Siemens Acquires Coal Gasification Business of the Swiss Sustec-Group - Trend-setting high-tech solutions for clean power generation

May 16, 2006

Erlangen, Germany, - The Siemens Power Generation Group (PG) is expanding its power plant business with products and solutions for conversion of coal to electricity by acquiring the technology and engineering activities of the Sustec-Group. This acquisition comprises, inter alia, the German firm Future Energy GmbH as well as a 50 percent stake in the Chinese joint venture with the Shenhua Ningxia Coal Group. By this acquisition, Siemens is securing a key technology for environment-friendly power generation. To accelerate development and testing of the next gasifier generation, Siemens also plans to build a large-scale coal gasification plant with an overall thermal capacity of more than 1000MW at the location Spreetal in Saxony. Approval from the anti-trust authorities for the acquisition of the Sustec-Group is still pending. The price of the transaction will remain undisclosed.

In addition to a wide range of coal grades, the Sustec-Group process known as GSP entrained flow gasification can also utilize biomass as well as petroleum coke and refinery residues as feedstocks. In line with the globally increasing demand for energy and raw materials, an attractive growth potential is now emerging for advanced coal gasification technology. In recent months, several contracts for large-scale coal gasification projects were already awarded to the Sustec-Group, three of which are located in China.

With the planned coal gasification plant in Spreetal which is to have an overall thermal capacity in excess of 1000MW, Siemens intends to enter a new output class. After completion of construction and the subsequent test phase, the plant is scheduled to start commercial production about three years from now. The syngas produced will be used for power generation and production of roughly 600,000 tons of methanol per year.

In recent years, the demand for steam power plants has risen considerably. The primary driver of this development is China’s immense market with its vast coal reserves. Furthermore, also other important markets such as the U.S. are showing increased interest in coal based power generation including application of clean coal technologies, as an environmentally compatible solution for their future electricity requirements. “The share of electric power generated by coal-fired power plants will remain significant,” stated Klaus Voges, chairman of the Siemens Power Generation group managing board. In response to persistently high natural gas prices as well as more and more stringent demands in terms of climate protection and supply reliability, the interest in solutions for clean conversion of coal to electricity is also on the rise. “Against this backdrop, innovative power plant concepts for environmentally compatible conversion of coal to electricity such as IGCC plants gain decisive importance,” Voges stated.

An IGCC plant (integrated gasification combined cycle) is a combined cycle plant that is supplemented by a front-end coal gasification plant for generation of syngas. A gas turbine is fired with this syngas, with the hot exhaust fed to a heat recovery steam generator. The steam produced in the latter is utilized to drive a steam turbine, thereby maximizing the amount of power generated. The emissions from IGCC plants are clearly below those of even the most advanced “conventional” coal power plants. In a second step, plans call for complete capture of CO2 contained in the syngas and sequestration of the former in caverns. This technology can therefore make a significant contribution to the supply of electric power which is both secure and highly compatible with the environment and climate.

About Siemens Power Generation

The Power Generation Group (PG) of Siemens AG is one of the premier companies in the international power generation sector. In fiscal 2005 (which ended September 30), Siemens PG posted sales amounting to approximately EUR8.1 billion and received new orders totaling EUR11 billion. Group profit amounted to EUR951 million. On September 30, 2005, PG had a work force of approximately 33,500 worldwide.

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Alfons Benzinger

Public Relations Manager

Siemens Power Generation Group

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