Company Information for Diversified Energy

Company Statement

Diversified Energy Corporation is a privately held company specializing in the advancement of a series of promising alternative and renewable energy technologies – an advanced gasification technique with feedstock flexibility and attractive economics targeted for industrial syngas applications and liquid fuels production, a biofuels conversion process that can take any renewable oil and produce transportation fuels that are physically and chemically identical to petroleum, and an algal biomass cultivation system that is scalable and economical. The company is focused on completing research and development on these technologies, building first-of-a-kind pilot commercial plants, and then eventually constructing, operating, and/or selling large-scale projects based on these technologies. The business approach relies heavily on forming partnerships with technology, construction, and financial providers so that end-to-end solutions can be delivered to the marketplace.

Company Diagram

Simgae™ System Conceptual Layout

Operations and Technology

Technologies

HydroMax® - Advanced Gasification Technology
Gasification, the process of converting carbonaceous materials like biomass or coal into carbon monoxide and hydrogen (called syngas), has seen little technical innovation since its first use in the early 1800’s. HydroMax®, a molten metals-based gasification technology, is breaking that paradigm. The patented process uses a low pressure 1300°C iron-tin melt to produce hydrogen from injected steam, then carbon monoxide from injected carbon. The clean syngas produced can then be used for multiple purposes, including as a low Btu replacement for natural gas, energy source for electricity generation, or input to be further refined into liquid transportation fuels, hydrogen, or various chemicals. HydroMax® integrates lessons from the mining and metals industries and has now been demonstrated successfully through a series of lab-scale tests with various feedstock, using different reactor designs and operating conditions. Larger, more comprehensive demonstrations are being planned under contracts by the Departments of Energy and Defense, and the state of California.

HydroMax® is being positioned to address the industrial gasification market – an area that has heretofore been poorly served. The existing gasification market is dominated by the extremes – either large (>800 MMBtu/hr) or small (<50 MMBtu/hr) gasifiers. These types of gasifiers have technical and economic challenges scaling to the 50 - 300 MMBtu/hr energy needs of most industrial users. HydroMax® is also unique in that it can gasify a very broad class of feedstocks. Lastly, small-scale gasifiers operate at lower temperatures, resulting in “dirtier” syngas and therefore requiring complex, expensive, and energy consuming equipment to clean the syngas.

Key Benefits

• Feedstock Flexibility – the high thermal inertia of the molten-metal bath allows HydroMax® to gasify a wide variety of carbon sources, with varying degrees of moisture and inorganic content. Examples include biomass, coal (including high sulfur coal), petcoke, wastes, etc.
• Output Flexibility – dependent upon the desired final product, HydroMax® can be operated to produce either separate or combined streams of hydrogen and carbon-monoxide rich syngas.
• Cleaner Syngas – the reactor's high temperature produces low volumes of tars and oils. This reduces the requirements for downstream gas clean-up systems and translates into lower capital and operations/maintenance costs.
• Attractive Economics – compact reactor designs, coupled with energy and carbon conversion efficiencies in excess of 70% and 85%, respectively, will allow HydroMax® to produce syngas well below $7/MMBtu

Centia™ - An Innovative Technology for Converting any Renewable Oil into High-Value Fuels
Diversified Energy Corporation (DEC) and North Carolina State University (NCSU) are developing a patent-pending technology for converting oils derived from any triglyceride feedstock (like agriculture crops, animal fats, algae, energy crops, waste greases, etc.) to highvalue biofuels. The technology, termed Centia™ (a derivation of “green power” in Latin), integrates a sequence of three steps to produce biogasoline, Jet A-1/JP-8 (aviation fuel), and renewable diesel. Unlike ethanol and transesterification-based biodiesel, the biofuels produced from Centia™ will replicate the chemical structure of their petroleum-derived counterparts, therefore enhancing performance and eliminating required modifications to distribution infrastructures, storage techniques, and engines. The process steps are either extensions of existing commercial systems or based on recent technology demonstrations by DEC-NCSU.

Key Attributes and Competitive Differentiation

Centia™ is based on a multi-step thermal, pressurized, and catalytic process, whose primary attributes include:Feedstock Flexibility - the first Centia™ step is designed to accommodate any triglyceride feedstock. As such, the process has the flexibility to accommodate oils (or a mix of oils) deemed the most available and cost-effective at any given time or in any geographic location. Oils from agriculture crops, animal fats, algae, energy crops, waste greases, among others, are all acceptable with only operational modifications required.

Fuel Output Flexibility - the third Centia™ step produces fuels capable of meeting strict aviation specifications (e.g., Jet A-1/JP-8), solving cold weather and other issues associated with biodiesel, or being distributed and utilized in vehicles as a direct substitute to petroleum-derived unleaded gasoline.

High Efficiency - the process is expected to deliver an end-to-end energy conversion efficiency of greater than 85%, a mass conversion efficiency in excess of 75%, and utilize roughly one-half the external energy of other conventional biofuel processes. This translates into higher yields and lower costs, an imperative for commercial viability and broad market adoption.

"100% Green" Solution - Centia™ does not require the addition of any form of fossil fuel as a component of the biofuel produced. In fact, the production process itself can be designed to operate without consuming fossil fuels as a heat source.

Maturity - process Steps #1 and #3 are extensions from the commercial marketplace and have been replicated by DEC-NCSU at lab scale. Step #2 builds upon recent NCSUDEC technology demonstrations – n-alkanes have been successfully produced from Free Fatty Acids (FFAs). NCSU has also developed and demonstrated a patent-pending burner that can safely burn the glycerol generated from Step #1, using the resulting heat as a thermal source back into the process.

Scalability - nothing inherent in the Centia™ approach will prevent scaling to large commercial volumes, ranging from 10M – 50M+ gallons/year. Scalability has been a central driver in the design and engineering of the system.

Affordability - competitive with, if not lower than traditional biofuels plants. Since feedstock costs must be added to these production costs, this reinforces the value of feedstock flexibility.

Simgae™ Algal Biomass Production System
Simgae™ (for simple algae) offers a low cost and simple approach to growing algae at large scale. The focus on cost and simplicity addresses the major reason algae production has yet to materialize in any meaningful volumes. Diversified Energy® (DEC) has filed for intellectual property protection as both inventors and co-inventors of the technology.

Algae has received substantial attention as a high-promise source of biofuel oil to alleviate the supply shortages and high prices of traditional feedstock sources like soybean, palm, canola, animal fats, waste greases, etc. Since the feedstock can contribute roughly 80% of the cost of biofuels production, keeping the feedstock affordable and readily available is paramount for continued growth of the biofuels industry. Algae has been shown to produce 25 - 100X more oil and require substantially less water to grow per surface area compared to other biofuels crops like soybeans. In addition, the non-oil components (i.e., carbohydrates and proteins) left over after oil extraction can be used for a multitude of purposes - as inputs into animal feed, fish feed, fertilizers, dyes, etc. or used to produce fuels/energy through fermentation, gasification or anaerobic digestion. Certain algae strains also produce polyunsaturated fatty acids (omega-3's) in the form of eicosapentaenoic acid (EPA) and docosahexaenoic acid (DHA) - nutritional supplements generally found in fish oils. These additional products greatly enhance the overall marketability and economics of producing algae. Algae consume inputs like sunlight, water, CO2 and nutrients, and can generally be cultivated on land not suitable for other purposes. The ability to ingest CO2 and produce oxygen through photosynthesis is particularly attractive as a means to curtail carbon emissions.

Key Benefits

DEC has reinvented the status quo photobioreactor system by leveraging technologies and processes standard to the agriculture industry. The trough-based tubing material leverages commercial technologies and manufacturing techniques. The CO2 injection and O2 relief system is based on extensions of commercial products and advances in polyethylene extrusion. The remaining pieces (e.g., pumps, mulch, piping, etc.) are all derived from traditional agriculture products. By avoiding complex architectures with lots of custom designed components and rigid structures, Simgae™ can be installed and operated for substantially less cost than competing systems. The simplicity of the architecture also allows for widespread adoption. It is not dependent upon any one source of CO2 or nutrients, and should provide the flexibility to adapt to a range of sunlight and temperature conditions. The ability of the system to handle saline water is also possible, opening up the potential to utilize a wider variety of algae strains.

Preliminary estimates are that Simgae™ capital costs (including installation, but not including land, harvesting, oil extraction, and product storage) will be in the range of $25k - $35k per gross acre. Competing systems have publicly claimed ranges anywhere from $100k - $1M per acre. Simgae™ is therefore expected to deliver a roughly 4X - 30X reduction in capital costs. Simgae™ annual yield is expected to be on the order of 40 - 60 tons of dry algae mass per gross acre (40 tons = approximately 24 g/m2-day), with oil content anywhere from 10 - 30%. This yield and oil content range is dependent upon a number of conditions, including sunlight and temperature, sources of CO2 and nutrients, algae strain used, and emphasis on oil versus carbohydrate/protein production. These yields and costs correlate to "Generation 1" physical test results conducted by DEC in both indoor and outdoor systems. The yields are also consistent with academic and industry experience in growing algae in open and closed architectures.

The substantially lower Simgae™ capital costs, coupled with its competitive yields, ultimately translate into attractive project economics. Based on a discounted cash flow, net present value analyses DEC believes algal oils could be produced much cheaper than current market prices of renewable oils from sources like soybeans. In addition, algal biomass systems like Simgae™ offer a clear path to a stable, domestic, secure, and non-food based source of renewable feedstock. A summary of the key Simgae™ benefits include:

• Simple, low risk architecture based on common agriculture components and processes
• Easy installation and operations and maintenance
• Substantial capital cost reductions, coupled with competitive yield expectations priced algae oils and solids
• Broad application due to the system not being reliant on any one source of CO2 or nutrients

Board of Directors and Key Management

W. David Thompson	Chairman and Chief Executive Officer
Phillip Brown	President and Chief Operating Officer
Sergey V. Agafonkin	Chief Financial Officer
Jeff H. Hassannia	Vice President, Business Development
Steven Schenk	Vice President, Special Projects
Jeanette Leitner	Director, Operations and Administration

Company Address 2020 W. Guadalupe Road, Suite 5 Gilbert, Arizona, United States AZ 85233-2804 Telephone: 480-507-0297 (ext 100) Email: abc[at]123.com Website: http://www.diversified-energy.com

Additional Address/Key Contact Mailing Address: Diversified Energy Corporation PO Box 1239 Gilbert, AZ 85299-1239 General Questions: 480-507-0297 (ext 100) info@diversified-energy.com Direct Business Development Questions or Opportunities: 480-507-0297 (ext 105) business@diversified-energy.com investors@diversified-energy.com.

Most Recent Statement

13/08/08 - HydroMax Gasification Technology Awarded Follow-On DOE Contract
01/07/08 - Crude Glycerol Combustion System Successfully Demonstrated
21/06/08 - Diversified Energy Begins Engineering Support to Bioenergy Projects
20/03/08 - Successful HydroMax Testing on DOE Project Announced
09/01/08 - Centia™ Technology Demonstrates Bio-gasoline Production
11/12/07 - Diversified Energy® Team Wins Department of Defense Renewable Fuel Production Contract