To:         John R Sultr~iANDERSEN WO; David B Duncan(iJ~ANDERSEN WO; Warren K Whitc@ANDERSEN WO;
	    Kimberly R Scardino(~ANDE.RSEN WO: Jennifer E Sims Vu(~ANDERSEN WO
CC:

	    10/12/2001 04:54 AM
	    KenG. Rue
 .~jecL:    Wessex Valuation Review - updated 10112
Attachments: Wessex Valuation Review .doc

J3ased on additional data gaThered last night and review of updated model
received late yesterday


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	  Wessex Valuation Review

Discounted Cash Flow Analysis

Wessex Unl~ Results

Company Projoelions (levered)
Company Projections (unlcvcrcd)

	   Equity
     ~     Value

90%  3%     $575
65%  3%    $1,048

	   Equity
DR   ~iE   Value

110% 3%    $385
75%  3%    $247

 1 Jon Oats (Wesse,~ Audit. Bristol) reviewing the projections for reasonableness
 2. Roasonablc cvidcncc prcscntcd by Wcsscx to support change in cash flows from proxy valuations
 3. Wussorstuin & Salomon Smith Barney used unleverud discount rates from 6.5% to 7 5%; rates have decreased
 4 Additional value may be created from growth strategy


 Public Marker Multiples

		  EI3ITDA     Acquisition   Adjusted     Wcsscx     Entcrpnsc    Equity
		  Multiole    Prcmium       Multiple     EBITDA     Value

Angliaii Water
Pennon Group
United Utilities
Kelda Group
Severn Trent

		   8 76
		   7 94
		   7 66
		   757
		   7 42

			    35%
			    35%
			    35%
			    35%
			    35%

					IlK
					10.7
					103
					102
					100

						   $250
						   $250
						   $250
						   $250
						   $250

							      2,956
							      2.680
							      2,585
							      2,555
							      2,504

							    Average:

									 SI ,026
									  $750
									  $655
									  $625
									  $574

									  $726

  1 Assume $1 93 billion in debt and preferred stock
  2 Premium bascd on Thames and Arncrican Watcr Works transactions

Acquisition Multiples

Transaction

ThamesIRWE (11100)

EBITDA       Equity
Multiple     Value

90

$320

RAB           Equity
Multiple      Value

122

$468

American Water Works/RWE (9/01)

				  119

					     $1,046

							N/A

								   N/A

 I  Stock prices have increased since the Thames transaction


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