adding value to energy™Producing Energy: Emerging Technologies Nov 11/04

Headwaters Coal-to-LiquidsTechnologies

Theo L.K. Lee

Headwaters Technology Innovation Group

1501 New York Avenue

Lawrenceville, NJ

Nov 11/04 Washington D.C.

2adding value to energy™Producing Energy: Emerging Technologies Nov 11/04

Corporate Vision

At Headwaters Incorporated, our singular focus is to create value

through innovative advancements in stewardship of natural resources

throughout the world.

3adding value to energy™Producing Energy: Emerging Technologies Nov 11/04

Headwaters at a Glance

Diversification Across the Coal Value Chain

4adding value to energy™Producing Energy: Emerging Technologies Nov 11/04

Corporate Fact Sheet

Pro forma TTM revenues 30JUN04: $834 million

Market capitalization >$1 billion

4,000 employees

Headquartered near Salt Lake City, Utah

Publicly traded company (NASDAQ symbol: HDWR)

Website: www.hdwtrs.com

5adding value to energy™Producing Energy: Emerging Technologies Nov 11/04

Headwaters Technology Innovation

Heavy Oil Upgrading Efficiently upgrades heavy oils such as oil sand bitumen into

light syncrude using a nanocatalyst

Direct Coal Liquefaction End result of $3.6 billion US government funded R&D

programs to convert coal directly into oil

Indirect Coal Liquefaction Fischer-Tropsch catalyst and process for converting coal into ultra-clean transportation fuel and chemical

feedstocks

Nanotechnology Nanocatalysts with extraordinary performance charact- eristics used in manufacturing chemicals, fuel cells and

emissions control

6 nm

6adding value to energy™Producing Energy: Emerging Technologies Nov 11/04

Direct Coal Liquefaction

Convert low cost coals to clean transportation fuels and petrochemical feedstocks

1st license to Shenhua Group’s Inner Mongolia pioneer plant (50,000 BPSP from12,800 TPSD of coal)– $26 to 30/bbl equiv. crude oil price– $2.2 billion capex

2nd project – feasibility study for Oil India Ltd.

Enquiries include –– South Africa, Mongolia, Philippines, United States

7adding value to energy™Producing Energy: Emerging Technologies Nov 11/04

Coal Derived Liquids

Properties Naphtha Diesel

Density, g/cm3 (20oC)

Viscosity, mm2/s (20oC)

Potential Aromatic, w%

S, ppm

N, ppm

Cetane No.

Flash Point, oC

Solidification Point, oC

Cold Filter Plugging Point, oC

Oxidation Sludge, mg/100ml

0.7641

-

68.8

<0.5

<0.5

<0.3

0.8648

3.69

81.9

<5

<1

46.7

76

-26

-90

8adding value to energy™Producing Energy: Emerging Technologies Nov 11/04

Indirect Coal Liquefaction

Gasification followed by Fischer Tropsch Synthesis to form ultra clean straight hydrocarbons

Lower efficiency as a standalone plant

Improved efficiency with poly-generation configuration

License through FT Solutions LLC. (JV with Rentech, Inc.)

Completed two feasibility studies for China

Started FEED of an ammonia revamp project in Illinois

Two other FS in progress in U.S.

9adding value to energy™Producing Energy: Emerging Technologies Nov 11/04

FT Diesel – an ultra clean fuel

Cetane No. >70

Zero Sulfur

No aromatics

10adding value to energy™Producing Energy: Emerging Technologies Nov 11/04

FT Diesel Exhaust Emissionsare Lower than Typical #2 Diesel

-42

-33

-9

-28

-45

-40

-35

-30

-25

-20

-15

-10

-5

0

Hydrocarbon CO N0x Particulates

Em

iss

ion

s R

elat

ive

to a

Typ

ical

Die

sel

Fu

el (

Per

cen

tag

e)

11adding value to energy™Producing Energy: Emerging Technologies Nov 11/04

Cost Estimates for FTD

FO

B D

iese

l C

ost

($

Bar

rel)

Feedstock Cost ($/mmbtu)

Natural Gas

21

42

63

Current CARB Diesel

1.00 2.00 3.000.50 1.50 2.50 3.50

Coal & Coke

adding value to energy™Producing Energy: Emerging Technologies Nov 11/04

Under the current high oil price and unstable supply scenario, coal-to-liquids is a viable

option for providing clean transportation fuels and petrochemical feedstocks in the United

States

13adding value to energy™Producing Energy: Emerging Technologies Nov 11/04

Pueblo, Colorado GTL Plant