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Thermo Energy wins $310,000 Dept of Energy Grant

January 17, 2006

LITTLE ROCK, Ark.--(BUSINESS WIRE)--Jan. 17, 2006--ThermoEnergy Corporation (OTCBB:TMEN) today announced the start of a $310,000 federally funded project to develop compact zero air emission power plants for medium to heavy industry. Commonly referred to as Combined Heat & Power (CHP) plants, these systems would allow main-stream industries to switch from natural gas to lower priced alternative fuels to supply their energy needs. Switching fuel sources could allow many companies to save hundreds of millions of dollars in energy costs, reduce air pollution, keep their US based plants operating, and lessen dependence on imported energy resources.

These CHP plants will be based on the Company's advanced patented zero air emission power plant design known as TIPS; an acronym for ThermoEnergy Integrated Power System. TIPS eliminates the atmospheric emissions of NOx, SOx, mercury, and particulates from power plants that run on coal, oil, natural gas or biomass. In addition, TIPS captures and recovers carbon dioxide (CO2) in pressurized liquid form for sequestration or beneficial reuse. With TIPS, harmful air emissions from power plants, which endangers the environment and human health, will become a thing of the past.

Currently, most heavy industry in the US relies on fossil fuel, in the form of natural gas, to supply its energy needs - a commodity that has gone up almost 600% in the past five years. A significant percentage of these facilities are situated in 'Non Attainment' areas; meaning that the local air quality does not meet minimum US EPA clean air standards. In order to change fuel sources, the new source must be as clean as or cleaner than natural gas. Currently no conventional power plant design in the 50Mw to 100Mw range will allow them to make such a switch. Hence the critical need for a reliable, cost-effective zero air emission power plant design. The need for such power plants is even greater in countries that are part of the Kyoto Treaty.

Joining ThermoEnergy on this project will be CANMET, the Canadian energy laboratory, and Reaction Systems Engineering of Kent, UK. "These two entities represent some of the most respected international experts in the field of advanced power generation systems," said Dennis Cossey, CEO of ThermoEnergy Corporation. "We are both fortunate and pleased to have people of this caliber involved with our project," added Cossey.

"We are very excited to be part of this team and to add our expertise to develop this process which has a high potential to play an important role in the next generation of clean power generation systems," said Bruce Clements of CANMET.

This project is the second of three separate US government grants, authorized by Congress in 2005, to get underway. A third grant, totaling $1.5MM, will focus on the development of TIPS as a cost-effective upgrade for existing coal-fired power plants designed to convert them to zero air emission facilities. This project is expected to get underway in the near future.

About ThermoEnergy

Founded in 1988, ThermoEnergy is an infrastructure technologies company whose core business is the design, fabrication and operation of renewable energy and power generation facilities based on the Company's patented technologies, including the ThermoFuel Process which converts municipal and industrial wastewaters into a high-energy biofuel, the Ammonia Recovery Process (ARP) which removes and converts ammonia from municipal and industrial wastewater into ammonium sulfate, a commercial grade fertilizer, and the TIPS process, which is an advanced thermodynamic method of converting fossil fuels, including oil, natural gas or coal, and most biomass into energy with zero air emissions. ThermoEnergy was recently named the recipient of the "2005 Municipal and Industrial Wastewater Treatment Technology Innovation of the Year Award" given annually by Frost & Sullivan, an international consulting firm. The Award recognizes ThermoEnergy's Ammonia Recovery Process (ARP) and ThermoFuel process as having brought significant contributions to the industry in terms of adoption, change, and competitive posture. More information on these innovative technologies can be found on the Company's website at www.thermoenergy.com.

Statements made in this press release, other than those concerning historical information, should be considered forward-looking and subject to various risks and uncertainties. Such forward-looking statements are made based on management's belief as well as assumptions made by, and information currently available to, management pursuant to the 'safe harbor' provisions of the Private Securities Litigation Reform Act of 1995. ThermoEnergy actual results may differ materially from the results anticipated in these forward-looking statements as a result of a variety of factors, including those identified in the ThermoEnergy Annual Report on Form 10-K and its Quarterly Reports on Form 10-Q filed with the Securities and Exchange Commission.