Trading Statement

7 Dec 2006 07:01

HydroDec Group plc07 December 2006 HYDRODEC GROUP PLC ESTABLISHMENT OF FIRST US HYDRODEC PLANT AND TECHNOLOGY UPDATE North American expansion Hydrodec Group plc ("Hydrodec" or "The Company") announces it has receivedstatutory planning consent for the establishment of its first North AmericanHydrodec plant in Canton, Ohio. Canton has been chosen due to its location inone of the major industrial regions in the USA, close to both the suppliers offeedstock oil and potential Superfine transformer oil customers. The State of Ohio and the City of Canton have also provided a package ofincentives to Hydrodec. These include, from the State, a Business Developmentgrant of up to US$100,000, a Workforce Development grant of up to US$65,000, agrant for off site infrastructure of up to US$400,000 and US$539,300 of StateJob Creation Tax Credits. Incentives provided by the City of Canton include aJob Creation Program incentive valued at c.US$210,938, Net Profits Tax incentivevalued at c.US$229,640, and an US$437,756 Enterprise Zone Tax Abatement over tenyears. The Company has also reached conditional agreement on the acquisition of theproposed production site located in an industrial park within Canton Citylimits. The site has direct access to interstate rail and road transportcorridors. Concept planning for the facility is near complete and detaileddesign is underway. Design completion is scheduled for Q1 2007. Order placementfor long lead equipment and commencement of construction site works has beenscheduled for Q2 2007. Commissioning of the new facility is expected during thefirst half of 2008. Finalisation of the production facility location andcommissioning dates has also enabled the acceleration of market development andproduct pre-sales activities. The site is expected to have a production capacityof 60,000 to 80,000 litres of Superfine transformer oil per day, a quadruplingof Hydrodec's existing Superfine production capacity. Technology update Ongoing product research and development carried out through July and August inresponse to customer inquiry identified a means of enhancing the technicalquality of Superfine oil. This enhanced quality has been delivered by adjustmentof operating conditions and minor modification of equipment in one section ofthe process train within the existing plant. As a result of these developments,Superfine production was halted in November while re-engineering took place tomodify the plant. This short term slow down in production means that the Australian operationswill now not achieve profitability until Q1 2007. Whilst this is a little laterthan previously expected, successful re-engineering of the process and our workwith two influential laboratories within the transformer oil industry hasincreased awareness of Superfine and created new sales opportunities. We arecurrently pursuing a number of these opportunities and hope to announce furtherprogress shortly. Hydrodec Chairman John Gunn commented, "We are delighted that after 18 monthswork, Hydrodec has located its first US plant. Canton is a logistically idealsite, given the location of feed-stock suppliers, Superfine customers and theavailability of a skilled workforce. The initial response from key customergroups indicates a high level of interest and support for the environmentalsustainability and greenhouse benefits that Hydrodec's technology provides. TheCanton plant marks the start of Hydrodec's US plans, and I look forward toconstruction commencing next year. We hope to be able to announce significantprogress on the second US production facility early in 2007. The recent technological developments in Australia mean that the Superfineproduct has been further tailored to meet the demands of our Australian and UScustomers in the future. Our aim is to create the world's best brand oftransformer oil; these measures ensure material progress in this area,particular in the area of product pricing." For further information please contact: John Gunn, Chairman Hydrodec Group plc Tel: 020 7236 6236 Emma Davis Curve PR Tel: 07764 197 003 This information is provided by RNS The company news service from the London Stock Exchange