Carmanah to acquire Soltek Powersource

Carmanah to acquire Soltek Powersource - becoming Canada's largest solar product company

Carmanah Technologies Corporation announce that the Company and Soltek Powersource have entered into a definitive agreement whereby Carmanah will acquire all the issued and outstanding shares of SPS, a leading privately-held manufacturer/supplier of solar power systems for industrial, government, residential and retail applications.

With approximately 60% market share, SPS is the largest Canadian supplier of solar systems and solar-related equipment.

In its most recently completed fiscal year ended August 31, 2004, the company achieved revenues of approximately $17.5 million and EBITDA of approximately $1.2 million.

SPS has maintained strong gross margins throughout its market expansion and has been profitable since inception in 1988.

SPS currently employs 65 people and is headquartered in Victoria, British Columbia, with additional offices in Alberta, Ontario and California.

Carmanah has agreed to acquire SPS for $10 million.

$6 million will be paid in cash from existing funds and $4 million equivalent in common shares (based on the 30 day weighted average trading share price for the 30 trading days immediately preceding the date of this announcement).

An additional contingent payment of up to $2 million in common shares (priced as above) may also be payable if SPS reaches specified revenue (pro-rated between $9 million and $12 million) and an EBITDA minimum of 5.5% of revenue for the six month period ending December 31st, 2005.

The transaction is scheduled to close June 30, 2005, subject to completion of due diligence and the approval of Carmanah's Board of Directors.

The purchase price is subject to an adjustment based on SPS's net working capital meeting a $3 million target at closing.

Most of the shares issued in respect of this acquisition will be subject to an escrow agreement allowing for the pro-rated release of shares over a two year period from the date of closing.

The transaction is expected to be accretive to the company immediately.

"With this acquisition, Carmanah will become the largest solar company in Canada", states CEO, Mr Art Aylesworth.

"The synergies we see from this purchase are extensive".

"We anticipate a new range of co-developed solar/LED general illumination products, including security lighting, street lighting and sign lighting, for applications in all of the markets we currently serve".

"We also foresee an entirely new product line of standardized 'plug-and-play' solar power sources that would take advantage of SPS's existing range of 'solar engines' and Carmanah's world-leading energy management technology.

In addition, Carmanah and SPS will share marketing and sales infrastructure to further broaden their combined sales reach".

""Our two companies have complementary expertise - Carmanah with its self-contained packages and proprietary LED technology, and SPS with its larger solar power systems", states Aylesworth".

""We also have overlapping customer bases, including government agencies, traffic OEMs, and resellers".

"Our combined sales staff will have a significant range of products to offer customers across many geographic and vertical markets.

"At a time when the demand for solar solutions in North America is rising at an unprecedented rate, the opportunities in front of SPS are many".

"None, however, are greater than our wish to continue to expand on the operations we have in the United States where our business is growing rapidly", states SPS CEO, Mr David Egles".

""We feel like the timing is right for a deal such as this and we look forward to the possibilities that will arise from the combined entity and its considerable market strength.

From an operational standpoint, SPS will gain access to capital, enabling it to expand to meet growing demand.

Carmanah will also be applying its engineering and design experience to enhance margins on proprietary SPS technologies.

Finally, the combined purchasing power and market share will make Carmanah a formidable player in solar power markets both domestically and internationally.

This energy sector is growing rapidly; in fact, the solar photovoltaic industry worldwide grew by an unprecedented 62% in 2004 to $6.5 billion, and it is predicted to grow 300% to $18.5 billion by 2010".

"With the expansion of renewable energy and sustainability mandates worldwide, as well as the obligations associated with international pollution reduction agreements such as the Kyoto Accord, the timing for our acquisition couldn't be better", states Aylesworth.

Upon completion of the purchase, SPS founders Mr David Egles and Mr Michael Cannon will join Carmanah's executive, bringing with them more than 20 years of experience in the solar industry.

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