CESI Catalytica Energy Sys (MM)

Catalytica Energy Systems Completes Acquisition of SCR-Tech GILBERT, Ariz., Feb. 23 /PRNewswire-FirstCall/ -- Catalytica Energy Systems, Inc. , a leading provider of innovative emissions solutions for combustion-related applications in the power generation and transportation industries, announced today that it has completed its acquisition of SCR-Tech LLC. Based in Charlotte, North Carolina, SCR-Tech is the North American leader in SCR catalyst regeneration technologies and management services for selective catalytic reduction (SCR) systems. SCR-Tech provides proprietary cleaning, rejuvenation and regeneration services for SCR catalyst used by coal-fired plants and other power generating facilities to reduce nitrogen oxides (NOx) emissions. In addition, SCR-Tech offers SCR system management and consulting services relating to system design, efficiency optimization, O&M cost reduction, catalyst specification and performance testing. SCR-Tech's customer base includes some of the largest utilities and independent power producers in the U.S. The addition of SCR-Tech strategically broadens and diversifies Catalytica Energy Systems' product and service offerings to the growing emissions control market for coal-fired power plants and other utility-scale power generating facilities. In addition to offering an excellent technological fit that aligns well with the Company's core chemical engineering, materials and catalyst capabilities, the combination represents a significant step forward in Catalytica Energy Systems' continued efforts to expand its business in new and growing markets and strengthen its position as a premier provider of innovative NOx solutions. Founded in 2001, SCR-Tech commenced commercial operations in its U.S. regeneration facility in March 2003 and completed orders in 2003 totaling approximately $3.0 million. In addition to contributing to increased sales for the combined companies, the SCR-Tech business unit is expected to generate top line growth and positive cash flow from operations this year. Mike Murry, president and CEO of Catalytica Energy Systems, said, "We are excited to have completed this transaction. We view the acquisition of SCR-Tech as an important strategic move that immediately expands our portfolio of commercial products and services, accelerates our penetration of the NOx control marketplace and strengthens our revenue base. We firmly believe that this combination creates a solid foundation for future growth and strengthens our ability tocontinue pursuing our development and commercialization efforts in other areas of our business, while also targeting additional business opportunities in the area of NOx control." The final terms of the transaction, originally announced on February 5,2004, resulted in Catalytica Energy Systems making an initial cash payment of $3.5 million. In addition, the Company will make a subsequent cash payment in mid-2004 of $0.5 million. Catalytica Energy Systems will also make deferred payments of approximately $7.5 million over a 10 to 15-year period beginning in 2005, including contingent payments relating to the acquisition of intellectual property and exclusive NAFTA ownership of patents. In addition, earn-out payments may be due between 2005 and 2009, contingent upon cash flow generation in excess of established targets. About SCR-Tech Through its proprietary cleaning, rejuvenation and regeneration processes, SCR-Tech is able to restore original catalytic activity, greatly extending the useful life of installed SCR catalyst. Catalyst regeneration provides SCR operators a significantly lower cost alternative to catalyst replacement and virtually eliminates the need to dispose of deactivated catalysts, which can be considered a hazardous waste. SCR-Tech is the only company in North America currently operating a commercial catalyst regeneration facility and offering catalyst regeneration in addition to cleaning and rejuvenation. In addition, SCR-Tech has several patents granted or filed related to these technologies. SCR-Tech's roots go back to the mid-90's when one of the founders of SCR-Tech, ENVICA GmbH, created a method for cleaning, rejuvenating and regenerating SCR catalyst in Germany. Meanwhile, EnBW, Germany's third largest energy company and one of SCR-Tech's former owners, was independently developing an innovative in-situ cleaning and rejuvenation process. In 1997, ENVICA in partnership with one of Germany's largest utilities, Hamburgische Electricitatswerke AG (HEW), began developing an off-site regeneration process based on ENVICA's core technology, which not only physically cleans but also chemically regenerates SCR catalyst. The successful test results achieved with this process led to the decision to jointly market SCR catalyst regeneration services to other SCR plant operators in Germany and the construction of the world's first full-scale commercial SCR catalyst regenerating facility. This process is marketed in Germany by ENVICA under the ENVICA Kat name. Both HEW and EnBW continue to use ENVICA's regeneration processes in their coal-fired plants throughout Germany. In March 2001, ENVICA and Energy & Environmental Consultants GmbH (E&EC), a German consulting company, formed SCR-Tech GmbH in Germany for marketing the regeneration process worldwide. SCR-Tech GmbH then formed SCR-Tech LLC in May 2001 for marketing this process in North America. In March 2002, EnBW Energy Solutions GmbH became a shareholder of SCR-Tech GmbH together with the two founders ENVICA and E&EC. EnBW Energy Solutions granted an exclusive license to SCR-Tech for its proprietary and patented in-situ cleaning process that it had independently developed in 1995. For the past six years, these technologies have been successfully applied commercially throughout Germany by SCR-Tech's founding owners, leading to the creation of SCR-Tech LLC in the U.S. in 2001 to begin marketing the technology in NAFTA. SCR-Tech subsequently initiated commercial operations in its Charlotte regeneration facility in early 2003. About Catalytica Energy Systems Catalytica Energy Systems is a leading provider of innovative emissions solutions for combustion-related applications in the power generation and transportation industries. The Company designs, develops, manufactures and services advanced products with a focus on offering cost-effective solutions for reducing nitrogen oxides (NOx) emissions. Its proprietary technologies include the application of catalysts to combustion systems and next-generation fuel processors to provide solutions that mitigate the environmental impact of power generation and transportation systems. Through its SCR-Tech subsidiary (http://www.scr-tech.us/), the Company now also offers catalyst regeneration services to industries that use selective catalytic reduction (SCR) systems to reduce NOx emissions. SCR-Tech provides catalyst regeneration services by means of two proprietary and patented processes that can restore used catalyst to its original activity level for significantly less cost than purchasing new catalyst. The Company also provides SCR system management services including ammonia injection grid (AIG) tuning to optimize efficiency and reduce overall operations and maintenance (O&M) costs, and consulting services related to the design of SCR systems, including catalyst specification, selection and initial performance testing for guarantee verification. Find Catalytica Energy Systems on the Worldwide Web at http://www.catalyticaenergy.com/. This news release contains forward-looking statements regarding the ability of Catalytica Energy Systems to successfully integrate the SCR-Tech business; the ability of SCR-Tech to contribute to an increase in sales revenues and generate top line growth and positive cash flow from operations this year; projections for future financial and operating results associated with the combined companies; market projections for SCR-Tech's business; the growth in market acceptance of and market demand for the combined companies' products & services; SCR-Tech's ability to expand its customer base for its regeneration services; the combined companies' growth prospects; and the competitive position of SCR-Tech in the marketplace. These statements are subject to risks and uncertainties that could cause actual results and events to differ materially from those expressed in the forward-looking statements. These risks and uncertainties include, among others: that Catalytica Energy Systems may not be able to accurately predict future financial performance; possible fluctuations in economic conditions affecting the markets for the combined companies' products & services; the risk that a market may not develop or be maintained for the combined companies' products & services; changes in the environmental requirements for NOx emissions; that marketing, project development and installation timelines and regulatory review outcomes are uncertain; that there may be unanticipated technical, commercial or other setbacks related to the combined companies' products & services; that the combined companies may not be able to maintain current or develop future customers or strategic relationships for its products & services; the risk that Catalytica Energy Systems and SCR Tech's businesses will not be integrated successfully; costs related to the transaction and the integration of SCR-Tech's business; the risk that Catalytica Energy Systems will be unable to retain key SCR-Tech employees, the failure by the combined companies to develop, manufacture, market and deliver products & services within currently estimated timeframes and budgets; expanded risks to Catalytica Energy Systems as a result of the acquisition of the business of SCR-Tech, including significant potential environmental, intellectual property, regulatory, business, financial and liability considerations; and the other risks set forth in the Catalytica Energy Systems' Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 31, 2003 and any filings made with the Securities and Exchange Commission upon consummation of the SCR-Tech transaction. Catalytica Energy Systems undertakes no obligation to update any forward-looking statements to reflect new information, events, or circumstances occurring after the date of this release. Editor's Note: Xonon and Xonon Cool Combustion are registered trademarks of Catalytica Energy Systems, Inc., Gilbert, AZ, USA CONTACT: Megan Meloni Investor Relations (650) 940-6253 DATASOURCE: Catalytica Energy Systems, Inc. CONTACT: Megan Meloni, Investor Relations of Catalytica Energy Systems, Inc., +1-650-940-6253 Web site: http://www.catalyticaenergy.com/ http://www.scr-tech.us/

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