Axion Power International Announces That the Chapter 11 Reorganization Plan for Mega-C Power Corporation Has Been Consummated.

WOODBRIDGE, Ontario -- Axion Power International, Inc. (Pink Sheets:AXPW) announced today the Chapter 11 plan of reorganization for Mega-C Power Corporation proposed by William M. Noall, Mega-C's Chapter 11 Trustee, Axion and others became effective and was consummated on November 21, 2006. In connection with the plan consummation:

* Axion's creditor claims against Mega-C have been compromised for $100;

* All pending and potential disputes between Mega-C and Axion, including potential derivative claims of Mega-C's creditors and shareholders have been released and settled;

* All of Mega-C's claimed interests in Axion's e3 Supercell technology, together with all of its tangible and intangible assets other than litigation claims against non-Axion parties have been conveyed to Axion;

* 1,500,000 Axion shares that were held in trust for the benefit of the Mega-C's creditors and shareholders have been returned to Axion for cancellation;

* 627,500 Axion shares that were held in trust for the benefit of the Mega-C's creditors and shareholders have been used to pay accumulated trust expenses through the effective date;

* 668,335 Axion shares that were held in trust for the benefit of the Mega-C's creditors and shareholders have been used to secure $2,005,000 in non-recourse loans to the trust, which has turned the proceeds over to the Chapter 11 estate to pay priority and administrative claims in accordance with the plan; and

* 5,331,665 Axion shares have been retained in trust for the benefit of a newly formed Mega-C liquidation trust and Mega-C's shareholders; and will be sold or distributed when the respective rights and interests of Mega-C's disputed creditors and shareholders are ultimately resolved by the Bankruptcy Court.

The litigation settlement and releases provided by the plan, which are as broad as the law allows, are now binding on Mega-C and all of its creditors and shareholders. The conveyance of Mega-C's tangible and intangible personal property eliminates conflicting claims to Axion's e3 Supercell technology. The plan requires the successor to the Chapter 11 estate to obtain dismissals of all derivative actions that are pending in the Canadian courts.

After accounting for the conversion rights of certain holders of preferred stock, Axion had 20,242,279 common equivalent shares outstanding on November 20, 2006. Therefore, the share cancellation represents a 7.4% decrease in the number of issued and outstanding shares and a proportionate increase in the value of each outstanding share. After giving effect to the settlement and accounting for the conversion rights of certain holders of preferred stock, Axion now has 18,742,287 common equivalent shares outstanding.

Tom Granville, Axion's CEO, said, "We are delighted to have a final resolution of the legal issues that have plagued Axion for years. Now that the plan has been consummated, we believe all appeals are effectively mooted. The plan eliminates conflicting claims to our technology and because of the broad releases included in the plan, we believe our risk of future litigation is not significant. The plan also creates a logical path forward that will allow Mega-C's creditors to be paid and the holders of its allowed equity interests to become Axion stockholders in due course."

Mr. Granville continued: "Most importantly, we can now concentrate all our resources on bringing the e3 Supercell technology to market. I look forward to leading Axion as we continue preparation for a series of planned demonstrations of our e3 Supercell technology that are scheduled to begin in the first quarter of 2007."

Mr. Granville concluded: "While plan consummation in the Mega-C bankruptcy is probably the single most important event in Axion's corporate history, we want to remind investors that our financial statements for the years ended December 31, 2003, 2004 and 2005 are currently being re-audited and material restatements are likely. We expect to resolve the remaining accounting issues in the near future."

About Axion Power International, Inc.

Axion uses patented carbon electrode assemblies to replace the negative electrodes found in conventional lead-acid batteries. The end result is the e3 Supercell; a battery-supercapacitor hybrid that offers higher power, faster recharge; longer-life and reduced lead content in a low-cost device that can be designed to deliver maximum power for fast discharge applications; maximum energy for slow discharge applications; or almost any balance between the two.

Axion is currently producing pre-commercial prototype e3 Supercells in small quantities at its lead-acid battery plant in New Castle, Pennsylvania. These pre-commercial prototypes use the same cases, materials, internal components and manufacturing equipment as Axion's conventional lead-acid batteries. The only notable manufacturing difference is the use of carbon electrode assemblies for the negative electrodes.

Axion believes e3 Supercells are the only class of advanced battery that can be assembled on existing lead-acid battery production lines throughout the world without significant changes to production equipment and fabrication processes. It also believes it will be able to manufacture carbon electrode assemblies in volume at low cost using standard automated production methods that are commonly used in other industries. If and when its electrode manufacturing methods are fully developed, Axion believes it will be able to sell carbon electrode assemblies as virtual plug and play replacements for the lead based negative electrodes used by all other battery manufacturers.

Axion's goal is to become the leading supplier of carbon electrode assemblies for the lead-acid battery industry.

"Safe Harbor" Statement Under the Private Securities Litigation Reform Act of 1995:

Certain statements in this Press Release are "forward-looking statements" within the meaning of the Private Securities Litigation Act of 1995. These statements include, without limitation, statements concerning the impact of the settlement agreement on our future business prospects and our ability to successfully complete the commercialization of the e3 Supercell. These forward-looking statements are based on our current expectations and beliefs and are subject to a number of risk factors and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. Such risks and uncertainties include the risk that the settlement agreement will not produce the results we intend and all of the risks inherent in commercializing a new product (including technology risks, market risks, financial risks and implementation risks, as well as other risks and uncertainties affecting the Company, included in filings with the Securities and Exchange Commission, all of which are available at www.sec.gov. We disclaim any intention or obligation to revise any forward-looking statements, including, without limitation, financial estimates, whether as a result of new information, future events, or otherwise.

Note to Editors: The "3" in "e3" should be superscript.