1. January 27, 2003 NADB RGVSG Project Review Summary Presentation San Antonio, Texas January 27, 2003

2. Introducing Pollutech’s Team Richard Laughton –Project Director –NADB Compliance –BECC Step 2 –Compliance Issues –Risk Assessment –Reporting Greg Brown –Project Manager –Technical Analysis –Financial Review –Regulatory Permits – Project Feasibility –Reporting

3. January 27, 2003 Project Description The project is a clean energy and air quality improvement project as defined under the BECC/NADB mandate expansion. The project sponsor is the sugar cooperative identified as the “Rio Grande Valley Sugar Growers, Inc.” (RGVSG). FOR MORE INFO... http://www.pollutechinternational.com/jobs/nadb/

4. January 27, 2003 RGVSG Facility The project is located 2½ miles west of Santa Rosa, Texas (Hidalgo County) in the Lower Rio Grande Valley on Highway 107.

5. January 27, 2003 Project Goals Review proposed system improvements in terms of capacity and operative compatibility with existing facility and expected performance, primarily focussing on equipment related to the co-generation from bagasse, air quality improvements, water and energy savings, and potential waste reduction. Review and validate proposed technical, financial, operational, and environmental claims, costs associated with system improvements, and electricity sales.

6. January 27, 2003 Technical Viability basic systems processes and technologies; O&M experience and requirements; technical specifications and design; energy production and sales estimates; proposed environmental efficiencies; cost savings, emissions credits, and environmental improvement-related credits

7. January 27, 2003 Project Technology Upgrades to bagasse handling system; New higher efficiency boiler; and New (rebuilt) turbine generator.

8. January 27, 2003 Project Resources NADB Project Manager RGVSG Management Team TCEQ Industry and Approvals Staff Schaffer & Associates, LLP Turner Collie & Braden Inc. Pollutech International Limited

9. January 27, 2003 Review Procedures Background document review; Site inspection and interviews; Consultants reports and inquires; Regulatory analysis; and Technical and financial analysis. FOR MORE INFO... 1) Pollutech Technical Review Report 2) Executive Summary Report

10. January 27, 2003 Project Timeline Pollutech Report January 23, 2003 TCB BECC Step 2 February 3, 2003 BECC Approval March 20, 2003 NADB Approval June 2003 Bagasse upgrade September 2004 Boiler and GenSet April 2005

11. January 27, 2003 Key Concerns Reduction in air emissions Change to net power exporter Compliance with BECC Step II Technically viable and sustainable Fits in with RGVSG long term plans

12. January 27, 2003 The Detailed Analysis Review Existing Process Analyze Proposed Upgrade Projected Power Capacities Project Air Emissions The Financial Analysis

13. January 27, 2003 Key Factors Sugar Policy (WTO and Farm Bill) Weather Conditions Supply of Irrigation Water Environmental Limits (air permits) Grower co-operation and education Plant Production Capabilities

14. January 27, 2003 Process Flowsheet

15. January 27, 2003 Proposed Plant Upgrades Schaffer Stage 1 –Production plant upgrades –Plant increase to 20,000 tcd Schaffer Stage 2 –Bagasse handling upgrades –Power plant upgrade (boiler & turbine)

16. January 27, 2003 Proposed Plant Upgrades As a result of other restrictions on the plant capacity increase (i.e. production quotas, growers capabilities, financing capabilities) there is no immediate plan to increase the production capabilities through the Phase 1 expansion. However, the positive economic and environmental benefits of the proposed Phase 2 expansion do warrant those tasks being undertaken at this time.

17. January 27, 2003 Proposed Stage 2 Plant Upgrades Bagasse Handling Upgrades –conversion of all bagasse conveyors to fully automated (PLC controlled) belt conveyors (for an increased capacity to handle 20,000 tcd) –expansion and upgrade of the bagasse storage building –conversion of the boiler building (height and length) to handle the modified bagasse conveyor system and to allow for the new boiler #5

18. January 27, 2003 Proposed Stage 2 Plant Upgrades Power Plant Upgrade (Boiler & Turbine) –installation of a new high efficiency boiler (#5) with corresponding reduction in the use of the existing boilers (#’s 1,2,3,4) –new condensate storage tank; –rebuilt 6,000 KW turbine generator to replace one of existing 2,500 KW turbine generators

19. January 27, 2003 Power Production

20. January 27, 2003 Proposed Operation Plant OperationOld Boilers (% capacity) New Boilers (% capacity) 10,000 tcd3490 13,500 tcd6790 15,000 tcd8590

21. January 27, 2003 Proposed Power Capacities Power Analysis MW Produced MW Purchased MW Sold MW Used Current4.31.70.06.0 10,000 tcd9.60.05.04.6 13,500 tcd11.80.04.27.6 15,000 tcd14.00.09.05.0

22. January 27, 2003 Air Emissions

23. January 27, 2003 Projected Air Emissions Emission Analysis CO tons/year NO x tons/year PM tons/year VOC tons/year Current2,458482385157 10,000 tcd1,32043919879 13,000 tcd2,191609335134 15,000 tcd2,564682393158

24. January 27, 2003 Allowable v. Actual Emissions

25. January 27, 2003 Projected Air Emissions

26. January 27, 2003 Financial Analysis - Project Costs Financial Analysis Bagasse Handling BoilerTurbine Generator TOTAL PROJECT Project Cost (10% contingency) $6,422,532$13,986,117$3,986,117$23,826,937

27. January 27, 2003 Financial Analysis - Cost Savings ComponentBagasse HandlingBoiler & Turbine Conveyor Operation $112,478 Bagasse Storage $135,000 Boiler Maintenance $841,000 Electricity $312,120 Natural Gas $250,000 Excess Power ________$450,000 TOTAL $247,478$1,853,120

28. January 27, 2003 Financial Analysis - Payback Period Cost Component Bagasse Handling Boiler & Turbine Total Project Total Cost $6,422,532$17,384,405$23,826,937 Annual Cost Savings $247,478$1,853,120$2,100,598 Payback Period 26.0 Years9.4 Years11.3 Years

29. January 27, 2003 Plant Environmental Programs TCEQ Site Assistance Visit (P2SAV) Emerald Consultants Compliance Audit EPA Pilot EMS Program Routine Regulatory Compliance

30. January 27, 2003 Air Quality Improvements - 42% at 10,000 tcd - 0.6% at 13,500 tcd + 9.0% at 15,000 tcd

31. January 27, 2003 Water Quality Issues 100% Recycle High Evaporation Stormwater Plan On-Site WWTP

32. January 27, 2003 Other Environmental Issues Solid Waste Chemical Waste TRI (no reports) EMS (in process)

33. January 27, 2003 Emission Reduction Credits ERC DERCs PPA Options

34. January 27, 2003 General Project Validation Is the plant proposing to use production and power generation technology that would be used by a prudent owner of a similar facility? Is the pollution abatement equipment that is proposed BACT-EA?

35. January 27, 2003 General Project Validation Will the upgraded facility be able to produce more power? Will the total air emissions from the upgraded facility be significantly less than the existing?

36. January 27, 2003 General Project Validation Will the project result in a reduction in the environmental impacts related to water supply and discharge? Has it been demonstrated that there are no adverse environmental impacts on the neighbouring community?

37. January 27, 2003 Air Emission Summary Immediate and significant 42% decrease in component and total air emissions at 10,000 tcd. Reduced air emissions from outside power producers.

38. January 27, 2003 Power Production Summary Currently a net importer of power at approximately 1.7 MW Will become a net exporter of power at 5 MW (plus 1.7 MW benefit)

39. January 27, 2003 Compliance with BECC Step 2 general; human health and environment; technical feasibility; financial feasibility; project management; community participation; and sustainable development.

40. January 27, 2003 BECC Guiding Principles Principle 1.The project is centered on energy conservation and the economic needs of the region. Principle 2.The rights of the cooperative members and surrounding communities to adequately raise their standard of living and develop their properties are recognized and underlie the reasons for undertaking the project.

41. January 27, 2003 BECC Guiding Principles Principle 3.Environmental protection is integral to the project with the promotion of renewable energy sources and the significant reduction in air pollutant loadings during operation. Principle 4.Stakeholders have been involved and have had the opportunity to participate in the decision-making process. This not only includes the cooperative members and surrounding residents, but also local, regional, state and federal agencies with statutory interest and standing in the issues at hand.

42. January 27, 2003 BECC II – Community Impact Air emissions from the RGVSG will be reduced while allowing the mill to continue to compete in an aggressive international market, while at the same time allowing for increased energy production (electricity) from the waste biomass (bagasse).

43. January 27, 2003 BECC II – Project Alternatives The “do nothing” alternative means no improvement in air quality and a less competitive industrial operation. More advanced alternatives might provide additional environmental improvement (i.e. better emissions control technology, more efficient energy production methods) but are deemed not to be economically viable at this time.

44. January 27, 2003 BECC II – Financial Feasibility The annual cost savings associated with reduced operating costs, reduced natural gas costs, and excess power sales are calculated to be approximately $2,100,000 per year. These cost savings account for 8.8% of the total project costs.

45. January 27, 2003 Risk Analysis Can this project achieve what is projected in terms of current and future plant operation, or are there some undermining limitations that may increase the risk? If the plant can go ahead with the upgrade to the operation with a manageable level of risk in operations, are we sure that the project they are proposing is technically sound?

46. January 27, 2003 Risk Analysis Can we confirm that all the local, state and federal environmental regulations will be met? What are the risks and impacts of occasional infractions? Does the plant have the capability to operate and maintain the upgraded facility, so as to minimize or eliminate any risk of plant upsets that could affect either plant profitability or environmental emissions?

47. January 27, 2003 Risk Analysis Does the project result in long term sustainability for the local area, giving due consideration to all of the issues required in the BECC Step II evaluation? RISK = [Likelihood x Impact] Likelihood = could it happen? Impact = what if it happens?

48. January 27, 2003 Cane Production 43,000 acres in production Yields of 45 tons cane per acre Peak generation of 2,000,000 tons cane per year Weather and irrigation are critical MODERATE RISK

49. January 27, 2003 Sugar Policies Current quota of 144,000 tons sugar Storage of shortfalls Current pricing in the $0.21 range Farm Bill expires in 2007-2008 Mexican and Canadian Issues MODERATE RISK

50. January 27, 2003 Production Expansion Satisfactory for the next 5 years Anticipate 10,000 tcd over 150 days Immediate cost savings in operation Future growth in Stage 2 upgrades LOW RISK

51. January 27, 2003 Plant Profitability Reduction in power costs Reduction in labour & equipment costs Payback period of 11.3 years EXTEMELY POSITIVE

52. January 27, 2003 Technology Evaluation Experience of Schaffer & Associates Relying on “proven technologies” Manufacturer guarantees Proven operation and maintenance LIMITED RISK

53. January 27, 2003 Regulatory Issues Immediate reduction in air emissions Ongoing program for cane burning No concerns with water discharge Moving to EMS in 2003 LIMITED RISK

54. January 27, 2003 Environmental Sustainability Direct benefit to the local community Plant can remain competitive Truly a “win win” situation

55. January 27, 2003 For Further Information Pollutech International Limited 768 Westgate Road Oakville, Ontario CANADA Tel: 1-905-847-0065 E-mail: laughton@pollutech.comlaughton@pollutech.com Web: http://www.pollutech.comhttp://www.pollutech.com