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AFC Energy Plc

27 January 2020

The information communicated within this announcement is deemed to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014. Upon the publication of this announcement, this inside information is now considered to be in the public domain.

27 January 2020

AFC Energy PLC

("AFC Energy" or the "Company")

AFC Energy and HiiROC Agree Terms to Unlock Natural Gas as Zero Emission Hydrogen Fuel

AFC Energy (AIM: AFC), a leading provider of hydrogen power generation technologies, is pleased to announce it has entered into a binding Heads of Agreement ("Heads of Agreement") with UK based green hydrogen generation technology developer, HiiROC Limited ("HiiROC").

HiiROC's plasma-based technology has proven its ability in early testing, to extract Hydrogen from methane and biomethane, readily available from incumbent gas networks, without the emission of CO(2) or other harmful greenhouse gases. The green Hydrogen produced from this technique has in turn the possibility of fueling AFC Energy's H-Power fuel cell systems, thereby opening up methane as a candidate carrier of green Hydrogen for AFC Energy's low-cost power generation.

Highlights

-- HiiROC's technology platform looks to, as distinct from steam methane reforming, produce clean, zero CO(2) emission hydrogen through a unique plasma process fuelled by natural gas or biogas, converting hydrocarbons (CH(4) ) into a clean hydrogen stream and a high value solid carbon ("carbon black").

   --      Under the binding Heads of Agreement, AFC Energy and HiiROC have agreed to enter into a Commercialisation Agreement intended to include the following provisions: 

o AFC Energy to obtain global preferential rights to integrate HiiROC's plasma-based technology with the Company's proprietary H-Power fuel cell, including an initial reduction in Hydrogen cost to AFC Energy derived from the system cumulatively valued at GBP2m.

o AFC Energy to also be granted exclusive rights to HiiROC's technology in key regions, including the UK, Europe and Australia, in the field of electrified transportation, including electric vehicles.

o Integration of the HiiROC and AFC Energy technology platforms, which if successful, has the potential to unlock natural gas as a zero-emission, low cost hydrogen fuel carrier.

-- It is anticipated that the Commercialisation Agreement will contain full commercial terms and principles that the parties intend to be bound based on the ongoing development work conducted in 2020.

-- AFC Energy is investing GBP100,000, payable in AFC Energy shares, into HiiROC's scaling up programme, which were allotted to HiiROC on 24 January 2020 conditional on admission to trading on AIM. AFC Energy also intends to make up to GBP300,000 of "in-kind" contribution to HiiROC over 12-18 months to support the development of a prototype unit.

Over recent years, AFC Energy has evaluated several emerging green, low cost hydrogen generation technologies for integration with its proprietary H-Power(TM) fuel cell systems.

For the past 9 months, the Company has been in discussions with HiiROC regarding the potential for natural gas to be utilised as a clean, zero CO(2) emission fuel, into the AFC Energy fuel cell through adoption of HiiROC's unique plasma process. HiiROC's plasma-based process acts to convert natural gas into a clean hydrogen stream for the fuel cell, alongside gaseous carbon that can then be quenched as a high value solid carbon ("carbon black").

Independent analysis of gas samples derived from HiiROC's plasma process in 2019 confirmed the potential for this technology, initiating plans for a strategic partnership between the two companies. With the objective of bringing to market a unique, natural gas fueled, zero emission fuel cell system, successful scale up of the HiiROC process could allow AFC Energy and its customers to take advantage of low cost natural gas and existing distribution pipelines to access one of the world's most readily available fuels, without greenhouse emissions.

It is intended that under the terms of the Commercialisation Agreement, AFC Energy will work alongside HiiROC to deliver a prototype unit through 2020 which it is supporting through an investment of GBP100,000 into HiiROC's scaling up programme, payable in AFC Energy shares, plus up to GBP300,000 worth of engineering, instrumentation, testing and associated support over eighteen months. In return, AFC Energy will have pre-defined rights including an initial reduction in hydrogen cost from the system, cumulatively valued at GBP2 million, and access to the technology for deployment in a number of applications, including exclusively in EV charging across the UK, Europe and other locations.

Under the proposed terms of the Commercialisation Agreement, HiiROC will work with AFC Energy on a preferential basis in the development of an integrated zero emission power generation solution and within the prototype system development, will assess and confirm the technical and economic viability of the system. Based on initial economic analysis, the HiiROC system has the potential to offer a cost competitive alternative hydrogen source and complement the Company's ammonia and direct hydrogen opportunities, building a portfolio approach to fuel for its customers and partners.

The GBP100,000 investment will be paid via the issue of 526,316 ordinary shares of 0.1 pence each in the capital of the Company at the closing price on 24 January 2020 of 19 pence per share. Application will be made to the London Stock Exchange for the new Shares to be admitted to trading on AIM shortly ("Admission"). A further announcement detailing when the shares will be admitted to trading will be made in due course. The Shares will be issued credited as fully paid and will rank in full for all dividends and other distributions declared, made or paid after the admission of the Shares, respectively and will otherwise be identical to and rank on Admission pari passu in all respects with the existing Ordinary Shares.

Following Admission, the Company will have 462,878,812 Ordinary Shares in issue, none of which will be held in treasury. Accordingly, the total number of voting rights in the Company will be 462,878,812 and shareholders may use this figure 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 Company under the FCA's Disclosure Guidance and Transparency Rules.

Adam Bond, Chief Executive Officer at AFC Energy, said "Evaluation of low-cost hydrogen has been a key part of AFC Energy's commercialisation strategy over recent years. HiiROC's innovative new technology platform not only has the potential to open up new green hydrogen sources but could do so whilst utilising existing natural gas distribution infrastructure, making access to hydrogen fuel more readily available and affordable in developed and urban areas. While we look forwards to the results of prototyping our H-Power(TM) system with that of HiiROC, we are also aware of several blue ribbon partners developing project opportunities with HiiROC which may leverage new opportunities for AFC Energy to open new markets reaffirming the future role of hydrogen as a key element of the world's future energy mix."

For further information, please contact:

 
AFC Energy plc 
 Adam Bond (Chief Executive Officer)              +44 (0) 14 8327 6726 
 
WH Ireland - Nominated Adviser and Joint Broker 
 Mike Coe (Corporate Finance) 
 Jasper Berry (Corporate Broking)                 +44 (0) 117 945 3470 
 
M C Peat & Co LLP - Joint Broker 
 Charlie Peat                                     +44 (0) 20 7104 2334 
 
Tuva Partners - Public Relations 
 James Kennedy                                    +44 (0) 7809 495 759 
 

About AFC Energy

AFC Energy plc is commercialising a scalable alkaline fuel cell system, to provide clean electricity for on and off grid applications. The technology, pioneered over the past twelve years in the UK, is now being deployed in electric vehicle chargers, off-grid decentralised power systems and industrial gas plants as part of a portfolio approach to the decarbonisation of local electricity needs.

About HiiROC

HiiROC is a step-change technology for low-cost, zero-emission Hydrogen production. HiiROC produces hydrogen through a unique plasma process. The HiiROC solution is the innovation required to enable the move to a 'Hydrogen Economy'.

Forward-looking statements

This announcement contains statements about AFC plc that are or may be deemed to be "forward-looking statements".

All statements, other than statements of historical facts, included in this announcement may be forward-looking statements. Without limitation, any statements preceded or followed by, or that include, the words "targets", "plans", "believes", "expects", "aims", "intends", "will", "may", "should", "anticipates", "estimates", "projects", "would", "could", "continue" or words or terms of similar substance or the negative thereof, are forward-looking statements.

These forward-looking statements are not guarantees of future performance. These forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of any such person, or industry results, to be materially different from any results, performance or achievements expressed or implied by such forward-looking statements. These forward-looking statements are based on numerous assumptions regarding the present and future business strategies of such persons and the environment in which each will operate in the future. Investors should not place undue reliance on such forward-looking statements and, save as is required by law or regulation (including to meet the requirements of the AIM Rules, the Prospectus Rules and/or the FSMA), AFC Energy does not undertake any obligation to update publicly or revise any forward-looking statements (including to reflect any change in expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based). All subsequent oral or written forward-looking statements attributed to AFC Energy plc or any persons acting on their behalf are expressly qualified in their entirety by the cautionary statement above. All forward-looking statements contained in this announcement are based on information available to the directors of AFC Energy at the date of this announcement, unless some other time is specified in relation to them, and the posting or receipt of this announcement shall not give rise to any implication that there has been no change in the facts set forth herein since such date.

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January 27, 2020 02:00 ET (07:00 GMT)