Headwaters Incorporated Announces Hydrogen Peroxide Acquisition

Headwaters Incorporated (NYSE: HW) today announcedDegussaHeadwaters Korea has entered into agreements to acquire ahydrogen peroxide facility and an exclusive supply contract.DegussaHeadwaters Korea, a joint venture owned equally by Degussa andHeadwaters, will exclusively supply a new propylene oxide facilityowned by SKC Chemicals Group ("SKC") with hydrogen peroxide. To enablethis, the joint venture is acquiring a hydrogen peroxide facility inUlsan, Korea from Kemira Oyj, Helsinki, Finland. The transactionstill remains subject to regulatory approvals. DegussaHeadwaters Koreawill more than double the annual capacity of this facility from itscurrent 35,000 tons. The joint venture's aim is to further expand itsmarket position, especially in the ever growing economic region ofAsia.

Degussa AG, located in Dusseldorf, Germany, has achieved afar-reaching breakthrough in its hydrogen peroxide business ("H2O2")through licensing of its HPPO technology. With annual capacityexceeding 550,000 tons, Degussa is the world's second largest producerof this environmentally compatible bleaching and oxidization agent.Degussa's hydrogen peroxide activities contribute significant growthfor its Building Blocks Business Unit, generating sales of 1.1 billioneuros in 2005, and employing approximately 4,500 employees.

Together with the high-tech engineering company, Uhde, located inDortmund, Germany, Degussa has developed an innovative process forproducing propylene oxide ("PO") from hydrogen peroxide, the so-called"HPPO" process. SKC Chemicals Group ("SKC"), a Korean companyheadquartered in Seoul, recently signed a licensing agreement withDegussa and Uhde to produce HPPO. SKC is planning to bring an HPPOfacility on stream at its site in Ulsan at the beginning of 2008. Thefacility will have an annual capacity of 100,000 tons. The Koreanchemical company intends to serve the strongly growing demand forpropylene oxide in the Asian market. Propylene oxide is a raw materialused in the production of polyurethane, which is used in furniture andautoseat upholstery.

Degussa Management Board Chairman Professor Utz-Hellmuth Felchtstated: "Our successful process innovation has opened up a gateway toan extremely attractive growth market for Degussa. In the future,hydrogen peroxide will not only be used to bleach paper and pulp, butwill also be employed in large quantities for chemical synthesis." Themajor propylene oxide producers are making plans to constructfacilities with annual capacity levels of at least 250,000 tons ofpropylene oxide. These facilities would each require more than 180,000tons of hydrogen peroxide per year.

During the innovative Degussa-Uhde HPPO process, hydrogen peroxideand propylene react to form propylene oxide when a special catalyst,also supplied by Degussa, is used. A significantly lower capitalinvestment makes this technology more economically viable than theproduction process currently employed. In addition, apart from water,no significant quantities of byproducts are produced.

In addition to the current progress being made with HPPO, Degussaand Headwaters are also working on another milestone, namely thecatalytic direct synthesis of hydrogen peroxide ("DSHP"). TheDegussaHeadwaters direct synthesis process will be commerciallyavailable starting in 2007. The combination of the HPPO process withDSHP offers additional cost advantages over conventional propyleneoxide manufacturing processes.

"We are extremely pleased with our Degussa relationship. Degussahas brought a high level of technical and marketing expertise to ourjoint venture," said Kirk Benson, chairman and CEO of Headwaters. "Weare excited about the future completion of our hydrogen peroxidedemonstration plant in Germany and the scale-up of direct synthesismanufacturing using our NxCat hydrogen peroxide nanocatalyst."

About Degussa AG

Degussa AG is the global market leader in specialty chemicals. Ourbusiness is creating essentials-innovative products and systemsolutions that make indispensable contributions to our customers'success. In fiscal 2005, around 44,000 employees worldwide generatedsales of 11.8 billion euros and operating profits (EBIT) of 940million euros.

About Headwaters Incorporated

Headwaters Incorporated is a world leader in creating valuethrough innovative advancements in the utilization of naturalresources. Headwaters is a diversified growth company providingproducts, technologies and services to the energy, construction andhome improvement industries. Through its alternative energy, coalcombustion products, and building materials businesses, the companyearns a growing revenue stream that provides the capital needed toexpand and acquire synergistic new business opportunities.

Forward-Looking Statements

Certain statements contained in this report are forward-lookingstatements within the meaning of federal securities laws andHeadwaters intends that such forward-looking statements be subject tothe safe harbor created thereby. Forward-looking statements includeHeadwaters' expectations as to the managing and marketing of coalcombustion products, the production and marketing of buildingmaterials and products, the licensing of technology and chemical salesto alternative fuel facilities, the receipt of product sales, licensefees and royalty revenues, which are subject to tax credit phase outrisks, the development, commercialization, and financing of newtechnologies and other strategic business opportunities andacquisitions, and other information about Headwaters. Such statementsthat are not purely historical by nature, including those statementsregarding Headwaters' future business plans, the operation offacilities, the availability of tax credits in an environment of highoil prices and potential tax credit phase out, the availability offeedstocks, and the marketability of the coal combustion products,building products, and synthetic fuel, are forward-looking statementswithin the meaning of the Private Securities Litigation Reform Act of1995 regarding future events and our future results that are based oncurrent expectations, estimates, forecasts, and projections about theindustries in which we operate and the beliefs and assumptions of ourmanagement. Actual results may vary materially from such expectations.Words such as "expects," "anticipates," "targets," "goals,""projects," "believes," "seeks," "estimates," variations of suchwords, and similar expressions are intended to identify suchforward-looking statements. Any statements that refer to projectionsof our future financial performance, our anticipated growth and trendsin our businesses, and other characterizations of future events orcircumstances, are forward looking. In addition to matters affectingthe coal combustion product, alternative fuel, and building productsindustries or the economy generally, factors which could cause actualresults to differ from expectations stated in forward-lookingstatements include, among others, the factors described in thecaptions titled "Forward-looking Statements" and "Risk Factors" inItem 7 in Headwaters' Annual Report on Form 10-K for the fiscal yearended Sept. 30, 2005, Quarterly Reports on Form 10-Q, and otherperiodic filings and prospectuses.

Although Headwaters believes that its expectations are based onreasonable assumptions within the bounds of its knowledge of itsbusiness and operations, there can be no assurance that our results ofoperations will not be adversely affected by such factors. Unlesslegally required, we undertake no obligation to revise or update anyforward-looking statements for any reason. Readers are cautioned notto place undue reliance on these forward-looking statements, whichspeak only as of the date of this report. Our Internet address iswww.headwaters.com. There we make available, free of charge, ourannual report on Form 10-K, quarterly reports on Form 10-Q, currentreports on Form 8-K and any amendments to those reports, as soon asreasonably practicable after we electronically file such materialwith, or furnish it to, the SEC. Our reports can be accessed throughthe investor relations section of our Web site.