BLUE ENERGY LIMITED. — Proxy Solicitation & Information Statement 2012

Mar 5, 2012

==> picture [179 x 155] intentionally omitted <==

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

NOTICE OF GENERAL MEETING

A General Meeting of the Company will be held at The Morgan Room, Christie Conference Centre, Level 1, 320 Adelaide Street, Brisbane, on Thursday 5 April 2012 at 11.00am (EST)

This notice of 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 (7) 3270 8800.

==> picture [51 x 44] intentionally omitted <==

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

NOTICE OF GENERAL MEETING

Notice is given that a general meeting of Shareholders of Blue Energy Limited ( "Company" ) will be held at The Morgan Room, Christie Conference Centre, Level 1, 320 Adelaide Street, Brisbane, on Thursday 5 April 2012 at 11.00am (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 Company has 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 4 April 2012 at 7.00pm (Sydney Time). Terms and abbreviations used in this Notice and the Explanatory Memorandum are defined in Schedule 1.

AGENDA

SPECIAL BUSINESS

1. Resolution 1 – Election of Mr John Ellice-Flint as a Director

To consider and, if thought fit, pass the following Resolution as an ordinary resolution:

"That, subject to Shareholders approving resolutions 2, 4, 5 and 6, Mr John Ellice-Flint, who offers himself for election, be appointed as a Director effective from the close of the Meeting."

2. Resolution 2 – Approval for the issue of Shares to the Placement Participants

To consider and, if thought fit, pass the following Resolution as an ordinary resolution:

"That, subject to Shareholders approving resolutions 1, 4, 5 and 6, for the purposes of Listing Rule 7.1 and for all other purposes, Shareholders approve the issue of 152,000,000 Shares to the Placement Participants, on the terms and conditions set out in the Explanatory Memorandum."

Voting Exclusion

The Company will disregard any votes cast on this Resolution by:

• (a) any person who may participate in the proposed issue of ordinary shares (the Placement Participants) and any person who might obtain a benefit , except a benefit solely in the capacity of a holder of ordinary shares, if the Resolution is passed; and

• (b) an associate of those persons.

2

==> picture [51 x 44] intentionally omitted <==

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 – Approval for the issue of Shares to the underwriter of the Company’s share purchase plan

To consider and, if thought fit, pass the following Resolution as an ordinary resolution:

“That, for the purposes of Listing Rule 7.1 and for all other purposes, Shareholders approve the issue of up to 64,000,000 Shares to Intersuisse Limited and/or sophisticated or professional investors nominated by Intersuisse Limited, on the terms and conditions set out in the Explanatory Memorandum."

Voting Exclusion

The Company will disregard any votes cast on this Resolution by:

• (a) any person who may participate in the proposed issue of ordinary shares and any person who might obtain a benefit , except a benefit solely in the capacity of a holder of ordinary shares, if the Resolution is passed; and

• (b) an associate of those persons.

However, the Company will not disregard a vote if:

• (c) 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

• (d) 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.

4. Resolution 4 – Approval for the issue of shares to Jeach Pty Ltd as trustee for the Pippi Super Fund under the Placement Agreement

To consider and, if thought fit, pass the following Resolution as an ordinary resolution:

"That, subject to Shareholders approving resolutions 1, 2, 5 and 6, for the purposes of Listing Rule 10.11 and for all other purposes, Shareholders approve the issue of 8,000,000 shares to Jeach Pty Ltd as trustee for the Pippi Super Fund (an entity controlled by Mr John Ellice-Flint) for $500,000 in accordance with the Placement Agreement.”

3

==> picture [51 x 44] intentionally omitted <==

Voting Exclusion

The Company will disregard any votes cast on this Resolution by:

• (a) a person who is to receive shares (Jeach Pty Ltd as trustee for the Pippi Super Fund ); and

• (b) an associate of those persons.

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.

5. Resolution 5 – Approval for the issue of shares and grant of options to Mr John Ellice-Flint (or his nominee) under his employment agreement

To consider and, if thought fit, pass the following Resolution as an ordinary resolution:

"That, subject to Shareholders approving resolutions 1, 2, 4 and 6, for the purposes of Listing Rule 10.11 and Chapter 2E of the Corporations Act and for all other purposes, Shareholders approve:

• (a) the issue of 41,236,500 Shares to Mr John Ellice-Flint (or his nominee) for a nil issue price in accordance with his employment agreement; and

• (b)

• the issue of:

• (i) 20,618,250 Tranche 1 Performance Options;

• (ii) 20,618,250 Tranche 2 Performance Options; and

• (iii) 41,236,500 Tranche 3 Performance Options,

to Mr John Ellice-Flint or his nominee in accordance with his employment agreement, on the terms set out in the Explanatory Memorandum.”

Voting Exclusion

The Company will disregard any votes cast on this Resolution by:

• (c) a person who is to receive ordinary shares or options (Mr John Ellice-Flint and his nominee);; and

• (d) an associate of those persons.

4

==> picture [51 x 44] intentionally omitted <==

However, the Company will not disregard a vote if:

• (e) 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

• (f) 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.

6. Resolution 6 – Approval of Mr John Ellice-Flint’s employment agreement

To consider and, if thought fit, pass the following Resolution as an ordinary resolution:

"That, subject to Shareholders approving resolutions 1, 2, 4 and 5, for the purposes of Chapter 2E of the Corporations Act and for all other purposes, Shareholders approve the Company entering into Mr John Ellice-Flint’s employment agreement and giving the financial benefits set out in that agreement to Mr John Ellice-Flint, on the terms set out in the Explanatory Memorandum.

Voting Exclusion

The Company will disregard any votes cast on this Resolution by Mr Ellice-Flint (or any entity associated with him that may obtain a financial benefit under the Resolution) or their 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.

Dated 1 March 2012 By Order of the Board

==> picture [123 x 36] intentionally omitted <==

Stuart Owen Company Secretary Blue Energy Limited

5

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

==> picture [51 x 44] intentionally omitted <==

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 Morgan Room, Christie Conference Centre, Level 1, 320 Adelaide Street, Brisbane, on Thursday 5 April 2012 at 11.00am (EST)

Terms and abbreviations used in this Explanatory Memorandum have the meaning given in Schedule 1.

2. Resolution 1 – Appointment of Mr John Ellice-Flint

Mr John Ellice-Flint seeks appointment as a Director of the Company under Resolution 1.

Mr Ellice-Flint is a highly-credentialed senior executive across the global oil and gas industry. His reputation has been built through successful careers in the US major Unocal and Australia’s number one domestic gas producer Santos.

Mr Ellice-Flint’s role at the Company will be in a part-time executive capacity and will include technical oversight of exploration activity in Blue Energy’s existing portfolio of Queensland assets, pursuit of new venture growth opportunities, and seeking to build the current reserve base to a level consistent with the Company’s stated vision of having 3,000PJ of 3P reserves by year end 2014. Mr Ellice-Flint’s achievements in the oil and gas industry are well known and highly respected. Following a 26-year international career with Unocal, serving in a variety of senior executive roles within strategic planning, exploration and technology functions, he joined Santos Limited as Managing Director, guiding the company through a major growth period which culminated in the recognition and of the potential of coal seam gas development through the Gladstone LNG export project in Queensland.

As the architect of the world-first, CSG to LNG breakthrough when at Santos, Mr Ellice-Flint was successful in driving his vision for the massive eastern Australian projects against plans for gas to be piped from gas-rich Western Australia to the gas-poor eastern states or bringing gas from PNG to Australia. The financial growth Mr Ellice-Flint delivered to Santos in this period is well documented and he was instrumental in transforming the Australian company from a domestic market-focused producer to an entity which now has significant production outside its legacy assets and is focussing on delivering energy to the international market.

The Board unanimously supports the election of Mr John Ellice-Flint.

6

==> picture [51 x 44] intentionally omitted <==

3. Resolution 2 – Approval of Shares to be issued to the Placement Participants

3.1 Background

Listing Rule 7.1 provides that (subject to certain exceptions) prior approval of Shareholders is required for issue of securities if the securities will, when aggregated with the securities issued by the Company during the previous 12 months, exceed 15% of the number of Shares on issue at the commencement of that 12 month period.

Resolution 2 proposes approval for the issue of Shares on the terms set out below, for the purpose of satisfying Listing Rule 7.1.

3.2 Placement Agreements

On 15 February 2012, the Company entered into Placement Agreements with a number of professional and sophisticated investors. Details of the Placement Participants and the relevant number of Shares for each of them are set out in Schedule 2. In addition to the Placement Participants, Jeach Pty Ltd as trustee for the Pippi Super Fund (an entity controlled by Mr John Ellice-Flint) has also entered into a Placement Agreement with the Company. Approval to issue shares to Jeach Pty Ltd as trustee for the Pippi Super Fund is not sought by Resolution 2 under Listing Rule 7.1 because approval for the issue of those Shares is sought by Resolution 4 under Listing Rule 10.11.

Under the Placement Agreements:

• completion of the issue of the Shares is subject to Shareholders approving Resolutions 1 (to appoint Mr Ellice-Flint), 2 (to issue Shares to the Placement Participants), 4 and 5 (to issue Shares and the Performance Options to Mr Ellice-Flint or entities associated with him) and 6 (to enter into Mr Ellice-Flint’s employment agreement and provide the benefits to him under that agreement);

• the Company provides representations and warranties in respect of certain matters to the Placement Participants;

• the Company can terminate the agreement if the issue price has not been received from the Placement Participant on or before 5pm on the date two business days following the Meeting (or, if the Placement Participant elects to waive the outstanding conditions under the agreement, two business days after the Placement Participant provides notice to the Company);

• the Placement Participant can terminate the agreement if the Company breaches the warranties referred to above and the breach has not been remedied prior to the proposed completion date; and

• the agreement terminates automatically if the issue of Shares has not been completed by 2 May 2012.

7

==> picture [51 x 44] intentionally omitted <==

3.3 ASX Listing Rules

In accordance with Listing Rule 7.3, the following information is provided in relation to Resolution 2.

If approval is obtained:

• Up to 152,000,000 Shares may be issued to the Placement Participants;

• The Shares will be issued no later than three months after the date of the Meeting;

• The Shares will be issued for 6.25 cents per Share, being a 20% discount to the 5 day VWAP up to the date of entering into and Placement Agreements;

• The Shares will be issued to the Placement Participants set out in Schedule 2;

• The Shares will rank equally in all respects with the Company’s existing ordinary shares on issue;

• Funds raised by the issue of Shares will be used, primarily, to fund the Company’s programs in its Sapphire and Monslatt Blocks of ATP814P and otherwise for working capital; and

• Allotment of the Shares is intended to occur progressively.

3.4 Reasons for, and Directors’ recommendation regarding, the issue of the Placement Shares to the Placement Participants

The Board is of the opinion that the issue of the Placement Shares provides the Company with funding sufficient to execute exploration programs on its Sapphire and Monslatt blocks of ATP814P. The Board also considers that the introduction of the Placement Participants, as institutional, and professional and sophisticated, investors to the Company’s register is in the interests of the Company and all Shareholders as it broadens and stabilises the shareholder base and will allow the Company to better attract future funding.

No Director has an interest in the outcome of Resolution 2. Each Director recommends that Resolution 2 be adopted for the reasons set out above.

4. Resolution 3 – Approval for the issue of Shares to the underwriter of the Company’s share purchase plan

4.1 Background

On 16 February 2012, the Company announced its intention to offer Shareholders the opportunity to acquire up to $15,000 worth of Shares, at 6.25 cents per Share, under a share purchase plan.

Listing Rule 7.1 provides that (subject to certain exceptions) prior approval of Shareholders is required for issue of securities if the securities will, when aggregated with the securities issued by the Company during the previous 12 months, exceed 15% of the number of Shares on issue at the commencement of that 12 month period.

8

==> picture [51 x 44] intentionally omitted <==

One exception to the limit is Listing Rule 7.1 (Exception 15) applies where Shares issued under a share purchase plan undertaken in accordance with the exception. However, Shares issued to an underwriter under a share purchase plan are not covered by the exception.

Resolution 3 proposes approval for the issue of Shares to Intersuisse Limited (the underwriter to the Company’s share purchase plan), or entities nominated by Intersuisse Limited on the terms set out below, for the purpose of satisfying Listing Rule 7.1. The specific number of Shares to be issued to the underwriter is unknown at the date of this Meeting. However, once the share purchase plan closes (which is currently scheduled for 30 March 2012), the Company will be in a position to calculate the number of Shares and will make an appropriate announcement informing Shareholders. The maximum number of Shares that will be issued to the underwriter is 64,000,000.

4.2 ASX Listing Rules

In accordance with Listing Rule 7.3, the following information is provided in relation to Resolution 3.

If approval is obtained:

• Up to 64,000,000 Shares may be issued;

• The Shares will be issued no later than three months after the date of the Meeting;

• The Shares will be issued for 6.25 cents per Share;

• The Shares will be issued to Intersuisse Limited and/or other sophisticated or professional investors nominated by Intersuisse Limited;

• The Shares will rank equally in all respects with the Company’s existing ordinary shares on issue;

• Funds raised by the issue of Shares will be used, primarily, to fund the Company’s programs in its Sapphire and Monslatt Blocks of ATP814P and otherwise for working capital; and

• Allotment of the Shares is intended to occur progressively.

4.3 Reasons for, and Directors’ recommendation regarding, the issue of the Shares to Intersuisse Limited (or entities nominated by Intersuisse Limited)

The Board is of the opinion that it is advantageous to the Company to retain its full entitlement to issue Shares under Listing Rule 7.1 as this will allow it maximum flexibility in the future funding of its exploration program. Accordingly the Board considers that it is in the interests of the Company and all Shareholders that Shareholders approve the issue of any Shares to the underwriter of the Company’s share purchase plan so as to preserve the Company’s full capacity under Listing Rule 7.1 to raise future capital.

No Director has an interest in the outcome of Resolution 3. Each Director recommends that Resolution 3 be adopted for the reasons set out above.

9

==> picture [51 x 44] intentionally omitted <==

5. Resolution 4 – Approval to issue Shares to Jeach Pty Ltd as trustee for the Pippi Super Fund under the Placement Agreement

Placement Agreement with Jeach Pty Ltd as trustee for the Pippi Super Fund (an entity controlled by John Ellice-Flint)

On 15 February 2012, the Company entered into a Placement Agreement with Jeach Pty Ltd as trustee for the Pippi Super Fund, an entity controlled by Mr Ellice-Flint. Mr Ellice-Flint is a director of Jeach Pty Ltd and a beneficiary of the Pippi Super Fund. Mr Elice-Flint is, subject to Shareholders approving resolution 1, proposed to be appointed as a director of the Company and is, therefore, a related party of the Company. Given the relationship between Jeach Pty Ltd and Mr Ellice-Flint, Jeach Pty Ltd as trustee for the Pippi Super Fund is a related party of the Company.

The agreement contains the same terms (other than the number of Shares to be issued) as the Placement Agreement entered into with the Placement Participants. Under the agreement, the Company proposes to issue 8,000,000 Shares to Jeach Pty Ltd as trustee for the Pippi Super Fund for 6.25 cents per Share, being a 20% discount to the 5 day VWAP up to the date of entering into and Placement Agreement.

Shareholder approval is sought for the issue of 8,000,000 Shares to Jeach Pty Ltd as trustee for the Pippi Super Fund under a Placement Agreement in accordance with Listing Rule 10.11.

Approval of Resolution 4 is subject to Shareholders approving Resolutions 1, 2, 5 and 6.

5.1 ASX Listing Rules

In accordance with Listing Rule 10.13, the following information is provided in relation to Resolution 4.

If approval is obtained:

• Up to 8,000,000 Shares may be issued;

• The Shares will be issued no later than one month after the date of the Meeting;

• The Shares will be issued for 6.25 cents per Share;

• The Shares will be issued to Jeach Pty Ltd as trustee for the Pippi Super Fund, a related party of the Company controlled by a proposed director, Mr John Ellice-Flint;

• The Shares will rank equally in all respects with the Company’s existing ordinary shares on issue; and

• Funds raised by the issue of Shares will be used, primarily, to fund the Company’s programs in its Sapphire and Monslatt Blocks of ATP814P and otherwise for working capital.

5.2 Voting Exclusion and proxies – Resolution 4

In accordance with Listing Rule 14.11, a person who is to receive shares (Jeach Pty Ltd as trustee for the Pippi Super Fund) and its associates are excluded from voting on Resolution 4.

10

==> picture [51 x 44] intentionally omitted <==

5.3 Directors’ recommendation – Resolution 4

No Director has an interest in the outcome of Resolution 4. Each Director recommends that Resolution 4 be approved because they consider that:

• (a) Mr Ellice-Flint’s appointment as an executive is in the best interests of the Company and he will not agree to that appointment unless the Shares are issued to Jeach Pty Ltd as trustee for the Pippi Super Fund; and

• (a) the issue of the Shares to Jeach Pty Ltd as trustee for the Pippi Super Fund under the Placement Agreement represents a transaction undertaken on terms that are substantially identical to the Placement Agreements entered into with the Placement Participants who are not related parties of the Company.

6. Resolutions 5 and 6 – Approvals relating to Mr John Ellice-Flint’s employment agreement

6.1 Background

John Ellice-Flint’s employment agreement

On 15 February 2012, the Company entered into an employment agreement with Mr John Ellice-Flint. Mr Ellice-Flint’s employment is subject to Shareholders approving his appointment as a Director under Resolution 1. Consequently, if Resolution 1 is not approved, the benefits set out in Mr Ellice-Flint’s employment agreement, for which approval is sought under Resolutions 5 and 6, will not be provided.

The employment agreement provides that:

• Mr Ellice-Flint will be appointed as a part-time employee and an executive Director of the Company. He is not required to work exclusively for the Company, provided that any other employment or work must not interfere with his duties to the Company and must not be performed for the Company’s competitors (in certain circumstances).

• The Company will provide remuneration, benefits and entitlements to Mr Ellice-Flint including:

• a base salary of $200,000 per annum plus superannuation contributions at a rate that satisfies the Company’s statutory obligations (to be reviewed annually but which will not be reduced).

• the issue of 41,236,500 Shares on the terms described in section 6.3.

• the grant of the Performance Options described in section 6.3 and Schedule 3.

• four weeks annual leave per annum (on a pro-rata full-time basis).

• a termination payment equal to one year’s base salary if the Company terminates Mr Ellice-Flint’s employment other than in certain circumstances described in section 6.4.

11

==> picture [51 x 44] intentionally omitted <==

• The Company may terminate the agreement at any time and the circumstances of the termination will determine whether the Company is required to pay the termination benefit. Mr Ellice-Flint can terminate the agreement by giving one month’s notice to the Company. The agreement terminates automatically if he is removed as a Director under Part 2D.6 of the Corporations Act and Mr Ellice-Flint must resign as a director if his employment agreement is terminated for any reason.

• Mr Ellice-Flint is subject to customary requirements for an agreement of this type relating to solicitation of employees and clients, intellectual property rights and confidentiality.

6.2 Shareholder approvals sought for the transactions with Mr John Ellice-Flint under his employment agreement

Shareholder approval is sought by the Company for:

• the issue of 41,236,500 Shares to Mr John Ellice-Flint under his employment agreement in accordance with Chapter 2E Corporations Act and Listing Rule 10.11 ( Resolution 5(a) );

• the issue of :

• 20,618,250 Tranche 1 Performance Options;

• 20,618,250 Tranche 2 Performance Options; and

• 41,236,500 Tranche 3 Performance Options,

to Mr John Ellice-Flint or his nominee under his employment agreement in accordance with Chapter 2E of the Corporations Act and Listing Rule 10.11 ( Resolution 5(b) ); and

• the Company entering into the employment agreement with Mr John Ellice-Flint and providing the benefits to him under that agreement in accordance with Chapter 2E Corporations Act ( Resolution 6 ).

Approval of Resolution 5 is subject to Shareholders approving Resolutions 1, 2, 4 and 6. Approval of Resolution 6 is subject to Shareholders approving Resolutions 1, 2, 4 and 5.

6.3 Resolution 5 – approval for issue of shares and options to John Ellice-Flint (or his nominee) under his employment agreement

For the purposes of Listing Rule 10.13 and section 219 of the Corporations Act information regarding the Shares to be issued to Mr John Ellice-Flint and the Performance Options to be granted to Mr John Ellice-Flint is provided below.

Terms and conditions of the Shares to be issued to Mr John Ellice-Flint under his employment contract

Under Mr Ellice-Flint’s employment agreement, the Company intends to issue to Mr Ellice-Flint 41,236,500 Shares for a nil issue price. These Shares will be subject to forfeiture if Mr Ellice-Flint resigns or is terminated for cause within one year of the commencement of his employment. Accordingly, the Shares will be held in escrow for 12 months by an independent escrow holder, being a recognised legal or accounting firm independent of the Company and Mr Ellice-Flint.

12

==> picture [51 x 44] intentionally omitted <==

Terms and Conditions of the Performance Options

Tranche	Number	Performance hurdle	Exercise price	Final expiry date
Tranche 1 Performance Options	20,618,250	The Company achieves 822PJ of certified 2P reserves within 2 years from commencement of Mr Ellice-Flint’s employment. However, if the Company achieves a minimum of 50% of certified 2P reserves within the two year period, the hurdle will be met if the Company achieves 822PJ of certified 2P reserves in the subsequent 24 month period.	6.25 cents	15 February 2017
Tranche 2 Performance Options	20,618,250	The Company achieves 3,000PJ of certified 3P reserves by 31 December 2014. However, if the Company achieves a minimum of 50% of certified 3P reserves within the three year period, the hurdle will be met if the Company achieves 3,000PJ of certified 3P reserves in the subsequent 24 month period.	6.25 cents	15 February 2017
Tranche 3 Performance Options	41,236,500	Company achieves $300 million market capitalisation within 3 years from commencement of Mr Ellice-Flint’s employment. The market capitalisation will be determined by the closing valuation on the ASX on at least 5 consecutive trading days. However, if the Company achieves a minimum of 50% of the market capitalisation within the three year period, the hurdle will be met if the Company achieves $300 million market capitalisation in the subsequent 24 month period	6.25 cents	15 February 2017

13

==> picture [51 x 44] intentionally omitted <==

Any Performance Options which have not been exercised will lapse immediately if Mr Ellice-Flint resigns or the Company terminates his employment for cause. Otherwise, the Performance Options will remain unchanged (except if there is a takeover bid or other change in control).

If there is a takeover bid or other change in control of the Company which would, if successful result in the delisting of the Company from ASX or the Shares ceasing to be quoted on ASX, either:

• the Company will procure an offer to Mr Ellice-Flint for the effective exchange of the Performance Options for securities in the bidder on terms that the Directors in their discretion consider equitable to Mr Ellice-Flint; or

• all Performance Options will immediately vest on a time elapsed pro-rata basis and be capable of exercise (regardless of whether the performance hurdles have been met) within 30 days if the bid or other change of control event is or becomes unconditional.

The Performance Options are not transferrable.

If there is a reorganisation of the Capital of the Company, the terms of the Performance Options will be adjusted to the extent necessary to comply with the Listing Rules applying to a reorganisation of capital at the time of the reorganisation.

If the capital of the Company is reconstructed, the number of Performance Options and/or the exercise price of the Performance Options will be correspondingly reconstructed in a manner consistent with the Listing Rules that will not result in any additional benefits being conferred on Mr Ellice-Flint that are not conferred on Shareholders.

The full terms of the Shares and Performance Options to be issued are set out in Schedule 3.

Issue of Shares and Performance Options

If Resolution 5 is passed, the Company will issue the Shares and Performance Options no later than one month after the date of the Meeting.

Mr John Ellice-Flint’s proposed remuneration

The total proposed remuneration package for Mr John Ellice-Flint is described in detail in section 5.4.

The exact amount of Mr Ellice-Flint’s remuneration in future years is not currently known (as the base remuneration will be subject to annual review) but it is anticipated that it will be similar to that proposed to be provided under the employment agreement.

Current shareholding of Mr John Ellice-Flint

Mr Ellice-Flint’s current shareholding (held directly or indirectly) is 2,500,000 Shares.

14

==> picture [51 x 44] intentionally omitted <==

Valuation of the Shares proposed to be issued under the employment agreement

Under the accounting standard AASB Share Based Payments, the Company would recognise the fair value of Shares issued to Mr Ellice-Flint under his employment agreement as an expense of $3,010,265 and the Performance Options as an expense of $2,938,101 in its income statement with a corresponding adjustment to equity. This valuation is not and should not be taken to be audited financial information.

For the 12 months prior to 15 February 2012, the Company’s shares traded on the ASX in a range from $0.125 to $0.060. As at the close of trading on 15 February 2012, the Company’s shares were quoted at $0.078.

Valuation of the Performance Options

A valuation of the Performance Options has been obtained and, on the basis of the assumptions set out below, the technical value of the Performance Options is as follows:

Tranche	Number of Options	Value per Option	Probability of Vesting	Total Value of Options
Tranche 1 Performance Options	20,618,250	$0.050	60%	$618,548
Tranche 2 Performance Options	20,618,250	$0.050	75%	$773,184
Tranche 3 Performance Options	41,236,500	$0.050	75%	$1,546,369

The Company engaged BDO Corporate Finance (WA) Pty Ltd to undertake a valuation of the Performance Options. This valuation imputes a total value of $2,938,101 to the Performance Options. This value may go up or down after the date of valuation as it will depend on the future price of the Binomial methodology used, together with the following assumptions:

• the risk free rate is 3.67%;

• Under AASB2 the shares and options will be required to be valued for accounts purposes on the issue date based on the market price at that time. Given the share price has responded to several price sensitive announcements and the valuation of the options is for inclusion in a notice of meeting, the independent valuer believes that the 30-day VWAP prior to the valuation date is the most up to date value of the Company’s shares. The 30-day VWAP for Blue Energy prior to valuation date was $0.073 and the independent valuer has adopted this price for its valuation;

• the recent volatility of the Company’s share price was calculated by Hoadley’s volatility calculator for a five year period, using data extracted from Bloomberg. For the purpose of the valuation, the independent valuer used a future estimated volatility level of 80% for the Company in our pricing model;

• for the purposes of the valuation, no future dividend payments have been forecast;

15

==> picture [51 x 44] intentionally omitted <==

• the valuation has been undertaken based upon meeting 100% of the performance hurdles;

• for the purposes of the valuation it is assumed that the Performance Options will not be exercised any earlier than 15 February 2017; and

• for the purposes of the valuation it is assumed there is a 60% probability that the Tranche 1 Performance Options will vest and be exercised, a 75% probability that the Tranche 2 Performance Options will vest and be exercised and a 75% probability that the Tranche 3 Performance Options will vest and be exercised.

The Board believes, having taken appropriate expert advice on the matter, that this valuation model is appropriate in the circumstances. The Board has not used any other valuation or model in proposing the terms or number of the Performance Options.

Reason for issue of Shares and Performance Options.

The Board has decided to issue the number of Shares and Performance Options proposed because the issue of the Shares and Performance Options under the employment agreement provide appropriate incentive to maximise the return to Shareholders over the long term to assist in developing a unity of purpose for both Mr Ellice-Flint and the Shareholders given the:

• (a) escrow and forfeiture that applies to the Shares; and

• (b) the performance hurdles attaching to the Performance Options; and

• (c) Mr Ellice-Flint’s appointment as an Executive is in the best interests of the Company and he will not agree to that appointment unless the Shares and Performance Options are issued to him.

Dilutionary effect of the issue of Shares and exercise of Performance Options

The following table demonstrates the dilution of all other Shareholders’ holdings in the Company upon the vesting of Mr Ellice-Flint’s Performance Options issued under Resolution 5:

Resolution 5:
Shares on issue at date of this Notice	722,488,256
Shares issued to the Placement Participants under Resolution 2	152,000,000
Shares to be issued under the SPP to the underwritten amount of $4,000,000	64,000,000
Shares issued to Jeach Pty Ltd as trustee for the Pippi Super Fund under the Placement Agreement	8,000,000
Shares issued to John Ellice-Flint under his employment agreement	41,236,500
Shares issued on exercise of all Performance Options	82,473,000
Total Shares on issue assuming the above transactions are finalised	1,070,197,756
Dilutionary effect of the issues to John Ellice-Flint and Jeach Pty Ltd as trustee for the Pippi Super Fund assuming the Shares are issued to the Placement Participants under Resolution 2 and to the underwritten amount of the SPP (approximately)	48.1%

16

==> picture [51 x 44] intentionally omitted <==

Mr Ellice-Flint currently holds, directly or indirectly, 2,500,000 Shares. If all of the Shares and Performance Options are issued under Resolutions 4 and 5 and the Performance Options vest and are exercised, he (or entities associated with him) will hold 134,209,500 Shares. Subject to no further Shares being issued (other than those contemplated to the Placement Participants, the underwritten amount of the SPP and Mr Ellice-Flint in this Notice), these Shares will represent 12.5% of the issued capital of the Company.

ASX Listing Rules

In accordance with Listing Rule 10.13, the following information is provided in relation to Resolution 5.

If approval is obtained:

• Up to 41,236,500 Shares and 82,473,000 Performance Options may be issued;

• The Shares and Performance Options will be issued no later than one month after the date of the Meeting;

• The Shares and Performance Options will be issued for a nil issue price;

• The Shares and Performance Options will be issued to Mr John Ellice-Flint (or an entity nominated by him). Mr John Ellice-Flint is a related party of the Company because he is a proposed Director of the Company;

• The Shares (and Shares issued once the Performance Options are exercised) will rank equally in all respects with the Company’s existing ordinary shares on issue; and

• No funds will be raised by the issue of Shares or Performance Options. The appropriate use of any funds raised on exercise of the Performance Options will be determined by the board at the appropriate time.

Voting Exclusion – Resolution 5

In accordance with Listing Rule 14.11 and section 224(1) of the Corporations Act, Mr Ellice-Flint and his nominee, and their associates are excluded from voting on Resolution 5.

Directors’ Recommendation – Resolution5

No Director has an interest in the outcome of Resolutions 4 and 5. Each Director recommends that Resolutions 4 and 5 be approved because they consider that:

• (d) the issue of the Shares and Performance Options under the employment agreement provide appropriate incentive to maximise the return to Shareholders over the long term to assist in developing a unity of purpose for both Mr Ellice-Flint and the Shareholders given the:

• (i) escrow and forfeiture that applies to the Shares; and

• (ii) the performance hurdles attaching to the Performance Options; and

• (e) Mr Ellice-Flint’s appointment as an executive is in the best interests of the Company and he will not agree to that appointment unless the Shares and Performance Options are issued to him.

17

==> picture [51 x 44] intentionally omitted <==

6.4 Resolution 6 – approval for John Ellice-Flint’s employment agreement

On 15 February 2012, the Company entered into an employment agreement with Mr Ellice-Flint. Mr Ellice-Flint’s employment with the Company is subject to Shareholders approving Resolutions 1, 2, 4, and 5.

Under the employment agreement Mr Ellice-Flint will be appointed as a part-time employee and executive Director of the Company. He is not required to work exclusively for the Company, provided that any other employment or work must not interfere with his duties to the Company and must not be performed for the Company’s competitors.

Terms and conditions of the employment agreement with John Ellice-Flint

The employment agreement includes the following terms:

’ Description of Mr Ellice-Flint s role in the Company

Mr Ellice-Flint will be an executive Director responsible for various duties relating to his technical expertise including:

• recommending strategy and developing strategic plans which align with the Company’s vision to achieve 3,000PJ by 2014;

• providing technical review to all programs and assisting in developing appropriate exploration and appraisal capability;

• internal and external stakeholder management;

• promotion of the Company; and

• identifying and assessing suitable new business opportunities.

Base salary and superannuation

Mr Ellice-Flint will be paid a base salary of $200,000 per annum plus superannuation contributions at a rate that satisfies the Company’s statutory obligations (to be reviewed annually but which will not be reduced).

Issue of Shares and Performance Options

The Company will issue the 41,236,500 Shares and 82,473,000 Performance Options on the terms described in section 6.3.

Leave entitlements

Mr Ellice-Flint is entitled to four weeks annual leave (on a pro-rata full-time basis) as well as statutory entitlements to sick leave, special leave and paternity or carer’s leave.

Other benefits

In addition to the base salary, issue of Shares and Performance Options and leave entitlements, the Company will also provide Mr Ellice-Flint with appropriate accommodation and transport while he is on Company business, reimbursement of all reasonable expenses such as Blackberry, mobile phone and appropriate client entertainment in accordance with the Company’s policies, reimbursement for business travel expenses.

18

==> picture [51 x 44] intentionally omitted <==

D&O insurance and deed of access, insurance and indemnity

The Company will maintain a directors and officers insurance policy in favour of Mr Ellice-Flint and will enter into a deed of access, insurance and indemnity with him on the same terms as currently applicable to the Directors.

Termination provisions

Mr Ellice-Flint can resign by giving one month’s notice. The Company can terminate Mr Ellice-Flint’s employment at any time by paying a termination payment equivalent to one year’s base salary (presently $200,000) to Mr Ellice-Flint.

The termination benefits payable to Mr Ellice-Flint comply with Listing Rule 10.18 and do not require specific Shareholder approval under Listing Rule 10.19.

Mr Ellice-Flint can terminate his employment immediately, without notice if:

• he is removed as a Director (except under Part 2D.6 Corporations Act);

• there is a material adverse change in his status, role or responsibilities or they are materially downgraded or diminished;

• the Company materially breaches a provision of the employment agreement and the breach is not remedied;

• the Company is subject to an insolvency event; or

• the Company is delisted from ASX.

The Company can terminate Mr Ellice-Flint’s employment immediately, without paying the termination payment if:

• he is guilty of any fraud, dishonesty, misconduct, wilful breach of duty or a serious or persistent breach of his employment obligations. The Company must first give Mr Ellice-Flint an opportunity to demonstrate why his employment should not be terminated;

• he materially breaches a provision of the employment agreement and the breach is not remedied. The Company must first give Mr Ellice-Flint an opportunity to demonstrate why his employment should not be terminated;

• Mr Ellice-Flint is convicted or charged with a criminal offence or the breach of any law which would be likely to bring the Company or its business into disrepute. The Company must first give Mr Ellice-Flint an opportunity to demonstrate why his employment should not be terminated;

• he is subject to an insolvency or bankruptcy event; or

• he resigns as a Director or is removed as a Director under Part 2D.6 Corporations Act.

19

==> picture [51 x 44] intentionally omitted <==

Restraint

Mr Ellice-Flint’s employment contract contains customary provisions restraining him from, during his employment and for a period of six months after his employment ends;

• approaching employees or contractors with a view to encouraging them to terminate their employment or contract with the Company or to enter into any conflicting or inconsistent contract or arrangement (other than persons whose involvement with the Company is a result of a personal relationship or connection with Mr Ellice-Flint prior to commencement of his employment);

• approaching clients or customers to cease or decrease their level of business with the Company; and

• accepting any approach from an employee, contractor or client of the Company with a view to obtaining their custom in a competitive business.

Confidentiality and intellectual property

The agreement contains provisions requiring Mr Ellice-Flint to keep certain information confidential. Further, the agreement provides that intellectual property rights (including moral rights) that arise during the course of his employment must be, at the Company’s election, assigned to the Company.

Other information

Further information regarding Mr Ellice-Flint’s remuneration is set out in section 6.3.

Voting Exclusion and proxies – Resolution 6

In accordance with Listing Rule 14.11 and section 224(1) Corporations Act, Mr Ellice-Flint and his nominee, and their associates are excluded from voting on Resolution 6.

Directors’ Recommendation – Resolution 6

No Director has an interest in the outcome of Resolution 6. Each Director recommends that Resolution 6 be approved because they consider that:

• (a) the terms of the employment agreement and the benefits to be provided to Mr Ellice-Flint under the agreement represent reasonable remuneration for the services he will provide and provide appropriate incentive to maximise the return to Shareholders over the long term to assist in developing a unity of purpose for both Mr Ellice-Flint and the Shareholders given the:

• (i) escrow and forfeiture that applies to the Shares; and

• (ii) the performance hurdles attaching to the Performance Options.

• (b) Mr Ellice-Flint’s appointment as a Director is in the best interests of the Company and he will not agree to that appointment unless the employment agreement is approved.

20

==> picture [51 x 44] intentionally omitted <==

7. 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 below;

• (a) delivered by post to the Share Registry of the Company, Computershare Investor Services Pty Limited, GPO Box 242, Melbourne, Victoria 3001; or

• (b) sent by fax to the Share Registry of the Company, Computershare Investor Services Pty Limited on 1800 783 447 (within Australia) or + 61 3 9473 2555 (outside Australia).

• (c) online by visiting www.investorvote.com.au and logging in using the control number found on the front of your accompanying proxy form. Intermediary Online subscribers (Institutions/Custodians) may lodge their proxy instruction online by visiting www.intermediaryonline.com.

Lodgement of a Proxy Form will not preclude a Shareholder from attending and voting at the Meeting in person.

21

==> picture [51 x 44] intentionally omitted <==

Schedule 1 - Definitions

In this Explanatory Memorandum and Notice:

"AASB" means the Australian Accounting Standards Board.

"ASX" means ASX Limited ACN 008 624 691 or the securities exchange operated by it (as the case requires).

"Board" means the board of Directors of the Company.

"Company" means Blue Energy Limited ACN 054 800 378.

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

"Director" means a director of the Company.

"EST" means Eastern Standard Time, being the time in Brisbane, Queensland.

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

"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.

"Performance Options" means the options to acquire Shares proposed to be issued to John Ellice-Flint and described in section 3.2.

"Placement Agreements" means either the placement agreement entered into with each Placement Participant described in section 3.2, or the placement agreement entered into by Jeach Pty Ltd as trustee for the Pippi Super Fund, as the context requires.

"Placement Participants" means the parties proposed to be issued shares under Resolution 2, set out in Schedule 2.

"Placement Shares" means 152 million Shares proposed to be issued to the Placement Participants in the Proportions set out in Schedule 2.

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

"Schedule" means a schedule to this Notice.

"Share" means a fully paid ordinary share in the capital of the Company.

"SPP" means the Company’s share purchase plan announced on 16 February 2012 .

"Shareholder" means a registered holder of a Share.

"VWAP" means volume weighted average price.

Words importing the singular include the plural and conversely.

22

==> picture [51 x 44] intentionally omitted <==

Schedule 2 – Placement Participants and number of Placement Shares to be issued

Schedule 2 – Placement Participants and number of Placement issued	Shares to be
Placement Participants	Placement Shares
BCP Alpha Investments Limited	2,000,000
Bizzell Nominees PtyLtd as trustee for the Bizzell FamilyTrust	2,000,000
BJGR PtyLtd as trustee for the EF Super Fund	2,400,000
BJGR PtyLtd as trustee for the Ellice-Flint FamilyTrust	1,600,000
CBJ Investments (Australia) Pty Ltd as trustee for the Hodgkinson No 1 A/C	4,000,000
Evergreen Australian Equities Return Fund	8,000,000
Eyeon Investments Pty Limited as trustee for the Eyeon Investments FamilyTrust	3,200,000
Focus Asset Management PtyLimited	8,000,000
Girdis Superannuation Pty Ltd as trustee for the Girdis Superannuation Fund	8,000,000
Hansan PtyLimited as trustee for the BishopNo. 1 Trust	3,200,000
IdollingPtyLtd as trustee for the McKeih Superannuation Fund	3,200,000
Independent Asset Management PtyLtd	8,000,000
JCI PtyLtd as trustee of the MS FamilyTrust	4,000,000
John Weir Ingram Pty Ltd as trustee for the John Weir Ingram Super Fund	4,000,000
Mathews Capital Partners PtyLimited	48,800,000
Narclip Pty Ltd as trustee for the Kevin Skelton Personal Superannuation Fund	8,000,000
Peter James Parry	4,000,000
Matthew Philipchuk	4,800,000
Qingdao Investments PtyLtd	2,400,000
Joanne Shaw	2,400,000
TBB NSW PtyLtd as trustee for the Watson No1 A/C	12,000,000
Transcontinental Asset Management PtyLtd	8,000,000
Total	152,000,000

23

==> picture [51 x 44] intentionally omitted <==

Schedule 3 – Terms of the Shares and Performance Options to be issued to Mr John Ellice-Flint under his employment agreement

Part I Forfeiture and Vesting Conditions

Share Entitlement	Forfeiture Condition	Exercise Price	Restriction
41,236,500 Shares (“T1 Shares”)	T1 Shares subject to forfeiture if resigns within 1 year or is dismissed for cause (para 9.2) within 1 year from Commencement Date	Not applicable	Restriction terminates 12 months after the Shares are issued. The T1 Shares will be held in escrow for 12 months by an independent escrow holder (being a recognised legal or accounting firm independent of the Company and you) agreed with you.
Option Entitlement	Vesting Conditions	Exercise Price	Expiry Date
Tranche 1 - 20,618,250 Performance Options	Company achieves 822PJ of certified 2P reserves within 2 years (“2P Qualifying Term”) of Commencement Date. If the Company achieves 50% of the 2P reserves target within the 2P Qualifying Term the 2P Qualifying Term is automatically extended by 24 months.	$0.0625	5 years from date of this agreement.
Tranche 2 - 20,618,250 Performance Options	Company achieves 3,000PJ of certified 3P reserves by 31 December 2014 (“3P Qualifying Term”). If the Company achieves 50% of the 3P reserves target within the 3P Qualifying Term the 3P Qualifying Term is automatically extended by 24 months.	$0.0625	5 years from date of this agreement.
Tranche 3 41,236,500 Performance Options	Company achieves $300 million market capitalisation within 3 years (“Market Cap Qualifying Term”) of Commencement Date. The market capitalisation will be determined by the closing valuation on the ASX on at least 5 consecutive trading days. If the Company achieves 50% of the Market Capitalisation target within the Market Cap Qualifying Term the Market Cap Qualifying Term is automatically extended by 24 months.	$0.0625	5 years from date of this agreement.

24

==> picture [51 x 44] intentionally omitted <==

Part II

Terms of Vesting of Shares and Performance Options

Termination

Cause of Termination of Employment	Shares, Exercised Options Vested Options	Unvested Options
Resignation	Retain T1 Shares (if resigns at least 1 year after Commencement Date), and retain Shares obtained under exercised Performance Options. Unexercised vested Performance Options lapse immediately.	Lapse immediately
Termination for cause	Retain T1 Shares (if termination at least 1 year after Commencement Date), and retain Shares obtained under exercised Performance Options. Unexercised vested Performance Options lapse immediately.	Lapse immediately
Termination without cause	Retain T1 Shares and Shares obtained under exercised Performance Options. Retain unexercised vested Performance Options.	Retain unvested Performance Options with Qualifying Requirements unchanged
Removal as a Director	Retain T1 Shares and Shares obtained under exercised Performance Options. Retain unexercised vested Performance Options.	Retain unvested Performance Options with Qualifying Requirements unchanged
Termination for downgrading or diminishing of role and responsibilities	Retain T1 Shares and Shares obtained under exercised Performance Options. Retain unexercised vested Performance Options.	Retain unvested Performance Options with Qualifying Requirements unchanged
Termination for Company’s breach	Retain T1 Shares and Shares obtained under exercised Performance Options. Retain unexercised vested Performance Options.	Retain unvested Performance Options with Qualifying Requirements unchanged
Termination due to death or disability	Retain T1 Shares and Shares obtained under exercised Performance Options. Retain unexercised vested Performance Options.	Retain unvested Performance Options with Qualifying Requirements unchanged, but in any event lapse 12 months after termination

25

==> picture [51 x 44] intentionally omitted <==

Takeover

In the event that a takeover bid or another change of control event is initiated which, if successful, would result in the delisting of the Company or its securities ceasing to have official quotation:

• a) The Company will use their reasonable endeavours to procure that an offer is made on like terms (having regard to the nature and value of the Performance Options) and incorporated into a new plan or agreement with the bidder that will preserve your rights and value.

• b) In the event that a new plan or agreement cannot be procured on terms the Directors, in their absolute discretion, consider equitable, then all unvested Performance Options will become vested, on a time elapse pro-rata basis, and exercisable within 30 days if the bid or other change of control event is or becomes unconditional.

Other Terms

• a) Performance Options will not confer an entitlement to receive dividends declared and paid by the Company, nor an entitlement to vote at general meetings of the Company.

• b) Performance Options will not confer an entitlement to participate in new issues of shares without the holder first exercising the option.

• c) Subject to the Company’s constitution, each Share issued on the exercise of a Performance Option will rank equally in all respects with other issued Shares.

• d) The Company will not apply to ASX for official quotation of the Performance Options.

• e) The Company will apply for official quotation by ASX of the Shares issued upon exercise of Performance Options within the time period required by the ASX Listing Rules.

• f) Performance Options will not be assignable or transferable except to a Company controlled by the holder or to a trust in which the holder or members of the holder’s immediate family are a principal beneficiary or (in the case of death) to the holder’s personal representative.

• g) In the event of a reorganisation of the capital of the Company, the rights of the holder will be changed to the extent necessary to comply with the ASX Listing Rules applying to a reorganisation of capital at the time of the reorganisation.

• h) If the capital of the Company is reconstructed, the number of Performance Options and/or the exercise price of the Performance Options will be correspondingly reconstructed in a manner that will comply with the Listing Rules and will not result in any additional benefits being conferred on the holder that are not conferred on shareholders.

26

Lodge your vote:

 Online:

www.investorvote.com.au

ABN 14 054 800 378



By Mail:

Computershare Investor Services Pty Limited GPO Box 242 Melbourne Victoria 3001 Australia

000001 000 BUL MR SAM SAMPLE FLAT 123 123 SAMPLE STREET THE SAMPLE HILL SAMPLE ESTATE SAMPLEVILLE VIC 3030

Alternatively you can fax your form to (within Australia) 1800 783 447 (outside Australia) +61 3 9473 2555

For Intermediary Online subscribers only (custodians) www.intermediaryonline.com

For all enquiries call:

(within Australia) 1300 552 270 (outside Australia) +61 3 9415 4000

Proxy Form



Vote online 24 hours a day, 7 days a week:

www.investorvote.com.au

Your secure access information is:

Cast your proxy vote Control Number: 999999 SRN/HIN: I9999999999 PIN: 99999 Review and update your securityholding  PLEASE NOTE: For security reasons it is important that you keep your SRN/HIN confidential.

 For your vote to be effective it must be received by 11.00 am (EST) Tuesday 3 April 2012

How to Vote on Items of Business

All your securities will be voted in accordance with your directions.

Appointment of Proxy

Voting 100% of your holding: Direct your proxy how to vote by marking one of the boxes opposite each item of business. If you do not mark a box your proxy may vote as they choose. If you mark more than one box on an item your vote will be invalid on that item.

Voting a portion of your holding: Indicate a portion of your voting rights by inserting the percentage or number of securities you wish to vote in the For, Against or Abstain box or boxes. The sum of the votes cast must not exceed your voting entitlement or 100%.

Appointing a second proxy: You are entitled to appoint up to two proxies to attend the meeting and vote on a poll. If you appoint two proxies you must specify the percentage of votes or number of securities for each proxy, otherwise each proxy may exercise half of the votes. When appointing a second proxy write both names and the percentage of votes or number of securities for each in Step 1 overleaf.

A proxy need not be a securityholder of the Company.

Signing Instructions for Postal Forms

Individual: Where the holding is in one name, the securityholder must sign.

Joint Holding: Where the holding is in more than one name, all of the securityholders should sign.

Power of Attorney: If you have not already lodged the Power of Attorney with the registry, please attach a certified photocopy of the Power of Attorney to this form when you return it.

Companies: Where the company has a Sole Director who is also the Sole Company Secretary, this form must be signed by that person. If the company (pursuant to section 204A of the Corporations Act 2001) does not have a Company Secretary, a Sole Director can also sign alone. Otherwise this form must be signed by a Director jointly with either another Director or a Company Secretary. Please sign in the appropriate place to indicate the office held. Delete titles as applicable.

Attending the Meeting

Bring this form to assist registration. If a representative of a corporate securityholder or proxy is to attend the meeting you will need to provide the appropriate “Certificate of Appointment of Corporate Representative” prior to admission. A form of the certificate may be obtained from Computershare or online at www.investorcentre.com under the information tab, "Downloadable Forms".

Comments & Questions: If you have any comments or questions for the company, please write them on a separate sheet of paper and return with this form.

GO ONLINE TO VOTE,  or turn over to complete the form

916CR_0_Sample_Proxy/000001/000001

MR SAM SAMPLE FLAT 123 123 SAMPLE STREET THE SAMPLE HILL SAMPLE ESTATE SAMPLEVILLE VIC 3030

==> picture [18 x 18] intentionally omitted <==

Change of address. If incorrect, mark this box and make the correction in the space to the left. Securityholders sponsored by a broker (reference number commences with ’ X ’) should advise your broker of any changes.

Proxy Form

Please mark

Appoint a Proxy to Vote on Your Behalf

I9999999999

I 9999999999 I ND

==> picture [21 x 21] intentionally omitted <==

to indicate your directions

XX

I/We being a member/s of Blue Energy Limited hereby appoint

==> picture [21 x 21] intentionally omitted <==

the Chairman of the meeting

OR



PLEASE NOTE: Leave this box blank if you have selected the Chairman of the Meeting. Do not insert your own name(s).

or failing the individual or body corporate named, or if no individual or body corporate is named, the Chairman of the Meeting, as my/our proxy to act generally at the meeting on my/our behalf and to vote in accordance with the following directions (or if no directions have been given, as the proxy sees fit) at the General Meeting of Blue Energy Limited to be held at The Morgan Room, Christie Conference Centre, Level 1, 320 Adelaide Street, Brisbane on Thursday, 5 April 2012 at 11.00 am (EST) and at any adjournment of that meeting.

Items of Business 

PLEASE NOTE: If you mark the Abstain box for an item, you are directing your proxy not to vote on your behalf on a show of hands or a poll and your votes will not be counted in computing the required majority.

==> picture [88 x 24] intentionally omitted <==

----- Start of picture text -----

For Against Abstain
----- End of picture text -----

SPECIAL BUSINESS

==> picture [83 x 162] intentionally omitted <==

1. Election of Mr John Ellice-Flint as a Director

2. Approval for the issue of Shares to the Placement Participants

3. Approval for the issue of Shares to the underwriter of the Company's share purchase plan

4. Approval for the issue of shares to Jeach Pty Ltd as trustee for the Pippi Super Fund under the Placement Agreement

5. Approval for the issue of shares and grant of options to Mr John Ellice-Flint (or his nominee) under his employment agreement

6. Approval of John Ellice-Flint's employment agreement

The Chairman of the Meeting intends to vote undirected proxies in favour of each item of business.

SIGN Signature of Securityholder(s) This section must be completed.

==> picture [504 x 77] intentionally omitted <==

----- Start of picture text -----

Individual or Securityholder 1 Securityholder 2 Securityholder 3
Sole Director and Sole Company Secretary Director Director/Company Secretary
Contact
Contact Daytime
Name Telephone Date / /
----- End of picture text -----

1 4 5 1 0 8 A

B U L