Active Energy Regulatory News (AEG)

Active Energy Group Plc / EPIC: AEG / Sector: Alternative Energy

28 November 2016

Active Energy Group plc ("Active Energy", "AEG" or the "Company")

Funding for First CoalSwitch Plant Secured and Testing Update

Active Energy, the London quoted international renewable energy, forestry management and timber processing business, is pleased to announce that it has achieved certain milestones in line with its strategy to commercialise its revolutionary CoalSwitch technology, which utilises low value wood, timber, forestry and pulp mill/ saw mill by-products to produce the world's first 'drop-in' biomass fuel that can be mixed at any ratio with coal or completely replace coal in existing unmodified coal powered fire stations globally.

Highlights

· US$6 million five-year unsecured loan facility to fund the construction of a 35,000 tonne per annum commercial reference plant in North America

· Opens up a significant revenue stream for AEG Coalswitch with rapid payback credentials

· Manufacture scale-up underpinned by utility industry endorsement - recent testing by Rocky Mountain Power ("RMP"), part of PacifiCorp, a major US utility, has proven that CoalSwitch behaves better than coal in every respect in the handling of feedstock to the power station as a drop-in replacement for coal

· Reiterates that AEG CoalSwitch can be used as a direct replacement for coal at a coal fired utility

· RMP will now prepare for commercial testing of the CoalSwitch product at one of its Utah facilities as soon as production of product from the new reference plant commences

Richard Spinks, Chief Executive Officer of Active Energy said: "This is a landmark moment for AEG. The funding unlocks our ability to commercialise our revolutionary and proven CoalSwitch technology and will enable us to generate meaningful revenues within the USA, which is set to be one of our core geographic markets. Additionally, we are delighted with RMP's public support for our product. Not only is it positive in terms of our future relationship with RMP but we anticipate that this will aid our ongoing discussions with other potential customers going forward. Due to its ability to enable coal fired power stations to meet strict green regulations without the need for expensive retrofit programmes traditionally required to accommodate biomass feedstock, we believe that CoalSwitch represents a potentially ground-breaking force in the market. Therefore we look forward to providing further details and timescales regarding the development of AEG CoalSwitch, which will be transformative for the Company and our customer base in the coming months."

Loan Facility

The Company has received a commitment for a five year unsecured loan facility of US$6M carrying interest at 8% per annum for the construction of a 35,000 tonne per annum plant in North America, which is capable of producing revenue of over US$6.3M per annum based on the Company's current projections. No principal or interest repayments are required in the first twelve months. Funding will be provided by Linarus FZE ('Linarus'), a private Dubai-based investment company which is controlled by a consortium of investors who are well known to AEG. Linarus has been a long-term supporter of AEG and has provided funding for the early-stage development of CoalSwitch, and remains committed to taking the project into commercial development. Further announcements regarding draw-downs will be made in due course.

RMP Testing

At the request of RMP, a major US Utility, and with funding to date provided by the Utah Department of Energy, AEG was contracted to manufacture a sample of AEG CoalSwitch pellets made using mixed wood wastes which are available in Utah. RMP intends to replace 10% of its coal feed at one of its Utah plants with biomass and as part of RMP's fuel change protocol, AEG CoalSwitch samples underwent a ball mill test under stringent conditions. The results are understood to prove that CoalSwitch mills and behaves better than coal in every respect, demonstrating once again that the product can be used as a direct replacement for coal at a coal fired utility.

Dr Andrew Fry, Associate Professor of Chemical Engineering at Brigham Young University said: "I observed the ball mill test at the University of Utah's Industrial Combustion and Gasification Research Facility on 11 November 2016. Observation during the milling process showed the CoalSwitch pellets mixed with coal, milled as if they were coal and had no detrimental impact on the milling system - in fact it seems the conditions required to mill the blend require less electrical energy than the coal by itself and produces a particle size distribution with no measurable difference to milling the coal without the CoalSwitch pellets. CoalSwitch pellets are the only wood-derived pellet I am aware of that can be milled readily with coal and this will make CoalSwitch a very desirable alternative to coal for utilities looking to use alternative environmentally friendly coal substitutes in coal fired boilers."

The next step is for RMP to prepare for the commercial use of the CoalSwitch product at one of its Utah utilities in 2017.

This announcement contains inside information for the purposes of Article 7 of Regulation (EU) 596/2014.

**ENDS**

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About Active Energy Group

Active Energy Group Plc ("Active Energy" or "AEG") is an AIM quoted company operating internationally across the entire timber supply chain - from forest to factory and fuel.

Active Energy's vertically-integrated business units provide timberland development services for forestry owners, industrial wood fibre for MDF manufacturers, and second-generation biomass coal replacement fuels for industrial power generators.

Active Energy has three divisions:

· 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's relationships with forestry owners through its AEG TimberLands operation allows the Company to maximise the value of its standing timber assets, converting low-grade material - primarily non-saw logs/technical lumber and forestry thinnings - into industrial wood fibre for MDF manufacturing via Active Energy's AEG WoodFibre division. This vertically integrated model also provides feedstock for the Company's AEG CoalSwitch joint venture, which generates green energy power generation from biomass.