US Strategic Relationship

30 November 2012

US Strategic Relationship

Hydrodec Group plc ("Hydrodec"), the cleantech industrial oil re-refining group (AIM: HYR), announces that it has signed a non-binding heads of terms to establish a potential Joint Venture with an industry participant in North America.

Under the terms of the proposed arrangement:

(1) The industry participant would provide a committed volume of feedstock sufficient to expand production capacity by up to a further six processing trains - Hydrodec's Canton plant currently has four trains - increasing total capacity in North America up to c. 65 million litres from 27 million litres currently.

(2) Hydrodec will licence its technology to the Joint Venture to manufacture oil in North America in return for a five per cent royalty on the revenues generated by the business.

(3) The industry participant would initially acquire a 25 per cent interest in Hydrodec's US business and (subject to the build out of further processing trains) would acquire up to 49.9 per cent in the Joint Venture. The industry participant will pay a price 5 times the EBITDA for the US business for the period ended 31 December 2012 subject to an earn-out equivalent to 6.5 times by which the EBITDA for the year ended 31 December 2013 exceeds that of 2012.

Completion of the proposed transaction is subject to: (i) entering into definitive legally binding agreements; and (ii) obtaining all necessary approvals. There can be no assurance that the transaction will be concluded.

Ian Smale, Chief Executive of Hydrodec, commented: "This is the first step in what would be a significant strategic relationship for Hydrodec. The potential to dramatically increase our capacity and have access to long-term, stable supplies of feedstock will enable us to scale up our North American operations and help Hydrodec take advantage of the strong market demand for our products."

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Notes to Editors:

Hydrodec'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.

Hydrodec's plants are located at Canton, Ohio, US and Young, New South Wales, Australia. The Group's shares are listed on the AIM Market of the London Stock Exchange. For further information, please visit www.hydrodec.com.