Press Release

Balfour Beatty, the international infrastructure group, announces today that it has reached agreement with the trustees of the Balfour Beatty Pension Fund for the triennial actuarial funding valuation and recovery plan.

The result of the triennial funding valuation as at 31 March 2010 has been settled and shows a funding deficit of £375 million on an actuarial basis. The last recorded accounting deficit under IAS19 was £432 million as at 26 June 2010, the date of the 2010 half year report.

A level of contributions has been agreed which is designed to eliminate the deficit over a period of eight years from 1 April 2010. It comprises a one-off payment of £40 million (c. £29 million after tax) to be paid by 31 December 2010 and annual deficit contributions of £48 million (c. £35 million after tax) with effect from 1 April 2010. In expectation of reaching an agreement, we have been making increased contributions since 1 April 2010 amounting to £36 million on an annualised basis.

As per the agreement, the annual deficit contributions will increase on each subsequent 1 April by the increase in the consumer prices index (CPI) up to a maximum of 5%, together with 50% of the percentage increase in the Group’s dividend in excess of that rate.

ENDS

Analyst/investor enquiries:
Basak Kotler
Balfour Beatty plc
Tel 020 7216 6924

Media enquiries:
Duncan Murray
Balfour Beatty plc
Tel 020 7216 6865

This document contains forward looking statements which have been made in good faith based on the information available at the time of its approval. It is believed that the expectations reflected in these statements are reasonable, but they may be affected by a number of risks and uncertainties that are inherent in any forward looking statement which could cause actual results to differ materially from those currently anticipated.

Notes to Editors:

1. The Balfour Beatty Pension Fund (BBPF) is the main defined benefit (DB) vehicle of the Group and is closed to new members other than through TUPE transfer.
2. This agreement has no impact on Balfour Beatty’s IAS19 accounting profit and loss charge for 2010. The impact of the revised assumptions (including mortality, membership numbers and the impact of CPI on deferred pensions) produces a slight reduction in the deficit on an IAS19 basis.
3. The agreement will be submitted to the Pensions Regulator who will conduct a review in accordance with the Pensions Act 2004.
4. Balfour Beatty agreed in 2008 to make deficit payments equivalent to £24m per annum until April 2013. As previously announced, this was increased to £36m per annum from 1 April 2010 in advance of agreement with the trustees over the new valuation.
5. Assumptions used in the 31 March 2010 funding valuation:
   1. A pre-retirement discount rate of 7.1% pa (2007: 7.2% pa) and post-retirement rate of 5.1% pa (2007: 5.3% pa).
   2. Inflation is assumed at 3.75% p.a. for RPI and 3.25% p.a. for CPI (2007: RPI 3.20%).
   3. Pay / pension increases are assumed to be zero for active members whose salary has been frozen for pension purposes, and 5.25% for others (2007: 4.7%)
   4. Mortality assumptions are based on a detailed review of scheme experience and an allowance for future long-term improvements of 1.5% p.a. (2007: medium cohort improvements). Compared with the 31 March 2007 valuation, for a 50 year old male this represents approximately 2.3 years additional life expectancy and for a 65 year old male an additional 1.4 years.
6. The next funding valuation will be performed as at 31 March 2013.
7. In 2009, cash generated from operations after net capital expenditure amounted to £242 million.
8. Balfour Beatty (www.balfourbeatty.com) is a world-class infrastructure group with capabilities in professional services, construction services, support services and infrastructure investments.
   
   We work in partnership with our customers principally in the UK, continental Europe, the US, South-East Asia, Australia and the Middle East, who value the highest levels of quality, safety and technical expertise.
   
   Key infrastructure markets include transportation (roads, rail and airports); social infrastructure (education, specialist healthcare, and various types of accommodation); utilities (water, gas and power transmission and generation) and commercial (offices, leisure and retail).
   
   The Group delivers services essential to the development, creation and care of these infrastructure assets including project design, financing and management, engineering and construction, and facilities management services.
   
   Balfour Beatty employs 50,000 people around the world.