HYR.L Regulatory News (HYR)

9 June 2011

Hydrodec Group plc

("Hydrodec" or the "Group")

AGM Statement

Neil Gaskell, the chairman of Hydrodec Group plc, the cleantech industrial oil re-refining group (AIM:HYR), will make the following statement at the Group's Annual General Meeting later today:

"Since the 2010 annual results were announced two months ago Hydrodec has maintained steady trading momentum as well as solid progress for the commercial launch of its joint venture in Japan with its strategic partner, Kobelco Eco Solutions, a subsidiary of Kobe Steel.

Demand for our SUPERfine products has remained strong in both the US and Australia. In addition, the Group is continuing to increase exports from its US plant as our products gain market acceptance. Finished product prices and gross margins have also continued to be firm, against a continuing tight supply market and helped by the Group successfully entering new industrial markets.

At the same time, the Group has continued to take considerable strides in improving the availability of feedstock supplies and our strategy of diversifying feedstock suppliers has made real progress. I am pleased to report that the Group has signed a three-year agreement with a major US utility, which will supply used transformer oil for re-refining at our Canton facility. This agreement will account for around 5 per cent of our current annual feedstock requirements. A year ago we were too highly dependent on obtaining supplies from a small number of ex-service equipment disposal companies. While we continue to obtain used oil from this sector, there is now a growing acceptance from utilities and other suppliers of our green solution and these now provide a majority of our feedstock. This is building a robust platform for future growth in North America and Australia.

We recently announced a new debt funding, which was supported by Andrew Black, one of our largest shareholders, and other individuals. The proceeds will primarily be utilised to build feedstock inventory prior to any potential seasonal constraints later in the year but it will also provide support for the continuing development of new business in our existing markets and Japan.

Turning to our strategic alliance with Kobelco, much progress has been made behind-the-scenes for the launch of our first joint venture plant in Japan. The heads of terms for the operating joint venture agreement for the first plant have now been signed. The formal agreement, which will encapsulate the day-to-day management and operations of the first plant, is expected to be signed shortly.

The plant budget is well advanced and the joint venture remains on track to commission the first site in the second half of 2012. Commercial negotiations are also underway with suppliers and customers. Details, including the location of the plant, remain subject to commercial confidentiality. Independent market research commissioned by Hydrodec and Kobelco has confirmed the scale of the potential market, transformer oil selling prices and the costs of the alternative disposal by incineration. Further, the joint venture has also identified an additional source of revenue from the cleaning of contaminated and discontinued transformer hardware with Hydrodec's clean oil. At present such hardware requires costly treatment, such as high temperature processing, prior to disposal.

In the US, we are still awaiting the US Environmental Protection Agency ("EPA") to issue the public notice in respect of the permit to treat high-level polychlorinated biphenyl ("PCB") contaminated oil. The notice is the beginning of the final formal stages prior to the grant of the permit. Depending on any responses to the public notice, we would expect to receive approval within three to four months from the date of the notice. We have already complied with and submitted all the requirements for issuance of the notice. We are continuing to press the EPA to complete its approval process in the light of its previous assurances as to timings.

With trading continuing to move in the right direction, the Board remains confident that volumes for the first six months of the year will show a material increase over the same period last year. The Board expects the current trend of steadily increasing volumes to continue into the second half of the year."

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Notes to Editors:

The Group's technology is a proven highly efficient oil re-refining and chemical process which is being initially targeted at the multi-billion US$ market for transformer oil used by the world's electricity industry. The Group takes spent oil, including polychlorinated biphenyl ("PCB") contaminated oil, as the primary feedstock, which is then processed at its two plants enabling 99 per cent or greater recovery of oil for reuse while also eliminating PCBs, a toxic additive banned under international regulations, without environmentally harmful emissions.