ENVIRONMENTAL CLEAN TECHNOLOGIES LIMITED. — Management Reports 2008

Mar 18, 2008

ABN 28 009 120 405

Environmental Clean Technologies Limited

ECT BUSINESS STRATEGY – MARKET UPDATE

19 March 2008 : ECT (ASX:ESI) provides this market update to clarify its business strategy for moving the commercialisation of its Coldry technology into production.

• At an initial stage in its commercialisation, ECT introduced a scientifically valid coal → Coldry testing process that independently tests 50kg coal samples and Coldry produced from those samples.

Deloittes

• Deloittes was engaged to develop a Coldry Special Purpose Vehicle (SPV) model working with ECT assumptions that were based on GRD Minproc +30% plant feasibility estimates. The +30% estimates ensure worst case scenarios in the initial modelling and establish the veracity of the expected improved results of the detailed feasibility study. The Deloittes’ modelling enables ECT to propose OpEx and CapEx based production solutions drawing on the independently validated Coal toColdry test results.

Arup

• The appointment of Arup as ECT’s global engineering and design partner delivers bankable feasibility by July 2008 that will include design, documentation and engineering support for the roll-out of Coldry production plants and will establish the financial certainty required to attract key investment partners.

• On proving commercial feasibility, the 150,000 t.p.a. plant is to increase in size to 2.5M t.p.a. Arup’s commitment to completion of the design and feasibility in July 2008 will provide a significant ‘de-risking’ step for financing and investment partners and once and for all overcome arguments about ‘scaling up’ risk.

Template MOU

• ECT has completed template ‘Memorandum of Understanding’ agreements with the crucial elements of the agreements including;

• IP release fee payable to ECT

• Domestic & Export royalties payable to ECT on a per tonne basis

• Version 1 Coldry plant and future upgrade designs (provided by ECT)

• Benchmarking of production statistics to support ongoing research and development

• Special Purpose Vehicle strategy options;

  • 17.5% ECT equity share with no capital contribution

  • 73% ECT equity share with 100% capital contribution

o Outsourced operation

Coldry Value Proposition

• ECT has established the Coldry Value Proposition and business cases have been provided to local power stations with supporting documentation along the lines of the example included in this announcement. As a result of the Coldry Value Proposition:

• Australian brown coal power stations are positively engaged

• Interest has been shown from other Lignite & Sub-Bituminous miners (domestic & international)

• There is support for the business case for introduction of higher efficiency boilers, to both reduce production costs and CO2 emissions by up to 56%

Level 13, 222 Kingsway � South Melbourne � Victoria 3205 � Australia � +61(0)3 96840888 � www. ectltd.com.au

• Forward compliance with CO2 reduction targets and recovery of large volumes of ‘mined’ water is enabled.

Strategic Partnering

• ECT has now commenced seeking indirect routes to market through strategic ‘partnering’ to deliver Coldry plants such as;

• Participants of the economic ecosystem that surround lignite fired Power Stations that stand to benefit from extending the useful life of the facilities, such as Boiler manufactures and Turbine maintainers;

• Miners that stand to be able to fully utilise equipment and resources as export markets come on stream; and

• Governments that remain committed to reduced CO2 emissions.

Construction

• ECT is negotiating with a global construction firm to support the feasibility estimates and deliver a Guaranteed Maximum Price (GMP) for Coldry Plant construction, recognising that an unequivocal contract price underpins SPV finance.

Intellectual Property

• As a key aspect of its strategic platform, ECT’s board has determined that the acquisition of IP is strategic to the company’s future interests and provisions are being made for that acquisition.

Off-take Agreements

• Progress has been made toward construction of a 150,000 tonnes per annum (t.p.a.) Coldry plant in Victoria, Australia, with off-take agreements for Coldry as both export and local auxiliary feedstock. As an adjunct to this ECT is negotiating access to enduring lignite supplies.

Global Markets

• ECT will initiate a global marketing campaign to 1524[1] lignite fired power stations that would receive provable benefit from Coldry. It is expected that a market assessment will be able to be announced this year, on launch of the campaign.

The Coldry Scenario Analysis - Coldry - 1500 MW Power Station based on ECT assumptions follows.

If you have any queries, please do not hesitate to contact the Managing Director, Con Galtos on 0413 747 077 or the Manager – Commercial Development, Kos Galtos on 0400 339 404.

1 Contact details in ECT database as compiled to date

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www.ectltd.com.au

Scenario Analysis - Coldry - 1500 MW Power Station

Indicative scenarios based on ECT assumptions, with results taken from financial model prepared with Deloitte

	Coldry 10% / Brown Coal 90%	Coldry 10% / Brown Coal 90%	Coldry 100%	Coldry 100%
Capacity - Coldry Plant	2,550,816 tpa		4,651,489 tpa
Power Station Efficiency	30%		50%
Coldry - Domestic	1,508,982 tpa		3,687,805 tpa
Coldry - Export	1,041,834 tpa		963,684 tpa
Capex	$229,200,000		$397,200,000
CO2 Reduction	-970,278 tpa -5.44%		-9,663,127 tpa -54.14%
Water Recovery	2,423,275,604 L		4,418,914,336 L
ECT Funded Capital Contribution	Scenario A: Coldry 10% / Brown Coal 90%		Scenario C: Coldry 100%(requires upgraded boilers)
	ECT	Power Station	ECT	Power Station
Capital Invested	45,840,000 $	- $	79,440,000 $	- $
SPV Equity	75.0%	25%	75.0%	25%
NPV(excludes terminal value)	252,570,792 $	59,058,361 $	333,649,946 $	2,064,894,600 $
IRR	32.44%	375.25%	28.56%	0.00%
Royalty - Domestic @$2.00 tonne	3,331,268 $	- $	8,141,293 $	- $
Royalty - Export @$5.00 tonne	5,749,951 $	- $	5,318,634 $	- $
Dividend & Operational Benefit(est.)	28,947,782 $	7,614,611 $	38,111,976 $	267,663,998 $
Total	38,029,001 $	7,614,611 $	51,571,902 $	267,663,998 $
Power Station Funder Capital Contribution	Scenario B: Coldry 10% / Brown Coal 90%		Scenario D: Coldry 100%(requires upgraded boilers)
	ECT	Power Station	ECT	Power Station
Capital Invested	- $	45,840,000 $	- $	79,440,000 $
SPV Equity	20.00%	80%	20.00%	80%
NPV(excludes terminal value)	136,010,689 $	175,913,443 $	191,938,515 $	2,206,606,031 $
IRR	0.00%	26.01%	0.00%	70.16%
Royalty - Domestic @$2.00 tonne	3,331,268 $	- $	8,141,293 $	- $
Royalty - Export @$5.00 tonne	5,749,951 $	- $	5,318,634 $	- $
Dividend & Operational Benefit(est.)	7,719,409 $	28,881,288 $	10,163,194 $	295,612,781 $
Total	16,800,627 $	28,881,288 $	23,623,120 $	295,612,781 $

Assumptions:

• Coldry specifications: 12% moisture, 59% Carbon, 2.4% ash, 24MJ/kg from Latrobe Valley coal of moisture 62%, Carbon 26.8%, Ash 0.9%, 8.4 MJ/kg

• WACC - 10%

• NPV - 20 years (excludes terminal value)

• Carbon Price - $30 tonne

• Coldry sale price - $25 domestic, $70 export

• Inflation @ 2.5% p.a.

• $ = Australian Dollars

(C) 2008 Environmental Clean Technologies Limited