H2O Innovation joint venture to serve industrial, commercial water treatment markets in India

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QUEBEC CITY, PQ, Canada, and MUMBAI, India, Feb. 1, 2010 -- H2O Innovation Inc. of Quebec City, Canada, a complete water treatment solutions company providing custom designed high performance systems for municipal, commercial, and industrial applications, and Chembond Chemicals Limited of Mumbai, India, a leading manufacturer and supplier of specialty performance chemicals to industries across India and a provider of technical and operation & maintenance services, today announce the execution of a joint venture agreement to create H2O Innovation India Limited, a company dedicated to providing water treatment systems and maintenance services to the Indian industrial and commercial markets for the production of boiler feed and process water, for industrial wastewater reclamation and reuse, as well as for wastewater treatment. H2O Innovation India is also expected to increase the Company's competitiveness on international projects and leverage its supply chain.

The execution of the Agreement took place today at 5:30 pm (Mumbai time) during a press conference held at the Taj Mahal Palace & Tower in Mumbai prior to the official inauguration of the Quebec Office in Mumbai, in the presence of Mr. Jean Charest, Premier of Quebec, Mr. Clément Gignac, Quebec Minister of Economic Development, Innovation and Export Trade, Mr. Pierre Arcand, Quebec Minister of International Relations, and Dr. Indu Shahani, Honourable Sheriff of Mumbai. Mr. Frédéric Dugré, President and CEO, signed the Agreement for H2O Innovation and Dr. Vinod Shah, Chairman of the Board, signed on behalf of Chembond. H2O Innovation is currently participating in the Quebec Government's economic mission in India, which is taking place from January 31 to February 6 in Mumbai, Bangalore and New Delhi.

"We are extremely pleased to be here today in the distinguished presence of Mr. Jean Charest, his Ministers and Dr. Indu Shahani, Honourable Sheriff of Mumbai, to announce our joint venture with Chembond. H2O Innovation India is our first operational base outside of North America. Creating this joint venture is a strategic complement to our growth strategy aimed at increasing our international sales and in particular our level of industrial and commercial sales. We are confident that H2O Innovation India will be successful in pursuing niche opportunities and applications and look forward to start working immediately with our new partners," stated Frédéric Dugré, President and CEO of H2O Innovation Inc.

"H2O Innovation India will play a key role in expanding Chembond's water treatment solutions beyond the sale of chemicals and services, enabling us to increase our share of the market and to add product lines to our portfolio in order to better serve our existing and future clients.

We are pleased to partner with H2O Innovation, a solid and knowledgeable player in the water treatment industry, and we are confident that our expertise and our existing long standing client relationships with many of India's leading manufacturing and commercial companies will actively contribute to the future successes of H2O Innovation India," stated Dr. Vinod Shah, Chairman of the Board of Chembond Chemicals Limited.

Pursuant to the Agreement, Chembond will own 51% of the shares of the joint venture and H2O Innovation will own the remaining 49%. Both partners will share seats on the Board of Directors of H2O Innovation India. H2O Innovation's Frédéric Dugré will serve as Chairman of the Board and Chembond's Nirmal Shah serve as Managing Director. The partners have supplied on a prorated basis the initial funding required to finance the start-up of the joint venture and to provide it with sufficient initial working capital for the first year of operations. H2O Innovation India's sales objectives are to generate between CAN$5 million and CAN$8 million within its first three years of operation.

The joint venture will operate out of facilities located in Chembond's centre in Mumbai. It is expected to initially have 12 active employees, including a complete and locally based management, engineering, and sales teams with extensive experience in the water treatment industry. H2O Innovation India's internal sales team is already active, identifying and developing sales opportunities.

H2O Innovation India will focus exclusively on capital equipment sales in the Indian industrial and commercial water treatment market, a market estimated at US$320 million and growing at a compounded annual rate of 10.5% according to Global Water Intelligence's Global Water Market 2008.

By partnering with Chembond -- a company founded more than thirty years ago -- H2O Innovation has chosen an experienced ally to enter the Indian industrial and commercial water treatment market. The joint venture announced today is Chembond's third joint venture but the first focusing on system and equipment sales. Chembond has been operating two joint ventures in the specialty chemicals business for industrial applications, one for more than 13 years and the other for 9 years. Chembond is headquartered in Mumbai where is also located its research and development centre.

Throughout India, Chembond operates five manufacturing plants and five sales offices and serves a roster of leading manufacturing companies -- Indian and international -- in several industries but particularly in the automotive assembly, refining and petrochemical, power generation, steel and construction. The addition of Chembond's client base with the H2O Innovation's knowledge and expertise in custom-designed and packaged water treatment systems for industrial and commercial applications will be of core importance to the success of the joint venture.

It is also expected that H2O Innovation India will serve as a sourcing and procurement platform for H2O Innovation, enabling it to leverage its supply chain by identifying new suppliers in the region and establish purchasing relationships with them for key system components and parts. After having picked up speed with local projects, H2O Innovation India will be called upon as sub-contractor for H2O Innovation's international projects, with objective to increase the Company's competitiveness on systems to be delivered to end-users located outside of North America.

The establishment of H2O Innovation India comes after the announcement twelve days ago on January 20 that H2O Innovation signed a sales representation agreement with 3M Purification for the U.S. oil & gas and automotive assembly markets, an initiative also aimed at increasing the Company's revenues from industrial sales and better balancing its sources of revenue, which still mostly come from the North American municipal market.

About H2O Innovation Inc.
With 10 years of experience developing water treatment solutions, H2O Innovation is establishing itself as a key player in sustainable development and clean technologies in North America and abroad. H2O Innovation designs, develops, produces, and integrates state-of-the-art custom-built water treatment systems for the production of drinking water, the reclamation of water, the treatment of wastewater and industrial process water in the municipal, commercial, industrial, oil & gas, mining, and energy markets. Additionally, the Company offers complete operating and maintenance solutions for membrane filtration and reverse osmosis systems. H2O Innovation has approximately 100 employees and eight offices including three manufacturing and assembly plants in Canada and the United States. Shares of H2O Innovation are listed on the TSX Venture Exchange (HEO) as well as on the NYSE Euronext Alternext Exchange (MNEMO: ALHEO). For more information about H2O Innovation, visit the Company's website at www.h2oinnovation.com

About Chembond Chemicals Limited
Founded in 1975, Chembond Chemicals Limited has headquarters in Mumbai and focuses on the speciality chemicals segment. The company is listed on the Mumbai Stock Exchange (BSE: CHEMBOND) and has an established presence across India. It operates four divisions -- construction chemicals, coatings, trading and biotechnology; and two joint ventures -- Henkel Chembond Surface Technologies Ltd. and Chembond Ashland Water Technologies Ltd. Chembond has been growing consistently over the years on the strength of its technology and service capabilities and counts over 500 employees. More information on Chembond Chemicals Limited can be found on Chembond's website at www.chembondindia.com.

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