Homeland Energy Group Ltd.

Homeland Energy Group Ltd.

April 17, 2008 08:30 ET

Homeland Energy Sells 5% Interest in Its South African Subsidiary to GMR Group of Bangalore, India

- GMR Group maintains options to acquire up to 50% of Homeland South Africa for US$155 million in 2008 - Sale of interest in Homeland South Africa provides cash for further development of South African and regional assets and for potential acquisitions - Developing partnership brings balance sheet strength and power development expertise to Homeland

TORONTO, ONTARIO--(Marketwire - April 17, 2008) - Homeland Energy Group Ltd. (TSX:HEG) ('Homeland' or 'the Company') is pleased to announce that it has completed the sale of five per cent (5%) of its South African subsidiary, Homeland Mining and Energy SA (Pty) Ltd ("Homeland South Africa") to GMR Energy Limited ("GMR Group") of Bangalore, India for a cash payment to Homeland of US$15 million. GMR Group maintains options to acquire an additional 5% and 40% of Homeland South Africa valuing the Company's subsidiary at US$310 million. If all three options are 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 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.

"This transaction represents a strategic move forward for Homeland Energy Group, as well as an endorsement of the quality of the underlying assets of the Company," commented Stephen Coates, President and CEO. "Our Board and management team believe that a partnership with an organisation of the quality of the GMR Group and the cash resulting from this deal provides the independence to develop the Eloff coal project, as well as other global opportunities that may arise. As these funds will be paid to Homeland's corporate entity, we are not limited to southern Africa for the deployment of the funds."

According to BVN Rao, Chairman & Managing Director of GMR Energy Limited: "The acquisition of sizeable coal assets overseas is a very critical part of GMR Group's international energy business strategy. Apart from ensuring fuel security for GMR Group's power projects in India, such a transaction also acts as a catalyst in the development of the energy business group. In our search for such assets we found that Homeland South Africa provided us with a perfect platform to grow the group's thermal energy portfolio. We are very pleased to be associated with Homeland Energy as a strategic partner in coal ventures. Apart from the quality and size of Homeland's South African coal assets, especially the development potential of the Eloff Project, we are impressed by the technical expertise, country specific knowledge and, above all, the commitment shown by the Homeland team. We, in turn, are committed to developing Homeland South Africa's assets into a world-class venture."

The GMR-Homeland Transaction

The conclusion of this initial sale by Homeland to GMR Group follows the 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 completes 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 holds an option - subject to conditions precedent - to purchase a further 5% of the shares of Homeland South Africa from Homeland for a purchase price of a further US$15 million on or before the date which is the later of May 1, 2008 and the date which is 10 days following receipt of an updated Independent Technical Report on the mineral resource at Homeland's Eloff property (the "Second Option").

If the Second Option is exercised, GMR Group 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 if the Purchaser does not exercise the Second 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 from the date that the First Option was completed. The SPA also 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.

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.

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.

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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