Distributed Energy Systems, Morgan Stanley Form Joint Venture to Boost Development of Renewable Energy Projects

Energy Resource, March 8, 2007

ENERGY RESOURCE-8 March 2007-Distributed Energy Systems, Morgan Stanley Form Joint Venture to Boost Development of Renewable Energy Projects(C)2007 JeraOne - http://www.jeraone.com

Distributed Energy Systems Corp. has entered into a joint venture with Morgan Stanley aimed at developing and financing power generation projects that better utilize energy resources.

Projects are designed to offer competitive returns for investors while also advancing environmental objectives, with primary applications including waste-to-energy, combined-heat-and-power, wind, solar, bio-digestion, fuel cell and other renewable technologies.

The joint venture will offer full project life-cycle services, including development, financing, engineering, procurement, construction, commissioning, operations and services.

Under the terms of the agreement signed today, Morgan Stanley and Distributed Energy will collaborate to develop and own alternative and efficiency-enhancing energy projects. Morgan Stanley expects to contribute the majority of the capital to meet project financing requirements, with Distributed Energy providing the balance.

Morgan Stanley will receive warrants to purchase up to 10% of Distributed Energy's common shares. The majority of the warrants will vest immediately, with the remainder vesting when the combined investment by the two companies reaches $100 million.

Distributed Energy Systems said the agreement with Morgan Stanley represents the successful conclusion of its previously announced goal of attracting a financing partner to support and accelerate development of renewable and efficiency-enhancing projects in the U.S.

"Teaming with Morgan Stanley lets us step up to a broader array of project opportunities," said Ambrose L. Schwallie, Distributed Energy's chief executive officer. "Many of the customers we deal with see the merit in projects that help them save on the cost of energy while reducing their environmental footprint, but the cost of these projects often exceeds their capital funding limits.

"Now, in partnership with Morgan Stanley, we can offer a third-party ownership and operations model that creates a win-win for end users and investors alike," said Schwallie. "Another clear benefit of working with Morgan Stanley is that our engineering and services business will have a chance to win business from their robust franchise in energy projects."

Noted Morgan Stanley Managing Director Aaron Lubowitz, "We see a large and growing number of investment opportunities in selected alternative energy projects. We look forward to creating a mutually beneficial business relationship with Distributed Energy Systems."

For more information, visit www.distributed-energy.com.

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