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Arch Chemicals Awarded 20 Year Contract to Supply Hydrazine Propellants to U.S. Government

Arch Chemicals has been awarded a 20-year contract by the United States Department of Defense for approximately $149 million for the production, storage, distribution and handling of hydrazine propellants for the U.S. government.

The Company’s prior long-term propellant contract with the government expired on April 30, 2004. Shortly thereafter, the Company was notified by the U.S. Defense Energy Support Center (DESC) that it had decided to award the next long-term contract to a competing firm. Arch had a debriefing with the DESC and submitted a formal protest of the award. In July 2004, the U.S. Government Accountability Office (GAO) informed Arch and the DESC that it would sustain the Company’s formal protest of the DESC’s decision. As a result of the GAO’s action, the DESC notified the Company that it had taken corrective action by re-opening the bidding process. The Company submitted its new bid on January 20, 2005.

On March 29, 2005, the Company was notified that it had been awarded the contract. The terms of the award call for an initial 10-year supply contract beginning in 2007, followed by two five-year renewal terms at the option of the government. Arch will utilize its existing hydrazine production facility in Lake Charles, Louisiana to provide products and services under this contract. For more than 50 years, Arch has served as the sole U.S. supplier of hydrazine propellants.

“We are delighted that Arch can continue its long heritage of safely and reliably supplying hydrazine propellants to the U.S. government,” said Arch Chemicals’ Chairman, President and CEO Michael E. Campbell. “This new long-term award solidifies our position as a major strategic supplier to the Department of Defense, NASA and other agencies that rely upon our propellants.”

Arch’s hydrazine propellants are used in a variety of critical government systems, including the Military Strategic and Tactical Relay communications satellite, the Defense Meteorological satellite, and the rockets used to launch Global Positioning System (GPS) satellites and classified payloads for the National Reconnaissance Office. Hydrazine propellants are also essential for F-16 fighter jets and NASA’s Space Shuttle.

Full-scale production and the supply of products under this new, long-term contract are not scheduled to begin until 2007; therefore, the Company does not expect that the contract will have a significant impact upon Arch’s financial performance in 2005. The government procurement process does provide an approximate two-week time frame during which all parties may file appeals of the contract.

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