June 30, 2011 08:00 ET

H2O Innovation Announces a Loan by FONDACTION, Repays Convertible Unsecured Debenture

All amounts in Canadian dollars unless otherwise stated.



H2O Innovation Inc. ("H2O Innovation" or the "Company") announces it has entered into a loan agreement with FONDACTION, Le Fonds de développement de la Confédération des syndicats nationaux pour la coopération et l'emploi ("Fondaction") for an unsecured subordinated loan in a principal amount of $2,000,000 (the "Loan"). The Loan will bear interest at an annual rate of 11% from the date of closing of the Loan transaction and will be repaid, with any interest accrued thereon, in 48 monthly equal and consecutive installments, the first of which shall be paid on July 1, 2012, up and until the term of the Loan. The Company intends to repay the Loan and the installments with its working capital and other liquidities.

H2O Innovation intends to use a portion of the Loan to repay the convertible unsecured debenture issued in favour of an institutional investor as part of a private placement completed in July 2008.

As additional consideration for the Loan, the Company has issued an aggregate number of 1,000,000 common share purchase warrants (the "Fondaction Warrants"). Each Fondaction Warrant entitles Fondaction to purchase one common share of the share capital of the Company at a price of $0.50 for a period of 30 months following the closing of the transaction. The TSX Venture Exchange Inc. has conditionally approved the issuance of the Fondaction Warrants.

Prospective disclosures

Certain statements set forth in this press release regarding the operations and the activities of H2O Innovation as well as other communications by the Company to the public that describe more generally management objectives, projections, estimates, expectations or forecasts may constitute forward-looking statements within the meaning of securities legislation. Forward-looking statements concern analysis and other information based on forecast future results and the estimate of amounts that cannot yet be yet determined. Forward-looking statements include the use of the words "expect", "believe", "estimate" and other similar terms as well as those usually used in the future and the conditional, notably regarding certain assumptions as to the success of a venture. Those forward-looking statements involve a number of risks and uncertainties which may result in actual and future results of the Company to be materially different than those indicated. Information about the risk factors to which the Company is exposed is provided in the Annual Information Form dated September 21, 2010 available on SEDAR (www.sedar.com). Unless required to do so pursuant to applicable securities legislation, H2O Innovation assumes no obligation to update or revise forward-looking statements contained in this press release or in other communications as a result of new information, future events and other changes.

About Fondaction

Fondaction invests in Québec SMEs in order to help in maintaining and creating jobs in Québec, in a sustainable development perspective. It manages $800 million in assets derived from retirement savings collected from more than 100,000 shareholders. It is the financial partner of some one hundred companies and partner and specialized funds operating in all industry sectors and in the social economy. For more information, visit www.fondaction.com.

About H2O Innovation

Building on 11 years of experience, H2O Innovation designs, manufactures, and integrates state-of-the-art custom-built water treatment systems for the production of drinking water and industrial process water, the reclamation and reuse of water, and the treatment of wastewater in the municipal, commercial, institutional, industrial, oil & gas, mining, and energy markets. The Company also offers operating and maintenance solutions for membrane filtration and reverse osmosis systems. H2O Innovation has approximately 100 employees, seven offices including three manufacturing plants in Canada and the United States and is a founding partner of H2O Innovation India, a joint venture based in Mumbai, India. Shares of H2O Innovation are listed on the TSX Venture Exchange (HEO) and on the NYSE Euronext Alternext Exchange (MNEMO:ALHEO). For more, visit www.h2oinnovation.com.

Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) nor the Alternext Exchange accepts responsibility for the adequacy or accuracy of this release.

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