Alternative Fuel Systems Inc. in Cooperation With Hydro Quebec and Kraus Group Inc. to Expedite Large Scale Natural Gas Conversion Project in Beijing.

CALGARY, Alberta--(BUSINESS WIRE)--Feb. 8, 1999--Alternative Fuel Systems Inc.'s (AFS) vice president, Ed Mirosh, signed an agreement on Feb. 3, 1999, in Beijing, People's Republic of China (PRC), with Lin Duo, deputy director of the Beijing Municipal Administration Commission (BMAC).

Under the terms of the agreement, AFS will immediately commence a detailed feasibility study and a pilot natural gas vehicle (NGV) program for the City of Beijing.

BMAC has been given a mandate by the Beijing People's Municipal Government to develop and implement a plan to convert vehicle fleets in Beijing from gasoline/diesel to natural gas (NGV Program). The Beijing Public Utilities Bureau (BPUB), under the leadership of BMAC and as the agency responsible for natural gas distribution in Beijing, wishes to develop and implement a plan to augment the existing natural gas distribution network by establishing NG service stations throughout Beijing.

In order to reduce local air emissions, Beijing intends to convert its entire public fleet, consisting of 5,400 large buses, 10,000 microbuses and 60,000 taxis, to alternative fuels. The conversions are to take place over the next several years. AFS has been asked to proceed immediately with a feasibility study and plans for the pilot program to enable conversions to be carried out on an expedited basis.

AFS and BMAC wish to begin the pilot project within the first half of 1999. The pilot project will test multiple vehicle conversions with 1) the AFS Sparrow electronic CNG injection fuel management system; 2) the Sherex/AFS three-stage fuel management system; and 3) the AFS Eagle dual diesel fuel management system.

AFS will act as coordinator of the NGV pilot program with the support and assistance of Hydro Quebec International (HQI) of Montreal and Kraus Group Inc. (Kraus) of Winnipeg. AFS was chosen for its proven expertise in NGV engine conversion system design and manufacturing, as well as its experience in NGV engine development and testing. HQI is recognized for its expertise related to all technical and economic matters pertaining to NG transmission, distribution and utilization, including facilities operation and financing.

Kraus designs and manufactures CNG stations and dispensers. Planned vehicle conversions will require the construction of 100-200 NG stations in Beijing over the next few years. Kraus has just been awarded a contract to build 14 NG stations in Sichuan Province.

AFS and BMAC have exchanged detailed technical and economic sinformation for the feasibility study and pilot program. Mirosh met with Vice Mayor Zhang Mao earlier to discuss similarities between air quality problems in Beijing and those in Mexico City, where AFS, HQI and Kraus are currently completing the first phase of a project to expand NG infrastructure, build NG stations and convert municipal fleets to NG. The Mexico City project will be expanded to convert a minimum of 10,000 vehicles annually to NG over a 10 year period.

The Beijing NGV project is in addition to and entirely separate from AFS' agreement in Sichuan Shutong, China, where an initial $1.7 million contract to supply NGV equipment and technology was finalized late last month.

AFS is a world leader in the fight against global vehicular pollution with its innovative Sparrow and Eagle technologies and revolutionary reverse flow catalytic converter (RFC).

AFS is listed on the Vancouver Stock Exchange, trading under the symbol ATF.

For further information contact:

Alternative Fuel Systems Inc. Jo-Anne Cappis Investor Relations 403/261-1833 403/237-7441 E-mail: [e-mail] Web site: www.altfuelsys.com