IPSA.L Regulatory News (IPSA)

6 December 2010

IPSA Group PLC

("IPSA" or "the Company")

Trading update and dispute with Sasol Gas Limited

IPSA PLC (AIM:IPSA), the developer, owner and operator of power generation capacity in Southern Africa, announces a trading update following initiation of proceedings by Sasol Gas Limited.

The Company announces that Sasol Gas Limited ("Sasol Gas"), which is the monopoly gas-producer and primary supplier of gas in South Africa, has commenced legal action against the Company's wholly-owned subsidiary, Newcastle Cogeneration Pty. Limited ("NewCogen"), for sums claimed under the gas supply agreement terminated in August 2009 amounting to approximately £4m. These sums principally relate to 'take or pay' penalties incurred as a result of the plant not running due to the lengthy delays in concluding a power purchase agreement. Any further action taken by Sasol Gas will be vigorously defended.

Notwithstanding this earlier termination, Sasol Gas did supply gas for the short term running of the Newcastle plant at the time of the FIFA World Cup finals in South Africa between June and August 2010, on a cash upfront basis. NewCogen subsequently signed a power purchase agreement under the MTPPP with Eskom, the South African electricity parastatal, as announced on 31 August 2010. Therefore IPSA does intend to negotiate terms for the long term supply of fuel to this plant by Sasol Gas.

Over the last few years the Company has been actively seeking to sell its four Siemens Westinghouse 701 DU gas turbines (the "Turbines") which were originally acquired for the delayed Coega project at Port Elizabeth, South Africa. Whilst strict cost containment measures were implemented earlier this year and with no revenues currently being generated, the Group's working capital position will continue to be extremely tight unless the Company is able to sell the Turbines at an acceptable price or is otherwise able to raise further working capital in the intervening period. Outstanding debt, accrued interest and other creditors of the Group currently amounts to approximately £36m.

Approximately £30m of the total outstanding debt is at present subject to a standstill agreement with Standard Bank PLC and Turbocare SpA following execution of an agreement on 5th March 2010. Although this agreement terminates on 31 January 2011, Standard Bank PLC is able to terminate it at any time because no sale of the Turbines was completed by 30th November 2010. However, IPSA has notified the bank that it is in negotiations to sell the turbines for an amount in excess of its liabilities, although no contract has yet been executed and there is no guarantee of a successful outcome.

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