Catalytica Energy Systems to combine with renewable energy company

Tempe, AZ, May 8, 2007 — Catalytica Energy Systems Inc., a provider of clean energy products and services, announced the signing of a definitive agreement pursuant to which the renewable energy divisions of NZ Legacy LLC (a privately owned Arizona land and energy development company), which include Snowflake White Mountain Power LLC, Renegy LLC, and Renegy Trucking LLC, businesses engaged in creating and operating renewable energy power projects and harvesting biomass fuel, will combine with Catalytica Energy Systems in an all-stock transaction. The combined companies will operate under a holding company to be called Renegy Holdings Inc.

Upon completion of the proposed transaction, the combined company will operate under two divisions focused on clean energy — a division focused on becoming an independent power producer (IPP) of renewable energy, and a division providing emissions compliance services for the coal-fired power generation industry. Under the first division, Renegy’s mission is to utilize existing technology to supply clean, renewable and economical power, with the vision of becoming a leading renewable energy IPP in the U.S. In addition to owning a 24 megawatt (MW) biomass plant, which is currently under construction in Snowflake, Arizona and expected to begin operating in the first half of 2008, Renegy will endeavor to create multiple renewable energy projects over a five-year period through acquisition, construction, installation and operation. Future projects will focus primarily on biomass, solar and wind power. The second division will focus on growing its SCR catalyst and management services business (SCR-Tech), and continuing to explore strategic opportunities to broaden its reach in the growing market for clean coal technologies.

The transaction, which has been unanimously approved by the board of directors of Catalytica Energy Systems, is subject to approval by the stockholders of Catalytica Energy Systems, regulatory approvals and customary closing conditions.

Effective upon the closing of the proposed merger, which is expected in the third quarter of 2007, Rob Zack, president, chief executive officer and chief financial officer of Catalytica Energy Systems, will serve as chief financial officer of the combined company, while Robert (“Bob”) Worsley, president of NZ Legacy, will serve as chairman and chief executive officer.

NZ Legacy’s renewable energy assets include the Snowflake White Mountain Power (SWMP) plant, a 24 MW biomass plant under construction outside of Snowflake, Arizona, along with Renegy and Renegy Trucking, forest logging and trucking companies created to harvest, collect and supply biomass fuel to the SWMP plant. The $70 million SWMP plant is scheduled to be completed and begin producing electrical power in the first half of 2008. The plant has two long-term power purchase agreements (PPAs) in place with Arizona Public Services (APS) and Salt River Project (SRP), Arizona’s two largest electric utilities. The PPAs guarantee that all of the power generated over a 20-year term is pre-sold, providing for a predictable future revenue stream subject to fuel availability. The plant will be located at the site of a paper mill owned by Abitibi, the largest newsprint manufacturer in the world. Recycled paper sludge from this mill will provide approximately 50% by weight of the fuel to be used by the plant. The remaining approximately 50% of the fuel will come from the surrounding National Forests in the form of woody waste material harvested from fire damaged Federal lands and forest thinning projects. NZ Legacy currently has in place 18 open and completed contracts with the U.S. Forest Service, either directly or as a subcontractor, for the collection, harvesting, chipping/grinding and hauling of woody waste material. Additionally, NZ Legacy has contracts to manage and collect material from several community green waste sites, and collects material from the waste generated by Renegy’s and other area sawmills. Three years worth of fuel in the form of logs, wood chips and grindings is being stored prior to the start-up and commissioning of the plant. Already, more than 270,000 tons of fuel has been stored to date.

Construction and implementation of the SWMP plant and related assets has been financed through $20 million in equity contributed by Bob Worsley and $53 million in secured, non-recourse debt, including $40 million in tax free industrial development bonds and a $13 million term loan with an 18-year amortization schedule. Once fully operational, the estimated debt payback period of the plant is approximately nine years based on revenues derived from its long-term PPAs.

Multiple other renewable energy project opportunities are currently being explored in the Western and Southwestern U.S., including additional biomass plants along with anaerobic digester, concentrating solar and wind projects.

Upon completion of the merger, stockholders of Catalytica Energy Systems will own approximately 41.5% of the outstanding stock of the combined entity, and NZ Legacy will own approximately 58.5%. Additionally, Mr. Worsley will receive warrants to acquire shares of stock at $2.34 per share, which, if exercised in full, will increase his ownership to approximately 70%. The warrants are divided into three equal parts, with the first one-third scheduled to vest upon the commissioning of the SWMP plant by July 2008, and the remaining two-thirds scheduled to vest upon the commissioning or acquisition of additional renewable energy facilities. The board of directors of the combined company will consist of five independent representatives from Catalytica Energy Systems’ current board, Mr. Worsley, and a new appointee expected to come from the renewable energy industry. Renegy will apply for listing on the Nasdaq Global Market.

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