NTransforming American Industry through Alternative Materials

MARK COSTASenior Vice President

Corporate Strategy and Marketing

Eastman At-A-Glance• A global manufacturer of chemicals,

plastics and fibers

• Leading producer of differentiated coatings adhesives, and specialty plastics products

• One of the world's largest manufacturers of PET polymers for packaging

• Leading supplier of cellulose acetate fibers

• 2006 sales revenue of $7.5B

EASTMAN Chemicals from Wood (1920)

Chemicals from Coal (1983)

Eastman Chemical CompanyAt-A-Glance

Coal Gasification based since 1983

Strong, Consistent Acetyl Stream Earnings An Industrial Gasification Competitive Advantage

2001 2002 2003 2004 2005

Acetyl Stream

Olefins and Polyester Streams

~ 20% of products based on gasification, but…

~ 50% or more of earnings based on gasification

East

man

Che

mic

al C

ompa

nyO

pera

ting

Earn

ings

The Costliest ComponentCommodity Chemical Costs

Conversion Costs(including energy costs)

Logistics

Raw Materials Costs

$0

$2

$4

$6

$8

$10

$12

1990 1992 1994 1996 1998 2000 2002 2004 2006$0

$10

$20

$30

$40

$50

$60

$70

$80

Crude$/bbl

Natural Gas $/MMBTU

Crude (West Texas Intermediate) Natural Gas (Houston Ship Channel)

Rising Costs of Conventional Raw Materials

Note: All prices are in constant 2007 dollars (YTD October)Source: Eastman, Global Energy Decisions

U.S. Industry Options

• Close Shop

• Move Out

• Transform American Industry

Impact to the Ammonia & Methanol Industries(Since 2003 – Approximately 20 Ammonia and 6 Methanol Plants Closed)

Illustration OnlySources: U.S. Geological Survey, Mineral Commodities Summaries, 2007

Chemical Economics Handbook - SRI Consulting, 2007

Ammonia PlantsMethanol Plants

The Exodus

“ Through the worst downturn in industry history, the North American chemical industry vowed never to build a world-scale chemical plant again.”

--Joseph Chang, EditorICIS Chemical Business magazine

(August 6, 2007)

The Exodus

Eastman Announced

Plants!

Source:ICIS Chemical Business

Eastman's Answer

• Transform the Company through Industrial Gasification of Alternative Domestic Materials– Coal– Petcoke– Biomass– Secondary Recycled Materials

$0

$2

$4

$6

$8

$10

$12

1990 1992 1994 1996 1998 2000 2002 2004 2006$0

$10

$20

$30

$40

$50

$60

$70

$80Coal & Petcoke vs. Conventional Raw Materials

Natural Gas, Coal & Petcoke $/MMBTU

Crude$/bbl

Industrial Gasification is AdvantageousCoal/Petcoke: Lower Cost & Less Volatile

The spread is large and growing…

Note: All prices are in constant 2007 dollars (YTD August)Source: Eastman, Global Energy Decisions

Crude (West Texas Intermediate) Natural Gas (Houston Ship Channel)Coal (Illinois Basin) Petroleum Coke

Industrial Gasification is AdvantageousU.S. has more than 25% of the World's Coal Reserves

0%

10%

20%

30%

40%

50%

Coal Crude Oil Natural Gas

U.S.Non-U.S.

% o

f Tot

al W

orld

Res

erve

s U.S. has 250-plus year supply of coal(largest single-nation fossil reserves on earth)

Source: International Energy Agency and Dept. of Energy Information Adm. (EIA)

Coal Gasification is AdvantageousEnvironmentally Friendly Choice

0

0.01

0.02

0.03

0.04

0.05

0.06

0.07

0.08

0.09

0.1

SCPC (FGD/ESP/SCR) IGCC (MDEA, No SCR) Industrial Gasification (IG)

NOxSO2Particulates

Lb/M

MB

tu

Lower air emissions and water usageLower solid wastesInexpensive mercury removalMuch lower costs for CO2 capture

Gasification Advantages

SCPC and IGCC Source: EPA Report – "Environmental Footprints and Costs of Coal-Based IGCC and PC Technologies", July 2006

Carbon Capture and Compression Costs(per metric ton)

$20

$40

$10 $8-10

$0$5

$10$15$20$25$30$35$40$45$50

Pulverized Coal IGCC Coal to Liquid IndustrialGasification

Source: MIT’s The Future of Coal, 2007Note: Does not include pipeline transportation and injection costs

The Challenges

• High Capital Costs• Reliability Concerns• Financing Issues• Economies of Scale• Off-take Agreements & Market Risks

1989 2006

Eastman's Performance HistoryAnnual Syngas Production

Continual Process Improvement

New Production Record!

Eastman's Gasification CredentialsDemonstrated Best-In-Class Performance (sustained high reliability)

Industry Start-up History

0102030405060708090

100

Plan

t Ava

ilabi

lity

%

Eastman

Average Industry Range of Performance

A

1 2 3 4 5 6 7 8Years from Mechanical Completion

9 10 11

Source, excluding Eastman data: J. Phillips, EPRI, "Integrated combined cycles with CO2 capture", GCEP research symposium, Stanford University, June 13-16, 2005.

CoalCoal

Petroleum CokePetroleum Coke

Gasification

Removal of: Sulfur,Mercury, Arsenic & Other Components

Carbon Dioxide

Ultra-CleanSyngas

Methanol

Enhanced Oil Recovery (EOR)or other sequestration options

EMN Strategic Chemicals

HydrogenBaseload

Hydrogen

Ammonia

Eastman's Strategy for Growth:

The Future is Here.

Right Now.

Thank you for your attention!

www.eastman.com