AFC Energy Regulatory News (AFC)

The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014. Upon the publication of this announcement via a Regulatory Information Service ("RIS"), this inside information is now considered to be in the public domain.

8 January 2018

AFC Energy PLC

("AFC Energy" or the "Company")

AFC Energy Delivers Material Improvement in Fuel Cell System and Electrode Performance Exceeding Targeted 2017 Milestones

AFC Energy (AIM: AFC), the industrial fuel cell power company, is pleased to provide an update on the successful operation of the materially enhanced fuel cell stack and cartridge.

Highlights

Fuel Cell Stack, Cartridge and System Design

· The successful development and operational validation of the enhanced fuel cell stack and cartridge basis of design that incorporates numerous design enhancements initiated over the past 12 months;

· This enhanced commercial design basis exhibits substantial progression against targeted Performance, Longevity, Availability, Cost and Efficiency ("P.L.A.C.E.") objectives set for 2017 in line with the minimum expected performance criteria of a commercial fuel cell system;

· The results achieved to date from operating the fuel cell provide outputs which closely match the results observed from months of extensive computational simulation, therefore providing further confidence in the overall performance of the fuel cell;

· This enhanced fuel cell stack and cartridge has demonstrated the ability to meet multiple power cycling steps without loss of performance.

Electrode Performance

· The latest electrode pairings, developed in collaboration with Industrie De Nora ("De Nora"), and tested during December 2017, exhibit significantly extended operational life for the fuel cell electrodes and significantly exceeds the longevity targets we set for 2017

· AFC Energy and De Nora planning is now undertaking the ongoing testing work for delivery of an electrode pairing that will achieve a four-year operational life with associated performance warranties and at a cost which should see AFC Energy's Levelised Cost of Electricity at below US$0.10 / kWh - excluding the cost of Hydrogen which varies from project to project and consistent with previous calculations.

Throughout the course of 2017, AFC Energy has built upon the intensive work that had taken place over the prior two years to deliver a commercial basis of design of its fuel cell system capable of delivering the Company's commercial performance metrics in the form of P.L.A.C.E.

In December 2017, the Company compiled its first fuel cell stack adopting a range of new system design characteristics, including:

1. New design of hydrogen, electrolyte and air plates following significant computational fluid dynamic simulation, which results in improved gas, liquid, temperature and pressure regulation within the fuel cell system and also addresses underlying legacy design observations which have previously led to premature failure of the fuel cell stack;

2. Integration of the new electrode pairings within a new flow plate design, removing the need for expensive nickel substrates whilst also enlarging the size of the active area of the electrode, thereby improving cell output and performance;

3. Fully redesigned cartridge system with reduced number of nozzles and simplified orientation for the gas and liquid inlet and outlet nozzles based upon the revised flow plate design;

4. Reconfiguration of the balance of plant to facilitate the above changes and which address legacy design inefficiencies observed in the earlier KORE system.

In parallel with the above activities, significant progress has been achieved in collaboration with De Nora in further iterations of the fuel cell electrode pairings (cathode and anode). Whilst AFC Energy froze its electrode design for the validation of its enhanced fuel cell stack design in Q3 2017, progress continued, with De Nora, via testing of smaller scale electrode samples, which is a routine development method, to further optimise the electrode performance. The results achieved to date, being approximately two month's operation, suggest this electrode pairing has the potential, on an extrapolated basis, to exceed the targeted one-year operational life objective set for 2017 and indeed, is likely to have the capacity to operate for a period more than 24 months. In December 2017, the latest electrode design was received at a size suitable for industrial scale applications and this pairing is on test at the Company's facilities in Surrey.

In December 2017, De Nora and AFC Energy commenced work on a programme of activities that will further enhance the electrode performance to a point where the objective is to achieve a cathode and anode pairing capable of operating for a period of up to four years.

The validation of the enhanced fuel cell system at electrode, stack and cartridge level, continued throughout the Christmas and New Year period and is ongoing.

Adam Bond, AFC Energy's Chief Executive Officer, said: "I am delighted to confirm that, following a period of rapid progress, we have through deliberate design changes successfully validated the revised basis for the Company's commercial fuel cell system whilst also, in collaboration with De Nora, achieving massive strides forward in electrode performance. This enhanced fuel cell system upgrade builds on the work of many individuals closely collaborating with our technology partners and is expected to provide the cornerstone of a commercial fuel cell system that is now capable of achieving the Company's PLACE metrics. Completion of this work within a three-year window was always going to be challenging, however, we are today seeing the fruits of our labour as we progress into a very exciting 2018."

Further details about the progress outlined in this announcement will be provided in the Quarterly Newsletter, to be issued later in January. Notwithstanding any further significant developments in the coming months, AFC Energy expects to provide its next progress update when it announces its annual results for the financial year-ended 31 October 2017, in March 2018.

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About AFC Energy

AFC Energy plc has developed and successfully demonstrated an alkaline fuel cell system, which converts hydrogen into "clean" electricity. AFC Energy's key project POWER-UP demonstrated the world's largest operational alkaline fuel cell system at Air Products' industrial gas plant in Stade, Germany. The Company is now looking to build upon the current pipeline of commercial opportunities and drive the findings 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