CHENCO GmbH Tells Facts Regarding Suit with Do-Fluoride Chemicals (DFD, 002,407.sz) and Refutes Comments by DFD Deputy General Manager Chen

REGENSBURG, Germany, Aug. 22, 2011/PRNewswire/ -- In response to the significant misrepresentations of the facts regarding the many years of successful cooperation between CHENCO GmbH and Do-Fluoride Chemicals (DFD, 002,407.sz), Dr. Jozsef Juhasz, Managing Director of CHENCO, responds to questions to inform the public of the facts.

Question: Why have you started arbitration proceedings against DFD?

Dr. Juhasz: It was never our intention to have to sue anyone in arbitration, but DFD has ignored their contractual agreements and has not only built many additional plants based upon our technology, but they have even used our technology to establish equity value in a joint venture with CHALCO without getting any license and without making payments as contractually agreed.

DFD has not paid for any of these plants. DFD is claiming that they have developed the technology they are using themselves. That is simply ridiculous.

Put simply, DFD did not have the capability to successfully build any of these plants before CHENCO. They licensed the technology for one plant each and they have built many more plants with our technologies. They were in significant debt when we saved them with our technology. Now they are a well-reputed company with great potential. It is terrible that they would rather use our technology illegally and risk their own future than simply pay what is due.

Question: DFD says that the technologies from CHENCO are defective. How do you respond to this?

Dr. Juhasz: Mr. Chen, DFD's Deputy General Manager, was recently quoted as saying that the aluminium fluoride, hydrofluoric acid, and lithium hexafluorophosphate technologies from CHENCO are defective. Mr. Chen is either mistaken, misquoted or simply ignorant of the facts. We take detailed notes at every meeting. These are signed off by both parties. These notes clearly show that the CHENCO technology has been successful and that delays, if any, were caused by failures on the part of DFD to build the plants and start them up according to the CHENCO specifications. Whether DFD performed this way in order to reduce costs or to try and be creative, we do not know. But, we do know that such behaviour is very dangerous. One of our engineers was almost killed when DFD had improperly placed a water valve where they should have put a hydrofluoric acid valve. There are a significant numbers of these failings that are all documented in the daily notes, signed by both parties.

The reality is that CHENCO technologies are the best in the world. They are used very successfully and extensively in many countries. While it is natural for every customer to want to claim that they have "improved" the technology, rarely is this the case. Usually, it is just a matter of marketing so they can better compete in the market. DFD has taken the unusual, and false, step to say that the underlying technology was somehow deficient. Mr. Chen must not be aware of the details about which he speaks.

Question: Would you please provide a timeline of your relationship with DFD?

Dr. Juhasz: I would be happy to.

We first met Mr. Li, President of DFD, at a conference in China in 2003. At that time Mr. Li asked CHENCO for a quote for an aluminium fluoride plant based upon CHENCO technology. Because of the larger investment, Mr. Li informed us that DFD was going to stay with the older technology; one that uses a different raw material and produces lower quality aluminium fluoride. One year later, at the "Annual Inorganic Fluorine Meeting" in China, Mr. Li again asked CHENCO for a quote on our aluminium fluoride technology, saying that DFD had very little money as they has lost Euro 1 million on their investment with the older technology.

We agreed to provide DFD, at a very, very large discount, our technology for aluminium fluoride for their first plant. This large discount was specifically agreed by CHENCO because we expected growth from DFD that would mean more plants that would be licensed at our normal license fee rates.

In the course of this we discovered that the hydrofluoric acid technology that DFD was using, Russian technology from the 1970's, was not capable of producing the 99.9% purity needed as a raw material for the aluminium fluoride production. Therefore, in 2006 CHENCO provided state-of-the-art CHENCO technology for the production hydrofluoric acid again at a very, very large discount for the first plant.

Unfortunately, DFD did not call CHENCO to commission the plants, as called for under the contract, nor did CHENCO inspect the equipment DFD purchased, which we normally do The result was that DFD started the plants with great difficulty and had to replace, because they failed quickly, some very expensive pieces of equipment. CHENCO was called on an emergency basis to help, only to discover poor quality equipment and equipment not installed as per the CHENCO specifications. This resulted in greater expenses and delays caused by DFD. In any case, we solved the problems and educated DFD how to start and run them properly. DFD paid for the technology licenses and the services for these first plants.

As CHENCO became aware of DFD building additional plants with our technology, Mr. Li, DFD President, asked CHENCO to wait to invoice DFD for the additional plants, even offering one day's supply of aluminium fluoride, so that DFD could file to become a public company, which CHENCO accepted as recognition of payment to come in the spirit of friendship and cooperation.

Mr. Li then asked CHENCO to license lithium hexafluorophosphate technology so that DFD could be considered "high-tech" and be approved to become a public company. The CHENCO lithium hexafluorophosphate technology is the only available technology to compete with industry leaders Stella and Morita, with the excellent quality, density and granularity needed for highest quality lithium battery production.

After long and unsuccessful negotiations, where CHENCO was unwilling to license the technology at the same discount levels of the other technologies, DFD finally agreed to CHENCO terms in 2009.

This plant suffered greatly due to failures on the part of DFD to provide the equipment required by CHENCO and some very significant design failures that were discovered by CHENCO. DFD, once again, failed to call CHENCO for commissioning and the result was a great delay in plant development. Today, we do not know the quality or capacity of lithium hexafluorophosphate from DFD.

DFD is now a public company and has the resources to pay the monies owed to CHENCO, but instead has decided to say bad things about CHENCO Technology to avoid paying what they owe.

Throughout the years CHENCO and DFD have had a mostly positive relationship. It was only when Mr. Li and others at DFD began to say false negative comments about CHENCO technology and refused to pay for the plants they have built, and those planned, that the relationship has failed. That is unfortunate.

Question: In a recent article, Mr. Chen is quoted to have said that CHENCO "is not engaged in actual production…" so they cannot know as much as DFD. How do you respond?

Dr. Juhasz: Every engineer at CHENCO has well over 20 years' experience in both plant operations and development. I, myself, began my career running plants and improving their technologies. No one at DFD has the experience of any one of the CHENCO engineers. You cannot fake real experience. CHENCO is the real expert. Why did DFD come to us for three technologies – those on which they have built the company? We have built over 50 fluorine plants in over 14 countries worldwide. It is simply nonsense to suggest that the experience and expertise of CHENCO is questionable.

One factor I would also add. We have been told that DFD pays its people so little money that the best ones leave. This is a problem because we teach their people to understand and perform technical functions. Every time an experienced person leaves the company, experience and expertise are lost. Unfortunately for DFD, we continue to meet more and more of these former employees at other Chinese companies seeking to license our technologies. This is very dangerous and irresponsible behaviour for a chemical production company like DFD – and they are witnesses to the value CHENCO has provided to DFD.

Question: In the recent article with Mr. Chen's comments is quoted a statement that "An industry official told reporters, CHENCO have given out over the Formosa Plastics lithium hexafluoride technology, but the pilot did not succeed, the current lithium hexafluorophosphate production is very small." How do you respond to this?

Dr. Juhasz: Firstly, there is no comparison of Formosa Plastics to DFD. Formosa Plastics is one of the best technology companies in the world and they kept a small capacity in LiPF6 because of the previous tensions between Taiwan and China, where they were selling the finished products. Without breaking our confidentiality agreements with Formosa Plastics, I will say that Formosa Plastics is very happy with the technology and they may well be expanding their own production. There is nothing to this nonsense statement. It is just intended to further disparage CHENCO. It is wrong and irrelevant. The fact is that DFD is simply trying to avoid paying for our technology and trying to make sure that investors are not frightened by the reality that DFD has built their company on CHENCO technology and that the monies we are seeking will be judged as a legitimate claim as contractually agreed, which will significantly reduce the available monies for the needed expansion to become a complete lithium battery producer.

Question: The answers to your previous questions are very concerning for readers. Just what are you hoping will happen from this release and your suit?

Dr. Juhasz: My hope is to help DFD learn from their mistakes and to stop the false statements made by DFD executives. We want them to rescind their false statements and agree to compensate CHENCO for our technology. We wish no harm to come to DFD, but they must respect their contracts, as well as international law, and pay us for the tremendous value of their use of our technology as contractually agreed.

We continue to wish to achieve an amicable solution, but DFD has so far refused to do so. So we are left with only the option to sue. CHENCO shall prevail, but DFD is risking its future. That is very sad for all.

CHENCO GmbH, Chemical Engineering and Consulting designs and constructs chemical, pharmaceutical and industrial recycling plants worldwide. CHENCO, based in Regensburg, Germany, was founded by Dr. Jozsef Juhasz in 1980 to continue the development of world-class fluorine-based chemical production plants. Dr. Juhasz has developed, rebuilt or otherwise significantly upgraded well over 50 plants world-wide in his greater than 45 years' experience with great success.

For Further Information Please Contact:

Mrs. Erika Utner, Commercial Director
CHENCO GmbH
Zur Schoenen Gelegenheit 8
D-93047, Regensburg, DE

Phone: +49-941-560247
Fax: +49-941-563503
Email: [email protected]

SOURCE CHENCO GmbH