Potential fund raising and strategic investment

 19 March 2010

Hydrodec Group plc

("Hydrodec", the "Company", or the "Group")

Potential fund raising and strategic investment

The Board of Hydrodec, the renewable oil company, announced on 4 March 2010 that the Group's working capital position had been affected by lower than anticipated sales and margins from December to February and sharply reduced trade credit terms from certain US feedstock suppliers. The Board is currently in discussions with a number of its largest shareholders and is confident it will secure further funding. An update will follow in due course.

The Board expects that the prospect of improvement in trade credit terms in the US and increased sales and margins in both the US and Australia should contribute to an improved working capital position going forward. Without this further funding or an earlier improvement in the market, currently the Group has sufficient working capital for the next four to six weeks.

The Board believes that the Company has recovered from plant operational challenges presented during 2009 and is preparing to move forward with a strengthened management team. The Board welcomes Stephen Harker as Chief Operating Officer. Stephen has a distinguished 30 year career in marketing, including lubricants, with BP, Shell and Caltex, including a period as Managing Director of Croda Chemicals. Stephen officially commences with the Company in mid-April and will be responsible for all aspects of the Group's transformer oil operations including feedstock procurement, sales and plant operations.

The Board believes the recently announced Japan and East Asia strategic alliance provides a transformational opportunity for Hydrodec which is entering a new and exciting phase of growth and development. Hydrodec's patented recycling process is the only treatment approved and authorised by the Japanese Ministry of Environment that recovers in excess of 99% of used transformer oil while removing polychlorinated biphenyls (PCBs), a toxic substance banned under international and Japanese laws. Based on industry data the current estimated quantity of low level PCB-contaminated transformer oil available for treatment by the joint venture is in excess of 1 billion litres, or US$1 billion in potential revenues, in Japan alone. Initial inquiries to the alliance regarding further growth opportunities have also been received from South Korea and Taiwan.

In the US, where Hydrodec's Canton plant is already successfully operating, the Group expects final approval from the Environmental Protection Agency (EPA) to treat PCB-contaminated transformer oil to be granted in the second half of 2010.

Hydrodec's potential global market opportunity to treat PCB-contaminated material is huge and likely to be driven by increasing regulatory pressure. PCBs are a highly toxic substance that were extensively used as an insulating additive in transformer oils and are still widely present globally, either stockpiled by users or still in circulation within transformers built many years ago.

The Board anticipates that, based on the growth requirements of the Japanese strategic alliance, continued expansion in the US and longer term plans for developing other markets and alternative applications for its core technology, a strengthening of the capital base over and above any immediate funding will be necessary. To these ends, following a number of approaches from interested parties, Hydrodec is investigating opportunities for the introduction of a substantial strategic investment into the Company. Initial contact has been received from potentially interested parties but there are no firm indications of intent at present.

The Board is excited by the prospects for the Company and believes these transformational opportunities in USA, Japan and East Asia are the gateway to the early exploitation of the full potential of Hydrodec's unique technology.

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