Active Energy Regulatory News (AEG)

8 February 2016

Active Energy Group Plc("Active Energy Group" or the "Group" or the "Company" or "AEG")

AEG CoalSwitch Reveal Event Attended by International Audiencefrom Power Generation Industry, Utah State Government and Investors;'Drop-In' Coal Replacement Fuel Technology Exceeds Expectations

AEG CoalSwitch, the recently-announced renewable energy division of Active Energy Group Plc (AIM: AEG.L), the AIM-listed supplier of timberland management and development services, industrial wood fibre and Biomass coal replacement fuels, has revealed its revolutionary Biomass fuel manufacturing process to an international audience of more than thirty representatives of power generation utilities, government bodies, manufacturing partners and investment firms at a 4-day event in Utah.

The AEG CoalSwitch technology, which has been heralded as the world's only 'drop-in' coal replacement or supplement for power generation and other industrial uses, converts any fibrous- or wood-based Biomass material into valuable high-energy feedstock via a pioneering process - protected by 19 international 'greenfield' patents - which removes the vast majority of minerals, salts and other contaminants that have prevented renewable Biomass-derived fuels from entering the energy mainstream.

Uniquely, AEG CoalSwitch Biomass fuel can be utilised in traditional coal-fired power plants as a direct substitute for coal - or, more likely, mixed with coal in co-firing operations in higher concentrations than existing Biomass fuels such as white pellets or simple/torrified black pellets - in most cases without requiring any furnace, handling or storage modifications; enabling existing coal-fired power plant owners to speedily and inexpensively comply with government legislation, such as the US Clean Air Act, under which they are mandated to reduce air pollution levels.

It therefore represents the first viable solution to overcoming the global problem of coal-fired power plants either having to shut down or being forced to invest in retrofitting and conversion of their facilities to meet stringent new regulations curbing carbon dioxide (CO2) and greenhouse gas emissions, the primary causes of global warming and climate change; potentially saving plant operators billions of dollars and enabling them to avoid the only other likely option: closure.

At the AEG CoalSwitch reveal event, held at the company's Centerville Research & Development facility in Utah, attendees witnessed the first live demonstration of an industrial-scale prototype of the AEG CoalSwitch manufacturing system; in which raw Aspen wood chip - specifically selected because of the significant Aspen reserves under the management of the AEG TimberLands joint venture and elsewhere in Western Canada - was processed in minutes into high-energy Biomass fuel with a calorific value of over 23 Gigajoules (GJ) per metric tonne… which compares favourably with industrial coals (which range from a calorific value of 15-32 GJ per metric tonne).

The high calorific value of AEG CoalSwitch fuel - typically, an increase of more than 5 GJ per metric tonne above the current industry-standard white pellet - is accompanied by a materially higher uplift in bulk density levels, meaning that less space is required to transport the same volume of energy; resulting in significantly lower shipping and logistics costs to deliver the finished fuel to power plants.

The upscaled manufacturing process, which utilises no chemicals and leaves no damaging waste residues - most of the water produced is recycled and used within the closed system - exceeded the AEG CoalSwitch technical team's expectations; surpassing the results from the two previous smaller-scale prototypes.

The Utah-based team have now twice achieved a ten-fold increase in the capacity of the systems that it has previously constructed, and have completed the design specifications for a commercial-scale reactor that will produce a further eight times more fuel per cycle. The company's industrial design calls for 32 of these larger reactors to be installed at a single site, which will be capable of producing in excess of 40 tonnes of finished fuel per hour from Aspen raw material.

Along with its increased calorific value and bulk density levels, the finished fuel's friability properties (its ability to be ground in a standard coal-fired power plant ball mill into a form suitable for usage in unconverted furnaces) is expected to be far superior to existing Biomass fuel products, and equivalent to coal, due to the removal of the volatiles responsible for mill fires. Moreover, removing those volatiles will enable AEG CoalSwitch fuel to be milled alongside coal in the same ball mill at the same time… another unique feature.

Finally, the team demonstrated a further innovation - the ability to 'dial in' customised characteristics into individual batches of AEG CoalSwitch fuel to match those of the specific coal with which it will be combined at individual power plants, removing the requirement for plant operators to make costly modifications to their boilers in order to accommodate Biomass feedstock.

AEG CoalSwitch fuel - which can be compacted into pellets, granules, briquettes or bales, according to customer specifications - is, unlike white pellets, hydrophobic (water-resistant); entirely negating the need for specialist storage or transport. And, crucially, it possesses very similar thermal and friability characteristics to coal, enabling it to be immediately integrated into the processing systems at coal-fired power stations, utilising their existing handling and storage facilities - something that is simply not possible with white pellets.

Completion of these vital stages in validating the viability of the AEG CoalSwitch manufacturing process are being accompanied by a five-day pilot-scale burn testing of the finished fuel at the University of Utah's Clean and Secure Energy Institute laboratory; evaluating its performance in a real-life environment and comparing the results to those achieved under the same test conditions with bituminous Illinois coal (which has a calorific value of 27 GJ per metric tonne), a feedstock typically used for industrial power generation.

The burn testing, which the event attendees witnessed being conducted at the University of Utah's 100kW pulverised coal combustor, evaluates the energy output, stability, furnace behaviour and emissions of AEG CoalSwitch fuel during combustion; and the detailed results - which include real-time analysis and interpretation of its combustion, particle and deposition characteristics, and compares them to those achieved with Illinois coal - are expected to be available in early-March.

These significant developments at AEG CoalSwitch - both confirming the feasibility of upscaling its revolutionary fuel manufacturing process to produce industrial volumes of clean-burning Biomass fuel, and directly comparing its performance to the coal utilised in advanced power plants - represent the next steps in the company's business strategy.

In a major endorsement of the company's efforts to date - and confirmation of the considerable worldwide interest that its initial announcements have generated - the AEG CoalSwitch reveal event in Utah was attended by high-level experts from the power generation industry, as well as representatives from the Utah state government, multinational conglomerates and international investment firms.

During a keynote speech by Dr Laura Nelson, Director of the Utah Office of Energy Development, attendees heard about Utah's current and future power generation plans. Dr Nelson explained that the state currently relies upon coal-fired power plants for 72% of its electricity supply; that it exports some 32% of its power generation capacity to neighbouring states, including California; and that whilst coal production and power generation will remain an integral part of Utah's economy, the state government is actively investigating complementary renewable fuel solutions.

She detailed Utah's investments in alternative energy technologies to enable it to comply with the recently-announced President Obama/EPA Clean Power Plan, which has set a goal of a 32% reduction in its CO2 emissions by 2023; expressed her excitement at the potential to co-fire low-emission AEG CoalSwitch Biomass fuel alongside coal in Utah's power plants, which are already some of the most efficient power generation facilities in the United States; and discussed the wide range of financial incentives that are available to ensure that coal will continue to be used within the state.

Dr Nelson concluded by explaining that combining AEG CoalSwitch with locally-produced coal would protect Utah's coal mining industry and safeguard jobs at coal-fired power plants, by enabling its existing power generation infrastructure to greatly reduce emissions and comply with state and federal clean air targets; setting an important precedent for other coal-producing and power-generating states across the US.

Dr Andrew Fry, Research Associate Professor and Director of the Industrial Combustion & Gasification Research Facility at the University of Utah - an internationally-recognised science and industry expert - detailed to the audience the technical processes and sampling methods that will be employed during the five-day CoalSwitch fuel evaluation process; and explained that the results will include comparisons to those obtained from Illinois coal under the same test conditions.

Philip Scalzo, AEG CoalSwitch Chief Technology Officer, and one of the inventors of the fuel manufacturing process, commented: "The Utah event is shaping up to be an outstanding success, confirming that our aim to 'make the unusable usable' - converting low-grade timber residues into high-energy fuel - has not merely been realised, but that the AEG CoalSwitch technology is both upscalable and that the finished fuel possesses all the qualities required for its immediate implementation in utility-scale power plants. I look forward to receiving the results of the University of Utah tests, and my team and I are very grateful for the research facility's advice and encouragement."

Dr C Drew Tait, AEG CoalSwitch Chief Science Officer, and another of the process inventors, added: "The University of Utah's Industrial Combustion & Gasification Research Facility is internationally-recognised as one of the best of its type. Dr Fry and his staff are extremely knowledgeable, great to work with, and have proven to be exceptionally helpful and supportive. The entire AEG CoalSwitch technical team anticipate a long and fruitful collaboration with them."

 Commenting on these crucial milestones for AEG CoalSwitch, Richard Spinks, CEO of Active Energy Group Plc, said: "My colleagues and I are greatly encouraged by the initial feedback from the AEG CoalSwitch manufacturing and burn tests, which validate our conviction that we possess a game-changing renewable energy solution. Creating a clean-burning Biomass fuel that can replace or supplement coal in existing power plants without retrofitting or facilities conversion has long been the' holy grail' of the power generation industry, and I applaud the entire AEG CoalSwitch team for their achievements."

"The phenomenal level of international interest from potential customers for AEG CoalSwitch fuel far exceeds our ability to manage such a large number of long-term commercial relationships, so we are in the process of bringing on board some experienced industry figures to negotiate offtake agreements with power generating utilities and asset owners."

"At the same time, we are concluding the funding arrangements for us to construct the first large-scale AEG CoalSwitch manufacturing plant, capable of producing more than 300,000 tonnes of high-quality fuel per annum; and continuing our efforts, via the Group's AEG TimberLands division, to secure ever greater volumes of raw Biomass feedstock from Canada, the US, Europe and elsewhere."

 "The success of the Utah event, and the exceptional reaction of all the attendees, including from the State of Utah, underscores the immense value that AEG CoalSwitch represents to the power generation industry as it seeks to reduce the harmful pollutants and emissions caused by existing technologies, and to improve air quality across the globe."

- ENDS - 

ABOUT ACTIVE ENERGY GROUP PLC:

Active Energy Group Plc is a London Stock Exchange AIM-quoted company (AIM: AEG.L). Headquartered in the UK, it is a fast-expanding international business that has experienced exceptionally strong growth and diversification into complementary industry sectors since the current management team assumed responsibility in mid-2012.

The Group has considerable expertise across the entire timber industry supply chain - from forest to factory and fuel.

Its three trading divisions, which operate as independent business units but work together to optimise resources and opportunities, are focussed on providing environmentally-sensitive solutions to specific global market sectors:

· AEG TimberLands: Forestry Asset Management and Development

· AEG WoodFibre: Industrial Wood Fibre for Medium-Density Fibreboard (MDF) Manufacturing

· AEG CoalSwitch: Advanced Biomass Coal Replacement Fuels and Fuel Processing Systems

Active Energy Group Plc operates from four international locations:

· Ukraine, where it is the largest producer and exporter of wood fibre for the Turkish MDF manufacturing sector.

· Canada, where it has entered into a joint venture with several indigenous Métis Settlements to commercialise in excess of 300,000 hectares of their lands, which contain valuable forests and natural resources.

· The United Kingdom and United States of America, where it develops advanced Biomass fuels and fuel processing systems that convert waste wood and industrial/agricultural residues into coal replacement feedstock for clean energy power generation in a joint venture with Biomass Energy Enhancements LLC.

Active Energy Group Plc is led by a highly experienced management team, supported by forestry, timber processing and renewable energy experts within its trading divisions. All possess a proven track record in the industries and regions in which the company operates and from which its revenues are generated.

The Group has grown significantly in recent years, and has established a firm foundation, excellent reputation and international customer base upon which to deliver lasting value to all stakeholders.

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