Support Services Analyst Day

NATIONAL OPERATIONS CENTRE, MANCHESTER 15 June 2011 Ian Tyler Chief Executive

Balfour Beatty Services 1 Agenda

ƒ Introduction Ian Tyler

ƒ Balfour Beatty Services Kevin Craven

ƒ Highway maintenance Nigel Russell

ƒ Local authority marketplace Terry Woodhouse

ƒ Opportunities in power Kevin Craven

ƒ Discussion with our customer Tim Cavanagh

ƒ Break for tea

ƒ National Operations Centre James Janion

ƒ Delivering efficiencies Duncan Magrath

ƒ Wrap-up Kevin Craven

ƒ Q & A

Balfour Beatty Services 2 Infrastructure is at the core

Civil Transport Road 49% Rail Aviation

Power Water

Social Complex Education 36% buildings Health Military housing Defence

Percentages indicate share in 2010 Group revenue

Balfour Beatty Services 3 Support Services borne out of infrastructure

Transportation Road Rail 35%

Power Electricity 26% Gas Ethos of Water service 9%

Education BSO & FM Health 30% FM

Percentages indicate share in 2010 Support Services revenue

Balfour Beatty Services 4 Differentiation - asset knowledge

Positioning in vertical markets

Power Water Transport Complex Communities buildings

Finance/Develop Infrastructure Investments

Design Professional Services Project Manage

Construct Construction Services Upgrade

Maintain Support Services Operate

Balfour Beatty Services 5 Maximising value through parenting advantage

Emerging Core Identify the skills necessary to Leverage existing capability to Value grow from existing business maximise potential

Offshore UK wind transmission (Transmission) & distribution

DWP Local (Public sector BSO) authority outsourcing

ROMEC Water (Private sector mobile FM) renewal (Infrastructure)

Potential Improve financial performance

Parenting advantage Illustrative chart; bubble is indicative of opportunity size for Balfour Beatty Services

Balfour Beatty Services 6 An integral part of the Group’s future

5-year profit growth prospects Direction of margin* Share in movement over 5 Group in 5 Organic Acquisition Margin* effects years years + utilisation Professional Services ++ ++ + collaboration Increase to 6% to 7% 30% + EPC contracting

+ cost effectiveness Construction Services +++/- operational delivery Stable 45% +/- mix effect + scale benefits/ Support Services +++ + cost effectiveness Increase to 4% 15% + scope of services to 4.5% - mobilisation costs - margin pressure

* Margin % is profit from operations before exceptional items and amortisation as a percentage of revenue including JVs and associates

Balfour Beatty Services 7 Kevin Craven CEO, Balfour Beatty Services

Balfour Beatty Services 8 £1.4bn turnover Organisational structure BB Support £4.5bn Services order book

20,000 employees 300 Kevin clients Craven

Infrastructure Professional Construction Support Investments Services Services Services

Highways Rail Renewals Balfour Beatty Balfour Beatty Balfour Beatty Balfour Beatty Maintenance Utility Solutions WorkPlace Living Places WorkSmart (BBUS) (BBW) (BBLP) (BBWS)

Balfour Beatty Services 9 Support Services revenue breakdown

Rail Renewals 13%

Highways BB WorkPlace Balfour Beatty Services Maintenance 32% 12%

OpCos

BB Living BB Utility Places Solutions 9% 34%

BB Services 2010 Revenue £1.1bn

Support Services 2010 Revenue £1.4bn

inc. BB Engineering Services £1.9bn

Balfour Beatty Services 10 Revenue by market vertical

PRIVATE 8% Complex Buildings & Complex Buildings & Communities Communities PUBLIC 8% 14% 36%

Power 26% Markets 22% Transport REGULATED 9% 56% 8% 13%

Complex Buildings & Water Communities

Transport 2010 Revenue £1,434m

Balfour Beatty Services 11 Balfour Beatty Services financial performance

1,400 ƒ Strong organic growth for CAGR 2005-2010 the period 2005 – 2010 1,200 7.6% ƒ Revenue CAGR of 8% ƒ Operating profit growing 1,000 significantly faster than revenue

800 BB Utility ƒ Notably a strong (£m)

Solutions 4.8% performance from WorkPlace 600 Revenue ƒ Utility Solutions performance shows the

400 cyclical nature of the BB WorkPlace utilities marketplace 14.0% ƒ Living Places relatively flat 200 over the period but has had

BB Living significant recent contract Places wins ‐ 3.0% 2005 2006 2007 2008 2009 2010

Balfour Beatty Services 12 Spectrum view of infrastructure lifecycle

Infrastructure

Asset-focused services Operations-focused services

Infra- Op. Portable Advisory Buildings ICT BPO BSO structure Assets Assets services Integrator

Construct Operate Customer Logistics/ Service Supply Chain

Infrastructure / Finance Maintain Integrator Buildings BSO*

Professional Technical Services Services Admin / Support

Infrastructure

Balfour Beatty Services 13 Support services universe

Fin an ce e t ra e p Support services O Operational & common requirements Portable Assets in a t in S a ƒ Continuous service our M C ce e onstruct ic S improvement v u O r p e e p p S c ly e r ƒ Service line expertise n r a a e C n t m h i e a F o t in ƒ Workforce/ direct s u BSO Buildings C

labour management M S a

P

e i

r r n v o t

ƒ i f a

Cost reduction c i e n s Tech Admin / Support ƒ Term contracts & on- Services A Core c going relationships c t o Operations n u g e n n t i i ƒ On-going organic Outsourcing m n t l g e

u g Operate s growth a Advisory n M n e a o t a Services c F C i i M c n f r u t f o r a t i O n s n t e n l O l o d f ga C Infra- d f Le = BB presence* i ic structure M e h s BPO

c e

e e ic

c T v

n r

* Indicative of spread of activity a e

n i S

not financial performance F Prof n tai Back Office Services ain M O p e r a t e

D e ICT v e l o p m e ion n lat t tal Ins

Balfour Beatty Services 14 Client centric universe Simple outcome ƒ All customers have similar outsourcing requirements ƒ Balfour Beatty Services focuses on the

HR highlighted areas Management ƒ Specific customer Financial Management characteristics drive Demand Operations Process (Production & Delivery) contract scope expansion IT/Telecom Services Simple ƒ Excellence in service DocumentDocument Customer ManagementManagement People lines lead to credibility Enterprise Supply R&D (Products / and trust AdminAdmin Processes) ServicesServices Infrastructure ƒ DWP contract has grown WorkplaceWorkplace / People People from a small base in 1992 Support Logistics Support (Inbound & to over £50m pa currently Facilities Outbound) FacilitiesSupport Evolution by Support CRECRE Support Procurement adjacency Support

Balfour Beatty Services 15 Client centric universe

Multiple outcomes ƒ Complex customer is one where a number of outputs or outcomes are required which are simultaneous or Middle Office interdependent ƒ Excellence in service resilience and asset knowledge drives transformational changes Complex Customer ƒ EDF – then British Energy – has moved from a bundled contract to a focus on extending the life of the nuclear fleet of eight stations which almost doubled the size of the contract

Balfour Beatty Services 16 Defining core capability

Technical Innovation Transformation

Risk Certainty Management

Asset Performance Service Core Core Resilience People Management

Customer Relationships

Client Client Relationships Centricity Deep Client & Sector Insight

Balfour Beatty Services 17 “Core” support services markets

UK “core” addressable markets

£41.8bn Market £6.0bnMarket £2.2bn Market 100% Share Share Share 2010 Gas Repex 14% £700m UK “core” addressable 90% markets: c.£50bn Elect. Bundled 80% (Substations) 2% Contracts 1% £800m £700m ƒ Balfour Beatty Services “Core” markets provide very large 70% Single Elect. Service (EHV Lines) Street lighting (PFI) 30% addressable UK market <1% £86m £27.7bn 41% £900m Street lighting (non PFI) 6% ƒ FM market is highly fragmented with 60% £105m no player having greater than a 5% share 50% ƒ All “Core” markets are fairly mature Water and highly competitive (Non-infra) 0% 40% £1.8bn Highways ƒ Outside of these core markets £1.3bn 7% 30% opportunities exist for BB Services in: Bundled £8.5bn ƒ UK Offshore Transmission 20% 4% Water (Infra) ƒ USA & Australasia T&D 10% £1.8bn ƒ New Public Sector Services 10% TFM ƒ Energy Services £5.6bn 0% UK Outsourced FM Utilities Local Authority (WorkPlace) (Utility Solutions) (Living Places) Source: Credo and BB Services Analysis

Balfour Beatty Services 18 Balfour Beatty Services target markets

26.0% ƒ Comprehensive Spending Review has had an impact on the Electricity: UK offshore overall size of public sector spending but has created “pockets” Key £1bn of contract liquidity ƒ High growth market segments to target (e.g. UK T&D, offshore 24.0% BBW markets: growth wind and private sector FM) Size £56.4bn ƒ Expand position in untapped markets (e.g. private sector FM) nual Growth 3.3% 12.0% ƒ Continue to invest in capability-led bolt-on acquisitions which enhance margin BBW share 0.8%

Electricity: UK T&D 10.0% Public sector bundled contracts growth

BBLP markets Government BPO Size £4.8bn Growth 5.3% annual 8.0% BBLP share 2.8% Public sector BPO Energy services New public sector services projected 6.0% BBUS markets: Size £17.1bn

Sector Private sector FM Growth 5.6% Water services US & Australasia T&D BBUS share 3.4% 4.0% LA and PCT transport Private sector BPO

Private sector TFM Gov BSO BB Services markets: 2.0% Size £78.3bn Growth 3.9% Gas services Public sector TFM BBS share 1.5% Highways: local authorities ‐ Note: Market size estimated Public sector FM based on 2009 / 2010 data, project growth rate 2010 – 2015 Source: Credo and BB Services Analysis and industry average EBIT % ‐2.0% based on BB Services ‐ 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% 8.0% management estimates. Industry average EBIT

Balfour Beatty Services 19 Overview of existing competitors

Utilities Services Outsourced FM Local Authority (Market size £6bn) (Market size £42bn) (Market size £2bn) BB Utility Solutions Carillion Amey Babcock MITIE Ringway Amec Sodexo BB Living Places Enterprise Interserve May Gurney Morrison US Johnson Controls Enterprise Morgan Sindall BB WorkPlace Atkins Skanska Serco Carillion Carillion

• BBUS is the leading player in the • Larger players have continued to • In integrated contracts there is a UK EHV market. Other key outgrow the market and are split between partnership delivery players looking to enhance consolidating through M&A (e.g. models (e.g. Ringway / Jacobs, capability are Morgan Sindall, MITIE/Dalkia) May Gurney / WSP, Enterprise / Amec / Babcock JV and Mouchel) and self delivery (e.g. Enterprise, following the Bethell Amey, Atkins) acquisition • Local Authority market is changing shape as more bundled contracts are coming to market

Note: Competitors are listed in order of market share in respective markets. Source: Credo and BB Services Analysis

Balfour Beatty Services 20 Moving toward the “Integrator” position

Role Ingredient Bundler Integrator Transformer

Characteristics ƒ Single-service ƒ Multi-service ƒ Multi-service provider ƒ Integrator of a complex provider provider, but with where there are genuine set of activities across a ƒ Measured on minimal interaction synergies between value chain ... inputs, e.g. man- between services activities ƒ ... typically involving hours ƒ Contracts still ƒ Responsibility taken for some bespoke solution relatively delivering outcomes ... design prescriptive ƒ ... even where some ƒ Responsibility taken for ƒ Typically self- services are sub- delivering outcomes ... delivering all contracted ƒ Very long-run and / or services ƒ Relatively long-run large-scale contracts contracts, e.g. aligned to infrastructure asset investment cycles

Potential for Weak – some Weak – increased share Good – involving scope to address complex customer long-term intelligence can be of wallet is useful, but problems and with various levers for innovation to attractiveness applied, but ongoing unless activities are create longer-term competitive advantage - but with risk of integrated, they risk options about how to develop the appropriate commoditisation becoming ingredients propositions and capabilities exposed to price pressure Source: OC&C Strategy Consultants

Balfour Beatty Services 21 Moving toward the “Integrator” position

Big Bang (M&A capex) “Chasing Pack”

Buy & Build (M&A capex) “Market Leaders”

Market Developer (opex and / or capex on Balfour Beatty Investment Style proposition / Services capabilities)

Contract Manager (low-investment philosophy) “Low Cost Contract Managers”

Ingredient Bundler Integrator Transformer

Role Performed

Source: OC&C Strategy Consultants

Balfour Beatty Services 22 Selected clients & JV partners

Balfour Beatty Services £1.0bn £4.5bn Order book Order book at additions 2011* Dec 2010

* Represents value of contract added to the order book (£450m Royal Mail, £200m Local Authority & £300m Beauly Denny) Balfour Beatty Services 23 Long-term relationships

aa a a 1980 1990 2000 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2020

Indicates a Joint Venture / Alliance

Indicates potential contract extensions

Balfour Beatty Services 24 Strategic partnering

BB WorkPlace BB Utility Solutions Power Efficiency Royal Mail National Grid Alliances Canary Wharf Group 9 years 10+ years 7+ years Length of existing client relationship Length of existing client relationship Length of existing client relationship £1.8bn £1.85bn £6.3m Contract value over 10 years Total value over contract periods (5-8 Saved in first 4 years years). Three capital delivery alliances – 2,200+ two in the UK, one in the US 460+ Sites served Meters across Canary Wharf Estate 20% + 8-15% Cost reduction delivered in the first 3 3 years Cost saving commitment years Protection of energy budget within 3 years

Balfour Beatty Services 25 Balfour Beatty Services summary

ƒ Delivering the maintenance aspects of the Group’s infrastructure offering

ƒ Focus on infrastructure and intelligent use of asset data differentiate us from the competition

ƒ Customer centricity and ability to deliver transformational solutions makes us best placed to win

ƒ The business will be driven by organic growth opportunities with targeted acquisitions to add capability where necessary ƒ Our core infrastructure-focused market is worth c. £50bn in the UK ƒ Outside these core markets, opportunities exist in UK offshore transmission, International T&D, New Public Sector Services & Energy Services

Balfour Beatty Services 26 Nigel Russell MD, Connect Plus Services

Balfour Beatty Services 27 Balfour Beatty involvement in Highways Maintenance

CNDR – Connect Roads North East

North West

Midlands

A50/A1/M1 – Connect Roads

East

Area 5 – Connect Plus Area 2 – BBMMJV South West A249 – BBMMJV

Area 4 – BBMMJV A30/A35 – Connect Roads South East DBFO roads

Balfour Beatty Services 28 Market share

Enterprise/ Mouchel 17% A-One+ 32%

Balfour Beatty 23%

Atkins 11% Carillion/WSP Amey 8% 9%

Balfour Beatty includes share of Connect Plus Services

Balfour Beatty Services 29 Highway Service’s capability

Highways Agency Area 5 (M25 DBFO) This is a 30 year project to provide network management, operations and maintenance, of the M25 Orbital and a series of major feeder roads, and the Dartford Crossing.

Highways Agency Area 4 MAC Network management, operations and maintenance, are provided for over 900 km of road network in the Southeast of England, including the M2, M20 and M23

Highways Agency Area 2 EMAC Network management, operations and maintenance, technology maintenance (Areas1 & 2) are provided for over 1250 km of road network in the southwest of England, including the M4, M5 and Severn Crossing

Balfour Beatty Services 30 Highway Service’s capability

DBFO projects Network management, operations and maintenance contracts for individual DBFO contracts including the A30/A35, A50 and M1-A1

Professional services Our in-house specialist technical services group supporting our various highways contracts

Chris Britton Consultancy Offer a unique approach to asset management lifecycle services and is one of the world’s leading providers of strategic asset and pavement management consultancy

Balfour Beatty Services 31 Case study Area 5 – M25 DBFO

1025 km of motorway/trunk road 8 depots 1893 structures including 56 strategic structures and the QEII bridge 5 tunnels 26 arterial road links into London Hatfield Tunnel

Holmesdale Tunnel Bell Common Tunnel

South Mimms Blunts Farm Scratchwood

Denham

Dartford Crossing Dartford

Sunbury Swanley

Leatherhead

Balfour Beatty Services 32 Services provided

Network management

ƒ Routine maintenance

ƒ Incident/emergency response

ƒ Winter service

ƒ Defect management

Balfour Beatty Services 33 Services provided

Asset management – including ƒ 1, 5 and 30-year plans ƒ £1.3 billion investment in renewals ƒ Landscape management ƒ Climate change adaptation ƒ Sustainability ƒ PAS 55 accreditation

Asset inspection – including ƒ Complete asset inventory ƒ General and principal inspections ƒ Condition survey ƒ Baseline for hand-back

Balfour Beatty Services 34 Services provided

Unique to Area 5

ƒ Dartford charging

ƒ Dart tag management

ƒ Tunnel management

ƒ Energy management

ƒ Olympic preparedness

Balfour Beatty Services 35 M1/Deansbrook viaduct, 15 April 2011

“... The Highways Agency and Connect Plus did a fantastic job. It is sad that there was so much disruption, but they did the work as fast as they could...” Mike Penning – Minister for Transport 5 May - Hansard

Balfour Beatty Services 36 Balfour Beatty Highway Service summary

ƒ Demonstrable capability in transportation across the Group

ƒ We operate and manage a large portion of the UK’s road networks

ƒ Through our experience in operating long-term assets, we can manage lifecycle risk

ƒ We have the ability to manage complex networks e.g. Dartford Crossing

ƒ We will win by adapting to the evolution of the Highways Agency’s business model

Balfour Beatty Services 37 Terry Woodhouse MD, Balfour Beatty Living Places

Balfour Beatty Services 38 Distinct Local Authority market strategy

Balfour Beatty Services 39 Highways and Transportation (H&T) market progression

ƒ Increased highways market share from 7.5% in 2009 to 11.7% in 2011E ƒ Fastest growing street lighting provider ƒ Fastest growing highways provider ƒ Diversified into on/off street parking enforcement ƒ General trend towards outsourcing more of the H&T expenditure, through larger integrated contracts ƒ Some local authorities outsourcing for the first time ƒ 2011 active H&T bids have £1.8bn contract English Local Authority H&T revenue expenditure 2009/10 value Department for Communities and Local Government (DCLG)figures

Balfour Beatty Services 40 Combined highways and street lighting market analysis

Key: £100m

Source: Internal analysis from publically available data: OJEU notices, customer and competition announcements. The information shown includes all highways TMC, highways MAC, street lighting TMC and street lighting PFI figures

Balfour Beatty Services 41 Local Authority gross expenditure

Physical infrastructure Social infrastructure

ƒ Highways ƒ Sustainability ƒ HR / org ƒ Housing ƒ Children’s ƒ Adult mental health ƒ Transport ƒ Waste development ƒ Leisure social care ƒ Asylum seekers ƒ Parking collection ƒ Finance ƒ Tourism ƒ Children’s ƒ Older people ƒ Recycling ƒ IT ƒ Culture health ƒ Learning disabilities ƒ Planning ƒ Property/FM ƒ Children and ƒ Revenues families ƒ Benefits ƒ Customer Other locally-managed budgets services 1.Police £13bn 2.Fire £2bn Balfour Beatty addressable markets in blue 3.Schools £49bn 4.Health £110bn Source: DCLG Health spend represents NHS Spend in 2010

Balfour Beatty Services 42 Local Authority – market trends

Balfour Beatty Services 43 Living Places order book progression

ƒ High volumes of tender activity ƒ Selective bidding – ‘no-bids’ in >50% of cases ƒ Win rates better than 1 in 2 ƒ Recent 100% track record in securing contract extensions ƒ Increasing role of integrated

£m contracts

* Current secured order book plus contracts at preferred bidder stage

Balfour Beatty Services 44 Integrator roles are increasingly required

Emerging opportunities for integrator roles

LA Property Healthcare LA Transport

Buyer ƒ Sufficient stock of well- ƒ Efficient use of resources to ƒ Well-maintained network needs maintained social housing deliver diagnosis & treatment ƒ Road safety ƒ Facilities for council staff ƒ Accurate monitoring & ƒ Reduced congestion ƒ Revenue generation management of clinical ƒ Reduced environmental activity impact

Drivers of ƒ CSR-driven budget cuts ƒ Major drive to save money ƒ CSR-driven budget cuts change in ƒ Diverse estate not well suited ƒ Significant structural change ƒ Backlog of improvement work contract to current purposes to NHS service delivery / roads in poor condition scope ƒ Capital tied up in buildings ƒ Ageing property ƒ Tough environmental targets

Possible Re-think of asset Support for hospital Delivery of core maintenance integrator management approach management in whole-life activities combined with role leading to co-ordination of asset management including planning and design work, new build and refurbishment commissioning, scheduling, monitoring and decisions programmes procurement, environmental about road network impact and efficiency management

Source: OC&C Strategy Consultants

Balfour Beatty Services 45 Integrator roles are increasingly required

Layers of activity in an example domain: Local Authority Transport

Financing Finance

Drive Integrator Role – LA Transport Plan and Model revenue Manage third Management design road transport generation parties network demand ƒ The Integrator model builds (eg tolls) an intelligent data management and implementation infrastructure that can solve Delivery Manage Maintain Rule for multiple client outcomes, supply chain roads enforcement in a world of numerous interdependencies ƒ The operational infrastructure needs to be Accident and Environment Parking responsive to dynamic Data / Traffic flows safety al impacts offences Software statistics changes ƒ Real-time (as traffic flows change with accidents or congestion) ƒ Funding and legislative changes ƒ Technological change Source: OC&C Strategy Consultants

Balfour Beatty Services 46 Integrated contracts – market trends

Integrated Highways/Transportation Integrated Property/FM

ƒ Slight increase in tender activity, ƒ Total addressable market c. £2.2bn pa projected 2-3 new tenders per annum. ƒ Local authorities increasingly ƒ Contract terms c. 10 years aggregating spend to create large single contracts ƒ Contract values £400m + ƒ 4 new tenders so far in 2011, average ƒ Bundling of blue/white collar services £25m pa and to 10 year terms ƒ Aggregation of previously distributed ƒ Portfolio restructuring, asset contracted services. management and energy management ƒ Trend towards outcome risk, e.g. asset key capabilities condition, or KSI statistics ƒ Nascent local public sector consolidation ƒ Transformation led – e.g. substantial opportunities emerging restructuring and investment ƒ Opportunity to leverage broader group construction capabilities

Balfour Beatty Services 47 North East Lincolnshire – initial £150m contract

Capabilities acquired through integrated contracts provide access to new markets

Embedded integrated highways HIGHWAYS AND TRANSPORT Parking enforcement creates new contract creates new market ƒ Car Parking, Collections, Resident Parking Permits, market opportunity and potentially key capabilities and referencability for Traffic Wardens and Enforcement component in integrated contracts future bids ƒ Management of Highways, including Traffic Management ƒ Highways Repairs and Maintenance

Embedded integrated property FACILITIES & ASSET MANAGEMENT contract creates new market capabilities and referencability for ƒ Asset Management and Building Surveying future bids. ƒ Estates and Valuation (including Markets and Licenses) ƒ Facilities Management to PCT ƒ Facilities Management and Services to 93 Schools

ECONOMIC AND PHYSICAL REGENERATION Key enabling service for physical AND PLANNING regeneration projects ƒ Economic Development and Regeneration ƒ Housing Improvement, Private Sector Housing and Leasing ƒ Town Planning

Balfour Beatty Services 48 Balfour Beatty Living Places summary

ƒ Balfour Beatty has developed a differentiated strategy to achieve rapid growth in the Local Authority market

ƒ The strategy has led to considerable success with Local Authority Services contracts ƒ Strongly growing order book ƒ Increasing market share

ƒ Market conditions are favourable to continue this progress

ƒ Integrated contracts will become increasingly important over time, and we are already well-positioned in that market

ƒ Our immediately addressable Local Authority markets provide substantial growth opportunity

ƒ There is further scope to expand our core offerings in time, which should enable us to continue our progress into the future

Balfour Beatty Services 49 Kevin Craven CEO, Balfour Beatty Services

Balfour Beatty Services 50 Power - an attractive infrastructure services market

Power in the UK ƒ Transmission & Distribution ƒ Substations ƒ Offshore Wind

International Power ƒ Transmission & Distribution

Demand side energy efficiency ƒ Power Efficiency

Balfour Beatty Services 51 Power supply chain – Balfour Beatty focus areas

Fuel / Mining Generation Transmission Substation Distribution Consumer (Commercial/ Residential)

Infrastructure Investments

Professional Services

Construction Services

Support Services

Carbon Capture Infrastructure Investments & Storage (CCS) Professional Services Construction Services Support Services

Balfour Beatty Services 52 Power in the UK – Offshore wind

ƒ Opportunity of c. £150bn over 10 to 15 years

ƒ Significant political support as Government seeks to secure power supply and meet carbon targets

ƒ Market pull for competent, credible, game- changing players

ƒ Biggest investor in the OFTO regime with two assets (Greater Gabbard and Thanet)

ƒ Active in the maintenance of offshore wind assets

ƒ Currently evaluating opportunities to expand capabilities in the transmission and cable-laying market

Balfour Beatty Services 53 International power – Transmission & Distribution

ƒ 2010-35 global market c. $85bn p.a. in transmission and c. $190bn p.a. in distribution, with increasing levels of outsourcing

ƒ Balfour Beatty is a leading provider • PB have international capability in power in general, and transmission in particular • BBUS is a leading international and skilled transmission engineering and construction player

ƒ Market drivers • Economic growth in emerging markets • Ongoing infrastructure spend in developed markets • Green agenda and renewables • Natural mineral resources

ƒ Global shortage of skilled resource

ƒ Barriers to entry relatively high resulting in above- average margins

Balfour Beatty Services 54 Demand side energy efficiency

Leading player in the energy management space with integrated procurement and carbon service offering with two core product lines ƒ Risk-managed energy procurement and invoice validation ƒ Carbon management and technical services Largest provider of energy services to the property management sector due to differentiated business model ƒ 60% of Canary Wharf Estate ƒ 6 out of top 10 property agents Power Efficiency Business established 1999 Overview of Services

Risk Managed Supply Contract Carbon Management Technical Services Procurement Management

ƒ Fixed ƒ Invoice Validation ƒ Carbon Policy ƒ Site Management Systems ƒ Flexible ƒ Tenant On Charging Development (CTH) ƒ Portfolio ƒ Professional ƒ CRC Compliance ƒ New Connection Management Helpdesk ƒ Energy Monitoring & Management including ƒ New Connections Benchmarking Contestable Works ƒ Energy Efficiency ƒ Capacity Management Improvement ƒ Power Quality ƒ Energy Performance ƒ Water Audit Services Certification

Balfour Beatty Services 55 Managing costs in the public sector

“NHS spends £400m on energy every Average increase year and is responsible for the emission of 1m tonnes of carbon Total Asset 6.4% pa dioxide” Operating Cost Source: NHS Confederation Report, Taking the Temperature 19.8% pa

6.9% pa Cost (£m)

5.9% pa

3.7% pa

Total asset operating cost for the representative Trust estate would increase by 240% over a 15-year term

Source: Estates Returns and Information Collection (ERIC) 2009/10 data

Balfour Beatty Services 56 Balfour Beatty Power and Energy summary

ƒ Power is a large global infrastructure market that plays to the skills and capabilities of the Balfour Beatty Group ƒ Capabilities across the entire power value chain ƒ Highly-skilled resources in extra-high voltage transmission ƒ Developing innovative cabling solutions (e.g. tunnel cabling) ƒ Training centres in the UK and Philippines

ƒ Power already accounts for a quarter of support services revenue

ƒ Opportunities focus on ƒ UK Transmission & Distribution ƒ UK Offshore Transmission ƒ International Transmission ƒ Energy Services

Balfour Beatty Services 57 James Janion Operations Director, N.O.C.

Balfour Beatty Services 58 Operating model

PHONE PHONE

text 3 6 1 7 PDA

1 CUSTOMER REQUEST/QUERY/PROBLEM 2 WORK ALLOCATION 3 RESPONSE TIME 4 WORK ALLOCATION & RESPONSE TIME 5 2 4 5 STATUS UPDATES 6 WORK COMPLETE 7 JOB COST

ENGINEERBBWCUSTOMER proceedingPLANNINGproviding acknowledgingconfirming sending regular &withIT-enabled DISPATCHDISPA work bill workstatusingTCH request/query/problemwork, completion for updates,workflowTETEAM work AMproviding confirmingallocating undertaken when for responseeffective required work work to BBW to timecoallocation ENGINEERmmunication and response across alltime stakeholders

Balfour Beatty Services 59 Supporting continuity of service

Scalable ƒ 110 members of staff ƒ Capacity 200 ƒ Core operating process Resilient ƒ 24/7 ƒ Disaster recovery £140m p.a. Technology 22 contracts ƒ Telephony ƒ Asset management ƒ Handheld devices Functional support ƒ IT helpdesk ƒ Incident hotline

Balfour Beatty Services 60 Supporting consistency and rich asset data

Review Record what we do, Consistency of data accurately, all the time formatting is critical Gather data Understand

Drive productivity Effective Interrogate and efficiency management data Improve Informed management Change delivery decisions Comparison between to best in class sectors and contracts Change

Balfour Beatty Services 61 Management information dashboards

May 2011 ‐ BB WorkPlace Management Information Dashboard Performance Indicator 9 Call handling Sector Performance ‐ Trend Analysis Good Poor NOC SLA Performance Real Time Reporting 9 Customer feedback 100% 90% Asset Operations Corporate services 80% 70% 69% 75% 70% 60% 57% 72% 9 SLA performance 50% 84% 74% 71% 40% 91% 63% Average time to Record Work done (Hrs) 30% 77% 32% Average time to Record Work done (Hrs) 20% 78% 91% 42% March 82% 90% 795 10% 59% 800 0% April 70 64 9 Process adherence May 700 SLA SLA SLA SLA

600 60 490 500 Rectify Rectify Perfomance Perfomance

50 Response Response 342 400 301 9 Labour efficiency PM PM 272 300 220 ASSET OPS CORP SERVICES 164 154 40 200 107 104 33 74 59 100 30 9 Billing Customer Confidence Score (Fairly Confident) 0 20 16 Sector February March April May 10 9 8 Asset 75% 86% 77% 86% 10 9 Trend Analysis Operations

Corporate 0 Services 69% 78% 77% 78% BUPA BBG Arqiva BBC QinetiQ HMRC

BBW Self Delivery Ageing of Billable Work(Completed Billable Work Orders Not Billed)

January Asset Operations 100% 75% 72% 69% 71% 62%67% 69% 71% 71% February 50% 64% March 10000 9000 April 0% 8000 May Asset Operations Corporate Services 7000 1158 Q2 2011 6000 442 5000 Q1 2011 4000 NOC Call Handling Q4 2010 3000 2000 Q3 2010 400 356 318 316 316 312 1000 Q2 2010 0 300 January AVG Queue Time (sec) February 200 155 153 160 March April 144 144 AVG talk time (sec) May 100 AVG Handle time (sec) BBW Performance 18 17 19 17 20 0 Corporate Services Overview January February March April May 12000 Calls Offered 10000 Sector March April May 2478 Asset 8000 5722 3901 6868 Operations Q2 2011 Sector Performance Corporate 6000 Q1 2011 9234 6822 8568 Services Q4 2010 4000 496 Percentage Answered Q3 2010 2000 Q2 2010

Sector March April May 0 Asset Contract Operations 97% 97% 96% January February March Corporate April Performance 96% 97% 95% May Services

Balfour Beatty Services 62 Supporting growth

4-Apr-11 4-May-11 1-Jun-11 NWR - Patterdale CARE UK BBC Wales BBC Bristol BB P&F

April 2011 August 2011

11-Apr-11 1-May-11 23-May-11 Energy NWR - Kirkdale BBC - Media City NWFR - Formby Services Fleetwood Newton

Looking Forward ƒ Energy Services Bureau to move to the N.O.C ƒ Plant & Fleet – Transition planned for mid-July 2011 ƒ Asset Operations and Corporate Contracts

Balfour Beatty Services 63 Supporting improved margin

Efficiency Management Robustness information

Customer Professionalism Consistency satisfaction

Early Visibility N.O.C. warning

Best Improved Resilience practice mobilisation

Core business 24/7 metrics Scalability

Balfour Beatty Services 64 National Operations Centre summary

Providing a centre of excellence for service experience 9Supporting existing business 9Supporting continuity of service to clients 9Supporting consistency and rich asset data 9Supporting growth 9Supporting improved margin

Balfour Beatty Services 65 Duncan Magrath Chief Financial Officer

Balfour Beatty Services 66 Improving operational performance and cost-effectiveness

Five clear objectives

1. Develop our business further

2. Focus on markets with the greatest opportunities

3.3. ImproveImprove operational operational performance performa andnce cost-effectiveness and cost-effectiveness

4. Continue to strengthen core skills

5. Continue to show leadership in values and behaviour

3. Improve operational performance and cost-effectiveness

ƒ Raising Professional Services performance – Improve staff utilisation – Collaboration with the rest of the Group – Leverage capabilities

ƒ Potential for enhancing Support Services margins – Leveraging scale

ƒ Underpin Construction Services margins ƒ –UnderpinImplement cost Construction efficiency programme Services (UK Shared margins Service Centre) – Procurement– Implement initiatives cost efficiency programme (UK Shared Service Centre) Source: 2010 FY results presentation – Procurement initiatives

Balfour Beatty Services 67 An update on the UK Shared Service Centre

ƒ Launched August 2010

ƒ Newcastle facility fitted out by November 2010

ƒ Good quality labour force, experienced in shared services, and effective labour rates

ƒ 135 people currently employed, of which c.50% with previous service centre experience and 6 transferred internally

ƒ Total capacity c. 470 employees

ƒ First transactions processed in March ‘11

ƒ Standalone operating company – Balfour Beatty WorkSmart

Balfour Beatty Services 68 Benefits the UK operations

Scope ƒ Transactional accounting ƒ Payroll processes ƒ Supply chain management

Current ƒ Payroll for 5,125 employees; 17,000 payslips per month status ƒ Transactional processing for 48% of UK revenue in 2011 ƒ Supply chain management for £68m spend p.a. ƒ Oracle R12 implementation Q4 2011

Costs & ƒ Costs and benefits as previously announced benefits ƒ One-off implementation cost of c. £25m, plus further IT investment of £10m ƒ Annual cost reduction to reach £30m by 2013 •£20m impact to structural cost base – Underpins margins – Half to be realised in 2011 • £10m to improve competitiveness at project level

Balfour Beatty Services 69 Balfour Beatty WorkSmart – part of Support Services

ƒ Essentially a BPO service

ƒ Implementation approach akin to the transition of a Support Services contract, e.g. DWP

ƒ External support in assessment and initial setup but now, centre and transitions wholly internally supported

ƒ Primary focus to serve internal customers, but has potential to also serve external customers as part of a bundled service

ƒ Similarities with the N.O.C.

ƒ Service mentality

ƒ Heavily data-centric

ƒ Process efficiency focused

Balfour Beatty Services 70 Reporting change - Plant & Fleet Services

ƒ Internal service-provider with £100m revenue of which 90% is generated from Group companies

ƒ Plant with value £25m

ƒ Fleet: 4,500 company cars, 4,000 commercial vehicles with value £75m

ƒ Reported under Construction Services in 2010

ƒ Internal reporting line moved to Balfour Beatty WorkPlace in Support Services on 1 January 2011

ƒ Will be reported in Support Services in 2011 and prior years will be restated

Balfour Beatty Services 71 Impact of the restatement

31 December 2010 Construction Services Support Services (£m) Previously Previously Restated reported Restated reported Revenue incl. share of joint ventures and associates 6,734 6,743 1,443 1,434 Share of revenue of joint ventures and associates (616) (616) (131) (131) Group revenue 6,118 6,127 1,312 1,303 Group operating profit 170 181 57 46 Share of results of joint ventures and associates 31 31 5 5 Profit from operations before exceptionals and amortisation 201 212 62 51

Net assets/liabilities (118) (107) 44 33

ƒ Internal reporting line moves to Balfour Beatty WorkPlace from 1 Jan 2011

ƒ Restatement of segment results

ƒ Revenue impact marginal as largely intercompany

ƒ Bigger impact on profit from operations for 2010: £11m

Balfour Beatty Services 72 Efficiency initiatives summary

ƒ Good progress in our back office and procurement initiatives

ƒ Costs and benefits as previously announced

ƒ Balfour Beatty WorkSmart and Plant & Fleet an integral part of recently- formed Support Services division

ƒ Minor segment restatement for change in reporting line for Plant & Fleet

Balfour Beatty Services 73 Kevin Craven CEO, Balfour Beatty Services

Balfour Beatty Services 74 Opportunities

Aspiration Next steps

UK Public ƒ Create leading position in UK ƒ Target specific market segments (e.g. Local Sector public sector delivering innovative Authority) where an integrated model solutions to ever increasing delivers a solution contract complexity

International ƒ Leadership position in ƒ Investigate opportunities and synergies with International Transmission & group Distribution ƒ Leverage global footprint of Group to exploit other service opportunities

Energy ƒ Create leading European Energy ƒ Leverage new capability and cross sell to Services business existing customer base ƒ Build scale and expand geographic footprint

Offshore ƒ Leading position in the UK ƒ Evaluate opportunities in cable-laying offshore transmission market ƒ Explore other opportunities to complete transmission offering

Balfour Beatty Services 75 Summary

ƒ Well established as a leading provider of facilities management, utility infrastructure, rail renewals and highways management

ƒ Supporting key customer groups in public sector and regulated industries

ƒ Driven by continuous improvement, contract renewal and scope expansion

ƒ Differentiated through infrastructure focus and asset knowledge

ƒ Focused on organic growth opportunities with targeted acquisitions to add capability where necessary

Balfour Beatty Services 76 Appendix

Balfour Beatty Services 77 BB WorkPlace case study Royal Mail (Project Enterprise)

The declining mail services market and need for the Royal Mail (RM) to modernise put our joint 9 years venture Romec at risk. Project Enterprise structured a deal that not only increased operating book Length of existing client value, but also deepened the relationship, providing solutions to challenges including energy, relationship facilities management and the cost of change in a reducing estate

Key objectives £1.8bn ƒCreate a more strategic relationship through a wider service offer aligned to RM goals Contract value over 10 years ƒGuarantee cost reductions without compromising quality in the context of a tough market sector where revenues are declining 2,200+ ƒEnsure any restructure is sensitive to a complex regulatory environment and potential privatisation ƒExplore how Balfour Beatty can help RM achieve a 25%+ carbon reduction by 2015 Sites served Key features of the Enterprise Agreement 8-15% ƒ£900m of core services with potential £900m of additional scope over the next 10 years Cost saving commitment ƒ8-15% cost savings commitment within 3 years ƒBuy-out and transform Romec Services Limited into market leading mobile engineering and maintenance business – Balfour Beatty Technical Services ƒInvesting Balfour Beatty expertise to unlock energy and carbon value for Royal Mail ƒDeveloping a platform for growth that provides employment opportunities for staff ƒInvestment in transformation and change management programme for 4,200 employees

Balfour Beatty Services 78 BB Utility Solutions case study National Grid Alliances

National Grid works in long-term collaborative relationships with a select number of suppliers, 10+ years selecting those with the right skills who are prepared to invest in the resources to deliver its Length of existing client capital programmes and long-term network maintenance. Balfour Beatty’s partnership with relationship National Grid is built on a legacy of collaborative delivery developed over more than ten years. Balfour Beatty has secured work in three integrated contracts with National Grid

£1.85bn National Grid - key objectives of the alliances Total value over contract ƒDriving improvement in health and safety periods (5-8 years) ƒUsing innovation to drive new ways of working and minimise outage windows ƒGuaranteed cost reduction year on year Three capital delivery alliances ƒCreation of an integrated delivery vehicle – two in the UK, one in the US ƒAddressing resource shortages in electricity and gas sector 20% + Balfour Beatty - key achievements Cost reduction delivered in the ƒIntroduced new ways of working designed to deliver cost and time efficiencies and improve safety first 3 years performance. These include the hydraulic lifting and sagging machine in use on the Woodhead Tunnel project, and catenary support system which is being used across the UK. Continuing to deliver year-on- ƒSignificant cost removed from the delivery process, initially circa 13% in year one of the gas alliance, year savings delivering similar achievements in initial years across the other two alliances ƒPromoting shared best practice between other delivery partners and alliance contracts Shared performance measures ƒInvestment in training resources through Balfour Beatty’s UK training school Delivery and operation teams integrated with National Grid

Balfour Beatty Services 79 Power Efficiency case study Canary Wharf Management Ltd

A consortium of four leading companies in London Docklands, including Canary Wharf Management, renewed their electricity contracts annually. In total they were consuming 7+ years around 350 million kWh each year. Power Efficiency’s market projections indicated a Length of existing client forthcoming rise in prices relationship Key objectives £6.3m ƒTo achieve a reduction in costs whilst reducing risk Saved in first 4 years ƒTo put in place a more flexible procurement strategy ƒTo enable realistic energy prices to be budgeted even during periods of volatile energy pricing

460+ Achievements Meters across Canary Wharf ƒPower Efficiency negotiated a supply contract with specific clauses to ensure the customer Estate received the best prices available in the power wholesale market ƒWholesale contracts were purchased at average prices below the market price for the duration 3 years of virtually the whole contract Protection of energy budget ƒThis block purchasing allowed the customer to reduce its risk and costs and mitigated the costs of its purchase of Green Electricity ƒSavings of £6.3 million were achieved

Balfour Beatty Services 80 Forward-looking statements

This presentation may include certain forward-looking statements, beliefs or opinions, including statements with respect to Balfour Beatty plc’s business, financial condition and results of operations. These forward-looking statements can be identified by the use of forward-looking terminology, including the terms "believes", "estimates", "plans", "anticipates", "targets", "aims", "continues", "expects", "intends", "hopes", "may", "will", "would", "could" or "should" or, in each case, their negative or other various or comparable terminology. These statements reflect the Balfour Beatty plc Directors’ beliefs and expectations and involve risk and uncertainty because they relate to events and depend on circumstances that may or may not occur in the future. A number of factors could cause actual results and developments to differ materially from those expressed or implied by the forward-looking statements, including, without limitation: developments in the global economy; changes in UK and US government policies, spending and procurement methodologies; and the failure in Balfour Beatty's health, safety or environmental policies. No representation is made that any of these statements or forecasts will come to pass or that any forecast results will be achieved. Forward-looking statements speak only as at the date of the relevant materials and Balfour Beatty plc and its advisers expressly disclaim any obligations or undertaking to release any update of, or revisions to, any forward-looking statements in the materials. No statement in the presentation is intended to be, or intended to be construed as, a profit forecast or to be interpreted to mean that earnings per Balfour Beatty plc share for the current or future financial years will necessarily match or exceed the historical earnings per Balfour Beatty plc share. As a result, you are cautioned not to place any undue reliance on such forward-looking statements.

Balfour Beatty Services 81 Balfour Beatty Services 82