Company Profile

Business Description

Founded in 1996, Catalytic Solutions, Inc. ("CSI" or the "Company") manufactures and delivers a break-through proprietary technology that significantly improves the performance and reduces the cost of catalytic converters. CSI has developed a unique catalytic coating and an innovative manufacturing process to apply its coating to a substrate that forms the functional element of a catalytic converter. Catalytic converters are the pervasive means of meeting increasingly stringent emissions standards around the world for vehicles, energy production facilities and other applications. Traditional catalytic coating technologies have not appropriately addressed the performance requirements created by these emissions standards at acceptable cost levels.

CSI's unique and proprietary Mixed Phase Catalyst ("MPC®") technology is fundamentally different from other approaches, and enables CSI to produce catalyst formulations with superior catalytic performance, a high degree of durability and cost-effectiveness for a wide range of environmental markets. CSI currently sells its products to the world's leading provider of aftermarket catalytic converters, and major automotive original equipment manufacturers ("OEMs") have selected CSI's products for high-volume platforms over products offered by its leading competitors due to the superior performance and cost characteristics of its catalytic coatings.

A catalyst is a substance that facilitates a chemical reaction without being consumed in the reaction itself. Catalyst-based emissions systems are used in a variety of industries to convert pollutants, fumes and odors into innocuous compounds. Today, the largest application for catalyst-based emissions systems is the reduction of hydrocarbons, nitrogen oxides and carbon monoxide emissions from gasoline and diesel vehicles. Catalysts are also used to control emissions in power generation plants, manufacturing operations and other industrial applications. Environmental regulations worldwide have mandated continually decreasing levels of allowable emissions from vehicles, power generation plants and other sources, driving demand for continually increasing numbers of catalysts and higher performance catalysts.

Opportunity

CSI's patented MPC® technology was developed in response to the need for a more cost-effective solution for automotive catalytic converters as emission standards around the world continue to tighten. Traditional automotive catalytic coating technologies currently utilize high loadings of platinum group metals ("PGMs") - platinum, palladium and rhodium - to satisfy performance requirements mandated by governmental regulations, resulting in high costs to the automotive OEMs. Therefore, there is a significant market opportunity for a catalytic coatings supplier that can provide catalytic performance comparable to that of traditional products with substantially lower PGM loadings. CSI's MPC® technology offers performance equal to or exceeding that of competing catalytic coatings with a significant reduction in PGM loadings. In addition, increasingly stringent emission standards for diesel engines and gas turbines are also driving demand for superior catalytic solutions in the diesel and energy markets.

Target Markets

Automotive
Since 2000, 100% of new cars sold in the U.S. and approximately 85% of all new cars sold worldwide have been equipped with a catalytic converter as the principal means of meeting emissions standards. The regulations controlling auto emissions in countries throughout the world have become increasingly restrictive and will continue to tighten in the future, with new emissions standards already set to take effect in 2004 and 2005 in the U.S. and Europe, respectively.

Automotive catalytic converters depend on large quantities of PGMs to perform the catalysis. These metals are rare and very expensive, and are the largest cost component of a catalytic converter. Current catalytic technology requires a substantial increase in the loadings of these costly PGMs in order to meet forthcoming emissions standards. As a result, automotive emissions control systems are expensive and becoming more so, and the auto industry has been under intense pressure to find a cost-effective emissions control solution. In addition, automobile manufacturers in Europe and other markets are looking for greatly improved performance at a fixed moderate PGM level.

Diesel
U.S. and European Union legislation requires 70% - 90% reductions in nitrogen oxide ("NOx") emissions from diesel vehicles over the next six to eight years and reductions in particulate matter as early as 2005. Catalysts using traditional technology will require high loadings of PGMs to comply with these standards, and diesel auto-makers are very concerned about the high price of these units.

Energy
CSI is targeting the large market for the reduction of NOx emissions from power generation facilities. These emissions have been a major focus of environmental regulations worldwide, particularly in response to the threats of acid rain and global warming. CSI is currently on new catalyst technology that will achieve low NOx levels, allow for higher temperature operation of the plant and a smaller footprint at reduced cost compared to existing technologies.

Competitive Advantages

CSI believes that its technology and products represent a fundamentally different emissions control solution, which delivers the following key benefits:

Superior Catalytic Performance
CSI's MPC® technology enables it to produce catalytic coatings capable of significantly better catalytic performance than previously available. CSI has achieved this demonstrated performance advantage by creating a catalyst using unique nanostructures with superior stability under prolonged exposure to high temperatures. This nanostructure technology enables the oxide catalysts in CSI's compounds to resist sintering, or fusing, thereby maintaining a high catalytic surface area. As a result, in automotive applications, for example, CSI's catalyst formulations are able to maintain high levels of performance over time using substantially lower PGMs than products available previously.

Significant Cost Advantage
In the automotive market in particular, where PGM costs represent a large portion of manufacturers' costs, a significant benefit of CSI's MPC® technology is that it offers performance equal to or exceeding that of competing catalytic coatings with a 50% - 80% reduction in PGM loadings.

Wide Range of Applications
Our MPC® technology is a design approach, as opposed to a single chemical formulation. We have developed our technology from its inception as a platform, which can be tailored for a range of different industrial applications. Specifically, our coating formulations can be tailored in two distinct ways. First, the oxide compounds used in our formulations can be adapted for specific applications by adding to them, or doping them with, a wide range of chemical elements, a process known as tuning. By contrast, the catalyst offerings of our competitors can be tuned only by adjusting the three PGMs. Second, we are able to vary the mixtures of our compounds to create customized solutions for specific applications. These two independent design mechanisms allow for customization and optimization for different vehicle platforms within the auto industry and for completely different applications such as SCR NOx control for gas turbines.

Proven Durability
Our coated substrates have undergone substantial lab and field testing by our existing and prospective customers and have demonstrated their durability and reliability in a wide range of applications. In addition, our coated substrates have satisfied numerous certifications and match or exceed the durability of conventional coated substrates.

Compatibility with Existing Manufacturing Infrastructure and Operating Specifications. Catalytic converters using our coated substrates are compatible with existing automotive manufacturing processes as well as specific vehicle operating specifications. There is no need for our customers to change their manufacturing operations, or how their products or processes operate, in order to utilize our technology.