Cleaner Coal Technologies Theo L.K. Lee Hydrocarbon Technologies, Inc. (A Wholly Owned Subsidy of

1. Cleaner Coal Technologies Theo L.K. Lee Hydrocarbon Technologies, Inc. (A Wholly Owned Subsidy of Headwaters Corporation) June 10, 2003 Woodrow Wilson International Center

2. Headwaters Corporation • Utah based alternate fuels company • NASDAQ: symbol “HDWR”; • 28 million shares @ $19.50/share • Subsidies: • Covol Fuel: alternate fuels • ISG: bottom and fly ash • Headwaters Technology Innovation Group • Hydrocarbon Technologies, Inc.: energy • Headwaters NanoKinetix: nano-catalysis

3. R &D Directions • Improving chemical synthesis/reactions via nano-catalysis • Developing cost effect technologies for processing low grade feedstocks, for example • coal • Petroleum residuum (bottom of the barrel)

4. Nano-catalysis • Nano-dispersion and atomic alignment techniques • Significant saving in precious metals usage • Breakthrough applications • Much simplified and energy efficient process • Examples: • Highly selective catalyst for direct synthesis of H2O2 • Efficient & stable catalysts for fuel cells (DMFC), catalytic converters, etc..

5. Crystal Phase Controlled Catalyst • Nano-scale deposition technology: • Aligning, spacing and adhering precious metal atoms on support materials. • Controlled spacing between lines of Pd atoms to consistently expose the preferred crystal face (110). • Nearly 100% selectivity for H2O2 ; no byproduct (H2O) H/O = 1/1 3/1 4/1

6. Alignment of Pd Particles • Princeton University Materials Institute high resolution transmission electron microscope image. • Illustrates highly organized and efficient structure of HTI nano-catalyst. • Parallel lines are rows of palladium atoms on support material. • Verifies consistent exposure of (110) crystal face and spacing between lines of atoms necessary to achieve 100% selectivity for H2O2. 3 nm

7. World Proved Recoverable Coal Reserves World Energy Council (Jan 2001) – million short tons

8. Coal to Liquids • Direct Coal Liquefaction (DCL) products: • Higher diesel to gasoline ratio than petroleum derived • Use existing refining techniques • Meet all current & projected specifications for sulfur and aromatics required • Indirect Coal Liquefaction (IDCL) products: • Less energy efficient • Ultra clean diesels with no sulfur or nitrogen • No aromatic; high cetane number ( over 75) • Integrated DCL and IDCL plant

9. Direct Coal Liquefaction • A clean coal technology • US DOE funded development between mid-70s & late 90s. • Japanese DCL program completed in late 90s • Significant technology improvements and cost reduction • China is constructing a pioneer commercial plant in Inner Mongolia; utilizing HTI’s COAL PROCESS • Feasibility study for an India client • Other potential sites under consideration: • Indonesia, Yunnan & Shaanxi (China), Australia, etc..

10. The Shenhua Project (Inner Mongolia) • China imported 500 million barrels of crude oils in 2001. • Energy security and self sufficiency • Huge coal resources ; Shenhua coalfield (236 billion metric tons proven reserves) • Estimated 10 plants to be constructed in the next 20 years in China • Shenhua’s Pioneer Plant: • Direct Coal Liquefaction technology • 60,000 BPD or 20 million BPY (15,000 TPD or 4.5 million tons/y) • Investment cost: US$2.0 to 2.2 billion • ROI of 12 to 15% • 1st Q 2006 Startup

11. Concluding Remarks • U.S. recoverable coal reserve is 273 billion short tons • 90 billion tons minable by surface mining • Coal conversion technologies are matured for commercial consideration • Coal liquefaction technologies produce clean fuels • Low or no S, N, & aromatics; no ash • Carbon dioxide can be effectively recovered at the coal conversion facilities • Lesser reliance on foreign oils and addressing energy security issue.