By Kevin R. Collins

President and CEO

Earlier today we announced an important deal with China Power Investment (CPI), one of China’s five state-owned power generation companies. The opening line of our “Agreement To Proceed” states clearly that it is the objective of both parties to build a K-Fuel® coal refinery in Inner Mongolia.

While this agreement does not call for construction of a plant, the tone of the agreement and our discussions so far with CPI suggest a strong desire to make this project a reality. It’s no surprise. China has millions of tons of lower-rank coal. Their energy needs are growing rapidly. They’re now importing coal because of domestic supply shortages. They’re concerned about emissions, which have become a global issue.

The K-Fuel® process fits precisely at the convergence of these issues faced by China, and our tests on lignite from Inner Mongolia have shown positive results.

Now, we will work in earnest on the three phases of this agreement. In fact, work is already under way the result of extensive meetings held at our Denver headquarters following the delegation’s tour, earlier this week, of our plant in Gillette, Wyoming.

This Agreement To Proceed is in line with my commitment in our Q2 conference call to maximize near-term cash flow through a variety of measures, including international licensing deals in Asia.

We have great respect for our counterparts at China Power Investment and we recognize that this relationship is one that should be punctuated by mutual understanding and respect.  But we will also protect our intellectual property, which is why we were pleased to see that this initiative will fall under a bilateral US-PRC fossil fuel technology agreement managed on the US side by the Department of Energy and on the Chinese side by their Ministry of Science and Technology.

Our activity overseas does not come at the expense of our domestic business development work. Those efforts continue unabated, along with our Bechtel-supported drive to optimize the Ft. Union plant. I can assure you that we will not allow our overseas efforts to dilute our work in the United States. Actually, I think it will help.

We’ve said for months that US policy makers and utility executives should look at near-term solutions to make coal cleaner while not losing sight of long-term technologies like IGCC with CCS that are decades from large-scale deployment. The Chinese, due to the urgency of their energy and environmental issues, see that near-term need. Perhaps their vision will guide our domestic energy leadership in that direction as well.