Alternative Fuel Systems Forms Alliance With DaimlerChrysler Licensee IDEM

29 June 1999

Alternative Fuel Systems Inc. Forms Important Alliance With Daimler Chrysler Licensee ``IDEM'' in Iran

    CALGARY, Alberta--June 28, 1999--Alternative Fuel Systems Inc. (AFS) Monday announced the signing of a detailed Memorandum of Understanding (MOU) with the largest diesel engine manufacturer in Iran.
    Iranian Diesel Engine Manufacturing Company (IDEM) manufactures Mercedes Diesel Engines under license from Daimler Chrysler. Daimler Chrysler has a 30 percent ownership interest in IDEM.
    AFS has successfully demonstrated its patented technology with Mercedes engines in prior programs in Brazil, Argentina, Chile and Thailand.
    AFS president, Gerry Klopp stated, "Because AFS has over 10 years of actual in-service experience with Mercedes engines, no additional research and development was required to reach this agreement with IDEM. Proven field performance, emission reductions, fuel efficiency, reliability, and driveability were the deciding factors in this deal."
    AFS will supply IDEM with 4,000 electronic fuel management systems over the next two years. Under the terms of the MOU, a firm order will be placed by IDEM after 30 days of on-road demonstration, to be completed by Aug. 15, 1999. IDEM engineering personnel will participate in the road demonstration which is to take place in the city of Tehran or Tabriz. As part of their commitment, IDEM is arranging a DM$150,000 (CDN$125,000) bank guarantee in favour of AFS to expedite the program.
    The value of the AFS components supplied will range between US$1,100 to $3,000 per unit depending on applications.
    Klopp added, "This initial contract is expected to lead to mass production of natural gas powered diesel engines, not only within Iran, but for export markets as well. We are thrilled!"
    AFS designs, develops and markets advanced technology fuel management and exhaust treatment systems that permit diesel and gasoline engines to operate on clean burning, environmentally friendly compressed natural gas. Commercial success and sales of the Sparrow and Eagle Systems continue to grow. AFS's most recent breakthrough, the reverse flow catalytic converter, previously referred to as the RFC, has now been formally named the "Condor." The development of new cutting edge technology is ongoing at AFS as the company continues to be a leader in the field of reducing engine emissions.
    AFS has successfully won contracts in Mexico and China, and is engaged in ongoing negotiations in many regions of the world including India, Japan, Australia, Chile, and Europe. The Japanese high tech Isuzu 6HHI engine equipped with the AFS "Eagle II" recently received JARI Certification after test results achieved pollution levels 15 percent-91 percent below stringent 13 mode LEV levels set in Japan.
    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
403/262-1833
403/237-7441 (FAX)
E-mail: afsweb@telusplanet.net
Web site: www.altfuelsys.com

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