Catalytica Energy Systems Xonon-Equipped Gas Turbine Achieves 8,000 Hours of Clean Power Production

Business Wire, June 20, 2001

Business Editors/Energy Writers

MOUNTAIN VIEW, Calif.--(BUSINESS WIRE)--June 20, 2001

Catalytica Energy Systems, Inc. (Nasdaq:CESI) today announced that its Xonon(TM) Cool Combustion system operating on a gas turbine at Silicon Valley Power (SVP) has successfully achieved 8,000 hours of ultra-low emissions power production. Performance data gathered throughout the 8,000 hours of operation confirms Xonon's ability to consistently deliver nitrogen oxides (NOx) emissions below 2.5 parts per million (ppm) and to operate reliably under commercial gas turbine operating conditions over an extended period of time.

"We have been very pleased with Xonon's performance," stated Craig Kitchen, president and CEO of Catalytica Energy Systems. "Achieving the milestone of 8,000 hours of operation provides valuable evidence supporting the long-term endurance and reliability of our product. Operating Xonon under unattended commercial conditions for this period of time demonstrates not only that Xonon can enable a gas turbine to achieve ultra-low NOx emissions, but also that it can do so while withstanding normal combustor operating conditions and without affecting gas turbine performance."

Kitchen continued, "We believe that the results we have seen to date verify that Xonon is a commercially viable NOx control technology, and should further enhance the integrity of our product in the marketplace."

Deputy Air Pollution Control Officer Peter Hess P.E., DEE, of the Bay Area Air Quality Management District, commented, "We are encouraged by Xonon's performance results and its potential for reducing NOx emissions in an environmentally-friendly manner. Technologies that can enable clean power are becoming more and more important both in the San Francisco Bay Area and nationwide as trends are shifting toward the need to site power sources close to the load. We view Xonon as a promising technology to satisfy community power needs without adversely affecting air quality."

Since its installation at SVP, a municipally-owned utility site, the Xonon-equipped 1.4 megawatt (MW) Kawasaki gas turbine has served alternately as a demonstration of Xonon's performance and reliability during unattended full-load operation, and as a development and test engine in support of commercial program initiatives for customers. During this time, the Xonon-equipped turbine has accumulated 8,000 hours of clean, reliable power generation on the commercial utility grid, serving the electricity needs of approximately 1,500 homes in Santa Clara, California. The first commercial installation of Xonon-equipped gas turbines is scheduled for later this year, when three Kawasaki M1A-13X (1.4 MW) turbines will enter service in Massachusetts to supply the primary power needs of a U.S. government healthcare facility.

The Xonon operation at SVP has been supported and recognized by a number of important third-party organizations including the California Air Resources Board, the California Energy Commission, the U.S. Department of Energy, the U.S. Environmental Protection Agency (EPA), the Electric Power Research Institute, and the Gas Technology Institute, many of which have participated in its funding. In February 2000, Xonon's operation at SVP met the EPA criteria for an emissions control technology that is "achieved in practice." This designation enables state and local agencies to require that new power projects consider Xonon in their permit applications. In August 2000, Catalytica won the EPA's first Clean Air Excellence Award for Xonon. Most recently, Xonon successfully completed an evaluation process by the EPA's Environmental Technology Verification (ETV) Program, which verified Catalytica Energy Systems' ultra-low emissions claim of less than 2.5 ppm NOx for its Xonon technology.

Catalytica Energy Systems designs and develops advanced products for more effective energy production. Its proprietary technologies include the use of catalysts to create solutions to ease the environmental impact of power generation. The Company's first product, Xonon Cool Combustion, is a breakthrough combustion technology that achieves ultra-low emissions levels for gas turbine power production. Xonon prevents the formation of pollution, particularly nitrogen oxides (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 performance of Catalytica Energy Systems' Xonon Cool Combustion system over extended periods of time, Xonon's ability to perform reliably, Xonon's ability to consistently deliver NOx emissions less than 2.5 ppm, incorporation of Xonon into the Kawasaki M1A-13X turbine, the scheduled delivery of Xonon-equipped M1A-13X gas turbines by Catalytica Energy Systems and Kawasaki for a Massachusetts' power project, the deployment of Xonon-equipped M1A-13X turbines at project sites, the market demand for technologies that can enable clean power production, 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 Xonon's performance, the incorporation of Xonon into the M1A-13X turbines, 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 10-K for the year ending December 31, 2000, filed with the Securities and Exchange Commission. 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 10-K for the year ending December 31, 2000, filed with the Securities and Exchange Commission, for additional factors that could affect Catalytica Energy Systems' future performance.