Auhua Clean Energy PLC : Update on Proposed Acquisition

AUHUA CLEAN ENERGY PLC

("Auhua" or "the Company")

Update on Proposed Acquisition

27 January 2014: Auhua Clean Energy Plc (AIM: ACE), the environmental technology group, is pleased to announce today that it has entered into an addendum agreement ("Addendum Agreement") which amends certain terms of the previously announced non-binding Heads of Agreement ("HOA")  relating to the Company's proposed acquisition of (i) the entire business and assets of Ziolar Pte Ltd ("Ziolar") from Riezen Pte Ltd ("Riezen") (the "Business Acquisition"); and (ii) the entire issued shares of Taiwan Ziolar Technology Co. Ltd ("Taiwan Ziolar"), a company incorporated in Taiwan, from the shareholders, Steve Peng and Yu-Yao Eddie Chen (the "Share Acquisition"). 

Under the original HOA signed on 1 August 2013, the Company agreed to satisfy the total consideration of US$4.5 million for the Business Acquisition and the Share Acquisition by issuing 11,727,022 new ordinary shares of Auhua (the "Auhua Shares") at 22.5 pence per Auhua Share and issuing a convertible loan note for the remaining US$0.5 million.  Pursuant to the Addendum Agreement, the parties have agreed that the Company shall instead satisfy the entire consideration by issuing 6,944,400 Auhua Shares (the "Consideration Shares") at 40 pence per Auhua Share to SSP Innovations Pte Ltd (3,086,400 Auhua Shares), Steve Peng (2,314,800 Auhua Shares) and Yu-Yao Eddie Chen (1,543,200 Auhua Shares).  There will not be an issue of any convertible loan note.  Of the Consideration Shares, 3,086,400 shares (equivalent to US$2.0 million) will be subject to a lock-in for 18 months from the date of issue and the remainder of the Consideration Shares (equivalent to US$2.5 million) will be subject to a lock-in of 24 months from the date of issue.

Auhua will be seeking shareholder approval for the proposed acquisition in February 2014.  The parties intend to enter into definitive agreements by no later than 1 March 2014. The Company will make an announcement when such definitive agreements are entered into. 

Auhua specializes in energy efficient water heating solutions, with a focus on the manufacture and sale of solar powered water heating systems. Taiwan Ziolar would bring state-of-the-art thermal panel technology to Auhua, a vital component in solar powered water heater systems. The proposed Taiwan Ziolar acquisition would add advanced coating technology that would enhance Auhua's system efficiency performance and reduce production costs, thereby helping to create a long-term competitive advantage for Auhua in the solar thermal water heater industry. Further, the innovative technology would enable the installation of smaller sized panels with good efficiencies, better utilised in high rise buildings. 

David Sumner, non-executive Chairman of Auhua, said: "We are delighted that we are proceeding with the acquisition of Taiwan Ziolar. This addition should complement the Company's already impressive stable of IP and technologies and would create a true competitive advantage for the solar thermal element of our product offering. We see this potential acquisition as a ground-breaking milestone in our development which would ease the way towards achieving our core objectives, namely to further differentiate our domestic product offering and enable preparation for the Company to embark on its international expansion strategy."

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About Auhua:

Auhua Clean Energy(www.auhuacleanenergy.com) is an environmental technology group based in the Shandong Province of Eastern China specialising in the development and application of green energy and energy efficient solar water heating solutions. In particular, the Group is focused on the manufacture and sale of split-unit solar water heating systems. Auhua Clean Energy operates through its wholly owned subsidiaries Shandong Auhua New Energy Co., Ltd and Weihua Auhua New Energy Co., Ltd., of which Auhua Holdings Pte Ltd is the intermediate holding company.