CUPERTINO, Calif. – September 1, 2009 – AE Biofuels, Inc., (OTCBB: AEBF), a global vertically integrated biofuels company, and San Diego-based Pearson Fuels, an alternative fuels provider, today announced that they have been awarded a $6.9 grant from the US Department of Energy (USDOE), through its Clean Cities program.

The Southern California Association of Governments applied for the money through their Clean Cities Coalition, The Partnership. Since 1994, The Partnership has been facilitating the creation of public/private business relationships and endeavors that serve to accelerate the deployment and market acceptance of Advanced Transportation Technologies throughout Southern California. In addition, The Partnership has received preliminary approval for a $4 million from the California Energy Commission, through its AB-118 matching grant program.

The award proposes that the parties build and supply 55 public E85 ethanol-fueling stations across California over the next 42 months. The stations will be located in areas with the highest concentration of flexible-fuel vehicles. The USDOE estimates that the initiative will help displace approximately 3.5 million gallons of petroleum annually.

This funding will be used to offset installation and permitting costs to position E85 dispensers in areas of greatest ethanol compatible vehicle population and to educate consumers regarding availability of this affordable, cleaner alternative. Under the terms of the agreement, AE Biofuels will supply Pearson Fuels with cellulosic ethanol and other biofuels for distribution through the E85 filling stations in California. Pearson Fuels will manage the construction and permitting of the new facilities.

“We are excited about the grant award, and we look forward to working with Pearson Fuels to bring our next-generation cellulosic ethanol to consumers,” said Eric McAfee, chairman and CEO of AE Biofuels. “California has over 300,000 flexible fuel vehicles already on the road today, but only a handful of E85 pumps at the state’s 9,000 stations. This grant will allow us to bring cellulosic E85 fuel to drivers around the state and meet the demand for carbon reducing fuels.”

Mike Lewis of Pearson Fuels added, “I am excited to see that we are now in a stronger position to bring alternative fuel infrastructure to the hundreds of thousands of flexible fuel vehicles already on the California roads while measurably reducing the State’s dependence on foreign oil imports.”

About AE Biofuels
AE Biofuels, Inc. is a global vertically integrated biofuels company based in Cupertino, California, developing sustainable solutions to address the world’s renewable energy needs. The company is commercializing its patent-pending next-generation cellulosic ethanol technology that enables the production of biofuels from both non-food and traditional feedstocks. Its Universal Biofuels subsidiary built and operates a name plate 50 million gallon per year biodiesel production facility on the east coast of India. For additional information about AE Biofuels, please visit www.aebiofuels.com.

About Pearson Fuels
Pearson Fuels specializes in bringing alternative fuels to the public. With their first project in San Diego, Pearson built a fuel station offering 10 vehicle fuels. It included the first Ethanol station for the state of California and the first Biodiesel, dual pressure natural gas, and propane station in San Diego County. In 2007, Pearson’s cutting edge approach to alternative fuels enabled them to make an unprecedented agreement with the California Air Resources Board to develop Ethanol (E-85) fueling infrastructure throughout the state. Pearson currently has fuel dispensers in twelve different cities across California. For additional information about Pearson Fuels, please visit www.pearsonfuels.com.

About The Partnership
The Partnership administers the Clean Cities Program in the Southern California Association of Governments region and works to build up and support the public and private participants of the Coalition. The mission of the Clean Cities Program is to advance the nation’s economic, environmental, and energy security by supporting local decisions to adopt practices that contribute to the reduction of petroleum consumption. Clean Cities carries out this mission through a network of more than 80 volunteer coalitions, which develop public/private partnerships to promote alternative fuels and vehicles, fuel blends, fuel economy, hybrid vehicles, and idle reduction. For additional information about The Partnership, please visit www.the-partnership.org

Forward Looking Statements
The information contained herein includes forward-looking statements. These statements relate to future events. Statements regarding future events are based on the parties’ current expectations and are necessarily subject to associated risks related to, among other things, the ability of AE Biofuels to successfully commercialize its cellulosic ethanol technology and deliver product, changes in government policy regarding ethanol production, the reduction or elimination of federal tax incentives for ethanol production, and changes in environmental regulations. Actual results may differ materially from those in the projections or other forward-looking statements. For information regarding other related risks, please see the “Risk Factors” section of AE Biofuels’ filings with the SEC, including its most recent filings on Form 10-K and Form 10-Q.