NEWS RELEASE                                   APRIL 2005

New Public Companies Will Reshape the Air Pollution Market

After thirty-four years of expectation, the air pollution control industry is finally going to deliver for investors.  The only problem is that, as of now, there are few public companies which will realize increased profits from the huge market.  The McIlvaine Company in its Air Pollution Management service, however, predicts that a number of new public companies will appear and will reshape the market.  This will include spin-offs of large companies as well as roll-ups of smaller privately held companies with public offerings for the combined enterprises.

Huge purchases by power plants in the U.S. and China have created a market in 2005 of more than $34 billion, of which half is new hardware and the rest repairs and services.  In 2004 McDermott (B&W) and Alstom, combined, generated several billion dollars in revenues and hundreds of millions of dollars of profits from this already hot market.  The problem is that these profits provide little opportunity for investors because of the overall size and performance of the parent companies.  BHA has been acquired by GE and, therefore, provides no pollution play for investors.

Several pure play power plant air pollution stocks, ADA-ES and Fuel-Tech, now have market caps each of over $125 million with P/E ratios from 78-350.  This reflects the enthusiasm of investors for this market segment.  However, these companies are presently providing products which address a small portion of the $34 billion market.

POWER PLANT AIR POLLUTION REVENUES

2005 ($ Billions)

Segment                            Hardware                       Repairs and Consumables

                                    $                      Growth                $                  Growth

Precipitator                   3.0                   low                      6.0                 low

Fabric Filters                1.2                   high                     0.8                  high

FGD                          11.0                   low                    10.0                  high

NO_x                            1.5                   medium                0.8                  high

Mercury                    0.02                   high                    0.01                  high

Total                         16.7                                            17.6

                                                Total  $34.3 Billion 

The potential market segment for Fuel-Tech is a small fraction of the $2.3 billion NO_x control market.  The ADA-ES future is heavily dependent on a market for mercury control separate from FGD.  This market is presently minuscule, but even with high growth, will represent a very small part of the total.  So there are few if any public companies which represent a play in the greater market.

The FGD market in particular is attractive.  The market for new hardware is already $11 billion/yr and will remain at this high level.

McIlvaine predicts that the substantial available capital will generate two types of activities.  First, there will be pressure on companies such as Alstom, McDermott and several Japanese companies to spin off their subsidiaries.  The McDermott P/E ratio is presently 20 compared to the ADA-ES ratio of 350.

Secondly, there are a number of private companies who stand to benefit substantially from the market.  Consolidation of some of these companies into sizable entities will make them good candidates for public stock offerings.  In addition to U.S. companies, there are both European and Asian companies who can greatly benefit from this market and would be acquisition candidates.  Acquisitions of Chinese companies are also likely.

For more information on Air Pollution Management, click on:  http://www.mcilvainecompany.com/air.html#5AB