken by the
         Guarantor under the guarantee in Clause 8.1.1 are those of primary
         obligor and not merely as a surety.

8.5      The Purchaser shall not be obliged before taking steps to enforce any
         of its rights and remedies under the guarantee in Clause 8.1.1:

         8.5.1    to take action or obtain judgment in any court against the
                  Seller and any other person;

         8.5.2    to make or file any claim in a bankruptcy, liquidation,
                  administration or insolvency of the Seller and any other
                  person; or

         8.5.3    to make demand, enforce or seek to enforce any claim, right or
                  remedy against the Seller and any other person.

8.6      The guarantee in Clause 8.1.1 shall be in addition to any other
         security, guarantee, assurance against loss or indemnity held by the
         Purchaser at any time from the Seller or any other person and shall not
         merge with or prejudice or be prejudiced by any security, guarantee,
         assurance against loss or indemnity or any other contractual or legal
         rights of the Purchaser.

8.7      Any settlement or discharge in whole or in part by the Purchaser of the
         Guaranteed Obligations shall be deemed to be given or made on condition
         that it shall be of no effect as a settlement or discharge if the
         assurance, security or payment on the faith of which it was made shall
         afterwards be avoided, set aside or ordered to be refunded by virtue of
         any law (whether English or foreign) relating to bankruptcy,
         liquidation or analogous circumstances in force from time to time or
         for any other reason so that at any time after such avoidance, setting
         aside or order for refund the Purchaser shall be entitled to exercise
         its rights under the guarantee in Clause 8.1.1 as if no such settlement
         or discharge had been made.

8.8      All payments by the Guarantor shall be made in immediately available
         funds to the credit of such account as the Purchaser may designate and
         in full without any set-off, counterclaim or other deduction. If any
         such deduction is so required, the Guarantor shall simultaneously pay
         to the Purchaser such amount as is necessary to ensure that the
         Purchaser receives a net sum equal to what it would have received had
         no deduction been made.

8.9      No claim may be made against the Guarantor pursuant to this Clause 8
         more than three years after the date of this Agreement, or, in the case
         of a claim related to any Seller's Warranty in Schedule 7 given
         pursuant to Clause 10.15, more than three years after the date on which
         the relevant Seller's Warranty is given.

                                       11
<PAGE>

8.10     The aggregate liability of the Guarantor pursuant to this Clause 8
         shall not exceed the aggregate of the consideration paid for the Shares
         pursuant to Clause 3 and, if the Call Option is exercised pursuant to
         Clause 10.15, the consideration paid by the Purchaser for the relevant
         Retained Shares pursuant to Clause 10.15.

9        CONFIDENTIALITY

9.1      UNDERTAKING

         Subject to Clause 9.2:

         9.1.1    each of the Seller and the Purchaser shall treat as strictly
                  confidential and not disclose or use any information received
                  or obtained as a result of entering into this Agreement (or
                  any agreement entered into pursuant to this Agreement) which
                  relates to the provisions of this Agreement and any agreement
                  entered into pursuant to this Agreement; and

         9.1.2    the Seller shall treat as strictly confidential and not
                  disclose or use any information relating to the Group
                  Companies following Closing.

9.2      EXCEPTIONS

         Clause 9.1 shall not prohibit disclosure or use of any information if
         and to the extent:

         9.2.1    the disclosure or use is required by law, any regulatory body
                  or any recognised stock exchange;

         9.2.2    the disclosure is made to a Tax Authority in connection with
                  the Tax affairs of the disclosing party,

         9.2.3    the disclosure is made to professional advisers or investment
                  managers of the Seller or the Purchaser;

         9.2.4    the Information is or becomes publicly available (other than
                  by breach of this Agreement);

         9.2.5    the other party has given prior written approval for the
                  disclosure or use;

         9.2.6    the information is independently developed by the disclosing
                  party after Closing;

         9.2.7    the disclosure is by the Seller to other members of its group
                  of information relating to the Group Companies received by the
                  Seller as a shareholder in the Company;

         9.2.8    the disclosure is by the Purchaser to any investor or
                  potential investor in the Purchaser or any holding company or
                  other controlling body of the Purchaser; or

         9.2.9    the disclosure is for the purpose of or in connection with the
                  listing on any investment exchange of any debt or equity
                  securities of Macquarie Infrastructure Assets Trust (for which
                  purpose the parties agree that any of the parties to this
                  Agreement or any third party shall be entitled to make any
                  disclosure otherwise prohibited by Clause 9.1)

10       OTHER PROVISIONS

10.1     FURTHER ASSURANCES

                                       12
<PAGE>
         10.1.1   Each of the Seller and the Purchaser shall, and shall use
                  reasonable endeavours to procure that any necessary third
                  party shall, from time to time execute such documents and
                  perform such acts and things as either of the Seller or the
                  Purchaser may reasonably require to transfer the Shares and,
                  if applicable, the Retained Shares to the Purchaser and to
                  give each of them the full benefit of this Agreement.

         10.1.2   Pending registration of the Purchaser as owner of the Shares
                  and, if applicable, the Retained Shares, the Seller shall
                  exercise all voting and other rights in relation to the Shares
                  and, if applicable, the Retained Shares in accordance with the
                  Purchaser's Instructions.

10.2     WHOLE AGREEMENT

         10.2.1   This Agreement contains the whole agreement between the
                  parties relating to the sale of the Shares and, If applicable,
                  the Retained Shares at the date of this Agreement to the
                  exclusion of any terms implied by law which may be excluded by
                  contract and supersedes any previous written or oral agreement
                  between the parties in relation to the matters dealt with in
                  this Agreement.

         10.2.2   The Purchaser acknowledges that it has not been induced to
                  enter this Agreement by any representation, warranty or
                  undertaking not expressly incorporated into it.

         10.2.3   So far as is permitted by law and except in the case of fraud,
                  each of the Seller and the Purchaser agrees and acknowledges
                  that its only right and remedy in relation to any
                  representation, warranty or undertaking made or given in
                  connection with this Agreement shall be for breach of the
                  terms of this Agreement to the exclusion of all other rights
                  and remedies (including those in tort or arising under
                  statute).

10.3     ASSIGNMENT

         10.3.1   Each of the Seller and the Guarantor agrees that the benefit
                  of every provision in this Agreement is given to the Purchaser
                  for itself and its successors in title and assigns.
                  Accordingly, the Purchaser (and its successors and permitted
                  assigns) may, without the consent of the Seller or of the
                  Guarantor, assign to the beneficial owner for the time being
                  of the Shares and, if applicable, the Retained Shares the
                  benefit of all or any of the Seller's and the Guarantor's
                  obligations under this Agreement, and/or any benefit arising
                  under or out of this Agreement, provided that the assignee
                  shall not be entitled to receive under this Clause any greater
                  amount than that to which the Purchaser would have been
                  entitled.

         10.3.2   Each of the Seller and the Guarantor agrees that, upon the
                  request of the Purchaser or its successors in title or
                  permitted assigns, this Agreement may be novated (in whole but
                  not in part) in favour of the beneficial owner for the time
                  being of the Shares and, if applicable, the Retained Shares
                  and the Seller and the Guarantor shall execute a novation
                  agreement in terms to be agreed at the time between the
                  Seller, the Purchaser and the Guarantor.

10.4     THIRD PARTY RIGHTS

         10.4.1   A person who is not a party to this Agreement has no right
                  under the Contracts (Rights of Third Parties) Act 1999 to
                  enforce any term of, or enjoy any benefit under, this
                  Agreement, except to the extent set out in this Clause 10.4.

                                       13
<PAGE>
         10.4.2   A Group Company (whilst the Group Company remains in the
                  Purchaser's Group) may enforce and rely on Clause 5.3 to the
                  same extent as if it were a party.

         10.4.3   This Agreement may be terminated and any term may be amended
                  or waived without the consent of any Group Company.

10.5     VARIATION

         No variation of this Agreement shall be effective unless in writing and
         signed by or on behalf of each of the parties.

10.6     METHOD OF PAYMENT

         Wherever in this Agreement provision is made for the payment by one
         party to the other, such payment shall be effected by crediting for
         same day value the account specified by the payee to the payer
         reasonably in advance and in sufficient detail to enable payment by
         telegraphic or other electronic means to be effected on or before the
         due date for payment.

10.7     COSTS

         Each party shall bear its own costs in connection with the preparation,
         negotiation and entry into of this Agreement and the sale of the Shares
         and, if applicable, the Retained Shares.

10.8     INTEREST

         If a party to this Agreement defaults in the payment when due of any
         sum payable under this Agreement, its liability shall be increased to
         include interest on such sum from the date when such payment is due
         until the date of actual payment (after as well as before judgment) at
         a rate per annum of two per cent above the base rate from time to time
         of Barclays Bank PLC. Such interest shall accrue from day to day and
         shall be compounded monthly.

10.9     GROSSING-UP OF INDEMNITY PAYMENTS, VAT

         10.9.1   Where any payment is made under this Agreement pursuant to an
                  indemnity, compensation or reimbursement provision (including
                  for the avoidance of doubt any claim pursuant to Clauses 5, 7
                  or 8) and that sum is subject to a charge to Taxation in the
                  hands of the recipient (other than Taxation attributable to a
                  payment being properly treated as an adjustment to the
                  consideration paid by the Purchaser for the Shares) the sum
                  payable shall be increased to such sum as will ensure that
                  after payment of such Taxation (and after giving credit for
                  any tax relief available to the recipient in respect of the
                  matter giving rise to the payment) the recipient shall be left
                  with a sum equal to the sum that it would have received in the
                  absence of such a charge to taxation.

         10.9.2   Where under the terms of this Agreement one party is liable to
                  indemnify or reimburse another party in respect of any costs,
                  charges or expenses, the payment shall include an amount equal
                  to any VAT thereon not otherwise recoverable by the other
                  party, subject to that party using all reasonable endeavours
                  to recover such amount of VAT as may be practicable.

         10.9.3   If any payment under this Agreement constitutes the
                  consideration for a taxable supply for VAT purposes, then in
                  addition to that payment the payer shall pay any VAT due.


                                       14
<PAGE>
10.10    NOTICES

         10.10.1  Any notice or other communication in connection with this
                  Agreement (each, a "NOTICE") shall be:

                  (i)      in writing;

                  (ii)     delivered by hand, fax, pre-paid first class post or
                           courier;

         10.10.2  A Notice to the Seller shall be sent to the following address,
                  or such other person or address as the Seller may notify to
                  the Purchaser from time to time:

                  the Seller

                  Address:        Level 30, CityPoint, One Ropemaker Street,
                                  London EC2Y 9HD

                  Fax:            020 7065

                  Attention:      Rob Tallentire

         10.10.3  A Notice to the Purchaser shall be sent to the following
                  address, or such other person or address as the Purchaser may
                  notify to the Seller from time to time:

                  the Purchaser

                  Address:        5, rue Guillaume Kroll - BP2501, L-1025
                                   Luxembourg

                  Fax:            +352 (48) 18 63

                  Attention:      Mr Bruno Bagnouls

                  With a copy to:

                  Address:        Level 30, CityPoint, One Ropemaker Street,
                                  London EC2Y 9HD

                  Fax:            020 7065 2041

                  Attention:      Annabelle Helps

         10.10.4  A Notice to the Guarantor shall be sent to the following
                  address, or such other person or address as the Seller may
                  notify to the Purchaser from time to time:

                  MBL:

                  Address:       Level 30, CityPoint, 1 Ropemaker Street,
                                 London EC2Y 9HD

                  Fax:

                  Attention:     Robert Tallentire

         10.10.5  A Notice shall be effective upon receipt and shall be deemed
                  to have been received:

                  (i)      two Business Days after posting, if delivered by
                           pre-paid first class post;

                  (ii)     at the time of delivery, if delivered by hand or
                           courier;


                  (iii)    at the time of transmission in legible form, if
                           delivered by fax.

10.11 INVALIDITY

         10.11.1  If any provision in this Agreement shall be held to be
                  illegal, invalid or unenforceable, in whole or in part, the
                  provision shall apply with whatever deletion

                                       15
<PAGE>
                  or modification is necessary so that the provision is legal,
                  valid and enforceable and gives effect to the commercial
                  intention of the parties.

         10.11.2  To the extent it is not possible to delete or modify the
                  provision, in whole or in part, under Clause 10.11.1, then
                  such provision or part of it shall, to the extent that it is
                  illegal, invalid or unenforceable, be deemed not to form part
                  of this Agreement and the legality, validity and
                  enforceability of the remainder of this Agreement shall,
                  subject to any deletion or modification made under Clause
                  10.11.1, not be affected.

10.12    COUNTERPARTS

         This Agreement may be entered into in any number of counterparts, all
         of which taken together shall constitute one and the same instrument.
         Any party to this Agreement may enter into this Agreement by executing
         any such counterpart.

10.13    GOVERNING LAW AND SUBMISSION TO JURISDICTION

         10.13.1  This Agreement shall be governed by and construed in
                  accordance with English law.

         10.13.2  Each of the parties to this Agreement irrevocably agrees that
                  the courts of England are to have exclusive jurisdiction to
                  settle any dispute which may arise out of or in connection
                  with this Agreement and that accordingly any proceedings
                  arising out of or in connection with this Agreement shall be
                  brought in such courts. Each of the parties irrevocably
                  submits to the jurisdiction of such courts and waives any
                  objection to proceedings in any such court on the ground of
                  venue or on the ground that proceedings have been brought in
                  an inconvenient forum.

10.14    APPOINTMENT OF PROCESS AGENT

         10.14.1  The Purchaser hereby irrevocably appoints Macquarie Investment
                  Management (UK) Limited of Level 30, 1 Ropemaker Street,
                  London EC2Y 9HD and the Guarantor hereby appoints the Seller
                  as their respective agents to accept service of process in
                  England in any legal action or proceedings arising out of this
                  Agreement, service upon whom shall be deemed completed whether
                  or not forwarded to or received by (as applicable) the
                  Purchaser or the Guarantor.

         10.14.2  The Purchaser agrees to inform the Seller, and the Guarantor
                  agrees to inform the Purchaser, in writing of any change of
                  address of such process agent within 28 days of such change.

         10.14.3  If such process agent ceases to be able to act as such or to
                  have an address in England, the Purchaser or (as applicable)
                  the Guarantor irrevocably agrees to appoint a new process
                  agent in England acceptable to the Seller or the Purchaser,
                  respectively, and to deliver to the Seller or the Purchaser,
                  respectively, within 14 days a copy of a written acceptance of
                  appointment by the process agent.

         10.14.4  Nothing in this Agreement shall affect the right to serve
                  process in any other manner permitted by law or the right to
                  bring proceedings in any other jurisdiction for the purposes
                  of the enforcement or execution of any judgment or other
                  settlement in any other courts.

10.15    CALL OPTION OVER THE RETAINED SHARES


                                       16

<PAGE>
         10.15.1  The Seller hereby grants the Purchaser, in consideration of
                  the Purchaser's execution of this Agreement, a call option
                  (the "CALL OPTION") over the Retained Shares, upon the terms
                  of this Clause 10.15.

         10.15.2  The Call Option may be exercised by the Purchaser by notice in
                  writing to the Purchaser served at any time up to and
                  including 31 December 2004.

         10.15.3  The Call Option may be exercised either in respect of all the
                  Retained Shares at the same time, or in two separate tranches
                  of 4,107,000 Retained Shares and 9,712,500 Retained Shares
                  each.

         10.15.4  The price payable by the Purchaser on exercise of the Call
                  Option shall be an amount in cash equal to (pound)1 per
                  Retained Share the subject of the exercise of the Call Option
                  plus an amount calculated as follows:

                          (A x 12% x (T)/365) - (B + C)

                  where:

                  A = (pound)2 x the number of Retained Shares the subject of
                  the exercise of the Call Option;

                  B = the amount of interest on P, calculated in accordance with
                  the terms of the Existing Loan Note Instrument, for the period
                  comprised in T;

                  C = the amount of any dividends paid by the Company in the
                  period comprised in T in respect of the Retained Shares the
                  subject of the exercise of the Call Option;

                  P = the nominal amount of Existing Loan Notes equal to the
                  nominal value of the Retained Shares the subject of the
                  exercise of the Call Option; and

                  T = the number of days elapsed from (and including) 30 April
                  2004 to (but excluding) the date of completion of the transfer
                  of Shares by the Seller to the Purchaser (or as it may direct)
                  upon exercise of the Call Option.

         10.15.5  The transfer of Retained Shares shall take place within five
                  Business Days after exercise of the Call Option at such place
                  as the Purchaser and the Seller may agree. On that transfer,
                  the Purchaser shall pay the Seller the Call Option price for
                  the relevant Retained Shares. Against that payment, the Seller
                  shall execute, and deliver to the Purchaser or as it may
                  direct, a duly executed stock transfer form in respect of the
                  relevant Retained Shares in favour of the Purchaser or as it
                  may direct accompanied by the relative share certificate.

         10.15.6  The provisions of Clauses 2.2 and 2.3 shall apply to the sale
                  of Retained Shares, as if the references in them to Shares
                  were to Retained Shares and to Closing were to the date of
                  transfer of the Retained Shares.

         10.15.7  On the transfer of Retained Shares to the Purchaser, the
                  Seller shall be deemed to represent and warrant to the
                  Purchaser that the statements set out in Schedule 7 are true
                  and accurate and not misleading as of the date of that
                  transfer.

         10.15.8  While the Call Option remains exercisable the Seller shall not
                  create any Encumbrance on, or dispose of, the Retained Shares
                  or any interest in them except in accordance with this Clause.


                                       17

<PAGE>
         10.15.9  On the transfer of Retained Shares pursuant to this Clause
                  10.15, the Purchaser shall also subscribe for New Loan Notes
                  with a nominal amount equal to the nominal value of the
                  Retained Shares being transferred at that time. On receipt of
                  the proceeds of that subscription, the Company shall forthwith
                  repay the same nominal amount of Existing Loan Notes.

         10.15.10 The Purchaser may not exercise the Call Option in respect of
                  all the Retained Shares or in respect of the tranche of
                  9,712,500 of the Retained Shares unless and until debt or
                  equity securities of Macquarie Infrastructure Assets Trust are
                  admitted to trading on an investment exchange.

         10.15.11 The Seller agrees with the Purchaser, in consideration for the
                  Purchaser's execution of this Agreement, not to sell, transfer
                  or otherwise dispose of any interest that it may have in any
                  of the Retained Shares at any time (other than to the
                  Purchaser) without first ensuring that the proposed transferee
                  enters into a shareholder's agreement with the Purchaser, its
                  shareholders and the Company substantially in the form of the
                  shareholders agreement between the Purchaser and its
                  shareholders (a copy of which is available to the Seller on
                  request to the Purchaser).

In witness whereof this Agreement has been duly executed.

SIGNED by                               }  /s/ Illegible

on behalf of MACQUARIE                  }  /s/ Illegible
LEASING (UK) LIMITED:                   }

SIGNED by                               }  /s/ Illegible

on behalf of MACQUARIE BANK             }  /s/ Illegible
LIMITED:                                }

SIGNED by                               }  /s/ Illegible

on behalf of MACQUARIE                  }  /s/ Illegible
LUXEMBOURG WATER SARL:                  }

                                       18

<PAGE>

                                   SCHEDULE 1
                        THE COMPANY AND THE SUBSIDIARIES

1        PARTICULARS OF THE COMPANY

         NAME OF COMPANY:

         Registered number:                    4866277

         Registered office:                    Level 30, CityPoint, One
                                                Ropemaker
                                               Street, London EC2Y 9HD

         Date and place of incorporation:      14 August 2003, England & Wales

         Issued share capital:                 55,500,001 ordinary shares
                                                @(pound)1.00

         Registered and beneficial shareholder: Macquarie Leasing (UK) Limited

2        NAMES OF THE SUBSIDIARIES

         Southern Utilities (Holdings) Limited
         (formerly Saur Water Services Plc)

         South East Water Limited

         Optimum Information Services Limited

         Dynamco Limited

         Mid-Sussex Water Limited

         West Kent Water Plc

         Eastbourne Water Plc

         Mid-Southern Water Plc

         Watercall Limited

         Southern Utilities Limited

                                       19
<PAGE>

                                   SCHEDULE 2
                        THE SELLER'S CLOSING OBLIGATIONS
                                   (CLAUSE 4)

         On Closing, the Seller shall deliver or procure that the Company
         delivers or makes available to the Purchaser the following (together
         the "CLOSING DOCUMENTS"):

1        a transfer of the Shares duly executed by the Seller in favour of the
         Purchaser or as it may direct accompanied by the relative share
         certificate;

2        a board resolution of the Company approving the registration of the
         share transfer referred to in paragraph 1 of this Schedule subject only
         to its being duly stamped, the issue of the New Loan Notes to the
         Purchaser and the execution of the Deed of Subordination;

3        documents evidencing:

         (a)      the drawdown under the Subordinated Loan Agreement to fund
                  payment of the Pre-Closing Dividend; and

         (b)      the declaration and payment of the Pre-Closing Dividend;

4        against performance by the Purchaser of its obligations pursuant to
         Clause 4.2.2, a copy of the New Loan Note Instrument and the original
         certificate for the New Loan Notes;

5        against performance by the Purchaser of its obligations pursuant to
         Clause 4.2.2, documents, in a form agreed with the Purchaser,
         evidencing the Loan Note Repayment;

6        in relation to the Company: certificate of incorporation, certificates
         of incorporation on change of name (if applicable), common seal (if
         applicable), statutory registers, minute books, share certificate
         books, books of account and all other books (all duly written up to
         date);

7        acknowledgements, in a form agreed with the Purchaser, from the Seller
         and the Company confirming that at and immediately after Closing, save
         for the (pound)13,819,500 of Existing Loan Notes issued by the Company
         to the Guarantor and not repaid at Closing and save for (pound)2.6
         million owed by the Company pursuant to the Subordinated Loan
         Agreement, nothing is owed by, on the one hand, the Company or any of
         its Subsidiaries to, on the other hand, the Seller, any member of the
         Seller's Group and any Connected Person of the Seller, and that there
         are no outstanding claims by any such person against the Company or any
         of its Subsidiaries or that, to the extent that there are any such sums
         due or possible claims, these are waived; and

8        any power of attorney under which any document required to be delivered
         under this Schedule 2 has been executed.

                                       20
<PAGE>

                                   SCHEDULE 3
                 WARRANTIES GIVEN BY THE SELLER UNDER CLAUSE 5.1

1        THE SHARES

1.1      The Seller:

         1.1.1    is the sole legal and beneficial owner of the Shares; and

         1.1.2    has the right to exercise all voting and other rights over the
                  Shares.

1.2      The Seller is the sole legal and beneficial owner of the entire issued
         share capital of the Company

1.3      To the best of the Seller's knowledge, information and belief, the
         Seller or a Group Company is the sole legal and beneficial owner of the
         entire issued share capital of each Subsidiary (the "SUBSIDIARY
         Shares").

1.4      The Shares, together with the Retained Shares, comprise the whole of
         the issued and allotted share capital of the Company.

1.5      The Shares have been properly and validly issued and allotted and are
         each fully paid or credited as fully paid.

1.6      No person has the right (whether exercisable now or in the future and
         whether contingent or not) to call for the allotment, conversion,
         issue, registration, sale or transfer, of any share or loan capital or
         any other security giving rise to a right over, or an interest in, the
         capital of the Company nor, to the best of the Seller's knowledge,
         information and belief, of any Group Company under any option,
         agreement or other arrangement (including conversion rights and rights
         of pre-emption).

1.7      There are no Encumbrances on the Shares or, to the best of the
         knowledge, information and belief of the Seller, on the Subsidiary
         Shares.

1.8      All consents for the transfer of the Shares have been obtained.

2        GENERAL

2.1      AUTHORITY AND CAPACITY

         2.1.1    The Seller is validly existing and is a company duly
                  incorporated under the laws of England and Wales.

         2.1.2    The Seller has the legal right and full power and authority to
                  enter into and perform this Agreement.

         2.1.3    This Agreement constitutes valid and binding obligations on
                  the Seller, in accordance with its terms.

         2.1.4    The Seller has taken all corporate action required by it to
                  authorise it to enter into and to perform this Agreement.

                                       21
<PAGE>
3.4      No order has been made, petition or application presented, resolution
         passed or meeting convened for the purpose of winding-up the Company
         or, to the best of the Seller's knowledge, information and belief, any
         of the Subsidiaries or whereby the assets of the Company (or, as
         applicable, the relevant Subsidiary) are to be distributed to creditors
         or shareholders or other contributories of the Company (or, as
         applicable, the relevant Subsidiary).

3.5      No receiver (including an administrative receiver), liquidator,
         trustee, administrator, supervisor, nominee, custodian or similar
         official has been appointed in respect of the whole or any part of the
         business or assets of the Company nor, to the best of the Seller's
         knowledge, information and belief, of any of the Subsidiaries nor has
         any step been taken for or with a view to the appointment of such a
         person nor has any event taken place or is likely to take place as a
         consequence of which such an appointment might be made.

3.6      No creditor of the Company or, to the best of the knowledge,
         information and belief of the Seller, of any of the Subsidiaries has
         taken, or is entitled to take any steps to enforce, or has enforced any
         security over any assets of the Company (or, as applicable, of the
         relevant Subsidiary).

4        BUSINESS ISSUES SINCE 1 OCTOBER 2003

         To the best of the Seller's knowledge, information and belief, since 1
         October 2003 (the date on which the Company acquired the whole of the
         issued share capital of Southern Utilities (Holdings) Limited -
         formerly SAUR Water Services plc):

4.1      there has been no material adverse change in the financial or trading
         position of the Group when taken as a whole;

4.2      each Group Company's business has been carried on as a going concern in
         its normal course;

4.3      no Group Company has entered into any contract or commitment other than
         on arms' length terms and in the ordinary course of business;

4.4      no capital commitment involving expenditure in excess of
         (pound)1,000,000 (exclusive of VAT) has been entered into by any Group
         Company;

4.5      no Group Company has declared, made or paid any dividend or other
         distribution to its members (other than the Pre-Closing Dividend or to
         another Group Company);

4.6      no Group Company has issued or allotted or agreed to issue or allot any
         share capital or any other security giving rise to a right over its
         capital nor has it repaid, redeemed or purchased (or agreed to do so)
         any securities of any class of its share capital;

4.7      otherwise than in the normal course of carrying on the Group's
         business, no Group Company has incurred any indebtedness for borrowed
         money;

4.8      other than to another Group Company, no Group Company has disposed of
         any interest in any of the shares in the capital of any other Group
         Company;

4.9      no Group Company has granted to any person the right (whether
         exercisable now or in the future and whether contingent or not) to call
         for the allotment, conversion, issue, registration, sale or transfer of
         any share or loan capital of any Group Company under any

                                       23
<PAGE>

                                   SCHEDULE 3
                 WARRANTIES GIVEN BY THE SELLER UNDER CLAUSE 5.1

1        THE SHARES

1.1      The Seller:

         1.1.1    is the sole legal and beneficial owner of the Shares; and

         1.1.2    has the right to exercise all voting and other rights over the
                  Shares.

1.2      The Seller is the sole legal and beneficial owner of the entire issued
         share capital of the Company

1.3      To the best of the Seller's knowledge, information and belief, the
         Seller or a Group Company is the sole legal and beneficial owner of the
         entire issued share capital of each Subsidiary (the "SUBSIDIARY
         Shares").

1.4      The Shares, together with the Retained Shares, comprise the whole of
         the issued and allotted share capital of the Company.

1.5      The Shares have been properly and validly issued and allotted and are
         each fully paid or credited as fully paid.

1.6      No person has the right (whether exercisable now or in the future and
         whether contingent or not) to call for the allotment, conversion,
         issue, registration, sale or transfer, of any share or loan capital or
         any other security giving rise to a right over, or an interest in, the
         capital of the Company nor, to the best of the Seller's knowledge,
         information and belief, of any Group Company under any option,
         agreement or other arrangement (including conversion rights and rights
         of pre-emption).

1.7      There are no Encumbrances on the Shares or, to the best of the
         knowledge, information and belief of the Seller, on the Subsidiary
         Shares.

1.8      All consents for the transfer of the Shares have been obtained.

2        GENERAL

2.1      AUTHORITY AND CAPACITY

         2.1.1    The Seller is validly existing and is a company duly
                  incorporated under the laws of England and Wales.

         2.1.2    The Seller has the legal right and full power and authority to
                  enter into and perform this Agreement.

         2.1.3    This Agreement constitutes valid and binding obligations on
                  the Seller, in accordance with its terms.

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<PAGE>
         option, agreement or other arrangement (including conversion rights and
         rights of pre-emption);

4.10     no Group Company has created any Encumbrances on its shares or on the
         shares in any other Group Company;

4.11     no Group Company has acquired or agreed to acquire any interest in any
         share capital or other security referred to in paragraph 4.9 above of
         any other company (wherever incorporated) other than of another Group
         Company;

4.12     no Group Company has established any branch, division, establishment or
         operations outside England;

4.13     no Group Company has granted any guarantee, indemnity or suretyship in
         respect of any material obligation of any third party;

4.14     the Group is not engaged in, and has not been threatened with, any
         litigation or arbitration or similar proceedings which individually or
         collectively are regarded or ought reasonably to be regarded by the
         Seller as likely to have a material adverse effect on the financial
         position of the Group as a whole; or

4.15     the Group is not engaged in any dispute with, and has not received
         notices in writing from, Ofwat, the Environment Agency or the Office of
         Fair Trading which individually or collectively are regarded or ought
         reasonably to be regarded by the Seller as likely to have a material
         adverse effect on the financial position of the Group as a whole.

5        CHANGE OF CONTROL

         As a result of the acquisition of the Shares by the Purchaser no party
         (other than the Company) will be relieved from its obligations under or
         entitled to terminate any material agreement or arrangement with the
         Company.

6        ACCURACY OF INFORMATION

         The information contained or referred to in Schedule 1 is true,
         complete and accurate and not misleading and the information contained
         in the Disclosure Schedule is true and accurate and not misleading.

7        CONTRACTUAL ARRANGEMENTS

7.1      To the best of the Seller's knowledge, information and belief:

         7.1.1    no Group Company is in contravention of, or non-compliance
                  with, any provision of any document relating to the Bridge
                  Facility and the Existing Loan Note Instrument;

         7.1.2    no steps for the early repayment of any outstanding
                  indebtedness of any Group Company have been taken or
                  threatened in writing; and

         7.1.3    no circumstances exist (other than the Loan Note Repayment) as
                  a result of which the continuation of the Bridge Facility or
                  the Existing Loan Note Instrument might cease or be
                  prejudiced, or which may give rise to any alteration in the
                  terms and conditions of any of the Bridge Facility or the
                  Existing Loan Note Instrument.


                                       24
<PAGE>
7.2      To the best of the Seller's knowledge, information and belief:

         no Group Company is in contravention of, or non-compliance with, any
         provision of any document relating to the acquisition by the Company of
         Southern Utilities (Holdings) Limited in October 2003 (the "ACQUISITION
         DOCUMENTS"); no counterparty to any of such documents ("VENDOR
         PARTIES") is in contravention of, or non-compliance with, any provision
         of such documents; and neither the Company nor the Seller is entitled
         to make any claim against any Vendor Party pursuant to the Acquisition
         Documents, whether for breach of warranty or otherwise.

8        PRE-CLOSING DIVIDEND AND LOAN NOTE REPAYMENT

         Payment of the Pre-Closing Dividend and effecting the Loan Note
         Repayment by the Company is lawful and, other than the Barclays
         Consent, does not require the consent of any third party.

                                   SCHEDULE 4
                                 (CLAUSE 5.1.4)

The following are the persons referred to in Clause 5.1.4:

John Stent

Jim Craig

Sondra Baron

Andrew Hunter

, all of c/o Macquarie Bank Limited, (London branch), Level 30, CityPoint, 1
Ropemaker Street, London EC2Y 9HD

                                       25
<PAGE>

                                   SCHEDULE 5
                                  (CLAUSE 5.2)

The following matters are disclosed for the purpose of Clause 5

1        On 7 November 2003, Pipeway Limited, then a subsidiary of Southern
         Utilities (Holdings) Limited (formerly Saur Water Services plc), was
         sold to an unconnected third party by Southern Utilities (Holdings)
         Limited for (pound)1.35 million.

2        On 29 February 2004, Optimum Information Services Limited transferred
         its business and assets to South East Water Limited.

3        On 8 January 2004, South East Water Limited and the Guarantor entered
         into an agreement for the provision by the Guarantor of financial and
         corporate strategy advice for a charge of (pound)2.4 million per annum.

4        South East Water Limited is in dispute with one of its contractors.
         Thus far, there has been exchange of correspondence with the threat of
         litigation from the contractor, but no proceedings have as yet been
         issued. The contractor alleges breaches of procurement rules in
         relation to the award of a contract in 2001 and is claiming loss of
         profit and bid costs of just over (pound)5 million. The management of
         South East Water Limited are confident there is no legitimate basis to
         this claim.

5        South East Water Limited has entered into two capital commitments in
         excess of(pound)1 million since 1 October 2003, being:

5.1      in relation to the Bewil-Darwell link, with a value of(pound)4.3
         million; and

5.2      in relation to the Cowbeech Water Treatment Works project, with a value
         of(pound)2.4 million.

6        A former employee of South East Water Limited has alleged false
         reporting of a failure of chlorination at Beenham Heath Treatment Works
         in November 1999. Management of South East Water Limited have
         investigated the claim and are confident that there is no legitimate
         basis to it.

7        The two issued shares in Southern Utilities Limited (a dormant company)
         are registered in the name of Margaret Devlin (Managing Director of
         South East Water Limited) and Geoffrey Hoskins (formerly Deputy
         Chairman of South East Water Limited). They are to be transferred to
         Southern Utilities (Holdings) Limited shortly after Closing.

                                       26
<PAGE>

                                   SCHEDULE 6
                                  (CLAUSE 5.7)
                        WARRANTIES GIVEN BY THE PURCHASER

1        The Purchaser is validly existing and is a company duly incorporated
         under the laws of Luxembourg.

2        The Purchaser has the legal right and full power and authority to enter
         into and perform this Agreement.

3        This Agreement constitutes valid and binding obligations on the
         Purchaser, in accordance with its terms.

4        The Purchaser has taken all corporate action required by it to
         authorise it to enter into and to perform this Agreement.

5        No consent, approval, authorisation or order of any court or government
         or local agency or body or any other person is required by the
         Purchaser for the execution or implementation of this Agreement and
         compliance with the terms of this Agreement does not and will not
         conflict with, result in the breach of or constitute a default under
         any agreement, instrument or obligation by which it may be bound or any
         provision of its constitutional documents.

                                       27
<PAGE>

                                   SCHEDULE 7
                WARRANTIES GIVEN BY THE SELLER UNDER CLAUSE 10.15

1        The Seller is the sole legal and beneficial owner of the Retained
         Shares being sold by the Seller to the Purchaser pursuant to Clause
         10.15 (the "RELEVANT RETAINED SHARES") and has the right to exercise
         all voting and other rights over the Relevant Retained Shares.

2        The Relevant Retained Shares have been properly and validly issued and
         allotted and are each fully paid or credited as fully paid.

3        There are no Encumbrances on the Relevant Retained Shares

4        All consents for the transfer of the Relevant Retained Shares have been
         obtained.

                                       28