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Infrastructure Investment In United Kingdom

In the United Kingdom, CKI's portfolio was substantially strengthened in 2010 following the acquisition of Seabank Power and three electricity distribution networks. Investments in the United Kingdom now comprise electricity, gas and water businesses.

The senior management team of UK Power Networks.

UK Power Networks Holdings Limited

In 2010, a consortium led by CKI and Power Assets acquired 100% of EDF Energy PLC's regulated and non-regulated network activities in the United Kingdom for a total consideration of approximately HK$70 billion (GBP5.775 billion). A new company, UK Power Networks, has been established to hold these assets and the Group now holds a 40% stake in it.

CKI holds a 40% stake in UK Power Networks.

UK Power Networks owns, operates and manages three of the 14 regulated electricity distribution networks in the United Kingdom. The licensed distribution networks of UK Power Networks are in London, the South East and the East of England. These networks distribute approximately 28% of the electrical power in the country, serving approximately eight million customers and covering around 30,000 square kilometres.

UK Power Networks also operates a non-regulated business to distribute electricity to several privately owned sites. These electricity distribution networks cover a number of renowned UK businesses and landmarks, including four London airports, the London Underground, the Channel Tunnel Rail Link and the site for the 2012 London Olympic Games.

Post-acquisition, UK Power Networks has generated two months of profit contribution for CKI in 2010.

Seabank Power Limited

CKI and Power Assets jointly acquired a 50% stake in Seabank Power.

During the period under review, CKI and Power Assets jointly acquired a 50% stake in Seabank Power, each with a 25% effective shareholding.

Seabank Power is an electricity-generating company located near Bristol. It owns and operates Seabank Power Station, which comprises two combined-cycle gas turbine generation units with an aggregate capacity of approximately 1,140 MW.

A long-term offtake contract is in place for Seabank Power to sell all electricity generated to SSE Energy Supply Ltd., a subsidiary of the other 50% shareholder of the company, Scottish and Southern Energy PLC.

Since acquisition, Seabank Power has provided seven months of stable earnings and immediate cashflow to CKI in 2010.

Northern Gas Networks Limited

Northern Gas Networks is benchmarked as one of the most efficient gas distributors in the UK.

Together with Power Assets, CKI jointly holds an 88.4% stake in Northern Gas Networks.

Operating the North of England Distribution Network, Northern Gas Networks is one of the eight gas distribution networks in the United Kingdom. The network spans 37,000 kilometres of gas distribution pipeline and delivers gas to over 2.6 million homes and businesses from the Scottish borders to South Yorkshire.

In 2010, Northern Gas Networks continued to deliver cost reductions and productivity improvements to ensure that it remains benchmarked as one of the most efficient gas distributors in the country.

The regulator, Ofgem, published the results of its initial analysis of Return on Regulatory Equity for 2008/09 and 2009/10. It showed Northern Gas Networks to be the best performing network amongst the eight gas distribution networks in the United Kingdom over these periods.

Northern Gas Networks also continued to deliver a strong performance in relation to customer service, with all key measures remaining in line with or improving from the previous year.

Despite prevailing economic conditions and difficult operational conditions due to adverse winter weather, Northern Gas Networks has achieved good revenue and profit growth in 2010. The current five-year regulatory period runs until March 2013.

Cambridge Water Plc

Cambridge Water delivered stable returns.

Cambridge Water is 100% owned by CKI and has been supplying fresh, clean drinking water for more than 150 years. The company supplies excellent quality underground water – pumped from boreholes – to the historic university city of Cambridge and surrounding areas in the United Kingdom.

In 2010, Cambridge Water delivered stable returns and outperformed its financial targets for the sixth consecutive year under CKI's ownership. The company achieved a score of 100% for the quality of its water, environmental impact and security of its water supply. It was also rated as one of the top three performing water companies in the United Kingdom by the regulator, Ofwat, in its annual Service and Delivery report.

Additionally, Cambridge Water is engaged in the non-regulated business of bottling and selling natural mineral water, Iceni Water, sourced from its own aquifers.

This business is performing well, with Iceni Water now available at retailers and supermarkets nationally. It is also being exported to the Hong Kong market.

Southern Water

CKI has a 4.75% strategic stake in Southern Water, a regulated business which supplies fresh, quality drinking water to more than one million households and recycles wastewater from nearly two million households across Sussex, Kent, Hampshire and the Isle of Wight.

Southern Water generated steady regulated revenues in 2010.

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