30 April 2007

APPENDIX 4C

Advanced Engine Components Ltd ("ACE") recorded an EBITDA loss of approximately $100,000 for the quarter ended 31 March 2007. The loss compares to a November 2006 forecast, for the 31 March 2007 quarter EBITDA, of $100,000. The loss principally relates to additional time for testing and trialling of the many natural gas ("NG") engine development programmes ACE is conducting in China and Australia; together with aligning the ordering, inventory and payment systems with our OEM customers in China.

The ability of ACE to achieve 2007 financial year sales and profitability, in line with forecasts announced in November 2006, is dependent on the ability to convert existing sales opportunities to sales deliveries over the next two months. The ability to catch up the current shortfall, within the two month period, appears unlikely.

The Board remain confident that ACE will achieve forecast monthly sales and profitability in the near future. This confidence is based on:

• Sales of various versions of First Auto Works ("FAW"), China's largest vehicle manufacturer, 7.1 litre, 6.6 litre and 3.2 litre NG engines, with the ACE natural gas vehicle system ("NGVS"), continued during the quarter. Development of the new range of Deutz / FAW 7.1 litre NG engines, with ACE's NGVS, is scheduled to occur in the second half of the 2007 calendar year.

• Weichai Weifang Peterson Gas Engine Co Ltd ("Weichai"), one of China’s largest heavy duty engine manufacturers with over 70% of the Chinese heavy duty engine market for construction and machinery, are producing, marketing and selling versions of the Weichai / ACE 11.6 litre, 9.7 litre and 6.2 litre NG engines. The LNG version of the 11.6 litre engine is currently being developed.

• the Dongfeng Nanchong Automobile Co Ltd ("Dongfeng") is conducting final on road reliability and vehicle testing on a 6.9 litre NG engine, incorporating NGVS components developed with ACE's technical collaboration. On completion of testing, Dongfeng is contractually committed to purchase a significant volume of ACE NGVS kits. Final testing should occur in the current quarter.

• ACE has an agreement with Wuxi Xilian Diesel Limited Company ("Xilian") of China to test and develop two versions of a 7.1 litre NG engine. Certification to Euro 3 emissions standard is expected to occur in the current quarter. Xilian expect to produce between 1,000 and 2,000 NG engines per annum. Immediately upon completion of final testing Xilian will purchase an agreed number of ACE NGVS kits.

• A large bus operator in the Zhejiang province of China has contracted ACE to convert three diesel buses to LNG for road trials. If subsequently successful, through a tender process, ACE will be contracted to replace a portion of the existing fleet of 5,000 buses. ACE expects to have a competitive price and performance advantage.

• Weichai have completed road trials of two 25 tonne prime movers powered by Weichai/ACE 9.7 litre NG engines. A further 30 prime movers will immediately be converted to NG as the first stage of converting the entire Weichai owned fleet of 3,000 trucks to NG over the next 2 years.

• A prominent bus manufacturer in Iran has been trialling three original equipment manufacturers ("OEM") NG engines for over twelve months. After a competitive tender process the Weichai/ACE NG engine was selected. The initial order is expected in the current quarter.

• The Bangkok Mass Transport Authority ("BMTA"), in Thailand, has issued a tender to convert 2,675 buses to NG engines. ACE is part of a Thai based consortium that has pre-qualified to tender. The ACE consortium will utilize Chinese and overseas OEM NG engines, manufactured in China, that incorporate the ACE NGVS.

• The ACE Thai consortium includes Monika Motors Limited ("Monika") and the Union Bus Company ("Union"). Both are Thai based companies. Monika has re-powered six NG buses for Union using FAW/ACE NG engines. Monika has ordered a further 62 NG engines from ACE for delivery in May 2007.

• The ACE Thai consortium is in final discussions with one of Thailand's largest company's for the conversion of a diesel powered truck to NG for a trial period. If the trial is successful, the company will replace the diesel engines of their existing fleet of approximately 6,000 trucks with NG engines.

• Advanced Fuels Technology Pty Ltd ("AFT"), a Melbourne based alternative fuels company, have installed Volvo engines, incorporating the ACE NGVS, in two prime movers for fuel and general haulage in Malaysia. The engines have passed all regulatory certification and are undergoing a two month road trial. Once road trials are complete AFT will commence conversion of the entire 1,000 vehicle fleet to NG.

• FAW Dalian Coach has built two NG buses, incorporating the ACE NGVS, for IBH Motors Ltd ("IBH") of Bangladesh. IBH has ordered a further 23 FAW/ACE NG buses for sale in Bangladesh and Pakistan. These NG buses will be the forerunner to an IBH lead and Bangladesh based joint venture building NG buses, using the FAW base engine and ACE NGVS, for Bangladesh and surrounding countries.

• In Australia, the 220HP Isuzu, city delivery, NG powered truck with ACE's NGVS, has travelled more than 60,000 kilometres in commercial service over the last twelve months. The Isuzu NG engine, developed by ACE as part of the Alliance Agreement with Motive Energy Pty Ltd, is now ready for commercial sale in Australia.

NG refuelling infrastructure continues to expand throughout China and other Asian countries in response to environmental concerns and the cost and supply security of oil to these regions. A clear indication of the growing significance of NG, as an alternative fuel source, is Weichai displaying 11 engines, of which 7 are powered by NG, at an upcoming Engine Exhibition in China.

Appendix 4C, 30 April 2007 (PDF, 389k)

For further information please contact:
Tony Middleton (Managing Director) on (08) 9209 6911; or
Email: shares@advancedengine.com

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