React Energy : 10th October 2016Heads of Agreement

11 October 2016

("REACT" or the "Company")

REACT, the renewable energy developer and operator focused on the production of clean energy in the UK and Ireland, today announces that it has signed conditional Heads of Agreement with several parties to potentially fund, through a combination of equity and debt, the repowering of its 4MW biomass gasification project located in Newry, Co. Down, Northern Ireland ("Newry Biomass").

Newry Biomass is owned by Newry Biomass Limited ("NBL") and is a joint venture with Farmer Business Development plc ("Farmers"), the Company's 23.2% shareholder. NBL is a 50.01% subsidiary company of REACT.

The Heads of Agreement envisage a total investment of up to £11.2 million to be made both directly, and indirectly through REACT, into NBL, through a combination of debt and equity. If an agreement is concluded, the equity component of the investment is to be provided by a sub fund of The Ethika Fund SICAV Plc, a Professional Investor Fund ("Ethika"), and Kyotherm SAS a France-based equity investor in biomass, geothermal energy and energy savings projects. Under the terms of the Heads of Agreement, Ethika is also to procure the debt finance for the repowering.

The terms of the Heads of Agreement between the parties are legally binding, however, are subject to the completion of, inter alia, legal, financial and technical due diligence, which is yet to commence and is expected to take approximately 60 days, and therefore may change from that set out in the Heads of Agreement. There can be no guarantee that definitive agreements will be concluded on the terms currently envisaged or at all, or on the timetable envisaged.

There is the possibility that that the equity component of the investment may require, inter alia, shareholder approval, however this will not be known until the conclusion of the due diligence exercise. In the event, shareholder approval is required, the Company will prepare and send the necessary documentation to shareholders to convene a general meeting of the Company to approve the proposals.

Background to Newry Biomass

As previously announced, planning permission for a waste to energy plant converting 25,000 tonnes per annum of wood was received by NBL in May 2009. However, due to underperformance of the original technology, a decision was made to repower the project with a new technology and with a new technology provider.

On 31 December 2015 the Company announced that it had entered into an agreement with Spanish MAB-listed EBIOSS Energy AD ("EBIOSS") to purchase its EQTEC Integrated Biomass Gasification Power Plant, with a

power output of 4MW, which, subject to completion of the above investment, NBL will use in the repowering of the project. Farmers, EBIOSS and its subsidiary, EQTEC Iberia SL, are therefore also parties to the Heads of Agreement.

The repowered plant will convert wood into electricity using EQTEC gasification technology, a form of advanced thermal treatment of waste where the carbon-based material in the waste is converted into a gas that is passed through a gas turbine engine to produce electricity.

A further announcement will be released in due course.

REACT Energy plc is committed to operating clean electricity and heat generation plants in the UK and Ireland. The Company seeks to identify, build, own and operate renewable projects and possesses significant knowledge of energy markets, clean technologies, fuel sources, project development, project finance and project delivery. REACT currently has four operational clean energy plants generating revenue from the sale of electricity and heat. The generation of clean electricity and heat from sustainable sources has the potential to address the key energy challenges of energy security and carbon commitment and provide strong returns on capital employed.

The Company is quoted on AIM and trades as REAC. Further information on the Company can be found at www.reactenergyplc.com.