Coal Upgrading Commercialisation

Blake WilliamsBangkok, ThailandCoaltrans Emerging Asian Markets

COAL UPGRADING

COMMERCIALISATION

http://www.coaltrans.com/emergingasia

Copyright: GTL Energy Limited: COALTRANS 15-16 Nov 2012 2

GTLE has developed a proprietary and patented technology to upgrade low rank coals (LRC) by

removal of moisture• 7 years of R&D and US$45 million have been spent developing the

technology

• GTLE process is unique relative to competitive technologieso Safe, robust, reliable and commercially viable

• Technology is at advanced stage of commercialisationo Commercial scale demo plant in North Dakota since July 2010

o 3rd party commercial facility in New Zealand commissioning now

o 1MMtpa Indonesian Plant under development

• Attractive economics and significant market opportunities

• Strong management team

Coal Drying Technology Being Deployed


Use of high mechanical pressure before drying:

1. Increases evaporation efficiency

2. Permanently transforms physical characteristics of coal by collapsing pore space where moisture resides

3. Produces a stable, transportable, high energy briquette suitable for power generation (PC) and coal chemicals (gasification)

The GTLE Process – Simple and Robust

GTLE’s unique patented process addresses the challenges of coal-drying safely and cost-effectively using tried and tested material handling equipment

Low Rank Coal/Lignite

Crush

Compaction

Drying

Briquetting

Wash (optional)

Dust

Product Storage

Low Temp Heat

Water


Compaction Reduces Pore Volume

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Competitive Advantages for GTLE

Challenge Competitors* GTLE Technology Difference**

Temperature and Pressure:

Use high temperature, chemical or high pressure vessels. This has cost, safety and environmental challenges.

Uses a mechanical process followed by low temperature (coal <150F, 65C), ambient pressure. Only water removed, no post-treatment required.

Stability of Product:

Had problems with coal moisture stability (staying dry) and propensity for spontaneous combustion.

Mechanical processing collapses pore space: limits moisture reabsorption. Stockpile trials demonstrate stable product.

Economics

High CAPEX and OPEX – partly linked to complexity of process, high temp/energy, pressure process design or binders.

Feasibility review indicates attractive economics for target coals and markets.

Scale-UpNot proven at scale, or experienced problems in scale-up

Demonstration at relevant commercial scale in North Dakota / New Zealand. Modular development approach mitigates risk.*Anecdotal, discussions with customers and publicly available information.

** Based on test programs to date, to be proven in the field by large volume production (residual risk)


Sample Results Achieved To-Date (Kcal/Btu)

Source of coal Date Reduction in moisture Increase in thermal energy (Kcal/kg)

Indonesian Sub-bituminous 2008 33% to 10.0% TM (70%) 4,585 to 6,110 Kcal/Kg (33%)

Indonesian Bulk Trial (500t) 2011 44% to 14.0% TM

(68%)3,578 to 5,494 Kcal/Kg

(55%)

New Zealand Lignite 2006 46% to 12.5% TM (73%) 3,055 to 5,280 Kcal/Kg (73%)

New Zealand Bulk Trial (500t) 2010 41.1% to 14.2% TM

(65%)3,525 to 5,090 Kcal/Kg

(44%)

Texas Lignite 2006 35% to 12.5% TM (64%) 3,055 to 5,110 Kcal/Kg (67%)

North Dakota Lignite 1 2008 42.5% to 12.5% TM (71%)

3,335 to 5,110 Kcal/Kg (53%)

North Dakota Bulk Trial (200t) 2010 37% to 13% TM

(64%)3,920 to 5,335 Kcal/Kg

(36%)

PRB Sub-Bituminous 2009 30% to 10% TM (67%) 4,780 to 6,000 Kcal/Kg (25%)

Australian Brown Coal 2010 61% to 12.5% TM (80%) 2,610 to 5,750 Kcal/Kg (120%)

Bold indicates trials at South Heart, ND Data reported on a Gross As Received (GAR) basis.

Copyright: GTL Energy Limited: COALTRANS 15-16 Nov 2012

7

GTLE Adds Value to Low Rank Coal Assets

$0

$20

$40

$60

$80

$100

$120

2,500 3,000 3,500 4,000 4,500 5,000 5,500 6,000 6,500 7,000

US

$/t

Kcal/kg

Argus CoalIndo Benchmark Pricing (FOBIndonesia)

Newcastle Benchmark Pricing (FOBAustralia)

China: 5800kcal (CFR Qinhuangdao)

AUS 60%TM

Value Uplift of between $30-$70/t*

pays for cost of upgrading and

license fees to GTLE

INDO 45%TM

PRB 27%TM

Brown Coal / Lignite

Sub-bituminous

Bituminous

*Price Arbitrage Concept Chart: Reference to prices as of Mar-2012 on GAR basis. Refer example economic slides for updated pricing analysis. Degree of upgrade is coal specific.


Following a program of lab testing, progressive scale-up, and bulk sample tests, GTLE is rolling out the technology with:

• 2 plants built

• 1 in engineering phase

• Others in the development phase

Ready for Commercial Roll-out

Projects Underway (Agreements Executed)

Advanced Interest/Negotiations

GTLE Operations (Pilot and Commercial Scale Demonstration)


Commercial Scale Demonstration Facility (ND)

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• Design capacity up to 250,000 tpa of dried coal product (Moisture reduction from 42% to 12%)

• Large volume trials on coal from NZ, US and Indonesia

• Training facility plus supports test programs for optimizing operational protocols, long term stockpiling and transportation studies

• Modular plant design – expansion possible by process train replication (addressed scale up risks)

• Additional production runs support specific coal analysis, engineering FEED studies


• Construction commenced September 2011 and completed in September 2012• Design capacity up to 100,000 tpa; single train modular plant – upscale by replication• Domestic NZ coal supply plus export test burns to support larger plant commitment

Underpins ability to have a continuous production plant – prove technology and market

Commercial Scale Facility (New Zealand)


• BOP (including boiler acceptance test) and Dry Commissioning completed October 2012

• First coal introduced late October 2012 – wet coal (no heat) to test all material handling equipment

• Rigorous process of Hazid/Hazop plus Independent Safety Review October 2012

• As at 15 November, completing minor mods on material handling and bag-houses

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NZ Plant Status


• Desktop Economic Review

• Pilot Scale Trials

• Bulk Sample Trials (500t) in ND Stockpiling & Handling

Customer Trials

• Combustion Tests Pulverizer Performance

Boiler Performance

o Ignition, Flame Stability and Turndown Capability

o Burnout Efficiency, Ash Deposition and Heat Transfer

• FEED Studies support FID

• Consenting / Permitting – Stakeholder engagement

• License Agreement with Technology Warranty / Package

• Standard Operating Procedures (Commissioning, Start-up/Shutdown, Ops, Maintenance) & Training

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Project Development Path – NZ Example

• Significant maturing of technology through process of design, build, commissioning

• Significant credibility to come from Operations


• Address “Technical Soundness, Economic & Financial Feasibility, Political & Institutional Predictability” (Per Nick Halkas, ANZ Coaltrans Presentation)

• Production Capability: Demonstrate continuous, safe long term reliable production

• Store and Ship Product: Large volume stockpile, transport demonstration reflecting real world conditions

• Customer Acceptance: Large volume PC plant test burns and product sales

• Technology Guarantees: Ability to provide performance warranties

• Engineering and Commissioning Package: Firm costing and engineering design, construction and commissioning service delivery. EPC Partnering, modular design and commissioning team.

• Operations Package: Service delivery model

• Finance: Opportunities to tie project finance with off-take arrangements and more traditional debt arrangements will change with technology maturity

NZ Plant Supports Commercialisation Path


• MOU signed for coal supply and site in Kalimantan Moisture reduced ~70%; Energy increase ~70% Existing production and transport infrastructure Value of $ margin ~$25/t product

• Pilot coal trials complete• Base Engineering Package complete

Moving to definitive cost estimate and Detailed Feasibility NZ Ops to support securing finance and off-take

arrangements Target project commitment 2H-2013, production

2014/2015

1MMtpa Plant Development (Indonesia)

GTL Energy is actively pursuing a 1MMtpa commercial scale plant in Indonesia:

Kalimantan Project

Wood Mackenzie Map of East Kalimantan


Economics – What makes good Project?

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• Economic viability for coal upgrading is dependent upon market and project specific variables:o Market prices (for raw and upgraded coal)o Properties of the raw coal

o Initial total moisture sets the feed:product (F:P) ratio o Higher the F:P ratio, the lower the required raw coal cost to stay

competitiveo A high ash content puts a ceiling on the ultimate calorific value

o Feed Coal Costs –alternative market value vs. fully loaded mining costo Transportation costs (from mine/GTLE plant to point of sale)

• GTLE analysis enables focused project assessment to identify market opportunitieso Focus towards high TM% (+40%TM) with “low” asho Stranded reserves - Can use mining costs instead of market price o Close to port/market - low cost (or low investment required) for transport

to market


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Indonesian Project Example

PILOT TRIAL COAL RESULTS

Raw Coal

Raw Coal

GTLE Product

AR Basis Dry Basis AR Basis

ProxAssay

Moisture 45.0% 0% 14.0%Ash 2.9% 5.3% 4.6%VM 29.4% 53.5% 46.0%FC 22.7% 41.2% 35.4%

Sulfur % 0.15% 0.3% 0.2%Kcal/kg HHV 3,500 6,365 5,475

Data reported on a Gross As Received (GAR) basis

LIFE OF MINE AVERAGE

Raw Coal

Raw Coal

GTLE Product

AR Basis Dry Basis AR Basis

ProxAssay

Moisture 49.0% 0% 14.0%Ash 4.6% 9.1% 7.8%VM 23.9% 46.8% 40.3%FC 22.1% 44.1% 37.2%

Sulfur % 0.4% 0.8% 0.7%Kcal/kg HHV 3,035 5,950 5,120

• Typical Indonesian target is upgrading from 3000-3500kcal to 5000-5500kcal

Can do higher/lower TM% - economics drive decision

• Using GTLE’s 1MMtpa project under development (as example):


Indonesian Example – Price Sensitivity

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INDO COAL (Based on 1MMtpa)– COASTAL EXAMPLE USING HPB ICI Formula

RECENT(AVE Mar-Jul)

2012CURRENT

(Oct 2012)LOW

(March 2009)

GTLE Upgrade of a 49%TM Coal to 14%TM Product (approx. 3,035 to 5,120kcal)

FOB Vessel Indonesia $80.00 $68.00 $58.00 Less Indonesian Truck/Barge Transport (est.) 5.00 5.00 5.00 FOB Mine Netback Price $75.00 $63.00 $53.00 Less Cost of Coal (Market $ Raw/t x 1.62 yield) 35.80 29.30 25.30 Less Process Costs (labor, power, steam, maint.) 11.00 11.00 11.00 GTLE Technology Value Add $28.20 $22.70 $16.70 Less GTLE License Fees (Base + ~% of uplift – indicative only) 4.70 4.00 3.00GTLE Plant Margin (EBITDA) 23.50 18.70 13.70 Less Depreciation (20 years) 3.00 3.00 3.00 GTLE Plant Owner Upgrade Margin (EBIT) $20.50 $15.70 $10.70

Unleveraged EBITDA ROI on Investment - % 38% 32% 22%Leveraged ROI (free-cash) on Investment - % 79% 62% 38%

FOB Raw Coal Cost - Transport = Coal Input Cost or Mining Cost $21.23 $17.36 (Floor) ~$15.00


GTLE Business Strategy

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Geographic MarketsProduct Markets

Business Model

Current GTLE Focus

Seaborne thermal export

IndonesiaNew Zealand

USA

LicensingProject Development

ResourcesEquipment

India

Australia

Other Asia

Gasification

Biomass

Other Other

China

Coking

Operations


Summary

• Simple and Distinctive Approach: Unique technology, validated by SENZ, that works with a broad range of coals

• Global Opportunity for Value Generation: Technology converts uneconomic low rank coal reserves into valuable, marketable assets to meet rapidly growing demand.

• Capable Team: Strong board and management team with engineering, technology, mining, finance experience, developed across US, Asian, Australasian and European markets.

• Deployment In Progress: Commercialization underway with a demonstration plant in USA, a commercial scale plant nearing completion in NZ, and a commercial scale plant under development in Indonesia.


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