German Pellets' Italian arm purchases majority stake in Italy-based renewable energy company Ely to accelerate construction of wood-pellet-fired CHP plants, boost its core wood pellets business

WISMAR, Germany , January 18, 2013 (press release) – Subtitle: Company acquires majority stake in Ely S.p.A. / Construction and operation of decentralised wood-pellet-fired power plants in Northern Italy

Mergers - Acquisitions - Takeovers

German Pellets Holding Italia, the Italian holding company of the Wismar-based German Pellets Group, has acquired a majority interest in the Italian Ely S.p.A. Group, a medium-sized energy company based in Milan that develops, builds and operates plants in Northern Italy for the production of electricity and heat from renewable energy sources. With Ely S.p.A., German Pellets plans in Italy to continue promoting the construction ofsmall wood-pellet-fired power plants and expects to see a significant increase in pellet consumption in the future.

"For us Ely S.p.A. is the ideal partner - competent in the development of plants and well connected in Italy owing to its existing business relationships," said Peter Leibold, managing partner of German Pellets GmbH. Ely S.p.A. operates combined heat and power plants fired with wood pellets. These CHP plants are located in Northern Italy and have capacities of 0.2 to one MW. Ely S.p.A. has specialised in the development, construction and operation of such plants and also runs a research centre in Cremona. "With the investment of German Pellets, we are expanding our know-how and, furthermore, have gained a partner that - like us - has taken up the cause of promoting the energy transition," said Massimiliano Cagelli, Ely managing director. Through the co-operation with German pellets, the construction of wood-pellet-fired CHP plants shall be further accelerated. The company plans to build new decentralised plants, above all in Northern Italian municipalities. The electricity will be fed into the public grid, and the heat energy, sold to regional buyers. The feed-in tariffs for green electricity from CHP plants in Italy are particularly economic. Potential customers for the heat energy produced from the wood pellets will include municipal heating networks, schools, retirement homes, supermarkets, hospitals and swimming pools.

Through its investment in Ely, German Pellets is boosting its core business. By supplying pellets to small power plants, the company will sustainably increase its pellet sales for the long term. As a partner for Ely, German Pellets is able to supply large quantities of wood pellets. For example, the new plant coming on stream at the end of the last year in the small town of Gorizia in north-eastern Italy required 27,000 metric tons of pellets per year.

Ely S.p.A. operates not only CHP plants but also photovoltaic plants. 2012 the company expects to generate approx. 30 million euros in sales. German Pellets Holding Italia has a 51 per cent shareholding in the joint-stock company.

For the German Pellets Group, Italy represents an important sales market, which is growing annually by minimum 10 per cent. 2012 the total annual pellet consumption in Italy is expected to exceed two million metric tons for the first time. Roughly two-thirds of this total is imported. German Pellets products already make up a substantial portion of the imports.

Wood pellets are made from dried shavings and sawdust pressed into a cylindrical shape. They can be used for a wide range of applications - in private households for firing central heating systems and stoves, in medium-sized heating plants for local, district and industrial process heating networks, such as in clinics, housing associations, businesses and municipalities, and in the green electricity market. CHP plants are characterised by their high efficiency, as both the generated electricity and the cogenerated heat are used. "The concept of decentralised energy also makes it possible to sell the generated heat, owing to the proximity of potential customers. The production of energy in close proximity to the end-user is a model for a sustainable future, for Germany as well," said German Pellets CEO Peter Leibold.

About Ely S.p.A. Ely S.p.A., Milan, was founded in 2009 with the aimof generating electricity and heat from renewable energies. With themotto "Energy, where it is needed", Ely S.p.A. develops, builds andoperates biomass-fuel-based, decentralised energy-supply systems, aswell as photovoltaic systems.

About German Pellets German Pellets GmbH was founded in 2005 inWismar (Mecklenburg-Vorpommern) and has since become the leadingmanufacturer of wood pellets in Germany and Europe. German Pelletsproduces wood pellets and animal-hygiene products at 14 sites inGermany and Austria. Currently German Pellets is building aproduction facility in Texas, USA.

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