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K-Fuel is a proven, patented pre-combustion process that transforms low-cost, low-grade coal, such as subbituminous

coal and lignite, into a clean, economical, efficient energy source. The U.S. has abundant reserves of low-grade coals

that, when upgraded by reducing moisture and polluting impurities, provide a high-quality, solid fuel, called K-Fuel

This commercial pre-combustion process creates a cleaner-burning beneficiated coal, essentially an "unleaded gasoline"equivalent for the coal-fired industry, helping facilities to comply with environmental standards while ensuring production

efficiency. The K-Fuel beneficiation process improves all three aspects of coal usage:

Energy: Increases the Btus per pound by approximately 30-40% by reducing moisture on average 80%.

Environment: Reduces mercury content on average 70% and can reduce SO 2 and NOx emissions up to 30% as a

co-benefit.

Economics: Increases system efficiency and maintains or improves generating capacity. K-Fuel can be an en

hancement of or alternative to post-combustion control systems.

The K-Fuel process is capable of upgrading nearly any coal, although some are more cost effective than others. Eco

nomics drive the use of low-grade feedstocks (such as subbituminous coal and lignite) because of the cost differentiabetween the raw coal value and ultimate product value. K-Fuel is superior to raw subbituminous coal and lignite be

cause of the quality and cost benefits that it offers the coal-fired industry.

K-Fuel Results

Average Change fr om

Sample to K-Fuel TM *

R 2

Btu/lb +35% 96%

Moisture% -79% 97%

Ash% Variable NA

Volatile% +32% 90%

Sulfur (lb/MMBtu) Variable NA

Mercury (lb/TBtu) -70% 92%

* Percentage change is average of 16 unique samples of primarily subbituminous feedstock and resulting K-FuelTM

autoclave product.

R2 is the measure of overall predictive ability of the model.

The K-Fuel pre-combustion process applies heat and pressure to reduce moisture from approximately 30% in the feed-

stock to 7-12% in the K-Fuel. As a result, the heat value is boosted by 30-40%, from 8,000-8,800 Btu/lb in the feed

stock to 10,500-11,500 Btu/lb in the K-Fuel. Because the various subbituminous and lignite feedstocks for the K-Fuel

process have a range of moisture content, heat value, and emissions upon combustion, so too the resulting K-Fuel will

have a range of Btu, moisture, and chemical properties. However, the common features of all K-Fuel can be well de

fined within a limited range of parameters such as increased efficiency and significantly reduced emissions compared to

the parent coal.

What is K-Fuel

KFx Inc. 55 Madison Street, Suite 500, Denver, CO 80206 Telephone: 303-293-2992 email : info@kfx.com V092905

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Emissions reductions are a co-benefit of the pre-combustion process. K-Fuel provides a pre-combustion mercury re

moval solution, reducing mercury content on average 70%. In addition, by burning K-Fuel, facilities can reduce emis

sions of sulfur dioxide (SO2) and nitrogen oxides (NOx) up to 30%. Finally, it is estimated that carbon dioxide (CO2) emis

sions will be reduced due to increased efficiency.

KFx experience indicates that K-Fuel should be as stable as the raw feedstock coal. Since KFx screens the raw coa

feed prior to the processor and maintains 7-12% moisture in the product, potential dust issues are minimized. Addition

ally, KFx has added a product rehydration and cooling step to the K-Fuel process after the Lurgi processor to stabilize

the product and will apply a dust inhibitor if necessary. Our intent is to make the product less dusty than the feedstock

coal so that no special handling, transport or storage is required.

Because K-Fuel is at equilibrium moisture it is comparable to the feedstock coal in terms of reactivity. The K-Fuel

process changes the chemical and physical structure of the coal through the heat and pressure process that expels the

moisture. K-Fuel will be at least as stable as the feedstock coal in terms of the potential for spontaneous combustion

By comparison, other coal drying processes that dry coal to or near zero percent moisture may have an increased sus

ceptibility to spontaneous combustion. The removal of moisture and the decarboxyl reaction associated with upgradingcoal renders the upgraded product more reactive. This has been a common problem with other previous coal drying

processes.

In addition to its environmental and Btu enhancing properties, K-Fuel can be custom-blended with other coals to meet

exact customer specifications. This upgrades and increases the marketability of other subbituminous coal and lignite

During handling, transport, and storage, K-Fuel provides higher Btu per ton of fuel shipped compared to the parent coal

produces significantly less dust than other beneficiated coal products, and does not require any special handling or stor-

age requirements. K-Fuel enables coal-fired facilities to potentially avoid capital-intensive retrofits for meeting emis

sions requirements with resulting expensive long shut down periods. K-Fuel can also preclude costly reductions in

generating capacity from burning low-grade subbituminous coal and lignite in boilers designed for higher Btu fuels.

Ash content between the feedstock and resulting K-Fuel can increase or decrease compared to the feedstock depend

ing on specific feedstock characteristics. The fly ash will have similar properties to that derived from the feedstock coal

Due to the pre-combustion removal of mercury, the resulting fly ash should be cleaner in terms of mercury than that o

traditional coals.

What is K-Fuel - continued

KFx Inc. 55 Madison Street, Suite 500, Denver, CO 80206 Telephone: 303-293-2992 email : info@kfx.com V092905