CONFORMED COPY



                     CONTRIBUTION AND SUBSCRIPTION AGREEMENT



                                     BETWEEN



                       MACQUARIE INFRASTRUCTURE ASSETS LLC



                                 as Contributor



                       MACQUARIE LUXEMBOURG WATER S.A.R.L.



                                 as Contributee



                                 LOYENS WINANDY

                                   LUXEMBOURG





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      THIS CONTRIBUTION AND SUBSCRIPTION AGREEMENT (the AGREEMENT) is made as of

June 7, 2004



BETWEEN



Macquarie Infrastructure Assets LLC, a Delaware limited liability company whose

principal executive office is at 600 Fifth Avenue, 21st floor, 10020, New York,

USA (the CONTRIBUTOR), and



Macquarie Luxembourg Water S.A.R.L., a Luxembourg private limited liability

company (societe a responsabilite limitee), incorporated in Luxembourg whose

registered office at 5, rue Guillaume Kroll - BP 2501, L-1025, Luxembourg,

registered number R.C.S. Luxembourg B 100.413 (the CONTRIBUTEE).



The Contributor and the Contributee are hereinafter, as the context so requires,

collectively referred to as the PARTIES and each individually as a PARTY.



WHEREAS:



      (A)   Macquarie Water (UK) Limited (UK WATER) is the holding company of

            Southern Utilities (Holdings) Limited.



      (B)   The Contributee and the existing shareholders of the Contributee

            have entered into a Shareholders Agreement governing the management

            of the Contributee (SHAREHOLDERS AGREEMENT) (a copy of which is

            attached to this Agreement at Schedule 1).



      (C)   Pursuant to a Share Purchase Agreement dated 30 April 2004 between

            the Contributee as Purchaser, Macquarie Bank Limited as Guarantor

            and Macquarie Leasing (UK) Limited as Seller(SHARE PURCHASE

            AGREEMENT) (a copy of which is attached to this Agreement at

            Schedule 2), the Contributee became a 75.1% shareholder of UK Water.



      (D)   Pursuant to the Share Purchase Agreement the Contributee has the

            option to acquire the remaining shares in UK Water held by Macquarie

            Leasing (UK) Limited and subscribe for certain loans in UK Water.



      (E)   The Contributor wishes to invest in UK Water via the Contributee.



      (F)   To that end, the Contributor shall subscribe for ordinary shares in

            the capital of the Contributee and the Contributor shall also

            subscribe for Preferred Equity Certificates (PECS) in the

            Contributee.



      (G)   Terms which are not defined in this Agreement shall have the meaning

            attributed to them in the Share Purchase Agreement and in the

            Shareholders' Agreement.



IT IS AGREED AS FOLLOWS:



1.          CONTRIBUTION



1.1         Subject to the satisfaction of the Conditions Precedent as defined

            in clause 4 of this Agreement, the Contributor hereby agrees to

            contribute a contribution (the CONTRIBUTOR'S COMMITMENT) in cash in

            GBP to the Contributee of the aggregate of (i) 17.5 per cent. of one

            hundred and eleven million pounds ((pound)111,000,000) plus the

            Carry, (ii) the applicable UK stamp duty payable on the transfer of

            9,712,500 shares in UK Water (the STAMP DUTY) and (iii) (pound)23,

            302 in respect of a working capital funding requirement for the

            Contributee (the WORKING CAPITAL REQUIREMENT).



1.2         In exchange for the Contributor's Commitment, the Contributee shall

            issue and allot to the Contributor, subject also to the satisfaction

            of the Conditions Precedent as defined in clause 4 of this Agreement



                  -     175 new ordinary shares with a par value of twenty five

                        euro ((euro)25.00) each in the share capital of tHe

                        Contributee (the CONSIDERATION SHARES);



                  -     9,712,500 B PECS with a par value of one pound

                        ((pound)1.00) each (the CONSIDERATION B-PECS); and



                  -     such number of A PECS (the CONSIDERATION A-PECS) with a

                        par value of one euro ((euro)1.00) each so as to ensure

                        that following the satisfaction by the parties of their

                        respective obligations in clauses 1, 2 and 3 of this

                        Agreement the entitlement of the A PECs held by the

                        Contributor expressed as a percentage of all of the A

                        PECs issued by the Contributee is the



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                        same as the proportion of Consideration Shares expressed

                        as a percentage of the entire issued ordinary shares of

                        twenty five euro ((euro)25.00) each in the Contributee.



            The Consideration A PECs and the Consideration B PECs together are

            referred to herein as the CONSIDERATION PECS.



1.3         The Contributor's Commitment shall be apportioned among the

            Consideration Shares and the Consideration PECs as follows:



                  -     Euro 4,418.75 in aggregate in respect of the

                        Consideration Shares, comprising Euro 4,375 in respect

                        of the ordinary shares and Euro 43.75 in respect of the

                        capital duty payable on such shares;



                  -     (pound)9,712,500 in respect of the Consideration B PECs;

                        and



                  -     the remaining balance in aggregate in respect of the

                        Consideration A PECs.



1.4         The Contributor's Commitment shall be paid by the Contributor in one

            installment as soon as possible after the satisfaction of the

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