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Forge Group Limited (FGE) has entered into a Share Purchase Agreement (SPA) to acquire all of the shares in CTEC Pty Ltd, a private Western Australian based company providing engineering, procurement and construction (EPC), operations and maintenance solutions to the energy and utilities sectors. The acquisition of CTEC is an important first step in Forge’s new growth strategy. The acquisition is expected to contribute annual revenue in the range of $200 to $250 million and EBITDA of between $15 to $20 million in the first full year of ownership.

Under the SPA, the consideration payable by Forge to the shareholders of CTEC is an upfront payment of $16 million (which Forge intends to fund from current cash reserves), and deferred payment amounts dependent on the Net Profit before Tax of CTEC over financial years ending 30 June 2012 and 30 June 2013 (FY13). Details of the total consideration to be paid to the Vendors under the SPA are as follows  Initial payment Cash on completion: $16.00m; Deferred payment 50% of CTEC’s NPBT for FY12 to a maximum payment of: $10.00m; If NPBT of CTEC is greater than $8m for FY12 or if the employment of a Key Employee is terminated without cause during FY 2012: $ 2.00m ;  50% of CTEC’s NPBT for FY13 to a maximum payment of: $ 8.60m; If NPBT of CTEC is greater than $8m for FY13 or if the employment of a Key Employee is terminated without cause during FY 2012 or FY 2013: $ 2.00m; Total maximum payment $38.60m.

Under the SPA, Forge is required to assist CTEC in providing bank guarantees or insurance bonds for the EPC contract between Hamersley Iron Pty Limited and CTEC for the construction of the West Angelas Power station (Rio Contract) and for the EPC contract between APA DPS Pty Ltd and CTEC in relation to the Diamantina Power Station project (DPS Contract) (refer below for further details on the Rio Contract and DPS Contract) to a maximum combined value of $25m. Forge’s objective in acquiring CTEC is to continue the strategy of diversification and to facilitate further growth in a complementary suite of service offerings.

The Executive Chairman of Forge, Peter Hutchinson said, “CTEC represents a good strategic fit to grow Forge Group as it opens up new markets both geographically and strategically. The acquisition of CTEC brings with it a total uninvoiced order book of approximately $600 million to be billed over the next 30 months.

Established in 2003, CTEC is a private Perth based provider of project solutions to the energy and utilities sectors. CTEC’s capabilities include major turnkey Engineering, Procurement and Construction (EPC) contracts, Build, Own Operate and Transfer (BOOT) projects and Operations & Maintenance (O&M) services and equipment supplies. In the last 12 months CTEC has been awarded four new projects leading to a significant expansion in management and staff. Forge Group Limited (FGE) is a Western Australian based public company. Its core business is engineering, procurement, construction, project management and maintenance, particularly for the resource and oil and gas sectors. It has operations in WA and West Africa, with more than 1000 staff and a suite of blue chip clients including Woodside, BHP Billiton, Worley Alumina and Alcoa Australia.

www.forgegroup.com.au

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