ThermoEnergy Announces $10.4 Million Restructuring of Debt Including New Investments and Dismissal of Lawsuits

ThermoEnergy Announces $10.4 Million Restructuring of Debt Including New
Investments and Dismissal of Lawsuits

LITTLE ROCK, Ark., Oct. 8 /PRNewswire-FirstCall/ -- ThermoEnergy Corporation
(Pink Sheets: TMEN) today announced that, in connection with a restructuring
of its outstanding debt and the closing of the first tranche of an anticipated
$10.4 million investment by four of its largest shareholders, the Company and
The Quercus Trust have filed joint motions for dismissal of the law suits
filed by Quercus against the Company in the Delaware Court of Chancery and the
U.S. District Court for the Eastern District of Arkansas and that both law
suits have been dismissed.

The law suits were dismissed in connection with the closing of the first
tranche of an anticipated equity financing of the Company by Quercus, Empire
Capital, Focus Fund and Robert S. Trump, four of the Company's largest
shareholders. In the first tranche, which closed on September 28, 2009, the
investors provided the Company with a total of $1.68 million through the
purchase of 8% Convertible Secured Promissory Notes and Common Stock Purchase
Warrants. The Notes will convert automatically into shares of the Company's
Series B Convertible Preferred Stock, which the Company expects to issue to
the investors prior to December 31, 2009. The Warrants have a term of 5 years
and entitle the investors to purchase a total of up 6,620,000 shares of the
Company's Common Stock at an exercise price of $0.50 per share. As part of
the transaction, a total of $4.15 million of outstanding debt from the Company
to the investors was restructured on the same terms as the Notes issued to the
investors in the new financing.

Dennis C. Cossey, the Chairman and Chief Executive Officer of ThermoEnergy
said, "We are grateful for the confidence and continuing support of our major
shareholders, which has led to the dismissal of these law suits and the new
infusion of capital." "This transaction will allow the Company to focus its
attention on milestone projects, such as the New York City Ammonia Recovery
Project, as well as provide additional liquidity to meet the Company's
obligations to its joint venture partners," said Cossey.

ThermoEnergy, through its subsidiary, ThermoEnergy Power Systems, LLC,
recently formed a Limited Liability Company with Babcock Power, Inc. called
Babcock-Thermo Carbon Capture, LLC, to finalize the development and
commercialization of the Company's zero air emission, carbon capture fossil
fuel power plant design. The joint venture is currently designing a 600 Mw
reference plant which will be used to design, build and operate a 40 Mw
demonstration plant at a host utility site.

About ThermoEnergy:
Founded in 1988, ThermoEnergy is a diversified technologies company engaged in
the worldwide commercialization of patented and/or proprietary municipal and
industrial wastewater treatment and power generation technologies. The
wastewater treatment technologies are consolidated in a wholly-owned
subsidiary, CASTion Corporation ("CASTion"), a fast growing developer and
manufacturer of innovative wastewater treatment and recovery systems for
industrial and municipal clients, with large-scale systems operating in the
U.S., Mexico, Canada and Japan. The systems are unique because they meet
environmental regulations while providing a rapid return on investment by
recovering and reusing expensive feedstocks, reducing contaminated wastewater
discharge and reusing wastewater in process operations. CASTion's wastewater
treatment systems have application in aerospace, food processing,
microelectronics, metal finishing, refineries, pulp & paper, heavy
manufacturing and municipal wastewater. All systems are assembled and shipped
from a 20,000 square foot fabrication facility in Worcester, Massachusetts.
The Company, headquartered in Little Rock, Arkansas, has additional offices in
Jacksonville, Florida and New York, NY. Additional information on the Company
and its technologies can be found on its website at www.thermoenergy.com, or
www.castion.com for specific information on its wastewater treatment systems.

THIS PRESS RELEASE INCLUDES STATEMENTS THAT MAY CONSTITUTE "FORWARD LOOKING"
STATEMENTS, USUALLY CONTAINING THE WORD "BELIEVE", "ESTIMATE", "PROJECT",
"EXPECT" OR SIMILAR EXPRESSIONS. FORWARD LOOKING STATEMENTS INHERENTLY INVOLVE
RISKS AND UNCERTAINTIES THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY
FROM THE FORWARD LOOKING STATEMENTS. FACTORS THAT WOULD CAUSE OR CONTRIBUTE TO
SUCH DIFFERENCES INCLUDE, BUT ARE NOT LIMITED TO, CONTINUED ACCEPTANCE OF THE
COMPANY'S PRODUCTS AND SERVICES IN THE MARKETPLACE, COMPETITIVE FACTORS,
CHANGES IN REGULATORY ENVIRONMENTS AND OTHER RISKS DETAILED IN THE COMPANY'S
PERIODIC REPORT FILINGS WITH THE SECURITIES AND EXCHANGE COMMISSION. BY MAKING
THESE FORWARD LOOKING STATEMENTS, THE COMPANY UNDERTAKES NO OBLIGATION TO
UPDATE THESE STATEMENTS FOR REVISIONS OR CHANGES.

SOURCE ThermoEnergy Corporation

Dennis Cossey, +1-501-376-6477