Rurelec Regulatory News (RUR)

5 January, 2012

Rurelec PLC

("Rurelec" or "the Company")

Expansion into Chile with 38 MW Project in Arica

Rurelec PLC (AIM:RUR), the electricity utility which owns and operates power generation capacity in Latin America, announces its expansion into Chile. Rurelec has today acquired a 50 per cent interest in Termonor SA, a Chilean project company which has developed a fully consented 38 MW diesel fired power plant in Arica, the port city which lies close to the northern Chilean borders with Peru and Bolivia Commercial operation is expected before the end of 2012.

Under the terms of the agreement, Rurelec is paying US$162,500 split equally between Invener, a local development company, and Enerbosch, the Chilean construction group, for a 50 per cent interest in Termonor. A further US $362,500 will be paid when the Arica project reaches certain milestones linked to financial completion and commercial operation taking the total consideration to US $525,000. Rurelec will also reimburse IPC's development costs of US$250,000 when the Arica plant enters commercial service, which is expected to be in the last quarter of 2012. The total equity requirement for the project is a further US$4 million over the construction period. This will be subscribed in the amount of US$2 million by Rurelec and US$2 million jointly by Invener and Enerbosch. Project construction debt is to be provided by suppliers and a privately placed project bond issue.

Rurelec's strategy to expand into Chile and Peru, where both countries are experiencing high demand growth for power, was made possible by the substantial increase in the share capital of Rurelec completed in April 2011, which eliminated the Company's external borrowings.

Commenting on the Chilean expansion (which follows an announcement concerning Peruvian expansion on 12 December 2011), Peter Earl, Chief Executive of Rurelec said:

"I am delighted to announce our expansion into Chile, a country we have hoped to enter since 2007.

"The grid in the Chilean Northern SING is currently under severe pressure. Our initial 38 MW installation will relieve that pressure but it also represents a hugely significant first step for us since the large mining companies, who are the main users of electricity in the north of Chile, will be awarding more than 1,000 MW of valuable power purchase agreements over the coming twelve months. We hope that 2012 will see Rurelec become the dominant new entrant in the Chilean power system over this period. With good fortune, this initial 38 MW in Arica will be just the start of a portfolio of excellent, new Clean Tech power plants in Chile."

Termonor SA

Existing cash producing power generation assets in both Chile and Peru change hands at a substantial premium to book value. Rurelec has therefore been working closely with the power development team of Independent Power Corporation PLC ("IPC"), which specialises in greenfield power generation projects, to identify and acquire development projects which are at an advanced stage of development and therefore constitute a low risk since project costs have been fixed and the new power plant is typically less than a year away from commercial operation.

Based on this cautious approach to expansion, Rurelec has come to an agreement with IPC and with IPC's Chilean power development partners for the acquisition of a 50 per cent interest in Termonor SA, the Chilean project company which owns all rights to a fully consented 38MW thermal power plant development in Arica. Arica is one of the most northerly cities in Chile. It is the principal port for northern Chile and serves the significant expansion projects in copper production and in mining of other minerals in the north of the country. Some 73 per cent of all the port traffic of Arica is destined for Bolivia. It is expected that power demand in the region will grow at a significant rate in the near future as current mining expansion projects, notably at Collahuasi, come into production.

The 38 MW Arica plant will be based on a GE 6B gas turbine similar to the two in operation at Rurelec's Energia del Sur ("EdS") plant in Argentina, and this ability to own and operate a similar turbine to the type already successfully installed in Comodoro Rivadavia is expected to lead to operating efficiencies across the Rurelec group.

It would be Rurelec's intention in due course to install further 6Bs in northern Chile and eventually convert them to combined cycle operations modelled on the successful project at EdS.

Rurelec and its new Chilean partners intend to secure long term bank debt on the Arica plant once it enters commercial service. The debt markets in Chile are strong for asset-backed loans, and Rurelec expects to secure long term finance for the completed plant at interest rates considerably more favourable than could be obtained in Europe.

In order to facilitate the issue of local bonds, it is the Company's intention to secure a dual listing on the Santiago Stock Exchange, as soon as possible.

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