ENVIRONMENTAL CLEAN TECHNOLOGIES LIMITED. — Capital/Financing Update 2006

May 25, 2006

SOLUTIONS INTERNATIONAL ENVIRONMENTAL ITD

ABN 28 009 120 405

26 May 2006

Company Announcements Office Australian Stock Exchange Limited

Dear Sir / Madam.

By e-Lodgement 2 Pages

IN-PRINCIPAL AGREEMENT FOR GIPPSLAND BASIN BROWN COAL ASSETS

The Directors of Environmental Solutions International Limited ("ESI") wish to update the market that substantive negotiations are underway between Directors of a privately held Australian company and a senior delegation of ESI, through it's wholly owned subsidiary Asia Pacific Coal & Steel ("APCS") relating to a potential business arrangement to commercialize ESI's proprietary Brown Coal dewatering technology known as the "Coldry® Process" and also its Matmor® Steel manufacturing process that utilizes the "Coldry® Process" to produce feedstock for steel production.

The parties have reached agreement in principal to apply the Coldry® Process" and Matmor® Steel processes under license utilising existing Victorian Brown Coal assets in the Gippsland Basin. Some of the applications of coal assets have previously been described in the Chairman's address of 12^th May 2006. Infrastructure will need to be put in place to enable these objectives to be achieved. It is not envisaged that ESI will be required to raise capital for this purpose.

ESI will provide a detailed announcement to the market as soon as the formal agreement is executed.

ABN 28 009 120 405

Ends.

For further information please contact:

MR SACHLAN FRAVAL Chairman

Contact: 0408 574 252