TMX group

QUEBEC CITY, Sept. 7 /CNW Telbec/ - H2O Innovation (2000) Inc. ("H2O",
TSX-V: HEO) is pleased to announce the execution, on September 6, 2006, of an
arm's length asset purchase agreement between Membrane Systems, Inc., a new
wholly owned subsidiary of H2O incorporated under the laws of the State of
Delaware, and Membrane Systems Corporation ("MSC"), pertaining to the
acquisition of all substantially assets held by MSC (the "Transaction") for an
amount of US$2,875,000, payable on closing. This Transaction was previously
announced by H2O on May 10, 2006. TSX Venture Exchange Inc. has conditionally
approved the Transaction, subject to fulfilling customary conditions.
The purchase price may be increased or decreased, on a dollar-for-dollar
basis, by an amount, if any, corresponding to the difference between MSC's net
book value, as determined pursuant to the closing financial statements, and
US$1.0M, and may be adjusted depending on the receivables still outstanding
180 days after the closing. Furthermore, the purchase price shall be increased
and additional payments shall be made to MSC on each financial year end for
the next three financial years following the closing provided that certain
financial objectives are reached.
"H2O, having completed, on May 31, 2006, a $10.1 million equity financing
with Amsterdams Effectenkantoor BV and benefiting from a solid balance sheet,
intends to rely on MSC's notoriety and expertise to position itself as a
significant player in the water treatment industry within a growing North
American market" said Guy Goulet, President and Chief Executive Officer of
H2O. He also added: "With the addition of Mr. Ashwin Desai and his experienced
team-mates, we are standing up asides top players in this industry inside the
so-called "Membrane Valley" in California; this will result in new
opportunities for H2O. We intend to continue to expand our market reach
through a growth of our distribution network and other targeted acquisitions".
The closing of the Transaction is scheduled to take place on or around
September 20, 2006 and is subject to the satisfaction of customary conditions
including, among others, the following:

<<
- Obtaining by MSC of all approvals, waivers, consents or releases as are
  required under applicable laws or agreements to permit the execution
  and delivery of the asset purchase agreement and the transfer and
  assignment of the acquired assets to H2O, free of all charges,
  hypothecs and liens;

- The signature of a 3-year consulting agreement with Ashwin Desai, sole
  shareholder of MSC; and

- The approval of all applicable securities regulatory authorities,
  including the final approval of the TSX Venture Exchange Inc.
>>

About H2O

H2O has become a leader in Canada and is pursuing its market development
in drinking water treatment with a complete portfolio of membrane technologies
for municipal, industrial and commercial sectors. H2O's mission is to develop,
produce and market state of the art, environmental friendly products dedicated
to the production of drinking water and the treatment of wastewater and
industrial processed water.

About MSC

Founded in 1990 under the laws of the State of California, MSC designs,
manufactures, assembles, supplies and installs water treatment systems/plants
for municipalities, industries, private developers and government/military
mainly in Florida, California and Mexico. Headquartered in California, MSC's
water treatment systems perform such functions as desalination and purifying
brackish groundwater in order to meet diverse and specific needs of a wide
range of applications. As per signature date, H2O Innovation increases its
backlog above $7 Million. Some manufacturing contracts are already being
performed in H2O's manufacturing facilities in Ham-Nord (Quebec).

Forward looking statements

Certain statements in this release are forward looking. These statements
are based on H2O's current expectations and involve many risks and
uncertainties. H2O undertakes no obligations to publicly update or revise any
forward looking statements contained herein.

For additional information, please communicate with Mr. Guy Goulet,
President and Chief Executive Officer, at (450) 669-3144 (ext. 203) or via
email at ggoulet(at)h2oinnovation.com or FrDedDeric DugrDe, Executive
Vice-President, at (418) 688-0170 (ext. 22) or via email at
fdugre(at)h2oinnovation.com .

The TSX Venture Exchange Inc. has not reviewed and does not accept
responsibility for the adequacy or accuracy of this release.