CFCL Fundraising to Support Further Growth

Friday 4 November 2011

Ceramic Fuel Cells Limited

("CFCL" or the "Company")

Fundraising to accelerate further growth

Placing and Subscription to raise GBP 3.8 million (AUD 5.9 million)

Rights Issue and Overseas Offer to existing shareholders to follow

Ceramic Fuel Cells Limited, (AIM / ASX: CFU) a leading developer of high efficiency and low emission electricity generation products for homes and other buildings, is pleased to announce that it has raised GBP 3.8 million (AUD 5.9 million) pursuant to a placing and subscription.

The Company will also launch a rights issue and offer to existing investors at the same issue price.

The funds raised will enable the Company to increase volume production of its products and match the demand from the volume orders it has started to receive. This funding will give the Company additional working capital required to leverage economies of scale by placing volume orders with suppliers and to implement further value engineering to drive down manufacturing costs.

The Company has raised approximately GBP 3.2 million (AUD 5.0 million) gross by way of a placing of 45,988,571 new ordinary shares in the Company ("Ordinary Shares") at 7 pence each with institutional investors underwritten by Nomura Code Securities Limited (the "Placing") and approximately GBP 0.6 million (AUD 0.9 million) by way of a subscription of 8,571,428 new Ordinary Shares at the same issue price with an existing private investor in the United Kingdom (the "Subscription").

As the Board feels strongly that existing shareholders should have the opportunity to participate in a capital raising process at the same price as investors under the Subscription and Placing it will invite existing shareholders to participate in a further fundraising at the same issue price by way of a 1-for-4 Rights Issue in Australia and New Zealand (the "Rights Issue") and an offer to shareholders in the United Kingdom and certain other jurisdictions (the "Overseas Offer").

The Rights Issue is non-renounceable and seeks to raise up to AUD 21.7 million, at an issue price of 10.8 cents per share. The Overseas Offer seeks to raise up to approximately GBP 2.15 million (being the pounds sterling equivalent of EUR 2.5 million) at an issue price of 7 pence per share. Eligible shareholders will receive either a Rights Issue prospectus or an Overseas Offer circular, as applicable, in due course.

The issue of the shares under the Placing, Subscription and Overseas Offer will not require shareholder approval to disapply preemption rights as they represent less than 15 percent of the Company's total issued share capital.

Further details:

Placing and Subscription

·; The Company has agreed to issue a total of 54,559,999 new Ordinary Shares to new and existing investors as part of the Placing and the Subscription to raise approximately GBP 3.8 million (AUD 5.9 million) gross, GBP 3.6 million (AUD 5.5 million) after expenses.

·; These new Ordinary Shares will represent 4.3 percent of the Company's issued share capital as enlarged by the Placing and the Subscription.

·; The new Ordinary Shares will be issued at a price of 7 pence per share. This price represents a discount of 13.8 percent to the mid-market closing price of the Ordinary Shares on AIM on the last business day prior to this announcement.

·; The Placing is underwritten by Nomura Code Securities. The Subscription will not be underwritten.

·; The Placing and Subscription are subject to the admission of the new Ordinary Shares to be issued pursuant to the Placing and the Subscription to trading on AIM becoming effective ("Admission"). The Company has applied to the London Stock Exchange for Admission which is expected to occur on 10 November 2011. Following Admission (and prior to the Overseas Offer and the Rights Issue) the Company will have 1,262,577,415 Ordinary Shares in issue.

The Rights Issue

·; The Rights Issue is a 1 for 4 non-renounceable rights issue offer to existing shareholders in Australia and New Zealand to subscribe for up to 201,446,710 new Ordinary Shares at 10.8 cents per share to raise a maximum of AUD 21.7 million (approximately GBP 14.1 million).

·; Participants in the Rights Issue will also be entitled to apply for additional Ordinary Shares to take up any shortfall created by other participants in the Rights Issue not taking up their full entitlements. The Board of CFCL also reserves the right to issue shares to third parties in the event of a shortfall.

·; The Rights Issue is not underwritten and the entitlement to participate in the Rights Issue cannot be sold.

·; A prospectus for the Rights Issue is expected to be lodged with ASIC and ASX today. The prospectus and application form for the Rights Issue will be sent to eligible shareholders in Australia and New Zealand within the next week and will also be available at www.cfcl.com.au.

·; The Record Date for participation in the Rights Issue is Tuesday 15 November 2011.

·; Eligible participants should consider the prospectus in deciding whether to acquire the applicable shares and will need to complete the application form that accompanies that document.

The Overseas Offer

·; A circular and application form relating to the Overseas Offer will be sent to existing Shareholders with registered addresses in the United Kingdom and certain other jurisdictions into which the Company may lawfully extend the offer without the publication of a prospectus. Those shareholders entered on the register at 18:00 (London time) on 3 November 2011 (the "Record Date") will be entitled to participate in the Overseas Offer.

·; Such qualifying shareholders will be able to apply for any number of new Ordinary Shares at 7 pence per new Ordinary Share but, if the aggregate amount raised under the Overseas Offer exceeds the pounds sterling equivalent of EUR 2.5 million, shareholders will be scaled back at the directors' discretion.

·; The circular and application form are expected to be mailed to all qualifying shareholders on Tuesday 8 November 2011.

·; The Overseas Offer will not be underwritten and the entitlement to participate in the Overseas Offer cannot be sold. The Overseas Offer will be subject to Admission occurring.

Background

Ceramic Fuel Cells Limited is a leader in developing solid oxide fuel cell (SOFC) technology to provide highly efficient and low-emission electricity from widely available natural gas.

The Company has a broad portfolio of wholly-owned intellectual property, including 27 patent families (i.e. a single invention covered in multiple jurisdictions) and 126 individual patents that have been granted in key global markets.

The Company and its subsidiaries employ approximately 125 staff in Australia, the United Kingdom and Europe.

The first products to be powered by the Company's fuel cells are small scale units for homes and other buildings that produce one to two kilowatts of power as well as heat for hot water or space heating, with very high efficiency and low emissions.

The Company's products have achieved peak electrical efficiency of 60 per cent. which the Directors believe is higher than any other technology in the rapidly expanding market for small scale power and heating products.

Over the last two years the Company has completed the initial development of these products, has tested and demonstrated the products with customers and has begun to generate larger volume orders.

Following recently announced orders, and discussions with other potential customers, the Directors believe that now is the time to invest in actions that will drive down the unit cost of the Company's BlueGen and Gennex units and increase volume manufacturing of these products.

Use of proceeds

The Company will receive funding of approximately GBP 3.8 million (AUD 5.9 million from the Placing and Subscription. Proceeds from the Rights Issue (of up to AUD 21.7 million / GBP 14.1 million) and from the Overseas Offer (of up to the pounds sterling equivalent of EUR 2.5 million) will supplement those proceeds.

These additional proceeds will provide the Company with further working capital required to leverage economies of scale by placing volume orders with suppliers and to implement further value engineering to drive down manufacturing costs.

Further details of the use of funds, and the impact of the fundraising on the Company's operations and finances, will be set out in the Rights Issue prospectus and the Overseas Offer circular.

For further information please contact:

About Ceramic Fuel Cells Limited:

Ceramic Fuel Cells Limited is a world leader in developing fuel cell technology to generate highly efficient and low-emission electricity from widely available natural gas.

Ceramic Fuel Cells is developing fully integrated power and heating products with leading energy companies E.ON UK in the United Kingdom, GdF Suez in France and EWE in Germany.

Ceramic Fuel Cells has also sold more than 300 BlueGen gas-to-electricity generators to major utilities and other foundation customers in Germany, the United Kingdom, Switzerland, The Netherlands, Italy, Japan, Australia and the USA.

Ceramic Fuel Cells recently won the 2010-11 DuPont Design for a Sustainable Future innovation award and the Microgeneration UK 2011 Technical Innovation Award. The company is listed on the London Stock Exchange AIM market and the Australian Securities Exchange (code CFU).

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