CHINA ENERGY LIMITED ("CEL" or the "Group") pioneered the use of dimethyl ether ("DME") as an alternative clean energy source in the People's Republic of China, and is now the market leader for DME. Currently used as a blend stock for liquefied petroleum gas ("LPG"), the fuel could one day completely replace LPG, natural gas and diesel.

The Group's patented Liquid Phase Dehydration Technology used in the production of DME has enabled the fuel to scale up the value chain. The patented technology allows DME to be produced under normal temperature and pressure, which results in cost savings that make it economically viable for DME to be blended with LPG or even replace it. As a result, what was once mostly an aerosol propellant has now been transformed into an alternative source of clean energy.

At present, most of our DME is sold to LPG distributors, who blend it with LPG to improve the product's combustion properties and reduce their average cost. This blended fuel is then sold to end-consumers for both household and industrial use. As carbon emissions for DME are about 44% lower than those for diesel, DME has the potential to become an environmentally friendly and economical choice of fuel for powering automobiles. We believe DME could well become a widely accepted alternative fuel for general household usage as well as powering automobiles.

Our Group also produces methyl alcohol ("methanol"), which is used primarily in the production of other chemicals and also as a feedstock for DME production. At present, nearly all the methanol we produce in-house is used as a feedstock in our production of DME.

The Group's production facilities are currently located in Linyi (Shandong Province), Nansha (Guangdong Province) and Zhangjiagang (Jiangsu Province). Our production capacities as at 31 December 2009 are summarised below: