DGAP-News: KHD Humboldt Wedag International AG announces strategic partnership with China-based CATIC

DGAP-News: KHD Humboldt Wedag International AG / Key word(s): Capital
Increase/Alliance
KHD Humboldt Wedag International AG announces strategic partnership
with China-based CATIC

21.12.2010 / 21:17

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– Partnership Will Broaden Global Footprint, Tap into Expanding Chinese and
Emerging Markets –

Cologne, Germany (December 21, 2010) – KHD Humboldt Wedag International AG
(–KHD–) (Frankfurt Stock Exchange symbol: KWG) (OTC Pinksheets symbol:
KHDHF), a global engineering, equipment and service company in the cement
industry, announced today that it has entered into a strategic partnership
with Beijing-based CATIC Beijing Co., Ltd. (–CATIC–), a subsidiary of
China–s state-owned CATIC International Holdings Ltd., to capitalize on the
rapidly expanding international market for the construction of cement
plants. KHD–s Director Jouni Salo said that KHD and CATIC combined will be
able to bid on a wider range of projects, including large turnkey projects,
and penetrate the most important cement markets including – China itself,
the largest single market in the world, and other countries and regions as
KHD and CATIC see fit.

The strategy behind the exclusive partnership includes:

– Leverage CATIC resources within China to win project awards
– Leverage the proven technological expertise of KHD
– Combine CATIC representation in more than 30 countries and 56 overseas
subsidiaries with the traditional strength of KHD in India, EMEA, the
Americas and countries of the former Soviet Union
– Penetrate or further strengthen our position in fast-growing emerging
economies, including India, Brazil, Turkey and the petroleum-producing
countries
– More effectively tap into the need of customers to manufacture cement
locally, closer to its intended uses.

Highlights:
– Agreement with CATIC for KHD to be their exclusive cement process
technology and equipment supplier.
– Agreement for KHD to have CATIC as their exclusive EPC (turnkey)
contractor.
– Investment in KHD by a CATIC controlled Hong Kong company (–MGI–) in the
range between EUR 37 and EUR 45 million.
– MGI will own 20% of the share capital in KHD.
– Method of purchase – Subscription from existing and unutilized
subscription rights (in North America, it would be like a non-transferrable
rights issue)
– Subscription offer expected to be published on January 5, 2011 with the
record date then being January 4, 2011.
– Price – EUR4.53 per share
– All shares purchased by MGI will be locked in, and not be available on
the market, for a 29 month period.
– MGI and CATIC Group will also be prohibited from buying shares in excess
of 29 percent of KHD for 12 months.
– CATIC to have representation on the Supervisory Board and contribute to
KHD operations with a management representative.
– KHD to co-invest with CATIC in China–s design and manufacturing resources
for the Chinese and export markets.
– Closing to occur as soon as practical but no later than March 08, 2011
– In the United States shares will be made available to accredited or
qualified investors by way of a private placement. It is not the
intentions to burden the company with the costs of compliance of
Sarbanes-Oxley Act and the cost of continuous US registration.

–This is a defining moment for both companies, as we partner to unite KHD–s
century and a half of experienceand its unmatched library of intellectual
property with the extraordinary reach and power of CATIC,– Salo further
stated that –KHD and CATIC are already cooperating and jointly preparing
several large turnkey RFPs and responding to the needs of new geographies,
including China itself.–

Salo continued, –Our global network of Customer Service Centers, combined
with the branch office networks of both companies, gives us a launch pad
for a broader global business. We believe that together we can now compete
effectively with the largest companies in our industry.–

KHD has now expanded its business horizons considerably following its
refocusing two years ago to concentrate on the cement industry. At that
time, KHD sold most of its non-cement operations, established its Customer
Service Centers, and announced plans to conserve and grow its substantial
cash reserves. With that now accomplished, and with KHD–s strong market
presence in Russia, central Asia, India and the Middle East once again in
place, KHD moved its headquarters to its historic center in Cologne, and
started trading of its common stock at the Regulated Market segment on the
Frankfurt Stock Exchange.

Mr. Salo concluded, –With a protective eye on our strong financial asset
base and a keen appreciation of our unique historical legacy, we believe
that we are in a strong position to expand, to build our revenue base, and
to contribute to the economies of the countries and regions we serve. New
jobs will be created and cleaner and greener technologies and designs will
help forward-looking governments achieve international goals regarding
energy savings, pollutant emissions, clean air and clean water.–

A New Player in a Growing Market

The global demand for cement continues to grow, as developing economies
expand and need to augment their infrastructures. As with many
commodity-driven industries, among the largest consumers of cement are the
fastest-growing emerging economies, such as China, India, Brazil, the
petroleum-producing countries, Turkey and the countries of the former
Soviet Union. Global cement demand is forecast to rise by more than 4.1%
per year to 3.5 billion tonnes, or US$ 246 billion, in 2013, according to
the latest report by US-based research company The Freedonia Group. The
report, World Cement, said the rise will be driven by growing investments
in infrastructure among developing countries, driven by economic growth and
increasing per capita income levels.

The cement industry around the world is extremely diverse, comprising
traditional manufacturing and sales companies such as Cemex, Lafarge,
Ultratech and Holcim, as well as many government-guided or government-owned
cement companies, typically in more centralized economies. Three aspects
of cement as a commodity are that it is (1) relatively inexpensive as
compared to steel, copper and other materials needed for infrastructure
expansion; (2) an ancient building material that can be compounded in a
variety of different ways depending on local raw materials availability;
and (3) heavy. These three aspects have led the industry to be
geographically and technologically diverse, and to establish an economic
need to manufacture cement in relatively close proximity to its intended
use, since transportation costs for a heavy commodity can negatively impact
the cost at which it can be sold.

According to the Freedonia report cited above, India, the world–s second
largest cement market, will also see –some of the most rapid advances of
any country in the world.– Other fast-growing markets include the
Philippines, Taiwan and Vietnam, all with growth rates exceeding 6% per
year, and Turkey, whose growth rate was recently reported at higher than
10% per annum. In Western Europe, improvement in construction activity will
fuel a turnaround in the region–s three largest cement markets, Spain,
Italy and Germany. Similarly, a modest rise in construction spending in
Japan will drive increases in cement consumption after a long period of
decline.

As demand for locally produced cement grows, the opportunities for KHD and
CATIC increase, because the capabilities that the pair of companies offer
are not commonly available. Most cement plants in the world are designed
and erected by one of a handful of specialized engineering and construction
companies, including KHD and CATIC. Cement plants are a market niche that
is difficult for non-specialists to enter, because companies such as KHD
has large libraries of intellectual property that may be difficult to
circumvent. The processes used in making cement are rather specific to the
industry, in spite of the fact that a variety of different raw materials
may be used. For example, KHD–s trove of intellectual property has been in
continuous development for over 150 years.

The largest contracts for cement plant design and construction are
typically awarded on a turnkey basis, with the EPC company handling all
aspects engineering, procurement and construction (EPC), and then handing
the completed and ready-to-operate plant to the buyer. KHD has in the past
not concentrated on this area of the business, but has become one of the
most notable companies in the world with regard to the technologies,
equipment and services involved in cement-making. For the most part, the
largest of these turnkey contracts have tended to be the domain of just two
companies — Denmark–s FL Smidth and China–s Sinoma. The strategic
partnership of KHD and CATIC has now created a third option for buyers, one
that combines the impressive portfolio of KHD–s intellectual property with
the strength and formidable turnkey experience of CATIC.

KHD HISTORY

KHD has a long, rich history. KHD Humboldt Wedag International AG traces
its origins back to 1856. Today KHD is one of the leading global cement
plant and equipment suppliers, and has built over 480 plants worldwide.
The company employs more than 750 people worldwide, with its headquarters
in Koln. KHD operates worldwide via four Customer Service Centers. These
are located in India, the Americas, Europe the Middle East and Africa
(EMEA) and Russia/CIS. KHD also has operations in Asia Pacific, China and
Australia.

In addition KHD provides services such as designing and engineering,
project management and supply, as well as supervision of erection and
commission of cement plants and equipment. Customer services such as supply
of replacements parts, plant optimization and training of plant personnel
complement KHD–s services.

KHD–s core equipment includes a wide range of grinding and pyro-process
technologies. KHD–s grinding technologies are utilized in raw material and
clinker grinding and include crushing, grinding and separation equipment,
while KHD–s pyro-process equipment includes pre-heaters, calciner systems,
kilns, burners and clinker coolers. KHD also has developed a range of
systems automation products, including process control systems and
equipment optimization products.

KHD–s strategic approach to the market has been to be the leading supplier
of innovative, environmentally friendly and energy efficient technologies
focused on reduced operating and maintenance costs.

CATIC TODAY

Revenue for the entire CATIC group with holdings was over 18 billion Euro
in 2009. Please visit the CATIC website at http://www.caticbj.cn

By using its well-established sales network of 56 overseas subsidiaries and
representative offices in over 30 countries and regions around the world,
and close working relationships with a range of design institutes,
suppliers and manufacturers both in China and abroad, CATIC has a strong
history of achievements and is committed to be a capable and competent
contractor to serve the cement industry for turn-key projects.

CATIC has formed a highly experienced project team covering procurement,
project management, quality control and assurance, programming and
planning, logistics, training, supervising and other technical service,
marketing and finance to offer complete services on EPC basis for the
cement industry.

About KHD Humboldt Wedag International AG

KHD Humboldt Wedag International AG operates internationally in the
industrial plant technology, equipment and service industry, and
specializes in the cement industry. To obtain further information about
KHD, please visit the KHD website at:
http://www.khd.com

KHD Products

Cement plants operate with robust and durable machines. These create the
basis for regular modernization measures using the company–s highly
developed technology. KHD–s plants and technology increase production, cut
specific power consumption, and reduce pollutant emissions. As a result,
not only do KHD–s longstanding business partners profit, but also the new
clients in the growth markets of today and tomorrow.

Burning Technology: KHD offers the whole range of products required for the
burning process of industrial cement production including preheaters,
calciners, bypass systems, kilns, burners, coolers and fans. KHD burning
technology aims to be high efficient, fuel variable, with high recuperation
efficiency, high availability and stable operation and high specific
throughput rates, reduced emissions as well as with flexibility to raw
materials.

Grinding Technology: KHD is a leading expert in grinding technology,
offering crushers, roller presses and tube mills as well as separators.
Combining KHD roller press and separation technology in one hybrid system
COMFLEX(R) KHD concentrates grinding effectiveness and efficiency in narrow
space. Grinding technology is used for raw material processing as well as
for clinker processing.

Process Automation: KHD has 150 years experience in process know-how, and
over 35 years experience in cement plant automation. KHD offers the
complete spectrum of cement plant automation including plant engineering of
electrical packages and implementation of particular process control
systems (PRODUX(R) PLUS), training simulators for cement plants
(SIMULEX(R)), quality control systems (ROMIX(R)), kiln shell scanners
(SCANEX(R)), advanced control systems for kiln (PYROEXPERT(R)) and for
grinding process (MILLEXPERT(R)).

Services: In addition to equipment, KHD offers global plant services to its
customers thru its Customer Service Centers. Spare parts supply, training,
plant audits, erection and commissioning advisory services and operation
and maintenance services all form important solutions for the customers.
Spare parts supply ensure for optimal plant operations. Training and plant
audits aid customers in identifying potential issues and provide for
recommendations for better plant performance in maintenance, production and
efficiency. KHD–s expert erection and commission advisory services assures
proper installation and operation of the equipment in the plant. Likewise,
full operation and maintenance of a plant by KHD is possible should the
customer require these services

Disclaimer for Forward-Looking Information
Certain statements in this release are forward-looking statements, which
reflect the expectations of management regarding Forward-looking statements
consist of statements that are not purely historical, including any
statements regarding beliefs, plans, expectations or intentions regarding
the future. No assurance can be given that any of the events anticipated
by the forward-looking statements will occur or, if they do occur, what
benefits the Company will obtain from them. These forward-looking
statements reflect management–s current views, expectations and estimates
and are based on certain assumptions.

This release is neither an offer to sell, nor solicitation of an offer to
buy any securities and shell not constitute an offer, solicitation nor sale
in any jurisdiction in which such offer, solicitation or sale is unlawful.
This press release does not constitute or form part of an offer or
solicitation to purchase or subscribe for securities in the United States.
The securities referred to herein may not be sold in the United States
absent registration or an exemption from registration under the U.S.
Securities Act of 1933, as amended. (KHD) does not intend to register any
portion of the offering of the securities in the United States or to
conduct a public offering of the securities in the United States. Copies of
this announcement should not be made in and may not be distributed or sent
into the United States or Canada.

CONTACT PERSONS: Manfred Weinandy, Michael Nielsen, Jouni Salo
Colonia-Allee 3
51067 Cologne Germany
Tel: +49 221 6504 1401
info@khd.com

INVESTOR RELATIONS
Ulrich Wiehle
Tel: +49 611 20 585 511
wiehle@cometis.de

For North American contact
Rene Randall
Tel: +1(604)683-8286 ex 224
rrandall@bmgmt.com

End of Corporate News

21.12.2010 Dissemination of a Corporate News, transmitted by DGAP – a
company of EquityStory AG.
The issuer is solely responsible for the content of this announcement.

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Language: English
Company: KHD Humboldt Wedag International AG
Colonia Allee 3
51067 Köln
Deutschland
Phone: +49 (0)221 6504 1106
Fax: +49 (0)221 6504 1090
E-mail: info@khd.com
Internet: www.khd.com
ISIN: DE0006578008
WKN: 657800
Listed: Regulierter Markt in Frankfurt (General Standard);
Freiverkehr in Berlin

End of News DGAP News-Service
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107304 21.12.2010