Catalytica Energy Systems Signs Agreements with Leading Diesel Engine Manufacturers to Evaluate Its 90% NOx Reduction Solution

MOUNTAIN VIEW, Calif., April 30 -- Catalytica Energy Systems, Inc. announced today that it has signed test agreements with two leading heavy-duty diesel (HDD) engine OEMs to evaluate its diesel fuel processor technology designed to enable a 90% reduction in NOx emissions. This solution could help bring diesel engines into compliance with significant emissions restrictions being imposed by the federal EPA, which require a phased-in 50% to 90% reduction in NOx between 2007 and 2010.

Catalytica Energy Systems has completed the manufacture of two full-scale prototype diesel fuel processors that will be used in an initial round of OEM tests scheduled to commence next month. These test activities will further validate the technology while operating on a HDD engine. Sub-scale tests conducted by Catalytica Energy Systems on a rig simulating the environment of a HDD engine have demonstrated the fuel processing performance under real world conditions of temperature, exhaust flow and fuel sulfur levels consistent with 2007 and 2010 after-treatment system requirements.

"The response of diesel engine manufacturers to our diesel fuel processor technology supports the industry and media assertion that identifying a solution for compliance with the EPA mandate remains an ongoing challenge," said Mike Murry, president and CEO of Catalytica Energy Systems. "With more than 500,000 HDD truck engines produced annually in the U.S., the over-the-road market presents a large and exciting opportunity for us to expand our NOx reduction technology suite. Successful OEM tests will provide additional credibility to our solution and will help secure our long-term prospects for participation in an expanding diesel emissions reduction market."

The Company has recently filed a patent related to its diesel fuel processing technology, which leverages years of catalyst development expertise along with its recognized diesel fuel processing capability. This enabling technology is designed to facilitate significant NOx reductions by improving existing NOx trap performance. While current NOx traps offer considerable NOx reduction capabilities, performance issues related to durability, operating range and fuel economy limit their real-world viability. The Company believes that the rapid regeneration capability of its technology will resolve these deficiencies and, when combined with a NOx trap, could prove to be the solution for diesel OEMs to comply with the most stringent phase of EPA-mandated emissions reductions. Catalytica Energy Systems now seeks to transform its rig-proven technology innovation into a durable, deployable NOx reduction solution for the 2007/10 diesel market.

Catalytica Energy Systems has also filed a separate patent for a variant of its diesel NOx reduction technology targeted at the retrofit market. The retrofit application combines the Company's diesel fuel processor with a proprietary lean-NOx catalyst designed to offer a non-intrusive, cost-effective means to address growing urban smog issues related to mobile, stationary and off-road diesel sources. In the U.S. alone, as many as 10 million such sources of diesel emissions are in service today, many of which operate in emissions-sensitive areas. State agency funding for diesel retrofits is now developing in many areas in an effort to meet air quality objectives, and in some cases to avoid EPA sanctions or the loss of Federal Highway Administration funds. In the coming year, the Company plans additional testing to further validate its retrofit solution and is exploring commercialization opportunities with strategic partners.

Catalytica Energy Systems designs, develops and manufactures advanced products for the energy and transportation industries with a focus on cost-effective solutions for improved performance and reduced emissions from combustion sources. Our proprietary technologies include the application of catalysts to combustion systems and next-generation fuel processors to mitigate the environmental impact of power generation and transportation systems. We are marketing our first commercial product, Xonon Cool Combustion(TM) a breakthrough pollution prevention technology that enables natural gas-fired turbines to achieve ultra-low emission power production. Xonon(R) prevents the formation of nitrogen oxides (NOx), a primary contributor to air pollution, through a proprietary catalytic combustion process. We are also conducting technology development efforts related to fuel processing for fuel cells and are actively pursuing adaptation of our core Xonon technology to mobile, stationary and off-road diesel applications. Find Catalytica Energy Systems on the Worldwide Web at www.CatalyticaEnergy.com.