Lb-Shell PLC Regulatory News (LBP)

Intelligent Energy Holdings plc

+44 (0)1509 271271

Dr. Henri Winand

Chief Executive Officer

John Maguire

Chief Financial Officer

Dr. Mark Lawson-Statham

Director of Corporate Finance

Canaccord Genuity

+44 (0)20 7523 8000

Simon Bridges

Richard Royden

Powerscourt

+44 (0)20 7250 1446

Giles Sanderson

Matthew Fletcher

Rob Greening

Principal Risk Description

Detail of Risk

Risk Management

1

The Group is developing complex, innovative technology products which require further technical development and investment in infrastructure, along with significant adoption by customers. Material markets for fuel cell technology may never develop, or develop more slowly than the Group anticipates. In addition, fuel cells may never be as competitive as other competing technologies or as direct competitors continue to evolve.

Due to the complex, innovative nature of this technology, projects and programmes may not be delivered on time or on budget or may fail to achieve expected performance criteria in new product launches or result in deficiencies in the products that are launched. Such delays could create an impression that fuel cell technology is not suitable or ready, in turn materially impacting the adoption of the technology by customers.

Commercialisation of fuel cell products and technologies also depends upon achieving a suitable total cost of ownership of these products and cost effective implementation of the technologies, since currently fuel cell products are more expensive when compared with products based on existing technologies. The Group may not be able to sufficiently reduce the cost of these products without reducing their performance, reliability and durability, which could affect the willingness of customers to buy the product.

The Group has dedicated project managers who control, monitor and manage identified work packages to meet predefined delivery criteria, or escalate material issues internally.

The Group has protected budget and resources for critical projects to ensure competitive advantage and increase the likelihood of the technology meeting the desired performance criteria and cost within the relevant timeframe to satisfy likely markets.

2

The Group is currently reliant on a small number of customers with various contractual obligations; failure to meet these commitments could result in contracts not being renewed, or termination of existing contracts.

The Group is reliant on revenue from a small number of customers and there can be no assurance that it will be able to retain or obtain additional customer relationships.

Intelligent Energy has a number of customer contracts requiring adherence to milestones and service level agreements. A failure to adhere to these contractual commitments could lead to financial penalties or in extreme scenarios the loss of future activity.

The Group's customers may experience adverse trading conditions which in turn may affect their ability to continue or to do further business with the Group.

The Group has divisional Business Development teams to attract and retain both new and existing business, thereby reducing the reliance on a small number of customers.

Contractual commitments are closely monitored internally to underpin delivery and identify corrective action, if appropriate.

Due diligence processes are carried out where appropriate and prior to entering into agreements with new customers.

The Group seeks to maximise revenue opportunities by seeking to enter into long-term commercial arrangements with multiple sources of value.

3

The Group is dependent on a variety of third party providers both in the manufacture of its products and the supporting operations.

The Group is reliant on third parties to successfully manufacture its products in the required numbers and to the required specification. As a consequence, the Group is and will remain exposed to the risks relating to the contract manufacturer's ("CM") business. These include:

· CM ability to employ and retain suitably qualified staff;

· Level of investment the CM makes in factory premises;

· CM ability to create and effectively manage the supply chain in order to successfully and consistently manufacture the Group's product to the required standards; and

· Reputational risks to the Group if the CM fails to meet legal or regulatory standards.

The Group will also continue to rely on third party service providers to deliver its business plan. CE and DP&G will be dependent on third-party providers to provide logistics and distribution of products and equipment. Service providers will be used to provide field services for the assets in the DP&G division and to support cartridge return and refill processes for the CE division.

Any failure by such third party service providers to meet their contractual obligations to the Group could have a material adverse effect on the Group's business, financial condition, results of operations or prospects.

The Group partners with industry-leading or specialist companies and has in place a detailed internal process to manage its key partners which includes Intelligent Energy staff being heavily involved in the set up phase with the CM.

During the negotiation of commercial agreements, a balanced approach to apportioning risk is sought.

The Group seeks to develop long- term relations with its key suppliers in order to develop quality manufacturing systems, which are flexible and scalable.

4

The Group is dependent on proprietary technology underpinned by intellectual property ("IP") and may not be able to obtain, maintain, defend or enforce those IP rights. The Group may also be exposed to litigation in the future in respect of IP infringement or product liability claims.

The Group's success will depend in part on its ability to obtain, maintain, defend and enforce its patents and other IP rights that underpin its proprietary technologies and products. There is no assurance that for example:

· any currently pending or future patent will be granted;

· the Group's patent applications will not be challenged by third parties;

· where patents have been issued to the Group, that others will not be able to design around such patents to create a competing technology or product;

· competitors will not develop similar products which are not within the scope of the Group's patents; and

· the Group's IT systems can fully prevent a loss of IP through a cyber-attack.

The business carried on by the Group means that it faces inherent risks in respect of IP infringement and product liability claims, each of which could materially adversely affect the Group's business, results of operations or financial condition.

Intelligent Energy identifies and registers its IP where appropriate to aid enforcement of its rights and protects and challenges infringement, where appropriate. It also looks to regularly extend its proprietary knowledge through acquisition with continued on-going research activities.

IP boundaries and ownership are integral parts of the contracts which the Group enters into at all levels in the business.

As part of a new employee's induction, IP training is given which emphasises the importance and relevance of IP to the Group's activities.

The Group has specialist in-house IP capability that oversees all IP activity including the management of external IP service providers.

The Group has an IT security framework and roadmap in place which highlights the highest cyber risks. The roadmap is being implemented with priority on highest risk items. As new cyber risks develop, or are identified, the roadmap and priorities adjust accordingly.

5

Depending on the level of growth in the Group further funding is likely to be required, particularly relating to activities in the DP&G division.

The Group's longer term liquidity and capital requirements are difficult to predict. This depends on numerous factors, including the success of the Group's products, the Group's R&D activities, relationships with third-party business partners and the impact of competing technologies and market developments. Furthermore, the Group's business plan must account for differing revenue generating activities and capital investment programmes across its three divisions, whilst also seeking to ensure that the Group has the capability to respond to strategic opportunities that may arise in target markets.

In response to or as a result of any one of, or a combination of these factors, the Group may need to incur additional capital or operating expenditure or accelerate planned expenditure, and may therefore incur net cash outflows in excess of those anticipated in the business plan, requiring the need to raise additional financing.

The Group regularly forecasts its future cash flow requirements and monitors the level of future financial commitments.

The Group engages with Banks and Investors from around the world to diversify potential sources of future investment.

6

The Group depends on key personnel and the failure to retain or attract suitably qualified employees could limit the growth of the business.

The success of the Group and its business strategy are dependent on its ability to attract and retain key management, commercial and technical personnel. The loss of the services of one or more members of the management group, or key technical, or commercial personnel, or the inability to recruit additional personnel as needed, may make it difficult for the Group to manage its business and meet its objectives. As a consequence its business, results of operations or financial condition may be adversely affected.

Intelligent Energy maintains regular contact with recruitment bodies to understand trends in the labour market and regularly monitors staff turnover. Following Admission of the Group's shares to trading on the London Stock Exchange, further consideration has been given to remuneration packages and long -term incentive arrangements offered to key personnel.

The Remuneration Committee carries out benchmarking exercises on a regular basis to ensure key personnel are remunerated in line with industry levels.

7

The Group's growth strategy involves operating in new and emerging parts of the world where there may be additional complexity in delivering the business plan.

The Group's growth strategy relies in part on the expansion of its businesses in parts of the world which are less developed. The costs associated with entering and establishing in such markets may be higher than expected, and the Group may face significant competition in such markets.

The Group understands its business may face a range of risks and challenges in its initial target markets, including:

· difficulties in managing overseas operations;

· difficulties and delays in contract enforcement and the collection of receivables under the legal systems of foreign countries;

· regulatory and legal requirements affecting its ability to enter new markets through joint ventures with local entities;

· changes to or inconsistent application of laws and regulations; and

· overcoming the logistical challenges of the supply and delivery of hydrogen.

The Group employs personnel who have strong international backgrounds and puts in place experienced personnel to run and work in its overseas subsidiaries.

Where appropriate, recruitment also takes place locally to ensure these businesses understand local markets, customs and working places.

External advisors are sourced locally to ensure legal and regulatory compliance.

8

The Group is exposed to foreign currency exchange risk.

The Group's financial statements are prepared in Pound Sterling but once material revenue is generated from the Group's CE and DP&G divisions, the majority of the Group's business is expected to be carried out in currencies other than Pound Sterling. As a result, the Group is exposed to both translational and transactional foreign exchange currency risk.

The Group monitors foreign exchange rates on a weekly basis and enters into forward rate agreements where large value obligations exist at a known date, where deemed suitable.