AFC Energy Regulatory News (AFC)

AFC Energy Quarterly Newsletter - June 2015

Dear Shareholder,

As I write this quarters' newsletter, some of you will already be enjoying an early summer break. For those of you relaxing, I'll try and make this as brief as possible, but needless to say we've been very busy this last quarter.

The key developments over the past three months have centered around new commercial agreements in some of the world's most attractive regions for fuel cell deployment along with the continuing progress of the POWER-UP programme in Stade, Germany.

In April, we made two significant announcements. The first announcement represented our first heads of agreement in Thailand with Bangkok Industrial Gas Co. Ltd. ("BIG") for an initial 10MW of installed AFC fuel cell capacity across three phases. As I stated at the time, we are extremely pleased to be working with such a prominent and innovative Thai partner in BIG. Thailand has long been identified as an important location for AFC, both in terms of the market for fuel cells, but also as a possible location for long-term manufacturing and fabrication.

Following from the BIG announcement, we signed an MOU with Dubai Carbon Centre of Excellence ("Dubai Carbon") for the assessment of 300MW of fuel cell capacity deployment in Dubai by the end of 2020. This programme was particularly significant as the MOU represents the world's largest single fuel cell deployment programme and further demonstrates both our ambitions and the progression of AFC 'out of the lab' and into the commercial sector. It is worth repeating that we see a significant economic opportunity to monetise not only the energy generated from the fuel cell, but also the water by-product from the catalytic process in ways which have never been considered before.

Many of you will be aware that in the last newsletter I stated that I firmly believed that we want to achieve an aggressive target of 1 GW (1,000 MW) of fuel cell capacity installed or under development by the end of 2020. Today, I am confident that we will exceed this figure. We have received a large amount of interest from other prospective partners following our recent commercial announcements in Asia and the Middle East and progress is being made in taking these opportunities forward. In some cases, these opportunities are likely to run into the hundreds of megawatts of installed capacity.

Despite AFC arriving relatively late to the game I believe that we will not only catch up with our peers, but in time become the world's largest stationary fuel cell company. Our aggressive commercialisation strategy continues unabated and we remain fully focused on the technical and commercial milestones that we have set out.

Before I come to POWER-UP and Stade can I say that it was a pleasure to meet many of you at the AGM in April. It was good to speak to a full room of people that share my aspirations for AFC and were clearly knowledgeable about our technology and its commercial potential. I took some time going over the investor presentation but I think it was worthwhile and is something that I plan to do again before the end of the year. I also look forward to welcoming old and new faces at the annual investor open day later this year.

So to POWER-UP. In Stade, progress has been swift and you almost have to see it to believe it. When the Company announced that it had received the second stage building permit, questions were raised as to how achievable the timescales were for commencing operations in Germany by the end of July. To this end, we have pulled some photos together to demonstrate the mammoth effort being put into the construction works not only by AFC staff, but also by our contractors and sub-contractors. They are doing an excellent job at pulling the construction activities together at a very quick pace and I would like to take this opportunity to extend a thank you to all those involved in working aggressively towards achieving the July 2015 operational deadline I set for the project. It wasn't too Iong ago that I was presenting a slide showing a photograph with a rough drawn outline of where our plant was going to be so the progress has been nothing short of spectacular.

As already mentioned, earlier this month, we received the final permit approval for construction of the world's largest industrial alkaline fuel cell facility in Stade. It would be remiss of me not to express my appreciation to the consenting authorities in Germany for the collaborative and constructive approach they have taken to this project.

Today, it is a bustling building site with the foundations in place, the housing for the KORE fuel cell system installed together with all storage tanks, piping, connection points and ancillary above ground equipment now in place. We are also finalising the construction of the KORE in Coventry which is scheduled to be relocated to Germany over the coming weekend.

I am happy to reconfirm my confidence in AFC delivering on its accelerated timeline for initial power generation from the KORE system next month.

Finally, we are working hard behind the scenes to educate stakeholders about the benefits of the hydrogen economy and in particular stationary fuel cells as a clean, reliable and sustainable energy source.

I look forward to updating you in September on the progress AFC expect to make over the next quarter; it will certainly be a watershed moment for this company and I look forward to continuing this exciting journey towards commercialisation.

Yours sincerely,

Adam Bond

Chief Executive Officer