Sale of Turbines

IPSA Group PLC

Conditional Sale of Turbines

and Settlement of Major Creditors

IPSA Group PLC (AIM:IPSA) ("IPSA"), the developer, owner and operator of power generation capacity in southern Africa, announces that it has agreed to the conditional sale of its two remaining Siemens Westinghouse 701 DU turbines (ex Fiat Avio TG50D5) (the "Turbines") to Rurelec PLC ("Rurelec").

Rurelec, the AIM-quoted owner and operator of power generation assets in Latin America, will pay a total consideration of approximately £16.1 million (US$25 million), of which approximately £11.9 million will comprise the initial consideration (the "Initial Consideration"), and the balance of approximately £4.2 million will be deferred on terms set out further below.

Structure of the Consideration

The Initial Consideration of approximately £11.9 million is to be funded by the allotment and issuance of 95,483,871 Rurelec shares of 2 pence each (the "Rurelec Shares") at an issue price of 12.5 pence per Rurelec Share (the "Issue Price"), as follows:

·; 8,000,000 Rurelec Shares are to be placed with Sterling Trust Limited ("Sterling Trust"), with the £1m cash consideration payable within 30 days to IPSA. The funds are to be used to pay down IPSA's existing outstanding trade creditors and used to fund its immediate working capital.

·; 78,978,843 Rurelec Shares are to be applied to discharge the majority of IPSA's key creditors including, inter alia, Bluestone Securities Limited ("Bluestone"), Independent Power Corporation plc ("IPC") and Sterling Trust. As a result, creditors, holding approximately £9.9 million of outstanding loans, have each agreed to accept Rurelec Shares and cancel their loans to IPSA in full, subject to their Rurelec Shares being duly admitted to trading on AIM. Included in these creditors are amounts due to Bluestone of approximately £6.3 million - Sterling Trust has agreed with IPSA and Rurelec to receive 50,720,316 Rurelec Shares at the Issue Price, and has separately undertaken to IPSA to discharge IPSA's total debt to Bluestone.

·; 8,505,208 Rurelec Shares are to be issued to IPSA directly, and will in due course be placed for cash subject to orderly market arrangements with Rurelec's broker.

The balance of the consideration, amounting to approximately £4.2 million will be paid in cash on the earlier to occur of, amongst other things: (i) commencement of commercial operation of the Central Illapa 255 MW open cycle greenfield gas fired power plant proposed to be constructed by Rurelec in Mejillones, Chile; (ii) the elapse of 30 days following receipt by Rurelec of funds in respect of its compensation claim against the Government of Bolivia; and (iii) 10 June 2015.

Key Terms

The Turbines acquisition agreement is conditional upon the Rurelec Shares being admitted to trading on the AIM Market of the London Stock Exchange ("Admission"). Admission is expected to take place on or before 14 June 2013. Once admitted to trading, the transaction will not be capable of being rescinded but title to the Turbines will not pass to Rurelec until after IPSA has delivered the Turbines for shipment and following notification that Rurelec is ready to receive them.

Pending transfer of title, Rurelec will be granted a pledge under Italian law secured over the Turbines to protect its interest up to the value of the Initial Consideration and Rurelec will also reimburse IPSA for the cost of insurance of the Turbines pending delivery to Rurelec. Under the terms of the acquisition agreement, IPSA undertakes to procure the release of any encumbrance, which its remaining substantial creditor, Turbocare, may have through the settlement of its indebtedness to Turbocare, which is the subject of ongoing negotiation.

Working Capital

Currently, IPSA has significant indebtedness and is reliant on the continuing co-operation of its creditors. In particular the Bluestone loans totalling approximately £6.3 million need to be repaid on or before 27 June 2013.

As a result of this sale, and following Admission, IPSA's indebtedness will be significantly reduced by approximately £10.9 million (including the Bluestone indebtedness).

However, IPSA's working capital will remain dependent on the continuing support of its key remaining creditors, in particular Turbocare and IPSA's salary creditors. IPSA is in constructive discussions with Turbocare to ensure a smooth transfer of the Turbines and to reduce its overall indebtedness. IPSA's salary creditors, being its directors and company secretary, are owed approximately £1.8m in aggregate. Of this total, a small amount will be payable to them immediately. However, the majority of these unpaid salaries will not be become payable until the earlier of the date that IPSA has sufficient funds or 31 May 2014.

IPSA will for the time being retain a quantity of other equipment ancillary to the Turbines, which it intends to sell by separate negotiation to realise additional commercial benefit. IPSA also owns the Newcogen plant which, although operating below full capacity, continues to run at good levels of performance and has improved its profitability and cash generation through short term steam contracts.

Related Party Transactions

The involvement of Sterling Trust as a substantial shareholder in both IPSA and Rurelec, owning 29.57 per cent. of IPSA and 50.01 per cent. of Rurelec, renders this sale a related party transaction for the purposes of Rule 13 of the AIM Rules for Companies. As mentioned above, Sterling Trust has also entered into an agreement with IPSA to discharge IPSA's total debt of approximately £6.3 million to Bluestone in consideration for the receipt of 50,720,316 Rurelec Shares at the Issue Price. Sterling Trust will also receive a further 16,193,905 Rurelec Shares at the Issue Price in consideration for discharging IPSA's debt of approximately £2 million to Sterling Trust and IPC. One of the creditors to whom IPSA owes in aggregate just under £0.2 million has confirmed that they intend to accept 1,574,334 Rurelec Shares at the Issue Price in consideration for the discharge of their debt. However, it is not expected to be able to sign its creditor letters until later today. If it has not signed its letters by the date of Admission of the Rurelec Shares, Sterling Trust has undertaken to discharge IPSA's debt due to it, and Rurelec, IPSA and Sterling Trust have agreed that Sterling Trust will receive the same number of Rurelec Shares at the Issue Price. Finally, in consideration for the discharge of £750,000 of debt due from IPSA to IPC (offset against a debt due from IPC to Peter Earl), Peter Earl will receive 6 million Rurelec Shares at the Issue Price.

Peter Earl and Elizabeth Shaw are directors of both IPSA and Rurelec and, having duly declared their interests in the transaction, did not count towards the quorum or vote in respect of the resolutions of the IPSA board of directors to approve these transactions. The Independent Directors of IPSA, having consulted with IPSA's nominated adviser, consider that the terms of the transactions are fair and reasonable insofar as its shareholders are concerned.

IPSA's Chairman, Richard Linnell, commented: "Reaching an agreement to sell the Turbines allows IPSA to progress its business in southern Africa once released from its significant burden of debt. It is a major step forward for IPSA, although working capital will remain tight for the foreseeable future."

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