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SDK to Cooperate with Veolia Water in Water Treatment Business

June 30, 2005

Showa Denko K.K. (SDK) has decided to have its consolidated subsidiary Showa Engineering Co., Ltd. (SEC) cooperate with Veolia Water S.A. of France to conduct a water treatment business in Japan and other Asian countries.

Veolia Water is the leading operating company for water services in the world having the largest share in delegated management of water treatment facilities. The company had annual sales of 9.8 billion euro (approx. ¥1.28 trillion) in 2004 and workforce of 67,800 operating in 55 countries.

SEC has been providing its proprietary UNOX System over many years for highly efficient treatment of sewage and industrial effluent using high-concentration oxygen. The system has already been adopted at more than 140 plants in Japan and foreign countries.

Following the tie-up, the two parties will jointly conduct the businesses of treating industrial effluent based on the UNOX System and producing drinking water based on Veolia Water’s technology. The two parties will also develop new high-performance water treatment systems by combining Veolia Water’s separator technology and SEC’£ó UNOX System technology.

Furthermore, the two parties will market the UNOX System and the new systems they will develop in China, using Veolia Water’s existing operation sites in that country, and other Southeast Asian countries to meet growing demand for water treatment in the region. The two parties will also participate in the growing Private Finance Initiative (PFI) business to undertake delegated management of public utilities for drinking water production and wastewater treatment by the use of private funds.

While the Showa Denko Group so far operated its water treatment business through SEC, Showa Setsubi Service Co., Ltd. and Showa Environment System Co., Ltd., the business has been consolidated into Showa Environment System, a wholly owned subsidiary of SEC, since June 1, 2005.

As of July 1, 2005, SEC will transfer 49% of the shares in Showa Environment System to Veolia Water Japan (VWJ). SEC will also transfer 3% of the shares to Sanbic Co., Ltd., a company headquartered in Handa engaged in the recycling of contaminated soil. As a result, SEC and Sanbic will jointly hold 51% of Showa Environment System, and VWJ 49%.

The Showa Denko Group is committed to global environmental protection, aiming to contribute to the good of society and establish public trust. In addition to the joint water treatment business with Veolia Water, the Showa Denko Group will further develop new environment-friendly products and technologies while promoting energy conservation and recycling activities.

[Reference]

[Profile of Veolia Water Japan.]

President Laurent Auguste
Head office Saint-Gobain Bldg., 3-7, Kohji-machi, Chiyoda-ku, Tokyo
Capital ¥300 million
Number of employees 40
Shareholder Veolia Water S.A. (100%)
Scope of business Water services and water treatment

[Profile of Showa Environment System Co., Ltd. (As from July 1, 2005)]

President Yasuo Sasaki
Head office 3-17-12, Shibaura, Minato-ku, Tokyo
Capital ¥100 million
Number of employees Approx. 130
Shareholder Showa Engineering (48%); Sanbic (3%); Veolia Water Japan (49%)
Scope of business Water treatment and distribution (including treatment of industrial effluent and production of drinking water)

For more information, contact:
Showa Engineering: Planning and Administration (Phone: 81-3-3457-5111)