Introduction to Shenhua Group and Baotou Project

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Shenhua Baotou Coal Chemical Co., Ltd. Thermal Power Division 1. Shenhua Group Co., Ltd. and coal-to-liquid/coal chemical industry development plan Shenhua Group Co., Ltd. was approved by the State Council in October 1995 and established in accordance with the Company Law of the People's Republic of China. Like PetroChina, Sinopec and other companies, it is one of the 57 large-scale state-owned enterprises affiliated with the Assets Management Commission of the State Council. It is a comprehensive large-scale energy enterprise whose main business is coal production and sales, electricity and heat production and supply, coal-to-liquids and coal chemicals, and related railways, ports and other transportation services. In the more than ten years since the company was founded, 100,000 Shenhua employees have worked tirelessly. Since 2005, coal production capacity, output per unit and other indicators have been ranked first in the world. Since 2006, Shenhua has become the world's largest coal producer and seller. In 2007, the company's total assets were 238.821 billion yuan, it produced 235 million tons of raw coal, sold 286 million tons of commercial coal, generated 97.9 billion kilowatt-hours of electricity, had main business income of 105.1 billion yuan, and realized profits of 28.9 billion yuan. In the same year, it won the China Industrial Award, the highest honor for Chinese industrial enterprises. In the past four years, the competitiveness of Shenhua Group Co., Ltd. has been among the top five among large state-owned enterprises. In 2004, its subsidiary China Shenhua Energy Co., Ltd. * * Successfully listed, its A-shares were successfully listed in China in 2007, and it has been in the leading position among stocks in the same industry with its excellent operating performance. Shenhua Group Co., Ltd. attaches great importance to * * Energy strategic security, has been committed to the development of coal-to-petroleum technology development and industrial development, and established four major business sectors including research and development, engineering construction, production operations, and logistics sales of the coal-to-liquids/coal chemical industry, using advanced coal chemical technologies at home and abroad. It plans to establish seven large-scale coal-to-liquids/coal-chemical bases in Inner Mongolia, Ningxia, Shaanxi, Xinjiang and other places, with a total investment of more than 400 billion yuan, creating an annual production capacity of 30 million tons of coal-to-liquids and 4 million tons of coal-to-chemicals. Shenhua Group is currently the leading company in the domestic coal-to-liquids/coal chemical industry, and currently has three large coal chemical bases under construction. ①The world's first 1 million tons/year coal-to-liquids unit built by Shenhua Group Co., Ltd. is about to be completed and will be put into operation in Ordos City, Inner Mongolia Autonomous Region in 2008. ②The 600,000 tons/year MTP plant being built by Shenhua Ningxia Coal Company will be put into production in 2010. ③Shenhua Baotou Coal Chemical Co., Ltd. is building a 600,000 tons/year coal-to-olefins (MTO) plant. The plant will be mechanically completed by the end of 2009 and put into production in 2010. In addition, the 1 million tons/year coal-to-olefins project jointly constructed by Shenhua Group and the American Dow Chemical Company in Yulin, Shaanxi is currently conducting feasibility studies and is scheduled to be put into production in 2012. At the same time, preliminary work has been started for coal-to-liquid projects planned in Xinjiang and other places. 2. Company Profile Shenhua Baotou Coal Chemical Co., Ltd. was established in December 2005. It is a wholly-owned subsidiary of Shenhua Group Co., Ltd. The company is located in Baotou City, Inner Mongolia Autonomous Region, with a registered capital of 4.5 billion yuan. The company has a capacity of 1,500 people and currently has 220 employees. It is currently the coal chemical enterprise with the largest investment in China. The company is currently undertaking the construction of the only economic * * A large-scale coal chemical project approved by the Development and Reform Commission - Shenhua Baotou coal-to-olefins project. According to the unified plan of Shenhua Group, Shenhua Baotou Coal Chemical Co., Ltd. will become a demonstration base for the domestic coal-to-olefins industry and a talent base for Shenhua Group and even the domestic coal chemical industry. The outstanding talents working and training in this world-class coal chemical industry base, while embodying and creating their own value, will surely move towards the coal chemical industry base built in the future in my country and will definitely make outstanding contributions to the development of my country's coal chemical industry. Company business scope: The production of olefins and downstream products from coal as raw material is technology-intensive, capital-intensive and talent-intensive, realizing the extension of the traditional coal chemical industry to the petrochemical industry, in line with * * energy development strategies and industrial policies have been included in * * Medium and long-term development plan for coal chemical industry. To optimize my country's energy consumption structure, improve energy utilization efficiency, reduce environmental pollution, and ensure * * Energy security has important demonstration significance. Company development strategy: The company's overall goal is to "build a first-class team and deliver quality projects ； Explore efficient management and improve profitability ； Cultivate corporate culture and deliver outstanding talents.” Three steps to achieve the company’s overall goals: The first step is to complete the Shenhua Baotou coal-to-olefins project with high quality and efficiency before 2010 in accordance with the requirements of "quality, technology, safety and efficiency", create a national quality project in the coal chemical industry with optimized plans, leading technology, excellent equipment, reasonable configuration, environmental friendliness, and cultural harmony, and build a technical and management team with high-quality thinking, high-standard work, and high-level business. The second step is to continue to improve the modern enterprise management system by 2015, adopt advanced business management concepts, and build the company into an excellent domestic coal chemical enterprise, with the comprehensive management level reaching "Shenhua's first, first-class in the industry." The third step is to build the company into a fully competitive domestic and internationally excellent coal chemical enterprise by 2020 based on Shenhua's advanced corporate culture and through scientific management and efficient operations. With the richness of the energy industry and the breadth of Shenhua's business, Shenhua Baotou Coal Chemical Co., Ltd., as a pioneer in China's new coal chemical industry, strives to build the most competitive coal chemical enterprise in China. 3. Project Overview Shenhua Baotou coal-to-olefins project was awarded in December 2006 * * Approved by the Development and Reform Commission, the total investment is 16.5 billion yuan, which is the largest investment so far. * * The only coal-to-olefins project approved. Inner Mongolia Autonomous Region has allocated 1.25 billion tons of coal resources for this project. The project is designed to consume 5 million tons of coal annually and produce 750,000 tons of petrochemical products such as polyethylene and polypropylene annually. According to the current market price of coal and polyolefin products, the complete cost of a ton of polyolefin is about 6,000 yuan. The factory can achieve annual sales revenue of 8 billion yuan and profit of 4 billion yuan. Project construction scale: 1.8 million tons/year coal-to-methanol, 600,000 tons/year methanol-to-olefins, 300,000 tons/year polyethylene, 300,000 tons/year polypropylene, 4 sets of 60,000 cubic meters/hour air separation oxygen production, 3 sets of 480 tons/hour evaporation capacity thermal power stations, as well as auxiliary production facilities and public works. The core technology adopts methanol-to-olefin technology with domestic independent intellectual property rights. Other major process devices adopt the world's advanced coal chemical/petrochemical technology, including GE coal-water slurry gasification technology, German Linde company's low-temperature methanol washing technology, British DAVY company's methanol synthesis technology, American DOW company's polypropylene technology, American UNIVATION company's polyethylene technology, etc. At present, the overall design and basic design of the factory have been completed, and the detailed design work is being carried out one after another. The factory construction work is in full swing. It is planned to complete the mechanical completion in 2009 and put the factory into operation in 2010.