ACE.L Regulatory News (ACE)

AUHUA CLEAN ENERGY PLC

Taiwan Ziolar Ceases to be a Subsidiary

08 September 2015: Auhua Clean Energy Plc (AIM: ACE) (the "Company"), the environmental technology group, announces that Taiwan Ziolar Technology Co. Ltd ("Taiwan Ziolar") is no longer a subsidiary of the Company.

Taiwan Ziolar has secured the investment of an independent investor, Ziolar Holdings Pte Ltd (the "New Investor") to inject US$700,000 (the "Investment") into Taiwan Ziolar for 2,100,000 new shares of Taiwan Ziolar, representing 97.7% of the total issued shares of Taiwan Ziolar. As the Company held and continues to hold 50,000 shares of Taiwan Ziolar, the Company's ownership has been significantly diluted as a result of the Investment and Taiwan Ziolar is now an affiliate of the Company. Taiwan Ziolar was acquired by the Company in May 2014 through the issue of 6,944,400 ordinary shares in the Company at 40 pence per share. As of 31 December 2014, the carrying value of Taiwan Ziolar's intellectual property was RMB21.649 million.

While this means that Taiwan Ziolar and its intellectual property are no longer solely within the control of the Company, and the Company may not be able to fully exploit Taiwan Ziolar's technology, once it has been successfully developed, the Company has sought to mitigate this future downside risk by agreeing with Taiwan Ziolar and the New Investor that the Company will have a 2-year non-exclusive, non-transferrable right to use Taiwan Ziolar's technology to build a 500,000 sqm injection foam solar thermal panel coating facility for the Company's own use in the future. The Company believes that such an arrangement will give the Company the opportunity to recoup its original investment value. The Company will continue to have a representative director, Mr Raphael Tham (the Company's Vice Chairman) on the board of Taiwan Ziolar to oversee its interest while Mr Jon Sumner (the Company's CFO) has resigned as the supervisor of Taiwan Ziolar.

The Company agreed to the Investment into Taiwan Ziolar for the following reasons:

· Taiwan Ziolar is currently a loss-making research and development company in a net liability position and with no sales. As at 31 December 2014, Taiwan Ziolar contributed nil revenue and a loss of RMB2.674m to profit before tax from the operations of the Company. Taiwan Ziolar is in need of financial support and investment which the Company is currently not in the position to provide given the depressed global fundraising climate. The Company believes that the New Investor will be able to support the overheads of Taiwan Ziolar and provide critical assistance to enable Taiwan Ziolar to produce the prototype for the injection foam solar thermal panel coating technology.

· Under the terms of its incorporation, Taiwan Ziolar is required to be capitalised in Taiwan with a paid up capital of Taiwan Dollar (NT) 50 million (circa US$1.53 million). Moving forward, the New Investor will have to be responsible to fulfill this requirement.

· If Taiwan Ziolar is successful developing its technology in the future, the Company has a right to access, and reap the benefits of, the technology.

As at the date of this announcement, none of the directors of the Company have any interest, direct or indirect, in Taiwan Ziolar (other than by reason of being a director of the Company) or in the New Investor. In addition, none of the Company's controlling shareholders have any interest, direct or indirect, in the New Investor or the Investment.

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About Auhua:

Auhua Clean Energy (www.auhuacleanenergy.com) 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 thermal 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.