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Energy challenge

The majority of our business is energy intensive and the extreme volatility in energy markets resulted in a number of challenges during 2008. In the short term, we protect margins through forward contracts on both the selling and purchasing side. In the long-term, we are pursuing the goal of improving the fuel mix of our energy requirements. One area of attention is to reduce our dependency on gas for process steam requirements. We already have alternative steam supply or steam supply contracts in place at several locations that use woodchips or waste as the fuel of choice.

Industrial Chemicals is also participating in the Dutch consortium for purchasing energy to reduce the dependency on high-priced gas-fired generation of base load power.

At all of our own sites and joint venture operations that utilize gas-fired power plants, we are mitigating the impact of high gas prices by employing more flexible operations. This essentially helps to reduce the minimum load of our installations. But it’s not just the consistently high gas price which poses a significant challenge to our business. The proposed post-Kyoto European Union greenhouse gas Emission Trading Scheme (ETS) regulations for carbon dioxide is also a major issue. AkzoNobel fully supports the CEFIC position of introducing benchmarks for energy intensive industries, rather than burdening them will the full impact of auctioning the CO2 rights, which is what the EC proposes. The Commission’s proposal would not only create unfair competition with other regions – so impacting Western European economies – but it would also unavoidably lead to carbon leakage. This would be counter productive in terms of achieving climate goals, because carbon leakage actually results in an overall higher amount of greenhouse gases.

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