12 June 2007

Letter of Intent concerning Coal Gasification Signed by Zakłady Azotowe Puławy and Lubelski Węgiel Bogdanka S.A.

Zakłady Azotowe Puławy S.A. and Lubelski Węgiel Bogdanka S.A. signed the previously announced letter of intent concerning a coal gasification project

In the letter, the Management Boards of both companies declared their intention to cooperate on a joint project involving coal processing for chemical and energy purposes. The coal gasification project is among the key items of the new business strategy adopted by ZA Puławy for 2007–2017. The project is designed to facilitate raw material diversification, one of the objectives set in the strategy. If the project is finally approved for execution, it will rank among the largest investment ventures in the chemical industry in Poland.

Zakłady Azotowe Puławy S.A. and Lubelski Węgiel Bogdanka S.A. will now commence a joint project analysis. The companies are situated in close proximity, have experience in implementing large-scale projects as well as appropriate logistics resources. Moreover, both companies enjoy very good financial standing. As the region in which they operate is one of the poorest in Poland, the project may be co-financed with the EU funds.

The coal gasification technology is becoming increasingly popular throughout the world. The volume of gas produced through coal gasification increased twofold in the years 1980–2004. It is estimated that by 2010 the production capacities will increase by 56%.

Projects based on coal gasification technology are implemented mainly in China, USA, South Africa and Germany. The coal gasification technology is expected to develop at the fastest pace on the Chinese market.