OREANDA-NEWS. October 05, 2015. Dear Shareholder,

The past few months have witnessed some rather turbulent times for the world's stock and commodities markets but we at AFC continue to focus our efforts towards progressing our aggressive commercialisation strategy.

Our RNS released today reported that Yady Worldwide ("Yady"), a company wholly owned by the family of AFC's founder, has increased its holding in AFC by 7.04% with the acquisition of all the shares held by former shareholder, Linc Energy, for an undisclosed amount.  Yady described the transaction as: "a rare opportunity to increase Yady's position in the Company at a time when we believe the future value of the Company is undervalued by the market".  This transaction should remove any concern in the market of an overhang due to the potential divestment of Linc Energy's position.  I am delighted that the family of AFC's founding shareholder has reaffirmed their confidence in AFC and the direction it is taking in accelerating the company towards commercialisation and achieving the goal so many long-term holders have aspired to for many years.     

Again, I wish to acknowledge Linc Energy's support of AFC during the past few years which saw substantial investments into the company at various times over recent years in support of the technology's development lifecycle.

From a technical standpoint, the POWER-UP project remains our key focus, alongside further developments and advancement in the fuel cell performance itself. 

Over the past three months, many of you will have seen the announcement in early August 2015 that we had successfully commissioned and commenced operations of the first KORE fuel cell system in Stade, Germany.  In what I called one of the proudest days for AFC, the AFC team achieved a peak output of 7.56kW from a single operational fuel cell cartridge.  Back in December 2014, we committed to reaching this milestone by the end of July, and whilst there were a few delays on the permitting of the facility, which delayed our commencement of construction by a couple of weeks, I'm pleased to say that due to the commitment of the teams both on the ground in Germany and back in our offices in the UK (together with a number of extremely late nights) we managed to achieve our target operating performance late in the evening of 31 July.  This demonstrates to me not only the effort AFC's technical teams and contractors are giving to the delivery of this project, but also the seriousness by which we as a company give to the target dates and milestones AFC put into the market, and our own expectations of meeting or exceeding those targets. 

We currently have two remaining project milestones for the POWER-UP programme in Stade.  These consist of: commencing operation of a full tier (8 cartridges) of the KORE fuel cell system and subsequent sale of that power into the German electricity grid, and secondly, generation of the full 240kW nameplate capacity of the KORE system before the end of this year.  Having had the opportunity to visit Stade yesterday, I continue to be confident of our ability to meet the final two milestones in the timeline outlined to the market.  Indeed, we could expect to see the first tier operational within the next few weeks which will present the first sale of power into the German grid and provide further evidence of the robustness of our technology platform.  

I think you'll agree that for the next three months, which will take us to the end of this year, you can expect some exciting and historic announcements from AFC.

I also mentioned in a brief market update that we have seen further evidence of fuel cell performance improvements over the past quarter.  Only this week, our fuel cell development team achieved another milestone which, through the application of an improved "recipe" for the fuel cell, further improvements in performance were achieved.  Whilst we will continue to perform further testing on this new fuel cell electrode over the coming weeks, I expect this to form the basis of our fuel cell platform in the final 240kW trial at Stade in December 2015.  More details on this cell and its performance will be provided in the coming months. 

In order to make further progress towards the conversion of MOUs and Joint Development Agreements with our international partners, we've also welcomed on board a new Commercial Director.  We continue to engage with our partners internationally and whilst there is an interest in observing some of the data that will come through from Stade on the fuel cell performance, we remain confident that these MOUs will crystalise into binding commercial contracts over the coming months.  There are other new opportunities which have emerged over the past quarter which, with a new commercial director on board, gives us added strength in reaching out to these and fully assessing the opportunity to take it forward.  Of course, as alluded to in earlier announcements, this includes discussions with prospective manufacturing partners, several of which we've met in our offices in the UK over the past few months and which we continue almost daily dialogue.   

We are planning to hold our annual Investor Day event at Dunsfold on Tuesday 24 November and I look forward to seeing many of you there.  Details of this event will be uploaded onto the AFC webpage over the coming weeks.

In the meantime, we continue to work hard behind the scenes to educate stakeholders about the benefits of the hydrogen economy. As a result, you should see some trade and investment articles appearing where I argue the case for hydrogen to be an essential part of the future energy mix, in the UK and elsewhere.

I'm very much looking forward to the next three month; we expect to be making a number of key announcements both with regards the technology platform in Germany, but also other commercial opportunities. 

Yours sincerely,

Adam Bond

Chief Executive Officer