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KFX INC. ANNOUNCES INITIAL INDEPENDENT RESULTS OF K-FUELTM TEST BURN

DENVER, March 27, 2006 -- KFx Inc. (Amex: KFX) today reported that it has received initial results from independently evaluated tests of K-FuelTM at Black Hills Power’s 22-megawatt Neil Simpson I power plant located near Gillette, Wyoming. The results, which were evaluated by an independent third party testing expert, showed excellent boiler performance and emissions reduction characteristics versus raw Powder River Basin (“PRB”) coal.

Approximately 2,000 tons of K-FuelTM was utilized for the test burn, which was produced from PRB feedstock coal with Btu values and moisture content characteristic for the northern part of the basin. After processing, the resulting K-Fuel™ met coal product specifications of approximately 10,200-11,100 Btu and 8-12% moisture. Initial third party emissions stack testing indicate the following results for K-Fuel™ emissions as compared to the Neil Simpson I power plant’s baseline emission levels:

Sulfur Dioxide (SO2) emissions decreased by 35-40%
Nitrogen Oxide (NOx) emissions declined 14-22%
Mercury (Hg) emissions decreased by 70-75%

Test evaluators also observed several positive characteristics of K-Fuel™ consistent with a higher Btu product than PRB coal. Testers observed a more stable and brighter flame in the boiler when burning K-FuelTM as compared to the boiler’s normal feedstock. Additionally, K-FuelTM exhibited no safety abnormalities during the testing process.

“We are delighted that these initial test results from the Neil Simpson station are as good as, or better than, our expectations. Product quality was completely consistent with K-FuelTM specifications and our anticipated results. Emissions stack testing and boiler operations confirm this,” said Mark Sexton, CEO. “Emissions results also confirm that K-Fuel™ comfortably meets the qualifications for Section 45 tax credits. Our confidence is high that the competitive emissions properties of K-Fuel™ will make this product extremely desirable to coal consumers.”

In September 2005, KFx entered into an agreement with Black Hills Power for a test burn of KFuel ™ at Black Hills Power’s Neil Simpson station. Black Hills Power did not participate in the evaluation or documentation of the test burn results. The test burn has been completed and final results from the third party testing company should be completed and available by mid-May.

About KFx
KFx Inc. offers combined energy, environmental and economic solutions to coal-fired power generating facilities and industrial coal users in the United States and internationally. Our proprietary K-FuelTM process uses heat and pressure to physically and chemically transform high moisture, low-Btu coals, such as subbituminous coal and lignite, into a more energy efficient, loweremission fuel. A co-benefit of the K-FuelTM process is the removal of significant amounts of impurities, including mercury, and the reduction of emissions of sulfur dioxide and nitrogen oxide.

Please visit www.kfx.com for more information.

Forward Looking Statements
Statements in this news release that relate to future plans or projected results of KFx are 'forwardlooking statements' within the meaning of Section 27A of the Securities Act of 1933, as amended by the Private Securities Litigation Reform Act of 1995 (the "PSLRA"), and Section 21E of the Securities Exchange Act of 1934, as amended by the PSLRA, and all such statements fall under the 'safe harbor' provisions of the PSLRA. Our actual results may vary materially from those described in any 'forward-looking statement' due to, among other possible reasons, the realization of any one or more of the risk factors described in our Annual Report on Form 10-K, or in any of our other filings with the Securities and Exchange Commission, all of which filings any reader of this news release is encouraged to study. Readers of this news release are cautioned not to put undue reliance on forward-looking statements.

Contact: KFx Inc., Denver, CO
Analyst Contact:
Andreas Vietor, Director of Investor Relations
303-293-2992
or
Brainerd Communicators, Inc.
Media Contact:
Michele Clarke/Jill Gumberg
212-986-6667

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