Proposed Cash Return by Tender Offer & Special Dividend

    Embargoed Release: 07:00hrs Friday 19th December 2008

                              CMR Fuel Cells plc                               

                             ("Company" or "CMR")                              

   Proposed return of cash by way of a tender offer and a special dividend,    
  associated reduction of capital and cancellation of admission to AIM ("the   
                                  Proposals")                                  

Introduction

The Board of CMR Fuel Cells plc today announces proposals to effect a return to
shareholders of a portion of its cash and cancel the Company's admission to
AIM, alongside which the Company will reduce its cost base to allow the Company
to continue its fuel cell development programme.

Under the Proposals, which will be subject to both shareholder and Court
approval, a tender offer will be made pursuant to which shareholders will be
able to tender all or a portion of their shares to be purchased by the Company
at a price of 20p per share. Shareholders who do not wish to tender their
shares will, following completion of the tender offer, receive a special
dividend in the region of 17p per share. There will be a limit on the total
amount to be returned to shareholders in the region of £3.8 million, subject to
further detailed analysis. So as to implement the proposals, the Company will
need to effect a reduction of capital. It is also proposed that the Company's
admission to AIM will be cancelled.

It is intended that early in the New Year the Company will publish a circular
setting out further details of the proposals, the reasons for them and their
implications. The circular will also contain a notice convening a general
meeting at which the approval of shareholders will be sought. It is expected
that the proposals will become effective in March 2009.

Background to the Proposals

Commercial and technical progress

The Company has made significant recent commercial and technical progress. As
announced on 24 November 2008, the Company has signed an exclusive joint
development agreement ("JDA") with a leading Asian original design manufacturer
("ODM"). The Company and the ODM have agreed to collaborate in the design and
development of a stand-alone hybrid power system using both a battery and 25W
direct methanol fuel cell charger intended for consumer use.

In the opinion of the Board, the signing of the JDA, together with other recent
developments, indicates that the Company remains on track to complete
development of the hybrid fuel cell power supply product on which it has been
working throughout 2008. The Company has also been developing a relationship
with an international fuel cell company which may or may not lead to the
Company acquiring some of its assets. Additionally, progress has been made in
the development of an alkaline fuel cell. The Board hopes to be able to
announce further progress in respect of these projects in due course.

Taking into account the above factors, the Directors believe that the Company
has a good prospect of achieving commercial success with the products that it
is currently developing.

Stock market conditions

Throughout 2008, the share price of the Ordinary Shares has traded on AIM at a
discount to the reported value of the net assets ("NAV") per Ordinary Share, as
per the published historical financial statements of the Company. The NAV as
reported in the Company's unaudited interim financial statements for the six
months ended 30 June 2008 was approximately £8.1 million, equating to
approximately 39.9 pence per Ordinary Share on an undiluted basis. The NAV on
30 June 2008 included approximately £7.5 million in cash. The closing
mid-market price of the Ordinary Shares, however, has been at a substantial
discount to the NAV per Ordinary Share in the range of 21 pence to 10 pence per
Ordinary Share in the six month period from 18 June 2008 to 18 December 2008
(being the last practicable date prior to the date of this announcement).

This share price performance has been disappointing and a source of frustration
for the Board and also for some of the Company's shareholders. The Directors
believe that the development of the business, in terms of strategic
partnerships and underlying operational infrastructure, and the strength of the
Company's management team, have not been adequately reflected in the value
attributed by the public market to the Company's shares. The Directors believe
the reasons for this under-valuation are multiple and complex, but include a
lack of liquidity in the Company's shares (common to many small cap companies)
and global economic uncertainty.

Discussions with large shareholders and Board deliberations

Against this background, the Board has spent significant time evaluating
different strategic alternatives for the Company. These deliberations have
taken into account the current financial position of the Company, the Company's
progress towards the commercial success of its products, the current financial
climate and the relative benefits compared to the ongoing costs of maintaining
a listing on AIM. The Board has also taken into account the views of the
Company's large shareholders, who have approached and engaged in a dialogue
with the Board, as well as assessing the position of the company's shareholders
as a whole. In particular, certain of the Company's large shareholders have
explicitly expressed a desire for a return of all or a substantial portion of
the Company's available cash.

Following careful consideration of these factors with its advisers, the Board
has decided that the Company should rationalise its business and focus on the
development of hybrid DMFC power supplies for portable applications. As a
result of such concentration of effort, the Board is in the process of
streamlining the Company's business so as to reduce costs and generate
additional savings.

Implementation of the Proposals

Following completion of the rationalisation of the Company's business, the
Company will have funds above those required to meet its near term operational
objectives. The Board therefore believes that it is an appropriate time to
return, through the Tender Offer and special dividend, up to a maximum of
around £3.8 million of cash to the Company's shareholders. This figure is
subject to further detailed analysis and professional advice.

In arriving at the level of cash available to be returned to Shareholders, the
Board has taken account of the levels of funding remaining in the group to
enable it to meet its current working capital requirements.

The Board has also concluded that it would be in the best interests of the
Company to cancel trading in the Company's shares on AIM and continue its
growth trajectory away from the public market, at least in the near term. In
particular such cancellation should allow the Company to grow without the
pressure a quoted company may face to deliver short term performance over long
term positioning and growth. The cancellation should also save the Company
costs associated with being quoted and, importantly, will allow executive
management more time to focus on driving the business forward. Ultimately, the
Board believes that greater shareholder value will be derived by operating the
Company's business off-market for the immediate future.

The Board recognises that not all shareholders will be able or willing to
continue to own shares in the Company following the Cancellation. The Tender
Offer gives such shareholders an opportunity to dispose of or reduce their
interest in the Company.

Those shareholders who want to continue to own shares in the Company after it
de-lists from AIM may do so and will still benefit in the proposed return of
cash by receiving the special dividend.

Future Financing Needs

Following successful completion of the Proposals outlined in this announcement
and which will be more fully explained in the circular, the Company does not
expect to have sufficient funds to achieve in full its stated commercial
objectives. The Company will therefore need to seek further financing in the
medium term. Assuming that the Company does meet its obligation to deliver a
prototype under the JDA with the Asian ODM in 2009, the Directors believe that
re-financing the Company should at that time be feasible. There can however be
no assurance that such a re-financing will be forthcoming.

Cancellation of Admission

If the required resolution is passed at the General Meeting, the Directors
intend to cancel the admission of the Company's shares to trading on AIM. In
accordance with the AIM Rules, cancellation of admission is conditional upon
consent of not less than 75 per cent. of votes cast by shareholders at a
general meeting. Such consent will be sought at a general meeting of
shareholders. The time of the general meeting and the principal effects and
timing of the cancellation will be set out in the circular to shareholders.

Other matters

Further information including details of the proposed amendments to the
articles of association and the implications of certain provisions of the City
Code on Takeovers and Mergers will be set out in the circular.

Takeover Code

Under Rule 37 of the Takeover Code (the "Code"), when a company purchases its
own voting shares, any resulting increase in the percentage of shares carrying
voting rights in which a person or group of persons acting in concert is
interested will ordinarily be treated as an acquisition for the purposes of
Rule 9 of the Code.

Under Rule 9 of the Code, any person or group of persons acting in concert who:
(i) are interested in less than 30 per cent. of the voting rights of the
company and as a result of the share purchase by the company become interested
in more than 30 per cent. of the voting rights in the Company; or (ii) are
interested in more than 30 per cent. but less than 50 per cent. of the voting
rights and as a result of the share purchase by the company become interested
in an increased interest in voting rights would ordinarily be required to make
a mandatory offer for the Company.

Following this announcement, the Panel will be approached to establish to what
extent there is a need to waive the requirement under Rule 37 for any
shareholders in the Company to make a mandatory offer for the Company as a
result of the Proposals. Under Rule 37, a person will not normally incur an
obligation to make a mandatory offer unless that person is a director or acting
in concert with any of the directors. However, any person who acquires an
interest in shares following this announcement and does not then tender their
shares under the Proposals may trigger obligations under Rule 9 of the Code in
the event that following the tender offer that person has an interest of 30 per
cent. or more in the new, reduced share capital of the Company. Due to the
potential size of the tender offer, shareholders should be warned that a small
current shareholding may result in them obtaining a controlling position if
they do not tender their shares into the tender offer. Shareholders who acquire
an interest in shares following this announcement and will not be tendering
their shares should consult with the Panel as to the implications of Rules 9
and 37 of the Code prior to acquiring such interests. The Panel's contact
details are provided at the end of this announcement.

Contact information

Further Information

Tim Curtis CMR Fuel Cells plc 01223 875 544

Chairman

John Halfpenny

CEO

Michael Ansell Investec Investment Banking 020 7597 5970

Daniel Adams

Vikki Krause Hansard Group 020 7245 1100

The Takeover Panel 020 7382 9026

Investec Investment Banking, which is authorised and regulated by the Financial
Services Authority in the United Kingdom, is acting exclusively for CMR Fuel
Cells plc and no one else in connection with matters described in this
announcement and will not be responsible to anyone other than CMR Fuel Cells
plc for providing the protections afforded to clients of Investec Investment
Banking nor for providing advice in relation to matters described in this
announcement.



END