ANDREW SMITH ANNOUNCES SALE OF 51 PER CENT OF PARTNERSHIPS UK TO PRIVATE SECTOR

27/02/2001 The Treasury is seeking private investors for a 51 per cent stake in Partnerships UK, the wholly owned government company set up to develop and implement more efficient public private partnerships (PPPs) and to promote the development of Wider Markets projects, Chief Secretary Andrew Smith announced today. By selling a 51 per cent stake, the Treasury plans to raise a minimum of £22.5 million of equity by private placement with qualifying institutions. Prior to completion of the Offer, it is expected that Partnerships UK will have a capital base of £45 million. Each potential qualifying investor will be invited to invest between £1million and £5 million. Speaking about the announcement to dispose of a majority shareholding to the private sector Andrew Smith said: "The opening up of the market in this way is a significant development in the PPP sector in what is becoming an increasingly mature market place. "By turning Partnerships UK into a public private partnership the Government is creating a key market opening for private sector shareholders, keen to seize the opportunity to help the public sector deliver modern, high quality public services. "Partnerships between the public and private sectors are the cornerstone of the Government's modernisation programme. With Partnerships UK already pioneering a business model in a strong private sector market they are well positioned to play a pivotal role in developing and expanding the PPP market and to bring private sector disciplines to bear on public sector procurement. "PPPs bring with them new challenges that require specialist skills and a high level of expertise. With their high calibre management team and skilled practitioners with significant public and private sector experience and their public sector mission, I expect Partnerships UK to remain at the cutting edge of project improvement and development for years to come." Derek Higgs, Non Executive Chairman of Partnerships UK said: "This move marks a major stepping stone in Partnerships UK's business plan. Having access to new capital will accelerate the fulfilment of PUK's public sector mission in driving forward successful PPPs. "The initial response has shown that interest in investing in Partnerships UK is high and we look forward to working with our public and private shareholders to make the business a success." James Stewart, Chief Executive of Partnerships UK said: "Partnerships UK is already fully operational and working on a wide range of PPP projects. The move to a PPP and the raising of capital will be the springboard to develop the business further. "We are confident that we can drive forward the Government's ambitions to see effective public private partnerships. Partnerships UK will strive to be at the forefront of the development and implementation of better, faster and stronger PPP transactions, helping to deliver value for money public services and efficient utilisation of public sector assets." The Private Placement offer will close on 27 March 2001. The basis of allocation under the offer is expected to be announced at the end of March. Following the completion of the Offer, Partnerships UK will be 51 per cent owned by the private sector and 49 per cent owned by the public sector. N M Rothschild & Sons Limited is acting as Placement Agent for and financial adviser to the Treasury in connection with the offer for sale by the Treasury to certain qualifying institutions. Partnerships UK's financial targets will be to achieve a rate of return of its investors which is commensurate with the risks of its activities. Following completion of the Offer, Partnerships UK will become a public private partnership : a joint venture with the public sector owning a minority interest and the private sector owning a majority. The governance structure is designed to balance private sector disciplines with Partnerships UK's public sector mission. A majority of board members will come from the private sector and the public sector will be represented by two non-executive directors appointed by the Treasury. The wider public interest will be represented through an Advisory Council made up of representatives from Government departments, Devolved Administrations, local authorities and other public bodies from amongst Partnerships UK's clients. As the successor to the Treasury Taskforce, Partnerships UK will aim to make PPPs a success, working in partnership with public bodies. Partnerships UK has been set up to help the public sector deliver:

fast and efficient development and procurement of PPPs strong PPPs that build stable relationships with the private sector; savings in development costs;
better value for money.
Partnerships UK plc has entered into a Framework Agreement with the Treasury for up to five years under which Partnerships UK will continue the work of the Treasury Taskforce, providing general support to the Treasury, the Office of Government Commerce and other parts of the public sector.

NOTES TO EDITORS Partnerships UK was launched in June 2000 to build upon the success of the Treasury Taskforce and to provide a permanent and sustainable centre of expertise to continue the Treasury Taskforce's role in developing and expanding the government's PPP programme. It aims to help develop and implement better and more efficient PPPs, including Wider Market projects. It will do this by working with public bodies on specific PPP transactions, aiming to improve the process of planning, negotiating and completing PPPs. Wider Markets projects are PPP transactions entered into pursuant to the Government's Wider Markets Intiative, which aims to exploit the surplus or latest potential of public sector assets (including physical assets, know-how and intellectual property), as the concept is discussed in the HM Treasury publication "Public Private Partnerships: The Governments Approach". PUK has been established with a defined public sector mission. "To assist government (whether local, municipal, regional, national, developed, supreme, state, federal or otherwise, and whether of the United Kingdom or elsewhere) and other public bodies in the United Kingdom and elsewhere in the development, procurement, financing, implementation and management of private finance and public private partnerships projects (being projects and undertakings the resources from which are provided partly by public bodies and partly by private persons) by entering into joint ventures, by participating in public private partnership projects with private persons or acting as an investor, financier, consultant or otherwise; and to promote the development and use of public private partnerships generally. Development Partnerships apply to Private Finance Initiative projects and to more innovative public private partnerships such as Wider Markets initiatives and joint ventures between the public and private sectors. Typically, Partnerships UK and the public body will jointly invest their skills, experience and financial resources to create better value from PPPs for the public sector. Partnerships UK's return will reflect the success of the project; but it will also be exposed to the costs and risks of failure. Following the completion of the Offer, Partnerships UK will be 51 per cent owned by the private sector and 49 per cent owned by the public sector (of which it is intended that 44.6 per cent will be owned by the Treasury and 4.4 per cent will be owned by the Scottish Ministers.) Partnerships UK plc has absorbed the activities and project staff of the Treasury Taskforce. Responsibility for the Government's PFI policy has been transferred to the Office of Government Commerce. An advert for the proposed offer appeared in the Financial Times on Wednesday 21 February 2001. Copies of the Information Memorandum are being made available to those qualifying institutions, being corporate bodies whose ordinary activities involve them in acquiring, holding, managing or disposing of investments as principal or agent for the purpose of the business and who satisfy a net assets test. The offer is not open to the public. Each "A" Unit comprises one "A" Ordinary Share of £1 and £3.50 of CULS and each "B" Unit comprises one "B" Ordinary Share of £1 and £3.50 of CULS. The expected capital base of £45 million is intended to be comprised of £10 million of ordinary share capital and £35 million of CULS. N M Rothschild & Sons Limited is acting as Placement Agent for and financial adviser to HM Treasury in connection with the offer for sale by HM Treasury to Qualifying Institutions of 5,100,000 "A" Units in Partnerships UK plc. UBS Warburg Ltd. acts as financial adviser to Partnerships UK plc. Enquiries on the placement should be made to James Vaux or Christopher Blunt at N M Rothschild & Sons Limited on 020 7280 5000 or fax 020 7280 5002. Press Enquiries to Malcolm Graves at HM Treasury on 7211 1366.

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