ACE.L Regulatory News (ACE)

AUHUA CLEAN ENERGY PLC

("Auhua" or "the Company")

Heads of Terms agreed for Proposed Acquisition

Auhua Clean Energy plc, the AIM quoted (AIM: ACE) environmental technology group based in the Shandong Province of China, announces that its wholly owned subsidiary, Auhua Holdings Limited ("Buyer") has entered into a non-binding Heads of Agreement ("HOA") to acquire (i) the entire business and assets of Ziolar Pte Ltd ("Ziolar") from Riezen Pte Ltd ("Riezen") (the "Business Acquisition"); and (ii) the entire issued shares of Taiwan Ziolar Technology Co. Ltd ("Taiwan Ziolar"), a company incorporated in Taiwan, from the shareholders, Steve Peng and Yu-Yao Eddie Chen who hold 60% and 40% of the issued shares of Taiwan Ziolar respectively (the "Share Acquisition") and certain related arrangements as set out in the HOA for a total consideration of US$4.5 million.

The consideration for the Business Acquisition of US$2.0 million will be satisfied by (a) the allotment and issuance of 4,397,633 new Auhua Shares at 22.5 pence per Auhua Share for an aggregate sum of US$1.5 million to SSP Innovations Pte Ltd ("SSP"), a 100% subsidiary of Rowsley Limited, a Singapore listed company (ROWS:SI) and/or its nominees; and (b) the issuance of a convertible loan note for an aggregate sum of US$0.5 million to SSP and/or its nominees. The convertible loan note will have a term of 6 months to be redeemed or converted at the prerogative of the holder(s) at a conversion price of 22.5 pence per Auhua Share.

The consideration for the Share Acquisition of US$2.5 million will be satisfied by the Buyer by the allotment and issuance of 4,397,633 new Auhua Shares at 22.5 pence per Auhua Share to Steve Peng and 2,931,756 new Auhua Shares at 22.5 pence per Auhua Share to Yu-Yao Eddie Chen.

The Business Acquisition and the Share Acquisition are subject to definitive agreements to be entered into among the parties no later than 31 August 2013. The Company will make an announcement when the definitive agreements are entered into. Completion of the transaction will be subject to the conduct of due diligence, funding and other conditions precedent.

Auhua's strengths to date have largely been centered on developments and innovations in solar water heater tanks. Taiwan Ziolar's focus is on solar thermal panels which are a vital component in solar powered water heater systems. The proposed acquisition should therefore complement Auhua's technology position and improve our product proposition by including advanced coating technology that helps increase product performance, reduce production costs and help create long-term competitive advantage in the solar thermal industry.

 Raphael Tham, Chairman of Auhua said: "The proposed acquisition of Taiwan Ziolar is synergistic to Auhua's business and should provide us with a more competitive edge as we continue towards one of Auhua's key long-term objectives in building an international customer base."

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About Auhua Clean Energy

Auhua Clean Energy is an environmental technology group based in the Shandong Province of Eastern China specialising in the development and application of green energy and energy efficient solar water heating solutions. In particular, the Group is focused on the manufacture and sale of split-unit solar water heating systems.

 Auhua Clean Energy operates through its wholly owned subsidiaries Shandong Auhua New Energy Co., Ltd and Weihua Auhua New Energy Co., Ltd., of which Auhua Holdings Pte Ltd is the intermediate holding company.

Information about the solar industry in the Shandong province

The Shandong province is the leader in China's solar thermal initiatives. It manufactures one third of China's solar water heaters and China uses 64.8% of the world's total capacity for solar heating (source: Global Status Report 2012).

In 2011, the solar industry in Shandong Province generated revenue of 98.2 billion yuan, a year-on-year growth of 18.3%; solar water heater production of 5.98 million units, an increase of 12.8% and a solar thermal application area of ​​22.73 million square meters.

Currently dominated by unibody systems purchased by end consumers, the Shandong government is shifting its focus to promote split-unit water heater systems to property developers. Consequently they have introduced regulations to increase demand by requiring all buildings with more than 12 floors (which traditional unibody systems cannot support) to utilise solar water heater systems. Government subsidies are also available to property developers when they incorporate solar water heater systems into their building plans.