Homeland Energy Group Ltd.
TSX : HEG

Homeland Energy Group Ltd.

May 06, 2008 02:00 ET

Homeland Energy Group Sells Additional 5% Interest in Its South African Subsidiary for US$15 Million

- GMR Group of Bangalore, India now holds 10% of Homeland South Africa for a total purchase price of US$30 million - GMR Group holds a final option to acquire an additional 40% of Homeland South Africa for total payments of US$155 million in 2008 - Homeland maintains strong cash and liquid asset position

TORONTO, ONTARIO--(Marketwire - May 6, 2008) - Homeland Energy Group Ltd. (TSX:HEG) ('Homeland' or 'the Company') has received its second cash payment of US$15 million from GMR of Bangalore, India for an additional 5% interest in Homeland Energy's South African subsidiary, Homeland Mining and Energy SA Pty) Ltd (Homeland South Africa). This second tranche brings GMR's ownership of Homeland South Africa to 10%. This payment, when received, will raise Homeland's cash and liquid assets to more than C$32 million. Additionally, the Company holds 22,250,000 shares or 39% of Homeland Uranium Inc. a private, uranium exploration and development company.

GMR Group maintains an option to acquire an additional 40% of Homeland South Africa, valuing the Company's subsidiary at US$310 million. If the third option is exercised by September 2, 2008, Homeland Energy will receive a total of US$155 million for the sale of 50% of Homeland South Africa. Details of the three options are included below. The sale to GMR Group incorporates the projects and properties held within Homeland's South African subsidiary, including the Kendal Mine, Eloff coal mining project, the Northfield site reclamation project as well as several exploration projects in South Africa. The transaction excludes Homeland Energy's corporate interests in Homeland Uranium, Altona Resources and other projects under consideration in southern Africa and elsewhere.

"We continue to be very pleased with our progress in South Africa and this additional commitment by GMR serves as an independent confirmation of the value being created by Homeland" commented Stephen Coates, President and CEO. "We look forward to having GMR as a partner on most of our South African coal projects as we grow our portfolio of development and production assets inside and outside of South Africa."

The GMR-Homeland Transaction

The conclusion of this second sale by Homeland to GMR Group follows delivery of a draft report of the drilling and coal quality analysis on the Eloff project. Following completion of this information, the Company will release an updated Independent Technical Report to both SAMREC and National Instrument 43-101 compliant standards. It is anticipated that this report will be complete and made public during the week of May 5, 2008.

Homeland and GMR completed negotiation of a Shareholders' Agreement and a Share Purchase Agreement (the "SPA") setting out the terms and conditions upon which Homeland agreed to sell up to a 50% voting and participating equity interest in Homeland South Africa to GMR Group. Following signing of a memorandum of understanding (the "MOU") in December 2007, Homeland received a payment of US$3 million. The additional payment made on April 15, 2008 of US$12 million completed the sale of the first 5% of the shares of Homeland South Africa for a total purchase price of US$15 million (the "First Option").

GMR Group now holds a final option to purchase 40% of the shares of Homeland South Africa for either US$125 million, if such option is exercised on or before September 2, 2008, or US$135 million, if such option is exercised after September 2, 2008 but on or before December 31, 2008 (the "Third Option").

The SPA provides Homeland with the right to buy back the Homeland South Africa shares sold under the First Option and the Second Option if the Purchaser does not exercise the Third Option. The purchase price for the shares subject to this buy back right is payable in cash and is equal to the original price paid plus 10% interest accruing as to 50% from the date that the First Option was completed and as to 50% from the date that the Second Option was completed.

GMR Group Limited

GMR Group is a Bangalore headquartered global infrastructure group with interests in Airports, Energy, Highways and Urban infrastructure as well as in the manufacturing sector, spanning the Agri-business including Sugar and Ferro alloys. The company is one of the fastest growing infrastructure organizations in India. Employing the Public Private Partnership model, the GMR Group has successfully implemented several infrastructure projects in India. With completion of the development of India's newest airport in Hyderabad, and the Delhi International Airport project well underway, GMR Group has established itself as a frontrunner and pioneer in the core infrastructure areas of the country. GMR's subsidiary, GMR Infrastructure Limited ("GIL"), is a Bombay-listed publicly traded company with a market capitalization in excess of US$6 billion.

When the Government of India opened the power sector to investments from the private sector, GMR Group took a strategic decision to venture into this sector. Over more than a decade, the Group has established its credentials and now has three power plants in Mangalore, Chennai and Andhra Pradesh. The GMR Group is currently developing three more power projects.

The GMR Group is also actively engaged in the areas of Education, Health, Hygiene and Sanitation, Empowerment & Livelihoods and Community-Based Programs under its Foundation wing, reaffirming its grass root presence as change agents of society in the field of Corporate Social Responsibility. A dedicated division, the GMR Varalakshmi Foundation, manned by committed professionals, oversees and manages these projects across India.

An infrastructure holding company, GIL was formed to fund the capital requirements of the GMR Group's initiatives in the infrastructure sector. GIL is engaged in the development of various infrastructure projects in the power and transportation sectors through several special purpose vehicles.

GMR Group's assets include six power plants, three of which are in production today, six road projects, two of which are in commercial operation and four are under development; and two airport projects, the recently completed Rajiv Gandi International Airport and the modernization and re-development of the Delhi International Airport. The GMR Group plays an active role in all stages of development of all projects, including the supervision of construction services, financing and operation.

Homeland Energy Group Ltd. is a producing coal company, traded on the Toronto Stock Exchange under the symbol "HEG". The company is focused on energy exploration and development in Southern Africa. Homeland owns two producing operations - the Kendal Mine near Witbank, South Africa and the Northfield site reclamation project near Dundee, South Africa - an advanced development coal project in South Africa (Eloff coal mining project) and a number of early-stage exploration properties in the provinces of Mpumalanga and Kwa-Zulu Natal.

The Company is currently negotiating to acquire interests in a number of additional coal properties in eastern South Africa and neighbouring countries. Homeland is also a significant shareholder in Homeland Uranium Inc., a Canadian uranium exploration and development company focused on projects in Niger and the United States, and has several other global strategic investments. Homeland Energy Group Ltd. began trading on the Toronto Stock Exchange on March 5, 2008 and has 146,041,117 common shares issued and outstanding.

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