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Biotech / Medical : Catalytica Energy Systems, Inc. (CESI) -- Ignore unavailable to you. Want to Upgrade?

To: Liatris Spicata who wrote (1453)	1/27/2000 1:31:00 AM
From: Erik T	Read Replies (1) \| Respond to of 1514

Dan and Larry, thanks for your comments. I am unaware of any existing orders for Xonon. I had to reread that press release a couple times, but I think technically, Larry, you are correct. I guess when you come right down to it, you cannot really receive commercial orders for something before you have proven its viability. While Xonon has achieved success on full load testing on the GE E-series turbine, I have never read anything that indicates Xonon has been tested, successfully or not, on the GE F-series. Cliff Baxter, chairman and CEO of Enron North America. ``We're pleased to be working with GE and Catalytica towards* the commercialization of Xonon for use on large-scale turbines.'* I do believe, however, that Enron has every intention of purchasing the Xonon units when/if it proves to work in the F-series, so I think it is not particularly relevant whether these are actually "orders" which would be cancelled should Xonon not work, rather than "preferred emission control technology" culminating in orders should it prove effective. The difference I see between this (what I would call an order) and the Kawasaki turbine at SVP (simply a test platform) is Enron is saying they want to equip their turbines at this project with Xonon as the control technology and are willing to pay for it should it meet the requirements of a commercial application. Nothing like this exists, that I know of, for the Kawasaki turbine at SVP, which is owned and operated by Catalytica. So I see the Pastoria project announcement as a willingness to pay for the technology, not as a "We'll let Catalytica test their product on our turbines and decide later if it is something we would consider buying." My guess is that Catalytica already has a contract and agreed price for the combustors when/if the requirements are met. I sincerely believe that neither Pres/CEO of GE power systems nor Chairman/CEO Enron North America would allow themselves to be quoted in the release unless they believe the system has an excellent chance of achieving the necessary objectives. Nor do I think Catalytica would be willing to spend the $9 million on the project unless they feel the same. Just my thoughts, and always open for debate, Erik

To: Liatris Spicata who wrote (1453)	2/1/2000 6:21:00 PM
From: Liatris Spicata	Read Replies (1) \| Respond to of 1514

CC Notes: My notes are sketchy, may not be 100% accurate, and I joined the call late. I'm going to break things into Pharm, Xonon and General categories and will not attribute names to statements. Quotes indicate actual comments made by CTAL management, unless otherwise indicated. ========================================== Pharm SK merger is a plus for CTAL as both they and Glaxo are customers who will probably want to "rationalize" their production facilities. This should open more opportunities to the combined company's contract manufacturers. Sterile facility is in high demand; nice results are "coming in future years". Moreover, "no contract manufacturer has the kind of sterile facilities we do", with the added implication that anybody who wants to compete in that sector has to go through a lengthy certification process as well as one of developing customer acceptance. The planned withdraw of certain Glaxo products will amount to about $40 million this year. They have been successful in bidding for new Glaxo work, but it has long been their goal to diversify their customer base. Combustion (Xonon) Strong finish to 1999 for Xonon. First, GE Power has accepted an order for which Xonon is expected to be part of the package. Commercial startup of Pastoria expected in 2003. Second, ISO 9001 registration shows they have their ducks in a row to respond when the industry wants Xonon. They have gotten positive industry response to the Xonon registration. California leads the nation in aggressive pollution control of power stations, and "Xonon is the only combustion system than can meet their requirements" without post combustion scrubbing. P&W and Kawasaki are making a substantial effort in distributed generation. They "are clearly both still working with us" and "there are many things out there" that the company could not discuss at this point. A question was asked as to "what is the single greatest hurdle [remaining]" that Xonon must overcome to be accepted. The response was "people needed comfort with reliability and durability of XONON". CTAL management believes that today's announcement that they are "EPA-approved" (this writers terminology, not CTAL's) puts those concerns to rest. See biz.yahoo.com The GE 7F is the largest turbine in the world (I think that was the claim- perhaps he meant the largest for which XONON was envisioned). Orders for smaller turbines could translate into business for CTAL before the Pastoria orders will. General For competitive reasons CTAL has not broken out revenues by chemical, pharmaceutical and sterile product lines. I think this lead to some evasiveness when responding to questions, but I had no sense the analysts objected to that. Capital expenditures this year will be in the neighborhood of $50 million, and they will (this year, I think) move to into a higher tax bracket. ============================================== I detected no real gaffes on the part of management, even though not all questions could be answered. Several of the analysts offered their congratulations on an excellent quarter, but for all I know they may sing a different tune when they get back to the office. But I think it was an upbeat conference and I'm guessing the 'buy on the rumor, sell on the news crowd' will be proved to be short-sighted. Larry