BLUE ENERGY LIMITED. — Proxy Solicitation & Information Statement 2007

Aug 14, 2007

BLUE ENERGY LIMITED A B N 1 4 0 5 4 8 0 0 3 7 8

NOTICE OF GENERAL MEETING

The General Meeting of the Company will be held at the Lindsay Room, Amora Hotel, 11 Jamison Street, Sydney, New South Wales on Friday 14 September 2007 at 10.30am (EST)

This Notice of General Meeting should be read in its entirety. If Shareholders are in doubt as to how they should vote, they should seek advice from their accountant, solicitor or other professional adviser prior to voting.

Should you wish to discuss any matter please do not hesitate to contact the Company Secretary by telephone on +61 (08) 9217 2227.

070809 BUL NOM

BLUE ENERGY LIMITED A B N 1 4 0 5 4 8 0 0 3 7 8

NOTICE OF GENERAL MEETING

Notice is hereby given that the general meeting of shareholders of Blue Energy Limited ( "Company" ) will be held at the Lindsay Room, Amora Hotel, 11 Jamison Street, Sydney New South Wales on Friday 14 September 2007 at 10.30am (EST) ( "Meeting" ).

The Explanatory Memorandum to this Notice provides additional information on matters to be considered at the Meeting. The Explanatory Memorandum and the Proxy Form form part of this Notice.

The Directors have determined pursuant to regulation 7.11.37 of the Corporations Regulations 2001 (Cth) that the persons eligible to vote at the Meeting are those who are registered as Shareholders on Wednesday 12 September 2007 at 5.00pm (EST). Terms and abbreviations used in this Notice and the Explanatory Memorandum are defined in Schedule 1.

AGENDA

1. Resolutions 1(a) and 1(b) – Ratification of Placement

To consider and, if thought fit, to pass with or without amendment, the following Resolutions as separate ordinary resolutions:

"That pursuant to and in accordance with ASX Listing Rule 7.4, and for all other purposes, the Shareholders approve and ratify the prior issue and allotment by the Directors of:

• (a) 13,604,730 Shares and 566,864 Options to CVC Limited; and

• (b) 26,284,061 Shares and 750,000 Options to Chimaera CM Pty Ltd,

on the terms and conditions in the Explanatory Memorandum", (“ Placement ”)

Voting Exclusion

The Company will disregard any votes cast on Resolution 1 (a) by CVC Limited and any associate of CVC Limited and on Resolution 1 (b) by Chimaera CM Pty Ltd and any associate of Chimaera CM Pty Ltd. However, the Company will not disregard a vote if:

• (a) it is cast by the person as a proxy for a person who is entitled to vote, in accordance with the directions on the Proxy Form; or

• (b) it is cast by the person chairing the Meeting as proxy for a person who is entitled to vote, in accordance with directions on the Proxy Form to vote as the proxy decides.

070809 BUL NOM

2

2. Resolution 2 - Authorise Further Placement

To consider, and if thought fit, to pass with or without amendment as an ordinary resolution the following:

"That, in accordance with ASX Listing Rule 7.1 and for all other purposes, the Shareholders approve and authorise the Company to issue up to 106,395,270 Shares at an issue price of $0.25 to CVC Limited and institutional and sophisticated investors and 4,433,136 Options to CVC Limited on the terms and conditions set out in the Explanatory Memorandum , ( "Further Placement .")

Voting Exclusion

The Company will disregard any votes cast on this Resolution by CVC Limited and any other person who may participate in the Further Placement and might obtain a benefit (except a benefit solely in their capacity as holders of ordinary securities) if this Resolution is passed, or any associates of such a person.

However, the Company will not disregard a vote if:

• (a) it is cast by the person as proxy for a person who is entitled to vote, in accordance with the directions on the Proxy Form; or

• (b) it is cast by the person chairing the Meeting as proxy for a person who is entitled to vote, in accordance with a direction on the Proxy Form to vote as the proxy decides.

3. Resolution 3 – Authorisation of Grant of Incentive Options to Mr Brian McGillivray

To consider and, if thought fit, to pass with or without amendment, the following Resolution as an ordinary resolution:

"That in accordance with ASX Listing Rule 10.11 and Chapter 2E of the Corporations Act, Shareholders authorise the Directors to grant 1,500,000 Incentive Options to Mr Brian McGillivray or his nominee on the terms set out in Schedule 3."

Voting Exclusion

The Company will disregard any votes cast on this Resolution by Mr Brian McGillivray or any of his associates.

However, the Company will not disregard a vote if:

• (a) it is cast by the person as proxy for a person who is entitled to vote, in accordance with the directions on the Proxy Form; or

• (b) it is cast by the person chairing the Meeting as proxy for a person who is entitled to vote, in accordance with a direction on the Proxy Form to vote as the proxy decides.

070809 BUL NOM

3

Dated 9 August 2007 By Order of the Board

Brian J McGillivray Director & Company Secretary

070809 BUL NOM

4

BLUE ENERGY LIMITED A B N 1 4 0 5 4 8 0 0 3 7 8

EXPLANATORY MEMORANDUM

1. Introduction

This Explanatory Memorandum has been prepared for the information of Shareholders in connection with the business to be conducted at the Meeting to be held at the Lindsay Room, Amora Hotel, 11 Jamison Street, Sydney, New South Wales on Friday 14 September 2007 at 10.30am (EST).

Terms capitalised in this Explanatory Memorandum have the meaning given in Schedule 1.

The terms of the Shares are in the definitions in Schedule 1, the terms of the Options are in Schedule 2 and the terms of the Incentive Options are in Schedule 3.

1.1 Purpose of Placement and Further Placement

Under the Placement and Further Placement, the Company is seeking to raise up to $30 million in cash and convert $4.6 million of existing loans to fund:

• (a) bankable feasibility studies into 3 - 4 coal seam methane projects in Queensland. The studies are to be carried out over 24 months and will investigate the feasibility of full-scale project developments;

• (b) the continuation of drilling of Cooper Basin conventional gas assets in accordance with farmin commitments (estimated at less than $5 million to be expended from the $30 million raised); and

• (c) general working capital for ongoing administrative expenses.

Part of the Placement has been used to repay principal of $4,600,000 and accrued interest of $109,275.63 owed to Chimaera CM Pty Ltd ( Chimaera ) under a loan agreement between the Company and Chimaera dated 13 April 2007.

The Shares and Options issued to Chimaera under the Placement were issued pursuant to an agreement between the Company and Chimaera dated 17 July 2007, details of which were announced to ASX on 18 July 2007.

The Shares and Options issued to CVC Limited under the Placement and Further Placement were issued pursuant to an agreement between the Company and Chimaera dated 17 July 2007, details of which were announced to ASX on 18 July 2007.

1.2 Escrow

All Shares issued to Chimaera and CVC Limited (including Shares issued on exercise of Options) under the Placement and Further Placement are subject to escrow for 12 months.

1.3 Issue price

As set out below, the Share issue price for:

070809 BUL NOM

5

• (a) Chimaera was $0.15 in relation to the accrued interest amount and $0.18 in relation to the loan principal; and

• (b) CVC Limited was $0.25 for the Placement and will also be $0.25 for the Further Placement.

Those issue prices compare to the volume weighted average price of the Company's shares on ASX prior to announcement of the Placement and Further Placement of $0.233 for the 60 days prior and $0.264 for the 30 days prior.

The $0.15 price for Chimaera's accrued interest amount was agreed in the loan agreement between the Company and Chimaera. The terms of this loan were agreed following the expiry of a Placement Agreement with BBY Limited and took into account the then adverse market conditions. The 14 day value weighted average price of the Company's shares as at the date of the loan agreement was 13.65 cents. The Directors agreed an issue price of $0.18 with respect to the repayment of the principal in connection with the equity funding package as announced on 18 July 2007 and subject to a 12 month Voluntary Escrow.

The Directors believe that the issue prices represent a commercially expedient result for the Company compared to the historical volume weighted average prices.

2. Resolution 1 – Ratification of Placement

2.1 Number of equity securities, price and allottees

On 18 July 2007, the Company issued a total of 39,888,791 Shares and 1,316,864 Options, each exercisable at 25 cents, under the Placement as follows:

• (a) 26,284,061 Shares and 750,000 Options to Chimaera to repay principal and interest owed to Chimaera under a loan agreement between the Company and Chimaera. 25,555,556 Shares were issued at $0.18 each in relation to the principal amount of $4.6 million 728,505 Shares were issued at $0.15 each in relation to the $109,275.63 outstanding interest; and

• (b) 13,604,730 Shares were issued at $0.25 each and 566,864 Options to CVC Limited.

2.2 Purpose

The funds raised, net of costs, have been applied to repay the loan and interest owed to Chimaera and the balance will be applied toward the project costs described under heading 1.1.

2.3 Ratification

Resolution 1 seeks Shareholder ratification pursuant to ASX Listing Rule 7.4 for the Placement.

Under ASX Listing Rule 7.1, a company may only issue a limited number of equity securities in any 12 month period.

The Company has used its 15% placement capacity under the Placement. The Company wishes to restore its 15% placement capacity and accordingly, under ASX Listing Rule 7.4, seeks Shareholder ratification of the Placement.

070809 BUL NOM

6

3. Resolution 2 – Approval of Further Placement

3.1 Reason for Resolution 2

Resolution 2 seeks Shareholder approval pursuant to ASX Listing Rule 7.1 for the Company to issue up to 106,395,270 Shares and 4,433,136 Options, each exercisable at 25 cents, under the Further Placement.

Listing Rule 7.1 provides that a company must not, without shareholder approval (but subject to certain exceptions), issue during any 12 month period any equity securities or other securities with rights conversion to equity (such as options) if the number of those securities exceeds 15% of the number of fully paid securities on issue at the commencement of that 12 month period.

As the issue of Shares and Options under the Placement fully utilised that 15% capacity, the Further Placement requires, and is subject to, Shareholder approval.

3.2

Specific Information Required by ASX Listing Rule 7.3

For the purposes of ASX Listing Rule 7.3, information regarding the Further Placement is provided as follows:

• (a) The maximum number of securities to be issued is 106,395,270 Shares and 4,433,136 Options.

• (b) The securities will be issued within three months of the date of Shareholder approval.

• (c) The issue price of the Shares will be $0.25 each.

• (d) At the date of this Explanatory Memorandum, the names of the all the proposed allottees and the quantity to be issued to each allottee are not known. However, the Company will issue Shares up to 19.9% of the Company's expanded capital and all Options in the Further Placement to CVC Limited. CVC Limited plans to approach investors to whom a prospectus does not need to be provided under the Corporations Act, and who are not related parties to the Company to offer the balance of the Further Placement Shares.

• (e) The Shares are ordinary fully paid Shares in the capital of the Company and were issued on the same terms and conditions of all other Shares. The Options, each exercisable at 25 cents, have the terms set out in Schedule 2.

• (f) The Options were issued as part of the fees payable in relation to the Placement and Further Placement.

• (g) The funds raised will be applied toward the project costs described under heading 1.1.

• (h) The Shares and Options the subject of the Further Placement will be allotted as soon as practicable after the Meeting.

• (i) A voting exclusion statement is included in the Notice.

070809 BUL NOM

7

4. Resolution 3 – Authorisation of Grant of Incentive Options to a Director

4.1 General

Resolution 3 seeks Shareholder authorisation pursuant to ASX Listing Rule 10.11 and Chapter 2E of the Corporations Act for the Directors to grant a total of 1,500,000 Incentive Options to Mr Brian McGillivray, a Director (or to his nominees) ( "Director Options Issue" ). Mr McGillivray was appointed a Director of the Company on 10 October 2006.

Shareholder approval is required under ASX Listing Rule 10.11 and section 208 of the Corporations Act because Mr McGillivray as a Director is a related party of the Company. Furthermore, Shareholder authorisation of the Director Options Issue means that the Director Options Issue will not reduce the Company's 15% placement capacity under ASX Listing Rule 7.1.

4.2 Specific Information Required by ASX Listing Rule 10.13 and section 219 of the Corporations Act

For the purposes of ASX Listing Rule 10.13 and section 219 of the Corporations Act information regarding the Director Options Issue is provided as follows:

• (a) 1,500,000 Incentive Options will be issued to the Mr McGillivray, a Director (or to his nominees) as follows:

Name of Participating Director	Number of 'A' Options	Number of 'C' Options	Total
Brian McGillivray	750,000	750,000	1,500,000

(b) The Company is a small listed energy and gas investment company. The Company has limited funds, most of which are allocated to specific exploration and development activities. As a result, the Board has chosen to issue Incentive Options to a Director as a key component of the incentive portion of his remuneration in order to retain the services of the Director and to provide incentive linked to the performance of the Company. The Board considers that the Director’s experience and contact base will greatly assist the Company in progressing its projects. As such, the Board believes that the number of Incentive Options to be granted to the Director is commensurate with his value to the Company.

The Company has set operational milestones and performance criteria for the Director to achieve, in line with its business objectives. Given the speculative nature of the Company’s activities and the small management team responsible for its running, it is considered the performance of the Directors and the performance and value of the Company are closely related. As such, the Incentive Options granted will generally only be of benefit if the Director performs to the level whereby the value of the Company increases sufficiently to warrant exercising the Incentive Options.

• (c) The Incentive Options are being issued for nil consideration.

• (d) The terms and conditions of the Incentive Options are detailed in Schedule 3.

070809 BUL NOM

8

• (e) The Company will issue the Incentive Options no later than one month after the date of the Meeting (or such longer period of time as ASX may in its discretion allow).

• (f) In relation to the issue of Incentive Options to be issued to Mr McGillivray, a Director, each other Director is in favour of the Resolution and each other Director does not have an interest in the outcome of the Resolution.

• (g) The total remuneration of Mr McGillivray (including remuneration by way of payment to consultant companies of Mr McGillivray) is as follows:

Participating Director	Total remuneration
Brian McGillivray	$198,000.00

The Directors are also entitled to reimbursement of all reasonable travelling, accommodation and other expenses that a Director or alternate Director properly incurs in attending meetings of Directors or any meetings of committees of Directors, in attending any meetings of members and in connection with the business of the Company. Other than as set out in this Notice, the Directors do not receive any other emoluments.

• (h) The current security holding of Mr Brian McGillivray is as follows:

Name of Participating Director	Total securities held directly or indirectly
Brian McGillivray	6,000,000 Ordinary Shares 333,334 options exercisable at 40 cents 333,333 options exercisable at 50 cents 333,333 options exercisable at 60 cents

(i) A valuation of the Incentive Options has been obtained from an independent expert and, on the basis of the assumptions set out below, the technical value of one Incentive Option is as follows:

Name of Participating Director	Value per 'A' Option	Value per 'A' Option	Number of 'A' Options	Number of 'A' Options	Value per 'C' Option	Value per 'C' Option	Number of 'C' Options
Brian McGillivray	$0.151		750,000		$0.147		750,000
Name of Participating Director		Total value 'A' Options		Total value 'C' Options		Total Value of Incentive Options
Brian McGillivray		$113,250		$110,250		$223,500

070809 BUL NOM

9

This valuation imputes a total value of $223,500 to the Incentive Options. This value may go up or down after the date of valuation as it will depend on the future price of a Share. Black & Scholes and Binomial methodology has been used, together with the following assumptions:

• (i) the risk free rate is the Commonwealth Government securities rate with a maturity date approximating that of the expiration period of the Incentive Options;

• (ii) the underlying security spot price used for the purposes of this valuation is based on the price of the Shares as at 1 August 2007;

• (iii) for the purposes of the valuation, no future dividend payments have been forecast; and

• (iv) for the purposes of the valuation it is assumed that the Incentive Options will not be exercised any earlier than the Expiry Dates as described in Schedule 3 .

• (j) The following tables demonstra te the dilution of all other Shareholders’ holdings in the Company upon exercise of all Director Options issued to Mr McGillivray in accordance with Resolution 3, assuming the Shareholders approve the proposed grant of the Director Options Issue:

Dilution effect on current and future shareholding upon the exercise of Incentive Options

Incentive Options
Shares on issue at date of this Notice	334,840,404
Shares proposed to be issued under Resolution 2	106,395,270
Shares issued assuming exercise of all Incentive Options under Resolution 3	1,500,000
Total Shares on issue assuming exercise of all Incentive Options under Resolution 3	442,735,674
Dilution Effect (est.)	0.34%

• (k) Under the accounting standard AASB Share based Payments, the Company would recognise the fair value of options granted to Mr McGillivray as an expense of $223,500 in its income statement with a corresponding adjustment to equity.

• (l) The market price of Shares would normally determine whether the Director will exercise the Incentive Options or not. If the Incentive Options are exercised at a price that is lower than the price at which Shares are trading on ASX, there may be a perceived cost to the Company.

• (m) No funds will be raised by the issue of the Incentive Options as they are being issued for nil consideration.

• (n)

• Historical share price information for the last twelve months is as follows:

	Price per Share	Date
High	$0.44	20 July 2007

070809 BUL NOM

10

	Price per Share	Date
Low	$0.11	22 March 2007

The share price at 8 August 2007 was $0.27.5.

The exercise prices of the Incentive Options compare to the volume weighted average price of the Company's shares on ASX prior to announcement of the Placement and Further Placement of $0.233 for the 60 days prior and $0.264 for the 30 days prior. The volume weighted average price of the Company's shares on ASX for the 60 days prior to 2 August 2007 was $0.289.

• (o) Other than the information above and otherwise set out in this Explanatory Memorandum, the Company believes that there is no other information that would be reasonably required by Shareholders to pass Resolution 3 which is known to the Company or its Directors.

• (p) A voting exclusion statement is included in this Notice.

• (q) As Shareholder approval is sought under ASX Listing Rule 10.11, approval under ASX Listing Rule 7.1 is not required.

5. Action to be taken by Shareholders

Shareholders should read this Explanatory Memorandum carefully before deciding how to vote on the Resolutions.

A Proxy Form is attached to the Notice. This is to be used by Shareholders if they wish to appoint a representative (a "proxy") to vote in their place. All Shareholders are invited and encouraged to attend the Meeting or, if they are unable to attend in person, to sign and return the Proxy Form to the Company in accordance with the instructions provided. Lodgement of a Proxy Form will not preclude a Shareholder from attending and voting at the Meeting in person.

070809 BUL NOM

11

Schedule 1 – Definitions

In this Explanatory Memorandum and Notice:

"ASX" means the Australian Securities Exchange.

"A Option" means an option which, subject to the achievement of any vesting conditions set by the Company, entitles the holder to subscribe for one Share at $0.25 for the period commencing on issue and ending on the date two years after issue and otherwise on the terms set out in Schedule 3.

"C Option" means an option which, subject to the achievement of any vesting conditions set by the Company, entitles the holder to subscribe for one Share at $0.35 for the period commencing on issue and ending on the date two years after issue and otherwise on the terms set out in Schedule 3.

“Chimaera” means Chimaera CM Pty Ltd.

"Company" means Blue Energy Limited ABN 14 054 800 378.

"Corporations Act" means the Corporations Act 2001 (Cth).

“Director Option Issue” means the grant of Incentive Options in Resolution 3.

“EST” means Eastern Standard Time, being the time in Sydney New South Wales.

"Explanatory Memorandum" means the explanatory memorandum to the Notice.

"Further Placement" means the proposed placement of Shares and Options referred to in Resolution 2.

"Incentive Option" means a class A Option or class C Option which entitles the holder to subscribe for a Share on the terms and conditions in Schedule 3.

"Incentive Option holder" means a person who holds an Incentive Option.

"Listing Rules" means the Listing Rules of ASX.

"Meeting" has the meaning given in the introductory paragraph of this Notice.

"Notice" means this notice of meeting.

Option means an option which entitles the holder to subscribe for a Share on the terms and conditions in Schedule 2.

"Option holder" means a person who holds an Option.

"Placement" means the placement of Shares and Options referred to in Resolution 1 (a) and (b).

"Proxy Form" means the proxy form attached to the Notice.

"Resolution" means a resolution contained in this Notice.

"Schedule" means a schedule to this Notice.

"Share" means a fully paid ordinary share in the capital of the Company that forms a single class and ranks pari passu with all fully paid ordinary shares on issue by the Company.

"Shareholder" means a shareholder of the Company.

070809 BUL NOM

12

Schedule 2 – Terms and Conditions of Options issued in the Placement and Further Placement

1.

Entitlement

Each Option entitles the holder to subscribe for one Share upon exercise of that Option and payment of the Exercise Price.

2. Exercise Price

The exercise price for each Option is $0.25 (Exercise Price).

3. Exercise Period

The Options are exercisable at any time after issue until the date two years after issue (Expiry Date).

4. Notice of Exercise

The Options may be exercised by notice in writing to the Company. Any notice of exercise of an Option received by the Company will be deemed to be a notice of the exercise of that Option as at the date of receipt.

5.

Timing of issue of Shares

After any Option is validly exercised, the Company must as soon as possible:

• (a) issue and allot the Share; and

• (b) do all such acts, matters and things to obtain the grant of quotation for the Share on ASX no later than five days from the date of exercise of the Option.

6. Shares issued on exercise

Shares issued on exercise of Options will form a single class and rank pari passu with all other fully paid ordinary shares on issue by the Company.

7.

Quotation of Shares on exercise

Application will be made by the Company to ASX for official quotation of the Shares issued upon the exercise of the Options.

8.

Participation in new issues

There are no participation rights or entitlements inherent in the Options and holders will not be entitled to participate in new issues of capital offered to Shareholders during the currency of the Options. However, the Company will ensure that for the purposes of determining entitlements to any such issue, the record date will be at least ten business days after the issue is announced. This will give Option holders the opportunity to exercise their Options prior to the date for determining entitlements to participate in any such issue.

9. Adjustment for bonus issues of Shares

If the Company makes a bonus issue of Shares or other securities to existing Shareholders (other than an issue in lieu or in satisfaction, of dividends or by way of dividend reinvestment):

(a) the number of Shares which must be issued on the exercise of an Option will be increased by the number of Shares which the Option holder would have

070809 BUL NOM

13

received if the Option holder had exercised the Option before the record date for the bonus issue; and

• (b) no change will be made to the Exercise Price.

10.

Adjustment for rights issue

If the Company makes an issue of Shares pro rata to existing Shareholders (other than an issue in lieu of in satisfaction of dividends or by way of dividend reinvestment) the Exercise Price of an Option will be reduced according to the following formula:

New exercise price = O – E [P – (S+D)] N + 1

• O = the old Exercise Price of the Option.

• E = the number of underlying Shares into which one Option is exercisable.

• P = average market price per Share weighted by reference to volume of the underlying Shares during the 5 trading days ending on the day before the ex rights date or ex entitlements date.

• S = the subscription price of a Share under the pro rata issue.

• D = the dividend due but not yet paid on the existing underlying Shares (except those to be issued under the pro rata issue).

• N = the number of Shares with rights or entitlements that must be held to receive a right to one new Share.

11.

Adjustments for reorganisation

If there is any reconstruction of the issued share capital of the Company, the rights of the Option holders will be varied to the extent necessary to comply with any ASX Listing Rules which apply to the reconstruction at the time of the reconstruction.

12.

Quotation of Options

No application for quotation of the Options will be made by the Company.

13.

Options transferable

Subject to any escrow arrangement, and any Optionholder providing sufficient evidence to the Company that the proposed transferee is a sophisticated or professional investor (as those terms are defined in the Corporations Act), the Options may be transferred.

14. Lodgement Instructions

Cheques shall be in Australian currency made payable to the Company and crossed "Not Negotiable". The application for Shares on exercise of Options with the appropriate remittance should be lodged at the Company's Registry, Computershare Registry Services Pty Ltd, Level 2, Reserve Bank Building, Perth, WA.

070809 BUL NOM

14

Schedule 3 – Terms and Conditions of Incentive Options

1. Entitlement

The 'A' Options and 'C' Options (together the "Incentive Options" ) entitle the Incentive Option holder to subscribe for one Share upon exercise of each Incentive Option.

2. Exercise Price and Expiry Date

Class of Option	Exercise Price	Exercise Date on or after	Expiry Date on or before
'A' Options	$0.25	6 months from date of issue	24 months from date of issue
'C' Options	$0.35	6 months from date of issue	36 months from date of issue

3.

Exercise Period

The Incentive Options are exercisable at any time on or subsequent to the Exercise Date, and on or prior to the Expiry Date.

4. Notice of Exercise

The Incentive Options may be exercised by notice in writing to the Company. Any notice of exercise of an Incentive Option received by the Company will be deemed to be a notice of the exercise of that Incentive Option as at the date of receipt.

5.

Timing of issue of Shares

After an Incentive Option is validly exercised, the Company must as soon as possible:

• (c) issue and allot the Share; and

• (d) do all such acts, matters and things to obtain the grant of quotation for the Share on ASX no later than five days from the date of exercise of the Incentive Option.

6. Shares issued on exercise

Shares issued on exercise of the Incentive Options rank equally with the then shares of the Company.

7. Quotation of Shares on exercise

Application will be made by the Company to ASX for official quotation of the Shares issued upon the exercise of the Incentive Options.

8.

Participation in new issues

There are no participation rights or entitlements inherent in the Incentive Options and holders will not be entitled to participate in new issues of capital offered to Shareholders during the currency of the Incentive Options. However, the Company will ensure that for the purposes of determining entitlements to any such issue, the record date will be at least ten business days after the issue is announced. This will give Incentive Option holders the opportunity to exercise their Incentive Options prior to the date for determining entitlements to participate in any such issue.

070809 BUL NOM

15

9. Adjustment for bonus issues of Shares

If the Company makes a bonus issue of Shares or other securities to existing Shareholders (other than an issue in lieu or in satisfaction, of dividends or by way of dividend reinvestment):

• (e) the number of Shares which must be issued on the exercise of an Incentive Option will be increased by the number of Shares which the Incentive Option holder would have received if the Incentive Option holder had exercised the Incentive Option before the record date for the bonus issue; and

• (f) no change will be made to the Exercise Price.

10. Adjustment for rights issue

If the Company makes an issue of Shares pro rata to existing Shareholders (other than an issue in lieu of in satisfaction of dividends or by way of dividend reinvestment) the Exercise Price of an Incentive Option will be reduced according to the following formula:

New exercise price = O – E [P – (S+D)] N + 1

• O = the old Exercise Price of the Incentive Option.

• E = the number of underlying Shares into which one Incentive Option is exercisable.

• P = average market price per Share weighted by reference to volume of the underlying Shares during the 5 trading days ending on the day before the ex rights date or ex entitlements date.

• S = the subscription price of a Share under the pro rata issue.

• D = the dividend due but not yet paid on the existing underlying Shares (except those to be issued under the pro rata issue).

• N = the number of Shares with rights or entitlements that must be held to receive a right to one new Share.

11. Adjustments for reorganisation

If there is any reconstruction of the issued share capital of the Company, the rights of the Incentive Option holders will be varied to the extent necessary to comply with any ASX Listing Rules which apply to the reconstruction at the time of the reconstruction.

12. Quotation of Incentive Options

No application for quotation of the Incentive Options will be made by the Company.

13. Incentive Options non-transferable

The Incentive Options are non-transferable.

14. Lodgement Instructions

Cheques shall be in Australian currency made payable to the Company and crossed "Not Negotiable". The application for Shares on exercise of the Incentive Options with the appropriate remittance should be lodged at the Company's Registry, Computershare Registry Services Pty Ltd, Level 2, Reserve Bank Building, Perth, WA.

070809 BUL NOM

16

BLUE ENERGY LIMITED

ABN 14 054 800 378

P R O X Y F O R M

The Company Secretary Blue Energy Limited

For information on returning this proxy form please see instructions over the page.

I/We[1] _______________

of ______________

being a Shareholder/Shareholders of the Company and entitled to

---

votes in the Company, hereby appoint[2]

---

or failing such appointment the chairman of the general meeting as my/our proxy to vote for me/us on my/our behalf at the general meeting of the Company to be held at the Lindsay Room, Amora Hotel, 11 Jamison Street, Sydney New South Wales on Friday 14 September 2007 at 10.30am (EST) and at any adjournment thereof in the manner indicated below or, in the absence of indication, as he thinks fit. If 2 proxies are appointed, the proportion or number of votes of this proxy is authorised to exercise is * [ ]% of the Sha reholder’s votes*/ [ ] of the Shareholder’s votes. (An additional Proxy Form will be supplied by the Company, on request).

INSTRUCTIONS AS TO VOTING ON RESOLUTIONS

IMPORTANT:

The chairman of the general Meeting intends to vote undirected proxies in favour of the Resolutions.

The proxy is to vote for or against the Resolution referred to in the Notice as follows:

For Against Abstain

Resolution 1 Ratification of Placement to (a) Chimaera CM Pty Ltd and (b) CVC Limited Resolution 2 Authorise Further Placement Resolution 3 Authorisation of Grant of Incentive Options to Brian McGillivray

Authorised signature/s This section must be signed in accordance with the instructions overleaf to enable your voting instructions to be implemented.

Individual or Shareholder 1 Shareholder 2 Shareholder 3 Sole Director and Sole Company Director Director/Company Secretary Secretary ____Contact Name ____Contact Daytime Telephone _____Date

~~1~~ Insert name and address of Shareholder ~~2~~ Insert name and address of proxy *Omit if not applicable

070809 BUL NOM

17

Proxy Notes:

A Shareholder entitled to attend and vote at the general meeting may appoint a natural person as the Shareholder's proxy to attend and vote for the Shareholder at that general meeting. If the Shareholder is entitled to cast 2 or more votes at the general meeting the Shareholder may appoint not more than 2 proxies. Where the Shareholder appoints more than one proxy the Shareholder may specify the proportion or number of votes each proxy is appointed to exercise. If such proportion or number of votes is not specified each proxy may exercise half of the Shareholder's votes. A proxy may, but need not be, a Shareholder of the Company.

If a Shareholder appoints a body corporate as the Shareholder’s proxy to attend and vote for the Shareholder at that general meeting, the representative of the body corporate to attend the general meeting must produce the Certificate of Appointment of Representative prior to admission. A form of the certificate may be obtained from the Company’s share registry.

You must sign this form as follows in the spaces provided:

Joint Holding: where the holding is in more than one name all of the holders must sign. Power of Attorney: if signed under a Power of Attorney, you must have already lodged it with the registry, or alternatively, attach a certified photocopy of the Power of Attorney to this Proxy Form when you return it. Companies: a Director can sign jointly with another Director or a Company Secretary. A sole Director who is also a sole Company Secretary can also sign. Please indicate the office held by signing in the appropriate space.

If a representative of the corporation is to attend the general meeting the appropriate "Certificate of Appointment of Representative" should be produced prior to admission. A form of the certificate may be obtained from the Company’s Share Registry.

Return of Proxy Forms

Proxy Forms (and the power of attorney or other authority, if any, under which the Proxy Form is signed) or a copy or facsimile which appears on its face to be an authentic copy of the Proxy Form (and the power of attorney or other authority) must be deposited at or received by facsimile transmission at the Company’s office as set out below not less than 48 hours prior to the time of commencement of the general meeting (EST).

Facsimile: +618 9217 2229 Post/Delivery: PO Box 1727 WEST PERTH WA 6872 Level 1 34 Colin Street WEST PERTH WA 6005

070809 BUL NOM

18