Half Yearly Report

IPSA GROUP PLC

('IPSA' or the 'Company')

Unaudited Results for the 6 month period ended 30 September 2011

IPSA, the AIM and Altx dual listed independent power plant developer with operations in southern Africa, today announces its unaudited interim results for the 6 month period ended 30 September 2011.

Highlights:

·; Revenue of £1.9m (2010 - £0.7m) comprising electricity sales of £1.7m (2010 - £0.7m) and steam sales of £0.2m (2010 - nil)

·; Group after tax loss of £2.6m (2010 - £0.4m loss)

·; Production of electricity under the MTPPP contract and, since July 2011, re-commencement of steam sales under a temporary contract, has generated a gross margin (revenue less cost of gas consumed) of £0.5m (2010 - £0.1m)

·; As announced on 2 December 2011, new contracts for the sale of the 4 turbines have been exchanged at a gross price of US$66.0m

Commenting, Richard Linnell, Chairman of IPSA, said:

"Following the significant delays before recommencing production of electricity in March 2011, which was due to the protracted negotiations in finalizing the MTPPP contract, it is pleasing to report that the plant in South Africa is now fully operational and, although output is still below full capacity, the plant is cash generative. We expect to add additional capacity by mid 2012 which we believe will make the plant profitable, covering both operating costs and depreciation, and will maximize revenues from our existing MTPPP contract.

"It is also most encouraging that the lengthy negotiations on the sale of the turbines have resulted in the exchange of new contracts, approved by our key creditors, on 30 November 2011. However, the working capital position will remain extremely tight until the sales of the four Turbines are completed."

For further information contact:

Phil Metcalf, CEO, Elizabeth Shaw, COO,

IPSA Group PLC +44 (0)20 7793 5615

John Llewellyn-Lloyd, Harry Stockdale

Execution Noble & Company Ltd +44 (0)20 7456 9191

Harry Ansell, James Joyce

W H Ireland Ltd +44 (0)20 7220 1666

Riaan van Heerden, PSG Capital (Pty.) Ltd, +27 (0)21 887 9602

Or visit IPSA's website: www.ipsagroup.co.uk 

CHAIRMAN'S STATEMENT

I am pleased to report the Company's interim results for the six month period to 30 September 2011. All comparisons to the prior interim period are made to results for the six months ended 30 September 2010. The previously published unaudited interim results were for the twelve month period ended 30 September 2010 as the Company has changed its year end to 31 March.

The results are broadly in line with our expectations. The net loss after tax for the period was £2.6m (2010 - £0.4m), giving a basic loss per share of 2.43p (2010 - loss per share 0.4p). The operating loss for the period under review was £0.8m (2010 - £1m). Other expense (comprising legal fees and storage costs associated with the turbines less unrealised exchange gains) was £1.0m (2010 - Other income of £1.4m due to release of overprovision of gas expense) and the net finance expense was £0.9m (2010 - £0.7m).

Revenues of £1.9m (2010 - £0.7m) during the period represented sales of steam and electricity (2010 - electricity only during the FIFA World Cup South Africa).

NewCogen

Following the recommencement of commercial operations at the plant on 24 March 2011, approximately 20.7 million kWh of electricity was sold to Eskom under the MTPPP contract up to 30 September 2011. Steam sales were resumed in June and 16,231 tonnes of steam were supplied to Karbochem by 30 September 2011 under an interim steam contract.

In accordance with the terms of the MTPPP contract, the sales price of electricity was increased by 5.8 per cent in April 2011. Subsequently, margins have suffered since July 2011 as a result of an 8.1 per cent increase in the gas price following an increase in the Brent oil price, which is a component of the escalation mechanism in the gas contract. We are considering a hedging contract to help protect against material movements in the price of Brent oil.

In December 2010, Sasol Gas Ltd served a summary judgment notification on NewCogen which we announced we would defend vigorously. Discussions have been initiated with a view to resolving this dispute as soon as possible.

The Turbines

On 20 July 2011, the Company announced that that it had entered into conditional equipment sale agreements in respect of its four Siemens Westinghouse 701 DU gas turbines for an aggregate consideration of US$66.0 million (approximately £42.3m at yesterday's exchange rate). Each purchaser paid a deposit of US$2 million in cash, which was held on deposit at 30 September 2011. On 30 November 2011, having obtained the approval of Standard Bank PLC and Turbocare SpA, the Company's key creditors, revised contracts were exchanged with a completion date of on or before 31 January 2012. The Directors anticipate that, following receipt of all the proceeds, the Company will be in a position to settle with all its creditors, including the £18.5m of loan principal and accrued but unpaid interest and legal and other fees due to Standard Bank PLC and approximately £15.1 million of trade payables, accrued interest and storage charges due to TurboCare SPA for the refurbishment and storage of the turbines.

Once the sale proceeds have been received and completion has occurred, we expect to record a pre-tax book profit on the sale of the 4 turbines of approximately £6.3m (based on a US$/£ exchange rate of 1.57 and a €/£ rate of 1.17).

Working capital

In spite of the revenues arising from the recommencement of electricity sales and the continuing very strict cost containment measures, the Group's working capital will continue to remain extremely tight until the Company completes the sales of the turbines.

Other Projects

The Directors are maintaining an active interest in developing further generation capacity in southern Africa, where there are increasing opportunities for Independent Power Producers. There are a number of potential opportunities arising, particularly in South Africa, as demand for electricity increases once more as a result of increased mining and other energy intensive manufacturing activities.

Conclusion

With completion of the turbine sales due well before the end of our financial year, and several projects in advanced stages of development, I look forward to reporting more positive news in the annual report.

Richard Linnell

Chairman

6 December 2011

IPSA GROUP PLC

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (unaudited)

for the 6 month period ended 30 September 2011

IPSA GROUP PLC

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION (unaudited)

at 30 September 2011

IPSA GROUP PLC

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (unaudited)

for the 6 month period ended 30 September 2011

IPSA GROUP PLC

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (unaudited)

for the 6 month period ended 30 September 2011

Notes to the unaudited Interim Statement for the 6 month period ended 30 September 2011

1. Basis of preparation

These condensed consolidated interim financial statements do not constitute statutory accounts within the meaning of Section 435 of the Companies Act 2006. The comparative figures for the 18 month period ended 31 March 2011 were derived from the statutory accounts for that period which have been delivered to the Registrar of Companies. Those accounts which contained an unqualified audit report, with an emphasis of matter paragraph on going concern, did not contain any statements under sections 489(2) or (3) of the Companies Act 2006. The financial information contained in this interim statement has been prepared in accordance with all relevant International Financial Reporting Standards ("IFRS") as adopted by the European Union in force and expected to apply to the Group's results for the year ending 31 March 2012 and on interpretations of those Standards released to date.

2. Accounting policies

These condensed consolidated interim financial statements have been prepared in accordance with the Group's IFRS accounting policies. These policies are set out in the Group's financial statements for the 18 month period ended 31 March 2011.

3. Revenue

Following execution of the MTPPP ("Medium Term Power Purchase Programme") agreement in August 2010 and a long term gas supply contract in February 2011, the Company's subsidiary in South Africa, Newcastle Cogeneration (Proprietary) Ltd ("NewCogen") re-commenced selling electricity in March 2011 and steam in June 2011.

4. Cost of sales

Cost of sales comprises cost of gas, routine plant maintenance, depreciation and other direct costs.

1 Exchange gains arising on the € denominated amount owing to Turbocare in respect of the refurbishment costs of the 4 Siemens gas turbines which were originally acquired for the Coega project and are now held as an 'asset held for resale';

2 Exchange gains arising in the Company's subsidiary, NewCogen, on sterling denominated loans from the Company which have funded the construction of the generating plant in South Africa. Since 31 March 2011, the loans to NewCogen are being accounted for as long-term / quasi-equity loans and gains and loss arising from movement of the ZAR relative to Sterling are accounted for in the foreign currency reserve.

3 Storage, legal and insurance costs in respect of the storage of the 4 Siemens gas turbines pending their sale (see note 9 below);

4 The 'take-or-pay' gas contract was terminated by Sasol Gas Ltd in July 2009. During earlier periods, there was a charge representing the difference between the minimum offtake level required under the 'take-or-pay' contract and the gas actually used since for certain periods the plant in Newcastle was unable to operate due to the absence of a electricity offtake agreement. The credit in the prior period represents the write-back of over-provisions in earlier periods;

5 Following the cessation of steam generation in 2009, the steam supply contract was terminated and accordingly the carrying value of the contract was impaired to nil.

7. Intangible

The intangible non-current asset represented the fair value of the steam supply contract owned by NewCogen. This was written-off at 31 March 2011.

8. Property, plant and equipment

Property, plant and equipment comprises the electricity generating plant in South Africa owned by NewCogen. The change in the value since 31 March 2011 comprises depreciation of £0.4m and exchange adjustment of £1.5m.

9. Cash and cash equivalents

Cash and cash equivalents includes US$4m (£2.6m) in respect of deposits received on the turbine sales (see also 11c below).

10. Assets held for resale

These assets comprise the 4 Siemens gas turbines which were acquired in 2007 for the proposed Coega project in South Africa. As a result of the delay in that project, it was decided that the turbines should be sold. Contracts for their sale were exchanged on 30 November 2011 for a gross price of US$66.0m. Cash deposits totalling US$4.0m have already been received and it is expected that completion will occur before the end of January 2012. The increase in the carrying value of these assets since 31 March 2011 includes (a) £2m of Italian VAT which has been charged on the refurbishment work and which may not be recoverable and which previously was carried in 'trade and other receivables' and (b) the refund of a deposit of US$1m (£650) received in December 2009 following non-completion of that contract.

11. Trade and other payables

Trade and other payables includes:

a) An amount of £15.1m (30/9/10 - £14.2m, 31/3/11 - £14.8m) owing to Turbocare SPA, the supplier of the 4 turbines, in respect of the refurbishment and storage of the turbines, plus interest.

b) An amount including interest of £4.0m (30/9/10 - £3.6m, 31/3/11 - £3.6m) claimed by Sasol Gas Ltd against the Company's subsidiary, NewCogen. The claim is being disputed and unless a mutually agreeable settlement is achieved, the parties will refer the claim to arbitration. The claim relates to amounts invoiced by Sasol Gas Ltd prior to the termination of the gas supply agreement by Sasol Gas Ltd in 2009.

c) An amount of US$4m (£2.6m) in respect of the deposits received on the turbine sales (see 9 above).

12. Borrowings

Included within borrowings are the following loans:

a) Amount due to Standard Bank of £18.5m, including accrued interest and legal fees (30/9/10 - £16.8m, 31/3/11 - £17.2m). In March 2008, the Company obtained a bank loan of £15.0m from Standard Bank PLC to finance the final instalment payment for the purchase of the 4 Siemens gas turbines. The loan was originally repayable in September 2009 and is now due on demand though Standard Bank PLC have agreed not to demand repayment pending completion of the sales contracts referred to in 9 above.

b) Loan note of £0.7m, including interest (30/9/10 - £0.7m, 31/3/11 - £0.7m). On 5 March 2010, the Company issued a £0.7m unsecured loan note, with interest payable at 6%. The loan note was originally repayable by 31 January 2011. The repayment date was formally extended to 31 July 2011. As repayment is now overdue, interest is accruing at 8%. Holders of the loan notes are entitled to subscribe for a total of 6.5m ordinary shares at a price of 8p per share or such lower price at which any future ordinary shares are issued prior to exercise.

c) Other loans of £1.9m, including interest (30/9/10 - £1.0m, 31/3/11 - £1.1m), comprising unsecured loans, with interest rates of between 5% and 12%, repayable within 12 months.

The Board of Directors approved this interim statement on 6 December 2011. This interim statement has not been audited.

Copies of this announcement are being sent to all shareholders on the register at today's date. Copies may be obtained from the Company's registered office, 5th Floor, Prince Consort House, Albert Embankment, London SE1 7TJ.

About IPSA:

IPSA Group PLC is a British company established to develop power generation projects in southern Africa. It is managed by a team with a strong track record in developing power projects worldwide and with considerable experience in southern Africa.

IPSA floated on the AIM market of the London Stock Exchange in September 2005 and obtained a dual listing on the Altx market of the Johannesburg Stock Exchange in October 2006.