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Headwaters Incorporated Begins Basic Engineering for Canadian Heavy Oil Upgrading Project

Posted on: Tuesday, 4 October 2005, 18:00 CDT

Headwaters Incorporated (NYSE:HW) announced today that one of its subsidiaries, Headwaters Heavy Oil, LLC ("Headwaters") has entered into a license agreement and initiated the Basic Engineering Design of a heavy oil hydrocracker for the North West Upgrading project in Alberta, Canada. North West Upgrading Inc. has previously announced its intention to construct a heavy oil upgrader in Sturgeon County, Alberta and has included the Headwaters' (HC)3(TM) heavy oil hydrocracking technology as a component of the project's design. The Headwaters' engineering design team participated in a project kick-off meeting in late September in Calgary, where the design basis and key process parameters for the project were established.

North West Upgrading, Inc. announced in May 2005 that it had secured financing for preliminary engineering, regulatory and environmental work associated with the upgrader. The preliminary engineering work requires Headwaters to design the (HC)3(TM) hydrocracker system, which will be integrated with the design of other processing equipment by North West Upgrading's integration engineers, SNC Lavalin Inc.

The (HC)3 technology is a catalytic hydrocracking process that operates in a gas-liquid reactor to convert the heaviest parts of crude oil, called "residuum," to cleaner, lighter components which can then be processed into gasoline, jet fuel and diesel. Used in place of conventional hydrocracking catalysts, the molecular-sized (HC)3 liquid catalyst provides efficient catalytic hydrocracking uniformly throughout the reactor.

Headwaters anticipates that the (HC)3 technology application will be demonstrated as an additive in commercial refineries currently using ebullated bed reactor systems. Headwaters' technology adds significant value to these systems because their objective is to convert as much low-value, bottom-of-the-barrel oil as possible into lighter, cleaner distillate fuels. Headwaters estimates that approximately 480,000 barrels per day of heavy oil are currently refined in ebullated bed reactor systems.

The North West Upgrading Hydrocracking unit is expected to come online in 2010. The technology agreement with North West Upgrading is subject to a successful commercial scale application of the (HC)3 technology. Robert Pearce, President of North West Upgrading, Inc., described the company's selection of the (HC)3 technology as "a technology decision that improves the economics of the upgrader and greatly assists North West in providing a fee-for-service business model to the growing oilsands industry." Kirk A. Benson, CEO of Headwaters, commented, "We are excited that North West Upgrading has chosen the (HC)3 technology as their preferred route for upgrading Canadian heavy sour crude oil and tar sand bitumen. These feedstocks represent a significant source of energy products for all of North America, and we are proud that Headwaters will be a part of this project."

The (HC)3 technology and trademark are used by Headwaters Heavy Oil, LLC through a license from the Alberta Research Council, Inc. and the Alberta Science and Research Authority.

About Headwaters Incorporated

Headwaters Incorporated is a world leader in creating value through innovative advancements in the utilization of natural resources. Headwaters is a diversified growth company providing products, technologies and services to the energy, construction and home improvement industries. Through its alternative energy, coal combustion products, and building materials businesses, the Company earns a growing revenue stream that provides the capital needed to expand and acquire synergistic new business opportunities.

Forward Looking Statements

Certain statements contained in this report are forward-looking statements within the meaning of federal securities laws and Headwaters intends that such forward-looking statements be subject to the safe-harbor created thereby.

Forward-looking statements include Headwaters' expectations as to the managing and marketing of coal combustion products, the production and marketing of building materials and products, the licensing of technology and chemical sales to alternative fuel facilities, the receipt of product sales, license fees and royalty revenues, the development, commercialization, and financing of new technologies and other strategic business opportunities and acquisitions, and other information about Headwaters. Such statements that are not purely historical by nature, including those statements regarding Headwaters' future business plans, the operation of facilities, the availability of tax credits, the availability of feedstocks, and the marketability of the coal combustion products, building products, and synthetic fuel, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 regarding future events and our future results that are based on current expectations, estimates, forecasts, and projections about the industries in which we operate and the beliefs and assumptions of our management. Actual results may vary materially from such expectations. Words such as "expects,""anticipates,""targets,""goals,""projects,""believes,""seeks,""estimates," variations of such words, and similar expressions are intended to identify such forward-looking statements. Any statements that refer to projections of our future financial performance, our anticipated growth and trends in our businesses, and other characterizations of future events or circumstances, are forward-looking.

In addition to matters affecting the coal combustion product, alternative fuel, and building products industries or the economy generally, factors which could cause actual results to differ from expectations stated in forward-looking statements include, among others, the factors described in the captions entitled "Forward-looking Statements" and "Risk Factors" in Item 7 in Headwaters' Annual Report on Form 10-K for the fiscal year ended September 30, 2004, Quarterly Reports on Form 10-Q, and other periodic filings and prospectuses.

Although Headwaters believes that its expectations are based on reasonable assumptions within the bounds of its knowledge of its business and operations, there can be no assurance that our results of operations will not be adversely affected by such factors. Unless legally required, we undertake no obligation to revise or update any forward-looking statements for any reason. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this report.

Our internet address is www.headwaters.com. There we make available, free of charge, our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and any amendments to those reports, as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC. Our reports can be accessed through the investor relations section of our web site.

Source: Business Wire

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