Catalytica Energy Systems' Xonon Receives EPA Validation for its Ultra-Low Emissions Capabilities.

Business Editors

MOUNTAIN VIEW, Calif--(BUSINESS WIRE)--Feb. 8, 2001

Catalytica Energy Systems, Inc. (Nasdaq:CESI) today announced that its Xonon(TM) Cool Combustion system has successfully completed an evaluation process by the U.S. Environmental Protection Agency (EPA) which verified the ultra-low emissions performance of a Xonon-equipped gas turbine operating at Silicon Valley Power. The performance results gathered through the EPA's Environmental Technology Verification (ETV) Program provide high-quality, third-party confirmation of Xonon's ability to deliver a near-zero emissions solution for gas turbine power production.

The verification, which was conducted over a two-day period on a Xonon-equipped Kawasaki M1A-13A (1.4 MW) gas turbine operating at Silicon Valley Power, recorded nitrogen oxides (NOx) emissions of less than 2.5 parts per million (ppm) and ultra-low emissions of carbon monoxide and unburned hydrocarbons.

"Eliminating or reducing pollution in power production is a critical focus of the EPA," stated Penelope Hansen, Director, Environmental Technology Verification Program. "Xonon's pollution prevention capabilities made it an ideal candidate for our ETV program which seeks to increase public awareness of promising new technologies for environmental protection."

Craig Kitchen, president and CEO of Catalytica Energy Systems, stated, "Receiving validation of the performance of our product through the EPA's ETV Program further supports the viability of Xonon as an enabling technology for the generation of essentially pollution-free power by gas turbines. The emergence in recent years of gas turbines as the preferred method of power production, along with the increasing demand for distributed generation, has created an ideal market opportunity for Xonon Cool Combustion. We believe that Xonon-equipped gas turbines will facilitate the siting of new power projects in urban areas where air quality is of great concern, and represent a reliable, cost-effective means for on-site power production."

Mr. Kitchen continued, "The California energy crisis is a good example of the escalating need for on-site power generation to ensure high-quality, reliable power while reducing dependence on the electricity grid. Power surges, brownouts, and rolling blackouts cost businesses millions of dollars in lost revenue, while at the same time a shortage of electricity is forcing consumers to pay skyrocketing prices during periods of peak demand. Distributed generation projects not only serve to improve power quality and reliability, but could also contribute to decreasing the load on an over-burdened utility grid, giving way to reduced costs to all parties and lessening the likelihood of power outages."

The Xonon-equipped Kawasaki M1A-13A gas turbine has operated for over 7400 hours at Silicon Valley Power (SVP), a municipally-owned utility, supplying essentially pollution-free power to the residents of the City of Santa Clara, California, with NOx levels averaging under 2.5 ppm. Three Xonon-equipped Kawasaki M1A-13X turbines, a slightly modified commercial version of the M1A-13A, are expected to enter commercial service in late 2001 in Massachusetts at a healthcare facility of a U.S. Government agency.

The ETV Program was created by the EPA to facilitate the deployment of innovative or improved environmental technologies through performance verification and dissemination of information. The goal of the ETV Program is to further environmental protection by substantially accelerating the acceptance and use of improved and cost-effective technologies by providing high-quality, peer-reviewed data on technology performance to those involved in the design, distribution, financing, permitting, purchase, and use of environmental technologies.

A number of technology centers operate under ETV, one of which being the Air Pollution Control Technology (APCT) Center which conducted the performance verification of Xonon under the direction of the Research Triangle Institute (RTI) in North Carolina. A verification statement and complete report detailing the evaluation of Xonon may be accessed via the EPA's website at http://www.epa.gov/etv/verifrpt.htm#air.

Catalytica Energy Systems develops proprietary technologies that use catalysts to create energy solutions for essentially pollution-free, reliable power. Its first product, Xonon(TM) Cool Combustion, is a breakthrough combustion technology that achieves ultra-low emissions levels for gas turbine power production. Xonon essentially prevents pollution, particularly oxides of nitrogen (NOx), a primary contributor to smog, through a proprietary catalytic combustion process. Find Catalytica Energy Systems on the worldwide web at www.CatalyticaEnergy.com.

This news release contains forward-looking statements regarding the incorporation of Catalytica Energy Systems' Xonon Cool Combustion system into the Kawasaki M1A-13X turbine and other gas turbines used in distributed generation applications, Xonon's ability to facilitate the siting of distributed generation power projects, Xonon's ability to perform cost-effectively and reliably, the scheduled delivery of Xonon-equipped M1A-13X gas turbines by Catalytica Energy Systems and Kawasaki for a Massachusetts distributed generation project, the deployment of Xonon-equipped M1A-13X turbines at project sites, the market demand for distributed power projects, and the competitive position of Catalytica Energy Systems. Actual results could differ and such differences could be material. These statements involve risks and uncertainties, including without limitation, the risk that there may be unanticipated technical, commercial, or other factors related to the incorporation of Xonon into the M1A-13X turbines or other gas turbines used in distributed generation applications, the arrangements between Kawasaki and Catalytica Energy Systems for the supply of M1A-13X gas turbines, that marketing, project development, and installation timelines and regulatory review outcomes are uncertain, and that results may differ from those stated and the other risks set forth in the Catalytica Energy Systems' Form S-1 filing with the SEC. Catalytica Energy Systems undertakes no obligation to update publicly any forward-looking statements to reflect new information, events, or circumstances after the date of this release. Investors are encouraged to review Catalytica Energy Systems' Form S-1 filed with the Securities and Exchange Commission on November 17, 2000, for additional factors that could affect Catalytica Energy Systems' future performance.

Editor's Note: Xonon and Cool Combustion are registered trademarks of Catalytica Energy Systems, Inc. Mountain View, CA, USA