ENVIRONMENTAL CLEAN TECHNOLOGIES LIMITED. — Capital/Financing Update 2006

Aug 10, 2006

SOLUTIONS ENVIRONMENTAL INTERNATIONAL ITD

ABN 28 009 120 405

11 August 2006

Company Announcements Office Australian Stock Exchange Limited

Dear Sir / Madam,

By e-Lodgement 2 Pages

UPDATE ON BACCHUS MARSH PROGRESS REPORT COMMERCIALISATION OF CLEAN COAL TECHNOLOGIES

On 17th July ESI announced to the ASX that its joint development partner Victorian Coal Resources Pty Ltd (VCR) was making excellent progress on the upgrading of the Bacchus Marsh pilot plant towards a 24/7 operation and moving to full commercialisation by October this year.

ESI directors are pleased to advise that the upgrade process continues to be on schedule and continues to attract great interest not only from industry but also government and potential customers, both domestic and overseas.

The uparade of the Bacchus Marsh pilot plant is one of the first reaujrements under the terms of the binding Memorandum of Understanding (MOU) to develop and produce brown coal pellets and high grade steel between ESI and VCR.

Other major terms of the MOU are:

• Pursuant to the MOU, ESI and VCR have commenced an upgrade of the existing Coldry Process® pilot plant at Bacchus Marsh. The 1 mill USD required for the upgrade is being funded by VCR. The plant upgrade is due for completion by the end of September 2006, and will be followed by a 60 day testing and commissioning period.
• ESI and VCR will work towards the creation of a proposed new company (NEWCO) to $\bullet$ develop the brown coal resources available in the Gippsland Basin (Exploration Licence EL4416) using the patented ESI technologies for the commercialisation of the Coldry Process® and Matmor Process®.
• ESI will deliver to NEWCO its rights to the Coldry Process® and Matmor Process® technology for a 25% ownership stake of NEWCO (subject to achieving technology and production milestones), ESI would own 25% of NEWCO and VCR will deliver its current 97% interest in Exploration Licence EL4416 in relation to brown coal in the Gippsland Basin for its 75% stake.

Environmental Solutions International Limited

C/- FJH Solutions Pty Ltd, 21 Teddington Road, Burswood WA 6100 PO Box 6918, East Perth WA 6892 T: (08) 9486 2333 F: (08) 9355 4580

ENVIRONMENTAL SOLUTIONS INTERNATIONAL ITD

ABN 28 009 120 405

All future financing requirements for the commercialisation activities are to be wholly $\bullet$ funded by NEWCO.

About Environmental Solutions International Ltd:

ESI is a publicly listed environmental technology company which via its wholly owned subsidiary Asia Pacific Coal & Steel Pty Ltd ("APCS") has an exclusive right under a Participants Agreement with the technology owners, subject to achieving technology and production milestones under that agreement, to licence, subject to paving royalties, the Coldry process (producing commercially saleable brown coal pellets from high moisture brown coal), and the Matmor process (producing high grade carbon steel from high moisture content brown coal). APCS was formed to commercialise and license these technologies.

The patented Coldry Process® is a unique process that dewaters brown coal and similar materials by as much as 85% in a mechanically simple and economic way, creating an equivalent high energy value feedstock equal to black coal. The Matmor Process® mixes wet brown coal with low grade un-marketable ores such as iron and nickel and produces high quality steel and nickel via a low cost, low emission retort.

The Company also holds patents to the ENERSLUDGE™ technology. The key to this patented technology is the molecular rearrangement by a process of slow pyrolysis plus intimate contacting of the product streams in the main conversion reactor to obtain the optimum quality of products. A series of lower cost and more flexible 'second-generation' designs are now ready for market. The ENERSLUDGE™ technology provides enormous environmental and operational flexibility. The variety of potential uses for the ENERSLUDGE™ output products from a particular sludge or waste give the technology considerable market and commercial flexibility.

Ends.

For further information please contact:

Mr. Murray d'Almeida (Chairman): 0401 691 514 or Mr. Sachlan Fraval (Director): 0408 574 252