BG Energy Holdings Limited, a subsidiary of BG Group plc, has today agreed the sale of 24.5 per cent of Phoenix Natural Gas Limited, the Northern Ireland natural gas distribution company, to East Surrey Energy Investments Limited, a wholly owned subsidiary of East Surrey Holdings plc.

BG Group will remain the majority shareholder with 51 per cent of the company while KeySpan Corporation of the US retains its 24.5 per cent shareholding.

The sale, valued at about £50 million, is subject to the approval of East Surrey Holdings' shareholders, which will be sought at an Extraordinary General Meeting on March 16, 2001.

Frank Chapman, Chief Executive, BG Group plc, said: "This sale demonstrates BG Group's ability to build material gas businesses and add value to its portfolio via equity sales. In just four years, Phoenix has become an attractive
investment opportunity realising a developer's premium for BG Group while presenting valuable growth opportunities for our partners. We are pleased to be welcoming East Surrey Holdings on board and look forward to applying the synergies that exist between the three shareholders in this developing business."

Pat Barrett, Chairman, East Surrey Holdings plc, said: "We are delighted to be participating in the development of the supply of natural gas in Northern Ireland and look forward to bringing East Surrey Holdings' skills to bear on the operations of Phoenix Natural Gas going forward. This acquisition provides an opportunity to significantly increase the proportion of East Surrey Holdings business that derives from outside the regulated water business, which I firmly believe is in the interests of our shareholders."
BG Group has invested some £104 million in Phoenix Natural Gas since the company was established and awarded a licence for the Greater Belfast area in 1996. The licence permits exclusivity of supply for eight years to customers using less than 75,000 therms of gas per year and three years for users of over 75,000 therms. In addition, Phoenix has 20 years exclusivity in the transportation of gas in its licence area.

The licence catchment area contains 240,000 domestic households and 20,000 business premises - the majority of which burn fuel oil. To date, Phoenix has laid 1,750 kilometres of pipe and connected 20,800 domestic and 2,200 business customers to the network.

Notes to Editors

BG Group plc has been responsible for introducing natural gas into Northern Ireland via a joint venture company, Premier Transmission Limited, which built and now owns and operates a 24-inch diameter transmission subsea pipeline, bringing natural gas from Scotland. Manufactured gas had been the only source of piped gas in the Province up until its removal in 1988.

The Group's first venture in Northern Ireland was the purchase of Ballylumford Power Station, part of the UK Government's programme to privatise the Northern Ireland electricity supply industry, in 1992. The station generates over half of Northern Ireland's current electricity requirements. In March 2000, the Group announced plans to invest £200 million in a combined-cycle gas turbine (CCGT) power plant at Ballylumford. Subsequently, construction began in June 2000.

BG Group's total investment in Northern Ireland's energy industry is about
£300 million.

Phoenix Natural Gas is licenced by the UK Government and regulated by the Office for the Regulation of Electricity and Gas (Ofreg), Northern Ireland.

East Surrey Holdings plc, via East Surrey Water, supplies water to a population of 634,000 people over an area of 833 square kilometres, covering parts of Surrey, Kent, Croydon and other areas of south-east England.