Active Energy : Interim Final Results – 28th September 2021

Active Energy Group Plc

Unaudited Interim Condensed Consolidated Financial Statements For the six months to 30 June 2021

Active Energy Group Plc

Active Energy Group Plc is a London listed (AIM: AEG) renewable energy company focused on the production and development of next generation biomass products that have the potential to transform the traditional coal-fired power industry and the existing renewable biomass industry.

The Company has developed a proprietary technology which transforms waste biomass material into high-value renewable fuels. Its patented product, CoalSwitch™, is a leading drop-in renewable fuel that can be co-fired with coal or replace existing biomass feedstock resources without requiring significant plant modifications. Active Energy Group's immediate strategic focus is the production and commercialisation of CoalSwitch™ and further fuel blends that utilise waste wood and residual materials.

CoalSwitch™ is a registered trademark belonging to Active Energy Group Plc ("CoalSwitch").

Biomass - critical part of a zero carbon economy

Biomass central to current European and Asian de-carbonization

• Europe has led the way, Asia is the next growth area
• Essential to grid stability: only source of renewable baseload power other than nuclear
• Fast implementation at scale: conversion of existing coal power stations is rapid and well-understood
• Fuel comes overwhelmingly from USA

Biomass with Carbon Capture is critical to 2050 net-zero plans

• IEA assumes global increase of 40EJ in biomass power to 2050
• By comparison, 40EJ is roughly 33% of China's current total primary energy demand

Once USA decides to decarbonize, biomass will likely be part of it

• Huge sustainable and certified domestic biomass feedstock
• Advantages means energy security and rural job creation
• Replacement of the dying pulp industry

Active Energy Group Plc Interim Report 2021

Active Energy Group Plc

Highlights

Operational Highlights

Construction of a second CoalSwitch reference plant at Ashland, Maine ("Ashland Facility") as part of a joint venture with Player Design Inc.

• First CoalSwitch production commenced at Ashland Facility in May 2021
• Transition from conceptual technology to production of next generation biomass fuel
• Initial deliveries of CoalSwitch to University of Utah, Brigham Young University and PacifiCorp in June 2021
• Samples of CoalSwitch delivered to twelve prospective customers

Independent CoalSwitch analysis from University of New Brunswick confirm the product's superior qualities to white pellets as well as its suitability as a sustainable substitute for carbon emitting fuels

Construction of CoalSwitch reference plant at Lumberton, N.C. ("Lumberton Facility") near completion but suspended and requiring permit amendment

Company ceases lumber and saw log activities in order to focus on strategy of delivering a next generation biomass pellet

Financial Highlights

Major balance sheet restructuring successfully completed

• Equity fundraise of £7.0 million (gross of expenses)
• Conversion and redemption of outstanding convertible loan notes and removal of security over the Company's assets

Revenue for H1 21 of US$636,241 (H1 20: US$499,893)

Loss for the reporting period of US$2,039,316 (H1 20: US$593,914)

Post-Period End

Design and engineering commenced for a larger proprietary reactor that would be capable of accommodating production volumes of up to 70,000 tonnes of CoalSwitch per annum

Component failure at Ashland Facility resulting in production suspension - options to re-establishnear-term production at Ashland Facility currently being evaluated

Outlook

AEG continues to be well placed to deliver on the growing need for more sustainable power sources

The Board is more convinced than ever that CoalSwitch fuel can form part of the energy transition process

The next key step: design and construction of a 70,000 tonne per annum CoalSwitch facility

Michael Rowan, CEO of Active Energy, said:

"I am pleased to report a successful period for AEG that saw the first production volumes of CoalSwitch and the completion of construction of a second reference plant in Maine. CoalSwitch has now transitioned from a concept to a deliverable biomass fuel, and the manufacturing process know-how obtained in the last three months is invaluable.

We expect next generation biomass fuels will play a key role in the transition toward the zero carbon economy. CoalSwitch's superior qualities to white pellets as well as its suitability as a sustainable substitute for carbon emitting fuels, positions AEG extremely well in the evolving global shift towards renewable energy. With product in hand and increasing market interest, AEG is now providing CoalSwitch samples to prospective long term customers.

With a restructured balance sheet, AEG's next key goal is to expand its production capacity to become a leading biomass fuel producer of next generation biomass fuels. The road to produce CoalSwitch is challenging, but the achievements of 2021 to date have provided confidence to the Board of the next phase for growth."

Active Energy Group Plc Interim Report 2021

1

Chairman and CEO's Letter

For the six-month period ended 30 June 2021

Dear Shareholders,

Introduction

AEG is focussed on developing next generation biomass products and the manufacturing processes and technology required to produce them.

The Directors believe that CoalSwitch represents a step change for the pellet industry, utilising steam technologies to produce a more efficient fuel addressing environmental and energy concerns for the immediate future.

In the first half of 2021, AEG achieved a number of significant milestones:

• the successful financial restructuring of the Company's balance sheet and raising of equity funding to construct the first CoalSwitch reference plant;
• sales and marketing activities moved from conceptual discussions to testing and analysis of sample fuel quantities produced at Ashland, Maine (the "Ashland Facility");
• supply of CoalSwitch samples to twelve prospective customers, with ongoing discussions with a number of interested parties, including discussions for technology licensing; and
• independent testing of initial CoalSwitch production has been completed to show that CoalSwitch is a superior biomass pellet fuel to existing white pellets in terms of heating value and bulk density.

The role of biomass in future energy supply

In the shift towards sustainability, there is an increasing recognition of the need for a balanced energy supply. The provision of a consistent level of base-load electricity within existing electricity grid systems currently requires a combination of energy sources which includes biomass fuels.

The International Energy Agency's ("IEA") "Net Zero by 2050" report shows a scenario of a global increase of 50 exajoules in biomass power to 2050 (equivalent to one-third of China's current annual electricity consumption). The IEA report noted that "Solid bioenergy provides flexible low-emissions generation to complement generation from solar PV and wind and it removes CO2 from the atmosphere when equipped with CCUS (Carbon capture)".

To date, Europe's regulation has led the way in the use of biomass power generation. Asia is fast adopting similar policies and this is expected to lead to future growth in these markets. The USA is now facing similar challenges to accommodate sustainability and maintain power supplies within its existing infrastructure. The interest in next-generation biomass fuels has never been greater. Against this backdrop, CoalSwitch is well positioned.

Strategy

The Board has drawn further confidence from:

• the utilisation of waste biomass material as a core feedstock;
• the validation of the steam explosion production process in scale from running the test reactors at Ashland;
• the additional technical product knowledge and know-how obtained during the first production cycles at Ashland; and
• the positive market interest in CoalSwitch received to date.

The Board is watching regulatory and technology developments, where recent supply challenges have identified potential power shortages. Next generation biomass fuels (such as CoalSwitch) will play an important part in addressing the shortcomings of renewable energies within existing electricity grid systems.

Developing a new technology has inevitable challenges and CoalSwitch is no different - notably the recent suspension of production at Ashland in August. However, we have now produced CoalSwitch through an industrial scale facility providing considerable manufacturing data and know-how. Design improvements for the reactors have already been identified alongside ways to simplify the manufacturing process to reduce costs of production.

The market requires a scalable solution to produce next generation pellets and the Directors believe that AEG now has the technical solutions to deliver pellets that have been produced via steam technologies. The Company's strategy is to construct scalable production facilities starting with the design and build of the first 70,000 tonne per year CoalSwitch plant in Ashland.

Operational update

During the first six months of the year, AEG focused its operational activities in two centres on the US East Coast, namely Ashland, Maine and Lumberton, North Carolina. AEG remains focussed on developing manufacturing capacity in the USA, which is at the heart of the current global biomass manufacturing industry. Our locations also allow AEG to make the greatest impact toward the industry changes that the biomass industry needs to make in the coming years.

2	Active Energy Group Plc Interim Report 2021

Chairman and CEO's Letter continued

For the six-month period ended 30 June 2021

Operations at Ashland, Maine

During construction of the Lumberton reference plant, AEG and Player Design Inc. ("PDI") received additional commercial enquiries about the possibility of combining CoalSwitch production facilities within existing lumber mill operations in North Eastern USA. This model aligned with the strategy being pursued in Lumberton and the Group was keen to expand into this region. In April 2021, AEG and PDI worked with the State of Maine to obtain a temporary operating permit to allow a second CoalSwitch reference plant to be constructed at PDI's facility at the Ashland Facility.

AEG had sufficient equipment to build a second facility when combined with PDI's existing operating infrastructure at the Ashland Facility. The Board therefore decided to proceed with this development before the permitting and construction issues arose in Lumberton during May 2021. With the subsequent events at Lumberton, resources within AEG and PDI were refocused toward completion of construction of the second reference plant and for it to become operational within the existing timetables. As a result, the reference plant at the Ashland Facility was completed and operational within 14 weeks from the date of issuance of the relevant temporary operating permit. First CoalSwitch fuel production commenced in May 2021 and first deliveries of CoalSwitch to the program organised by the University of Utah, Brigham Young University ("BYU") and PacifiCorp ("PacifiCorp") were made in June 2021.

The Ashland Facility reference plant continued to operate until 5 August 2021 when a monitoring component failure resulted in a suspension of production, rendering both reactors inoperable and requiring replacement. All other equipment at the Ashland Facility remains operable and capable of recommencing CoalSwitch production operations at any time. More importantly, production from the second reference plant validated the steam explosion process to produce next generation biomass fuels on an industrial scale. During the production period, valuable manufacturing and product data was acquired which provides key information to allow the construction of larger scale production facilities.

Operations at Lumberton, North Carolina

Lumberton (the "Lumberton Site") was purchased in 2019 to become a strategic hub for a variety of lumber activities, including the production of next generation biomass fuels, such as CoalSwitch, and performing various ancillary lumber activities, including the production of rail ties and other lumber products. These activities were seen as complementary given AEG's aim to demonstrate that biomass fuel production must work within sustainability goals. By situating all the activities within one facility, AEG sought to demonstrate that biomass fuel manufacture can be successfully accommodated within an integrated lumber producing facility. This model has attracted increasing interest from prospective lumber partners throughout the USA and Canada during 2021 and remains a core component of the Company's strategy.

In respect of the lumber activities during the period, the first quarter provided a number of operational issues for Active Energy Renewable Power LLP ("AERP"), the Company's operating subsidiary at Lumberton. These issues included adverse weather conditions which disrupted log supplies to the Lumberton Site, ongoing supply chain disruption for product distribution and the continuing operational limitations occurring as a result of COVID-19. The Board had set modest goals to operate AERP's lumber and saw log activities at breakeven by the 2020 year-end but did not achieve the operational scale to attain these targets. The Board's review of the lumber and saw log activities at the Lumberton Site determined that they neither aligned with the Group's strategic intent of utilising residual materials in the production of biomass fuels, nor could the investment required to achieve scale for these businesses be justified at the expense of developing CoalSwitch. As a result, the Board took the decision to cease the Company's lumber and saw log activities in AERP.

Active Energy Group Plc Interim Report 2021

3