AFC Energy Regulatory News (AFC)

AFC Energy PLC

("AFC Energy" or the "Company")

AFC Energy Achieves Milestone Power Output from KORE Fuel Cell System in Germany

AFC Energy (AIM: AFC), the industrial fuel cell power company, is pleased to announce that following an intense and accelerated twelve month fuel cell development programme, it has successfully delivered gross electrical output in excess of 200kW at its KORE fuel cell power plant in Stade, Germany.

Highlights

The commissioning activities of the KORE system over the past five days concluding on 31 January, delivered a series of firsts for the technology with a summary of the key achievements for the AFC proprietary fuel cell cartridge and balance of plant including:

· In excess of 200kW of power produced from the fuel cell system

· The first time all three tiers of the KORE fuel cell system operated in parallel with each other to successfully dispatch power into the German power grid

· In excess of 1.3MW of power generated and sold into the grid under the Power Purchase Agreement agreed with Statdewerke Stade

· In excess of 10kW of power generated from multiple fuel cell stacks operating within the KORE against a design rating of 10kW per stack

· From a single tier of the KORE system (8 x fuel cell stacks), 83.3kW of power was generated (against a nameplate of 80kW for a single tier)

· From two tiers of the KORE system operating in parallel (16 x fuel cell stacks), a cumulative 158.4kW of power generated (against a nameplate of 160kW for two tiers)

· KORE system automation was fully demonstrated for the first time through the application of AFC proprietary software against previous manual trials

Importantly, the trial of the KORE fuel cell system in Germany last week follows an extensive work programme on the individual 101 fuel cell stack in December and January during which time significant design parameters were adjusted. These improvements resulted at one point in the 101 fuel cell stack achieving a gross power generation output of 11.7kW (against a 10kW design capacity) and a 9 fuel cell stack achieving an equivalent 14kW output (grossed up to 101 cell equivalent). The decision to delay commissioning activities in December was designed to provide sufficient time to implement a number of these changes to design parameters into the KORE module in Stade.

One of the key successes from trialling AFC's proprietary KORE fuel cell system this week is the vast quantity of operational data that has been acquired. This enables the team to fully assess and identify learnings to further enhance the fuel cell stack and fuel cell system, which at present is the largest alkaline fuel cell system operating in the world today.

Importantly, the trials demonstrate the AFC fuel cells can, and indeed have, exceeded the name plate capacity of the individual 10kW cartridges which is an outstanding achievement for the technology which twelve months ago had only operated at most in 25 fuel cell stacks.

We now know that AFC's fuel cell stack is capable of operating at or above nameplate capacity and with a few adjustments to the balance of plant structure, 240kW of power generation, or above, can be achieved in the near term. The technical team at Stade felt at this stage, with the successes and learnings achieved during commissioning, that it was not prudent to push the system to 240kW given the adjustments needed to further optimise design parameters of the fuel cell stack and balance of plant. However, knowledge that the electro-chemistry within the cartridge is capable of delivering at least 10kW of power was sufficient evidence of a further significant de-risking of the technology at this time.

AFC will now embark on a programme of design optimisation for the balance of plant and fuel cell stack to capture the learnings obtained over the past week on the KORE. The second generation of AFC fuel cell system will be developed with an expectation of being released later this year. The second generation will focus on maintaining power output as seen today, whilst also further enhancing the system's efficiency, longevity and availability as a whole, and incorporating an engineering cost reduction programme to ensure the system remains cost competitive.

In addition to the operability of the fuel cells in Stade, the Company's manufacturing capability necessary to deliver these trials and the vast number of fuel cell cartridges has seen several key successes over the past twelve months:

· Fuel cell production at AFC's facilities increased 1,112% from 2014 to 2015; and

· Fuel cell electrode yield has improved to 91% (up from 85% in 2014).

Adam Bond, AFC's Chief Executive Officer, said "As a company, we've come an extraordinary distance over the past twelve months and today marks a significant milestone achievement, most importantly being the delivery of a fuel cell stack which has generated in excess of its nameplate capacity of 10kW. Today marks a significant step forward, demonstrating further de-risking of our technology and validates the decision in December 2014 to accelerate the deployment of AFC's KORE fuel cell system."

Bond further commented, "I would like to again thank all the staff and contractors working with AFC together with the FCH JU for their continued support in delivering this project. I also wish to recognise the massive contribution and sacrifices made by many to achieve this world class outcome. 2016 is going to be another exciting year for AFC and I look forward to further updating shareholders on future milestones and achievements in the coming weeks."

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About AFC Energy

AFC Energy plc is developing an alkaline fuel cell system ("KORE"), which converts hydrogen into 'clean' electricity. AFC's key project POWER-UP demonstrated the world's largest operational alkaline fuel cell system at Air Products' industrial gas plant in Stade, Germany in January 2016. The Company is now looking to build upon an already established pipeline of commercial opportunities and drive the learnings from the development phase of the technology into a technically optimised and commercially relevant fuel cell system. For further information, please visit our website: www.afcenergy.com