Thermal Energy International Inc.
TSX VENTURE : TMG

Thermal Energy International Inc.

January 31, 2006 17:09 ET

Thermal Energy Reports Near-Record Revenues in Q2 FY2006

OTTAWA, ONTARIO--(CCNMatthews - Jan. 31, 2006) - Thermal Energy International Inc. (TSX VENTURE:TMG) (the "Company" www.thermalenergy.com) today announced its financial results for the second quarter of fiscal year 2006 ended November 30, 2005.

Revenue for the quarter was $807,364, a 260% increase over revenue of $223,824 for the same quarter a year earlier. The revenues represent work on the nearly-completed FLU-ACE® project at CAMCO in Montreal, and the Thermal Energy's largest FLU-ACE® project to date at an East Coast pulp and paper mill.

"From a revenue perspective, our second quarter was extremely strong and the second-best in the history of Thermal Energy," said President and CEO Tim Angus. "I am also extremely encouraged by the progress made with our sales and marketing efforts during the quarter, particularly in the U.S. - a market I am confident we are on the verge of breaking through."

During the quarter, Thermal Energy made considerable headway in laying to rest a number of legacy problems which have adversely affected Company growth and shareholder value. These efforts include significant changes in management, revamping engineering and design process, and the implementation of strong governance. This included further strengthening the Board of Directors with strong, experienced, independent representation and the adoption of charters to govern Board actions in areas such as Ethics, Governance and Compliance.

However, the strong performance during the quarter was overshadowed by having to account for significant cost overruns on two projects attributed to previous management. The Company is seeking to recover these costs through previously announced litigation. While management is optimistic of a favourable outcome, prudence dictates that the amounts be recorded at this time. The cost overruns totaling $837,229.64 on two contributed to a net loss of $1,008,669 (-$0.02/share) in the quarter, compared to a net loss of $242,283 ($0.00/share) for the same quarter a year earlier.

Revenue for the six months ended November 30, 2005 was $1,189,544 with a net loss of $1,112,419 (-$0.02/share) compared to revenue of $380,389 and a net loss of $460,346 (-$0.01/share) for the six months ended November 30, 2004.

"While we continue to project that Fiscal 2006 will be a year of record revenue for Thermal Energy, it is anticipated that these additional costs will continue to have an impact upon our ability to achieve profitability," said Mr. Angus.



Highlights and other significant developments:

- Work commenced on the Company's first pulp and paper industry
FLU-ACE® installation in Nova Scotia. This is the largest
FLU-ACE ® contract to date with completion scheduled by the end
of this year;

- R. James Ansell joined Thermal Energy's Board of Directors.
Mr. Ansell brings over 20 years of executive and senior management
experience in the U.S. energy and industrial power sectors;

- Dr. Raymond Belanger was appointed Thermal Energy's chief scientist
and research and development work resumed on the Company's
THERMALONOx™ technology for reducing nitrogen oxide (NOx)
emissions from coal-fired power plants and other large industrial
boiler applications;

- Voluntary mediation between Thermal Energy and its former president
and CEO ended without resolution resulting in the litigation
announced previously. Management is very confident of the merits of
its position and a favourable outcome beneficial to shareholders.


For complete financial statements with notes and management discussion and analysis please go to www.sedar.com or our website at www.thermalenergy.com.

NOTE: This release may contain forward looking statements based on management's expectations, estimates and projections. Such statements including those about the Company's strategy for growth, product development, market position, expected expenditures and financial results are forward looking statements. These statements are not guarantees of future performance and involve a number of risks, uncertainties and assumptions. Many factors, including those discussed more fully elsewhere in this release and in documents which may be filed with the British Columbia Securities Commission, the Alberta Securities Commission, the Ontario Securities Commission, the TSX Venture Exchange, as well as others, could cause results to differ materially from those stated. These factors include, but are not limited to changes in the laws, regulations, policies and economic conditions, including inflation, interest and foreign currency exchange rates, of countries in which the Company does business; competitive pressures; successful integration of structural changes, including restructuring plans, acquisitions, divestitures and alliances; cost of raw material, research and development of new products, including regulatory approval and market acceptance; and seasonality of sales in some products.

About Thermal Energy

Thermal Energy International Inc. is an innovative technology company providing custom energy and emission reduction solutions. Headquartered in Ottawa, Canada, TEI is a designer, developer, fabricator, and supplier of proprietary and patented energy conservation, renewable energy products, environmental compliance (air) and technology solutions. Thermal Energy is a fully accredited professional engineering firm, and offers advanced process and applications engineering services. FLU-ACE® and THERMALONOx™ are trademarks of Thermal Energy.

To find out more about Thermal Energy International Inc. (TSX-V: TMG), visit our website at www.thermalenergy.com.

THE TSX VENTURE EXCHANGE HAS NOT REVIEWED AND DOES NOT ACCEPT RESPONSIBILITY FOR THE ADEQUACY OR ACCURACY OF THIS RELEASE.

www.thermalenergy.com

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