AFC Energy Regulatory News (AFC)

AFC Energy PLC

("AFC Energy", "AFC" or the "Company")

Exercise of Option by Linc Energy and Placing

AFC Energy (AIM: AFC), a world leading developer of low cost alkaline fuel cell technology, is pleased to announce that Linc Energy Limited (ASX: LNC) has exercised its option to extend licence rights and that it has raised £4.0 million net from the placing of new ordinary shares with Linc Energy Limited ("Linc Energy") and a group of private investors.

Further to the binding heads of agreement made between AFC with Linc Energy and B9 Coal Limited ("B9 Coal") and announced on 8 December 2009, Linc Energy has exercised its option to extend in perpetuity its worldwide exclusive rights to utilise and operate AFC fuel cells in conjunction with underground coal gasification ("UCG") and to use AFC fuel cells in any commercial or research application in Australia.

Linc Energy has invested £2.97 million pounds in AFC Energy at a 7.5% discount to the 30 day volume weighted average price at the close of business on Wednesday 5th October 2010 meaning that the exercise price is 17.72 pence per ordinary share. This includes a £2.3 million investment to exercise its option. Linc Energy will receive 16,763,650 new ordinary shares of 0.1 pence each in the capital of the Company (the "Linc Shares").

AFC, Linc Energy and B9 Coal will now work together to conclude the detailed terms of the licence. Under the terms of the licence, for Linc Energy owned sites, Linc Energy will pay to AFC an upfront payment calculated on the cost of delivery of fuel cell systems, and a royalty based upon profits generated from the use of AFC fuel cells. Linc Energy will pay B9 Coal, as introducer and broker to the transaction, a royalty equal to 2% of the net profits generated from the use of AFC fuel cells.

AFC is also pleased to announce that it has agreed, conditional only on Admission (as defined below), to place a further £1.055 million of new ordinary shares at 18.5 pence each (5,702,703 new ordinary shares of 0.1 pence each in the capital of the Company (the "Placing Shares")) with a group of investors, comprising principally high net worth individuals ("Investors"), who have been in dialogue with the Company about the development of new business streams (the "Placees").

Linc Energy and the Placees have agreed not to dispose of ordinary shares held by them for a minimum period of 12 months and Linc Energy has also agreed that for a further 12 months after the expiry of the initial 12 months lock-in period that it will not dispose of any ordinary shares it holds save through the Company's broker so as to ensure an orderly market in the shares. The net proceeds of approximately £4.0 million will be used to provide operating capital for the development and commercialisation of the Company's fuel cell systems.

Ian Balchin, CEO of AFC said: "We are delighted that Linc Energy has exercised its option and look forward to working closely with them to integrate our technologies, enabling low cost, clean power generation from underground coal. We are also delighted to welcome a group of significant high net worth individual investors who have the potential to open doors to new markets. The additional investment received will be used to take AFC Energy well into the early stages of commercialisation."

Alisa Murphy, Director of B9 Coal, added: "We are extremely pleased with this development and the strengthening of the relationship between Linc Energy, AFC Energy and B9 Coal. We look forward to moving forward with low-carbon power generation projects and showcasing the role of this unique combination of technologies in a low-carbon future."

Peter Bond, CEO of Linc Energy concluded: "Linc Energy have been impressed by the rapid progress made by AFC Energy since partnering with them less than a year ago, including the successful deployment of a fuel cell system at our Chinchilla Facility in June. In conjunction with B9 Coal, AFC Energy have also shown great commitment and tenacity in exploiting opportunities in the European market for our jointly-developed technology.

"We look forward to maintaining this rate of technical and commercial development, working together to fully commercialise smart, efficient fuel cell power systems on a large scale at UCG sites, with virtually no CO2 emissions. Linc Energy is one of the cheapest potential sources of Hydrogen in the world via its underground coal gasification (UCG) process. A relationship with AFC to use this cheap Hydrogen to produce power via fuel cells, is a common sense way that Linc energy can further monetise its UCG gas and create a clean energy power market for generations to come."

The aggregate number of Linc Shares and Placing Shares to be issued by Company is 22,466,353 new ordinary shares of 0.1 pence each in the capital of the Company. Application has been made for the Linc Shares and Placing Shares to be admitted to trading on AIM and dealings are expected to commence at 8.00am on 25 October 2010 ("Admission").

The total enlarged issued share capital of the Company following Admission will be 173,339,207 ordinary shares of 0.1 pence each in the capital of the Company. The above figure may be used by shareholders as the denominator for the calculations by which they will determine if they are required to notify their interest in, or a change to their interest in, the share capital of the Company under the Disclosure and Transparency Rules.

ENDS

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