AFC Energy : Interim Results April 2022

The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the EU market abuse regulation (596/2014).

29 June 2022

AFC Energy plc

("AFC" or the "Company")

Interim Results

AFC Energy (AIM: AFC), a leading provider of hydrogen power generation technologies, is pleased to announce its interim results for the half year ended 30 April 2022.

Commercial Highlights

• First commercial order of S Series liquid cooled fuel cell system received from ABB worth up to £4m

1. High power density system

1. Initially to be configured for EV charging use in grid constrained environments

1. System design contemplates other applications especially maritime and data centres

1. £2m non-refundable deposit received from ABB (revenue recognition upon milestone

achievement)

• 1. Next milestone payment of £1 million due upon delivery of initial 100kW unit scheduled for this year
• Considerable progress has been made since the launch of the Company's new power dense S Series fuel cell systems and Power Tower products in Q1 2022
• 1. Partners and customers have opted to amend earlier agreements in order to upgrade to the Company's latest Hydrogen power generation platforms.
• Order book of further qualified fuel cell deployment enquiries continues to strengthen, leading to system leasing contracts
• Secured series of initial leasing contracts with construction sector:
• 1. Acciona Power Tower field trial to be conducted across several months in Spain during H2

1. Power Tower system leased to Keltbray for UK construction site deployment in coming weeks

• 1. Power Tower system leased to Kier for South West construction site deployment in August 2022 (signed post period-end)
• Extreme E contracted to continue to use AFC Energy's L Series fuel cell for all five rounds of Season 2 following a successful inaugural season
• Successful deployment of L Series fuel cell system to Urban-Air Port's Air One deployment in Coventry designed to support electric vertical take-off and landing (eVTOL) aircraft and serve as a hub for other sustainable modes of transport like electric vehicles (EVs)
• Successfully achieved Approval in Principle ("AiP") in December 2021 from international certification agency DNV for Ammonia based fuel cell and cracker system for cargo ships in conjunction with ship builder, VARD
• 1. AiP receipt has led to multiple new enquiries from ship builders interested in exploring auxiliary and propulsion systems .

Financial Highlights

• Revenue of £0.28 million (HY 2021: £0.15 million) includes revenue earned for Extreme E second season series contract renewal
• Initial payment of £2 million collected from ABB
• Half year cash balance of £48.6m (HY 2021: £61.3m) with a loss for the period of £8.5m (HY 2021: £3.6m)
• Company continues to target full year growth in revenue

Operational Highlights

• Production, technical and operating capacity significantly enhanced during the period with employee numbers up to 87 at period end (2021: 34) further improving depth of skills and experience
• Significant facility upgrades completed with new offices, manufacturing and testing facilities
• Graeme Lewis, Chief Financial Officer, has today informed the Company that he wishes to retire. In order to ensure an orderly handover to his successor, Graeme has agreed to stay with the Company until 30 April 2023. The Company has commenced the process of recruiting a successor and will update the market in due course.

Technology Highlights

• Launched the new S Series Power Tower utilising AFC Energy's Hybrid Fuel Cell ("HFC") platform

1. offers materially higher energy density than earlier generation products

• 1. aimed at the ability to use Methanol and Ammonia alongside Hydrogen to offer fuel cell customers a "flex fuel" solution
• Development of the 2.5kW air cooled, high energy dense, fuel cell technology platform which is the core component of the Power Tower system
• Working with methanol reformer and ammonia cracker technologies to optimise whole of system operation to drive reductions in Total Cost of Ownership ("TCO")
• Completed Front End Engineering and Design ("FEED") study for Fuel Tower concept utilising methanol reformer technology platforms to support Power Tower deployments
• A number of further technology developments are expected in the second half of the year, including:
• 1. Integration of methanol reformer into Power Tower unit validating new fuel flex platform

1. Taking receipt of scaled up ammonia cracker technology for integration with fuel cell systems o Creation of new technology platforms upstream of the fuel cell for wider value chain exposure o Multiple Power Tower configuration to increase power output and higher voltage efficiencies

Outlook

• Series of Power Tower deployments at construction sites in the UK and Spain in H2 will deliver valuable field data ahead of wider customer deployment

1. Initial leased system deployments to construction market expected to lead to further deployments and commercial orders

• 1. ACCIONA Power Tower system undergoing final commissioning before deployment to Spain over the next fortnight
• Expected delivery in latter part of the year of ABB's first milestone of 100kW high energy dense S Series
  Liquid Cooled fuel cell system run on Hydrogen
• System cost reductions combined with high cost of diesel and the removal of UK diesel subsidies are driving increased levels of customer enquiries
• Revenues from the leasing of Power Tower systems to be supplemented by the associated supply of Hydrogen on commercial terms
• Continued cost reduction of system and components through engineering and volume pricing
• Ongoing dialogue with maritime sector raising profile of AFC Energy's technology for shipping and portside applications

Adam Bond, Chief Executive of AFC Energy, said:

"I am pleased that following the launch earlier this year of our Power Tower fuel cell platform, AFC Energy will see several of these new systems being operated by strategic partners in off-grid environments in the coming months. We are carefully selecting strategic partners that have a pressing need and desire to lead in the decarbonisation of their industries in line with Net Zero aspirations.

"We continue to assess our manufacturing scale up and supply chain and are preparing for growth in system production and deployment. The Power Tower, whilst currently focussing on Hydrogen fuel, will also be able to meet the demands of clients for Hydrogen carrier fuel compatibility later this year with the integration of methanol reformer technology. We believe, based on market feedback, that this will lead to an increase in the number of systems deployed and also the size of those systems.

"Our robust cash position enables us to continue to invest in our people, products and technology platforms to maximise our potential within the global clean energy space. The macro environment of high global energy prices and drive for enhanced energy security and independence continues to create a compelling environment for accelerated growth of the global Hydrogen market and we remain focused on delivering tangible deployment expectations for the full year."

About AFC Energy plc

AFC Energy plc is a leading provider of hydrogen fuel cell power systems to generate clean energy in support of the global energy transition. Based in the UK, the Company's scalable systems provide off-grid, zero emission power that are already being deployed for rapid electric vehicle charging and the replacement of diesel generators for temporary power applications. AFC Energy is also working with global partners in the deployment of products for the Maritime, Ports, Data Centres and Rail industries, emphasising the central role of its technology in the decarbonisation of global industry.

Operational review

AFC Energy continues to scale up its operations supporting the global transition to Net Zero. We have invested both in people and facilities to create a global centre of excellence in fuel cells and flex fuelling systems unrivalled in the world. This team, together with contributions from our strategic partners, aims to deliver competitive integrated fuel cell solutions to meet the needs of a sustainable transition away from diesel generators.

We continue to engage with customers and other end users whose feedback is important to help us continually align our product development roadmap with their needs and timelines.

Commercial activity

Our target markets remain unchanged with our immediate focus being the displacement of diesel generators from the off-grid / grid constrained environment. With the UK's removal of fiscal subsidies on the red diesel traditionally used in construction and off-grid power markets, together with the growing cost of diesel fuel due to macro circumstances, we are seeing an acceleration in the all in cost of highly pollutant generators making premium priced "green" alternatives a more viable solution in the market today.

AFC Energy's commercial activity therefore continues to target those markets where industry dynamics and policy drivers support early adoption of our hydrogen fuel cells. The optionality afforded by our "fuel flex" approach, giving customers the choice of fuel between direct Hydrogen or Hydrogen carrier fuels such as Green Ammonia and Green Methanol to achieve the lowest total cost of ownership, is driving increased market engagement and continues to be our unique selling point into the off-grid power market.

The construction sector continues to be a market where the desire and need for immediate change is most evident and is therefore expected to be one of the first sectors to transition from diesel generators to Hydrogen fuel cells. Deployment agreements signed with Keltbray and Kier Group, two leading UK contractors, in addition to Spanish construction group, Acciona, will generate revenue this year and provide valuable proof points for customers, regulators, procurement authorities and most importantly, site operators. Initial contracts will allow counter parties to familiarise themselves with our 10kW Power Tower, before larger capacity Power Towers become available with the next design series. A unique selling point sought by all these customers is a flexible fuelling technology which sets us apart from competing technologies by offering a lower total cost of ownership. The Company is confident that successful initial deployments will lead to further commercial orders.

Our current pipeline is principally front ended with short term leases which will provide modest revenues (compared to eventual sales) but the quality of our customers, due to their scale and market influence (including with plant hire businesses), gives us confidence of successfully demonstrating our systems to the industry, with resultant growth and quantum of revenue following thereafter.

Extreme E, following a successful partnership in the inaugural season, has contracted to continue to use our "L" Series fuel cell platform, for the five round, 2022 season. This partnership continues to provide evidence of how AFC Energy's technology can operate in the harshest of conditions in some of the remotest locations on Earth. The championship continues to also provide high levels of publicity and customer enquiries whilst also generating revenue from the leasing of equipment for the year.

Progress on collaborations

In November 2021, we announced the sale and development agreement with ABB. Under the agreement, ABB has already paid £2 million with two further instalments, worth a combined total of £2 million, due on successful completion of laboratory and field testing.

By committing to purchase the first 'S' series liquid cooled system, ABB is helping to fund the wider liquid cooled platform project - the basis for all larger (>100KW) fuel cell systems envisaged for use in maritime, data centre and large stationary power installations. ABB's participation provides us with direct end user feedback on the system which will form the basis for continuous product development improvements.

The majority of work performed to date has been setting up the infrastructure, both people and manufacturing equipment, and the design and development of the core technology for the key components of this next generation fuel cell platform. Our current expectation is for laboratory validation to begin in the latter part of the year.

Whilst the platform is specifically intended for high voltage EV charging, the system, once delivered, will also form the basis of collaborations across other ABB markets, including maritime and data centre applications. Over the past six months, through ABB, we have commenced dialogue with several of their customers in the maritime and data centre sectors.

Our relationship with Juelich continues to evolve. Their original order was for a 100 kW "L" series bespoke system; however, after further discussions on our product development roadmap, agreement was been reached to review and update the deliverables in line with technology progression. However, Juelich has advised due to further delays with regards the civils of the project mean they will be unable to take possession until the H2 2023. In the interim, Juelich has made a down payment to AFC Energy to demonstrate its ongoing commitment to the project.

In December 2021, we announced that DNV, the international certification agency, had awarded "Approval in Principle" ("AiP") status for the ZeroCoaster ammonia fuelled cargo ship, confirming independently that the design concept was feasible. Vard, the consortium leader, are leading commercial activities in regards the marketing of the vessel's design to customers. We see this as a sizeable medium to long term opportunity as the transition to zero / low carbon shipping technologies takes place. Following receipt of the AiP, we have received a significant number of enquiries from ship yards and maritime operators seeking to undertake diligence over our technology platforms, ranging from cracker to fuel cell. We have also had early interest from ship builders in green methanol based solutions, however these also represent early discussions and are longer term opportunities within the global maritime sector.

Discussions with Al Taaqa Alternative Solutions for a distribution agreement has continued with valuable insights received on the end user demand which can be summarised as a >100 kW system supported by flexible fuelling solutions. The relationship is ongoing and we are currently evaluating these requirements into our product roadmap and looking at ways to accelerate the timeline whereby we can deliver to their needs.

A joint deployment team has been set up with Acciona and a construction project in Andalucia has been identified and evaluated as the planned test site. The unique selling point Acciona see with our solution is access to a flexible fuelling solution which provides a lower total cost of ownership than other similar competing technologies. We are finalising the production of the first Power Tower and expect to have the unit on site shortly.

Fuel cell platforms

Investment focus has been on the design and accelerated build of our latest 2.5kW air cooled fuel cell module and

the associated "S" series stack which is the fundamental building block of our air-cooled fuel cell solutions aimed at

near term target markets. The 2.5kW module forms the basis of our 10kW Power Tower. The performance of the 2.5kW module has surpassed expectations in terms of system efficiency and power output and, in collaboration with our supply chain partners, we are already seeing sizeable cost reductions across key component parts.

Due to global supply chain challenges experienced by many industries at present, we have made early investments into the purchase of long lead items so that when finalised we are in a position to embark upon a sizeable initial production run of hybrid units for customers.

Further development work has been done on integration platforms which drive modularity and scalability for our customers; specifically, the first Power Tower units have been developed and are part of the initial production run for field trialling. It is likely that the air cooled platform will form the basis of all systems up to (approx.) 100kW nameplate capacity.

In addition to the 2.5kW air cooled fuel cell module, we have also commenced a sizeable piece of work in delivering

a fast track liquid cooled system supported by ABB's partnership with us. The liquid cooled system will most likely

be sized in modules of 100kW and therefore provide the platform for larger scaled systems designed for the maritime and data centre markets.

In each of these configurations, being air cooled or liquid cooled, we expect to have the ability to offer both alkaline and hybrid based systems. In the short term, focus will be on early stage hybrid system deployment at sub 100kW scale where hydrogen or methanol are likely to provide an earlier route to market, with ammonia lending itself to larger scale systems.

In respect to core technology development, we have been assessing our own MEA technology against externally available materials in order to balance time to market, performance specifications and durability - all of which are critical to the total cost of ownership for our customers. Ultimately, our aim is to develop a suite of polymer options