News

8th August 2006

HYDRODEC GROUP PLC - Transformer oil sales and feedstock agreements - Australia

Hydrodec Group plc (”Hydrodec”) is pleased to announce it has secured written acceptance from a leading Australian transformer manufacturer, and conditional acceptance from at least one additional transformer manufacturer, along with major transformer purchasers, for bulk use of its SuperfineTM transformer oil in new transformers. Bulk supply of Superfine transformer oil to manufacturers will commence in the immediate future. New bulk supply arrangements have been underpinned by additional feedstock supply commitments from major utility companies.

Following commissioning of the new 20,000 litre per day refining facility in NSW Australia, progressively increasing orders are now expected to ensure market uptake of at least 50% of the productive capacity of the new refining plant later in Q3 2006. Achieving 50% sold capacity on the new plant is expected to generate annualised revenues of up to or greater than £1,800,000 ($AU4,400,000).

Commencement of bulk shipment of product to transformer manufacturers is scheduled for late August 2006. Increased feedstock supply arrangements commenced in July 2006.
The above transformer manufacturer commitments evidence the broad acceptance that Superfine oil has achieved for use in new transformer equipment. Industry acceptance has followed extensive testing and quality evaluation of Superfine by utility users of transformer oils, transformer manufacturers and independent testing laboratories. The completion of quality evaluations by all parties has resulted in written endorsement of Superfine as compliant with all technical standards for new mineral transformer oils, by utilities and manufacturers alike.

New sales supplement ongoing sales to power companies who are using Superfine in both power transformer and general infrastructure maintenance activities. Increasing oil sales to utilities is underpinning gradually increasing demand from some utilities for Hydrodec’s field services including voltage transformer retrofill and on site oil management.

Hydrodec Chairman John Gunn said: “These major new sales ensure the Australian operations will move into profitability during Q3 2006. We further expect that demand for Superfine transformer oil production from the Australian plant will escalate through late 2006 and into 2007 to achieve sold capacity in excess of 80% of design capacity.

We are now well positioned to utilise the emerging financial strength of the company along with the internal experience, skills, technical knowledge and product performance data developed during the past 18 months to accelerate targeted growth into other international markets”.

For further information please contact:

John Gunn, Chairman, HydroDec Group plc Tel: 020 7236 6236

Nick Fox, M:Communications Tel: 020 7153 1530