Exhibit 13
















                            THERMO ECOTEK CORPORATION

                        Consolidated Financial Statements

                                Fiscal Year 1996
PAGE
<PAGE>
    Thermo Ecotek Corporation
    Consolidated Statement of Income


                                                     Nine Months
                                   Year Ended           Ended     Year Ended
                              ---------------------  -----------  ----------
                              Sept. 28,   Sept. 30,   Sept. 30,    Dec. 31,
    (In thousands)                 1996        1995        1995        1994
    ------------------------------------------------------------------------
                                         (Unaudited)

    Revenues (Note 14)         $150,076    $139,319   $107,139    $134,261
                               --------    --------   --------    --------

    Costs and Operating
      Expenses:
      Cost of revenues
        (includes $4,952,
        $4,689, $3,223 and
        $4,653 to related
        parties) (Notes 9
        and 10)                 101,883      98,822     74,097     100,457
      General and administra-
        tive expenses
        (includes $1,759,
        $1,885, $1,429 and
        $1,854 to related
        parties) (Notes 9
        and 10)                  12,218       9,307      7,856       8,555
                               --------    --------   --------    --------
                                114,101     108,129     81,953     109,012
                               --------    --------   --------    --------

    Operating Income             35,975      31,190     25,186      25,249

    Interest Income               5,104       3,340      2,820       1,636
    Interest Expense
      (includes $2,740,
      $2,740, $2,055 and
      $2,715 to parent
      company)                  (14,727)    (13,333)   (10,567)    (11,143)
    Equity in Loss of Joint
      Venture                       (26)          -          -           -
                               --------    --------   --------    --------
    Income Before Provision
      for Income Taxes and
      Minority Interest          26,326      21,197     17,439      15,742

    Provision for Income
      Taxes (Note 8)              7,271       7,200      6,027       4,972
    Minority Interest Expense     1,275       1,457      1,148       1,119
                               --------    --------   --------    --------
    Net Income                 $ 17,780    $ 12,540   $ 10,264    $  9,651
                               ========    ========   ========    ========

                                        2PAGE
<PAGE>
    Thermo Ecotek Corporation
    Consolidated Statement of Income (continued)


                                                     Nine Months
                                   Year Ended           Ended     Year Ended
                              ---------------------  -----------  ----------
    (In thousands except      Sept. 28,   Sept. 30,   Sept. 30,    Dec. 31,
    per share amounts)             1996        1995        1995        1994
    ------------------------------------------------------------------------
                                         (Unaudited)
    Earnings per Share:
      Primary                  $    .70    $   0.58   $   0.46    $   0.48
                               ========    ========   ========    ========
      Fully diluted            $    .53    $   0.43   $   0.34    $   0.37
                               ========    ========   ========    ========

    Weighted Average Shares:
      Primary                    25,476      21,796     22,477      20,118
                               ========    ========   ========    ========
      Fully diluted              36,315      33,114     33,794      31,193
                               ========    ========   ========    ========


    The accompanying notes are an integral part of these consolidated
    financial statements.



                                        3PAGE
<PAGE>
    Thermo Ecotek Corporation
    Consolidated Balance Sheet


                                               September 28,   September 30,
    (In thousands)                                      1996            1995
    ------------------------------------------------------------------------
    Assets
    Current Assets:
      Cash and cash equivalents                    $ 63,238         $ 49,159
      Restricted funds (Note 1)                      18,936           11,992
      Accounts receivable and unbilled revenues      28,061           25,275
      Inventories                                    11,299            9,976
      Prepaid income taxes (Note 8)                   2,016            2,847
      Other current assets (Note 12)                  2,937            2,536
                                                   --------         --------
                                                    126,487          101,785
                                                   --------         --------

    Property, Plant and Equipment, Net              262,766          244,750
                                                   --------         --------

    Note Receivable (Note 12)                             -              900
                                                   --------         --------

    Due from Parent Company (Note 8)                 12,116           18,794
                                                   --------         --------

    Long-term Available-for-sale Investments,
      at Quoted Market Value (amortized cost of
      $6,004 in fiscal 1996) (Note 3)                20,254                -
                                                   --------         --------

    Restricted Funds (Note 1)                        14,112           12,040
                                                   --------         --------
    Other Assets (Note 1)                            13,410           12,207
                                                   --------         --------
                                                   $449,145         $390,476
                                                   ========         ========








                                        4PAGE
<PAGE>
    Thermo Ecotek Corporation
    Consolidated Balance Sheet (continued)

                                               September 28,   September 30,
    (In thousands except share amounts)                 1996            1995
    ------------------------------------------------------------------------
    Liabilities and Shareholders' Investment
    Current Liabilities:
      Current portion of long-term 
        obligations (Note 13)                       $ 24,806        $ 21,291
      Accounts payable                                 1,517           1,274
      Lease obligations payable                        1,812           1,765
      Accrued interest                                 3,159           3,496
      Accrued income taxes                             1,858           4,452
      Other accrued expenses                          15,532          10,695
      Due to parent company                            1,586             451
                                                    --------        --------
                                                      50,270          43,424
                                                    --------        --------
    Long-term Obligations (Note 13):
      Nonrecourse tax-exempt obligations              77,900          94,700
      4% Subordinated convertible debentures,
        due to parent company                         68,500          68,500
      Noninterest-bearing subordinated convertible
        debentures                                    31,727               -
      Capital lease obligations                       31,154          39,160
                                                    --------        --------
                                                     209,281         202,360
                                                    --------        --------
    Deferred Income Taxes (Note 8)                    42,633          34,892
                                                    --------        --------
    Other Deferred Items (Note 12)                    13,958          13,958
                                                    --------        --------
    Minority Interest                                  3,316           2,857
                                                    --------        --------
    Commitments and Contingencies
      (Notes 4, 9, 10 and 11)

    Shareholders' Investment (Notes 5 and 6):
      Common stock, $.10 par value, 50,000,000
        shares authorized; 16,174,636 and
        15,506,433 shares issued                       1,617           1,551
      Capital in excess of par value                  74,740          64,188
      Retained earnings                               45,048          27,268
      Treasury stock at cost, 21,413 and 1,521
        shares                                          (481)            (22)
      Net unrealized gain on available-for-sale
        investments (Note 3)                           8,763               -
                                                    --------        --------
                                                     129,687          92,985
                                                    --------        --------
                                                    $449,145        $390,476
                                                    ========        ========


    The accompanying notes are an integral part of these consolidated
    financial statements.
                                        5PAGE
<PAGE>
    Thermo Ecotek Corporation
    Consolidated Statement of Cash Flows


                                                     Nine Months
                                   Year Ended           Ended     Year Ended
                              ---------------------  -----------  ----------
                              Sept. 28,   Sept. 30,   Sept. 30,    Dec. 31,
    (In thousands)                 1996        1995        1995        1994
    ------------------------------------------------------------------------
                                         (Unaudited)
    Operating Activities:
      Net income               $ 17,780    $ 12,540   $ 10,264    $  9,651
      Adjustments to reconcile
        net income to net cash
        provided by operating
        activities:
          Minority interest
            expense               1,275       1,457      1,148       1,119
          Depreciation and
            amortization         20,425      15,239     12,752      10,080
          Deferred income tax
            expense               3,086       6,088      3,987       7,396
          Changes in current
            accounts, excluding
            the effect of
            acquisition:
              Restricted funds   (6,944)      2,038      3,453       6,038
              Accounts 
                receivable
                and unbilled
                revenues         (2,130)     (3,236)   (11,050)      2,473
              Inventories         1,584      (1,078)       582         809
              Other current
                assets              544       5,423      3,418       2,772
              Accounts payable      148        (969)      (931)         30
              Lease obligations
                payable             389         879     (1,668)     (3,078)
              Due (to) from
                parent company    5,319        (874)       (91)          -
              Other current
                liabilities       3,599       2,787      3,572      (2,165)
          Other                      26         (77)       720         777
                               --------    --------   --------    --------
      Net cash provided by
        operating activities   $ 45,101    $ 40,217   $ 26,156    $ 35,902
                               --------    --------   --------    --------









                                        6PAGE
<PAGE>
    Thermo Ecotek Corporation
    Consolidated Statement of Cash Flows (continued)

                                                     Nine Months
                                   Year Ended           Ended     Year Ended
                              ---------------------  -----------  ----------
                              Sept. 28,   Sept. 30,   Sept. 30,    Dec. 31,
    (In thousands)                 1996        1995        1995        1994
    ------------------------------------------------------------------------
                                         (Unaudited)
    Investing Activities:
      Acquisition (Note 4)    $ (8,088)    $      -    $      -     $      -
      Funding of long-term
        restricted funds        (2,073)     (10,485)     (7,907)      (4,133)
      (Increase) decrease in
        other assets            (3,004)      (2,030)     (2,030)         749
      Purchases of property,
        plant and equipment    (36,587)      (5,472)     (5,350)      (1,512)
                              --------     --------    --------     --------
      Net cash used in
        investing activities   (49,752)     (17,987)    (15,287)      (4,896)
                              --------     --------    --------     --------

    Financing Activities:
      Net proceeds from
        issuance of
        subordinated convert-
        ible debentures
        (Note 13)               35,942            -           -            -
      Repayment of long-term
        obligations            (14,100)     (11,200)     (3,400)     (16,300)
      Payments under capital
        lease obligations       (7,191)      (2,649)     (2,649)           -
      Net proceeds from
        issuance of Company
        common stock (Note 5)    5,026       27,575      27,575            -
      Distribution to minority
        partner                   (947)      (1,598)     (1,060)      (1,877)
      Due to parent company          -          542           -      (13,283)
                              --------     --------    --------     --------
      Net cash provided by
        (used in) financing
        activities              18,730       12,670      20,466      (31,460)
                              --------     --------    --------     --------

    Increase (Decrease) in
      Cash and Cash
      Equivalents               14,079       34,900      31,335         (454)
    Cash and Cash Equivalents
      at Beginning of Period    49,159       14,259      17,824       18,278
                              --------     --------    --------     --------
    Cash and Cash Equivalents
      at End of Period        $ 63,238     $ 49,159    $ 49,159     $ 17,824
                              ========     ========    ========     ========


                                        7PAGE
<PAGE>
    Thermo Ecotek Corporation
    Consolidated Statement of Cash Flows (continued)


                                                     Nine Months
                                   Year Ended           Ended     Year Ended
                              ---------------------  -----------  ----------
                              Sept. 28,   Sept. 30,   Sept. 30,    Dec. 31,
    (In thousands)                 1996        1995        1995        1994
    ------------------------------------------------------------------------
                                         (Unaudited)
    Cash Paid For:
      Interest                 $ 14,267    $ 12,310   $ 11,409    $  6,804
      Income taxes             $    101    $     26   $     25    $      1

    Noncash Activities:
      Acquisition of asset
        under capital lease    $      -    $ 47,020   $ 47,020    $      -
      Reduction in lease
        obligations payable           -       1,980      1,980           -
                               --------    --------   --------    --------
          Assumption of
            obligations under
            capital lease      $      -    $(49,000)  $(49,000)   $      -
                               ========    ========   ========    ========

      Fair value of assets of
        acquired company       $  8,983    $      -   $      -    $      -
      Cash paid for acquired
        company                  (8,088)          -          -           -
                               --------    --------   --------    --------
          Liabilities assumed
            of acquired
            company            $    895    $      -   $      -    $      -
                               ========    ========   ========    ========

      Conversions of
        subordinated
        convertible
        debentures             $  5,273    $      -   $      -    $      -
                               ========    ========   ========    ========


    The accompanying notes are an integral part of these consolidated
    financial statements.







                                        8PAGE
<PAGE>
 Thermo Ecotek Corporation
 Consolidated Statement of Shareholders' Investment


                                                                          Net
                                                                   Unrealized
                         Common                                       Gain on
                         Stock,  Capital in                        Available-
                       $.10 Par   Excess of   Retained  Treasury     for-sale
(In thousands)            Value   Par Value   Earnings     Stock  Investments
-----------------------------------------------------------------------------
Balance January 1,
  1994                  $ 1,316     $36,826    $ 7,353   $     -      $     -
Net income                    -           -      9,651         -            -
                        -------     -------    -------   -------      -------
Balance December 31,
  1994                    1,316      36,826     17,004         -            -
Net income                    -           -     10,264         -            -
Issuance of stock
  under employees'
  stock plans                 2          89          -       (22)           -
Net proceeds from
  initial public
  offering of
  common stock
  (Note 5)                  233      27,273          -         -            -
                        -------     -------    -------   -------      -------
Balance September 30,
  1995                    1,551      64,188     27,268       (22)           -
Net income                    -                 17,780         -            -
Net proceeds from
  private placement
  of common stock
  (Note 5)                   22       4,942          -         -            -
Issuance of stock
  under employees'
  and directors'
  stock plans                18         503          -      (459)           -
Conversions of 
  noninterest-bearing
  subordinated
  convertible
  debentures
  (Note 13)                  26       5,107          -         -            -
Change in net unrealized
  gain on available-
  for-sale investments
  (Note 3)                    -           -          -         -        8,763
                        -------     -------    -------   -------      -------
Balance September 28,
  1996                  $ 1,617     $74,740    $45,048   $  (481)     $ 8,763
                        =======     =======    =======   =======      =======


The accompanying notes are an integral part of these consolidated financial
statements.

                                        9PAGE
<PAGE>
    Thermo Ecotek Corporation
    Notes to Consolidated Financial Statements

    1.   Nature of Operations and Summary of Significant Accounting Policies

    Nature of Operations

         Thermo Ecotek Corporation (the Company) is an environmental company
    providing a range of environmentally responsible technologies and
    products, including non-utility electric power generation using clean
    combustion processes, engineered clean fuels, as well as environmentally
    friendly pest control products through its biopesticides subsidiary,
    Thermo Trilogy Corporation (Thermo Trilogy) (Note 4).

         The Company is principally engaged in the development and operation
    of alternative-energy electrical generation facilities. The Company
    develops and operates facilities through joint ventures or limited
    partnerships in which the Company has a majority interest, or through
    wholly owned subsidiaries (the Operating Companies). The Company's
    interests in the Operating Companies range from 60% to 100% and, in each
    case, are held by wholly owned subsidiaries of the Company. Of the
    facilities operated by the Company, three are owned by the Company and
    the remainder are owned by unaffiliated parties who lease them to the
    Operating Companies under long-term leases (Note 9).

    Relationship with Thermo Electron Corporation

         The Company was incorporated on November 30, 1989 as a wholly owned
    subsidiary of Thermo Electron Corporation (Thermo Electron). At September
    28, 1996, Thermo Electron owned 20,064,619 shares (adjusted to reflect
    the three-for-two stock split distributed in October 1996 in the form of
    a 50% stock dividend) of the common stock of the Company, representing
    83% of the outstanding shares.

    Principles of Consolidation

         The accompanying financial statements include the accounts of the
    Company and its majority-owned and wholly owned Operating Companies. All
    significant intercompany accounts and transactions have been eliminated
    in consolidation. The Company accounts for investments in businesses in
    which it owns between 20% and 50% using the equity method.

    Fiscal Year

         In June 1995, the Company changed its fiscal year end from the
    Saturday nearest December 31 to the Saturday nearest September 30.
    Accordingly, the Company's transition period, which ended on September
    30, 1995, was the 39-week period from January 1, 1995 to September 30,
    1995, referenced as "fiscal 1995." References to "fiscal 1996" and "1994"
    are for the years ended September 28, 1996 and December 31, 1994,
    respectively. Fiscal 1996 and 1994 each included 52 weeks. The unaudited
    consolidated statements of income and cash flows for the 52-week period
    ended September 30, 1995 are presented for comparative purposes only.

                                       10PAGE
<PAGE>
    Thermo Ecotek Corporation
    Notes to Consolidated Financial Statements

    1.   Nature of Operations and Summary of Significant Accounting Policies
         (continued)

    Cash Equivalents and Restricted Funds

         As of September 28, 1996, $53,250,000 of the Company's cash
    equivalents were invested in a repurchase agreement with Thermo Electron.
    Under this agreement, the Company in effect lends excess cash to Thermo
    Electron, which Thermo Electron collateralizes with investments
    principally consisting of corporate notes, U.S. government agency
    securities, money market funds, commercial paper, and other marketable
    securities, in the amount of at least 103% of such obligation. The
    Company's funds subject to the repurchase agreement are readily
    convertible into cash by the Company. The repurchase agreement earns a
    rate based on the 90-day Commercial Paper Composite Rate plus 25 basis
    points, set at the beginning of each quarter. Cash equivalents also
    include investments in money market accounts. The use of cash and cash
    equivalents totaling $7,603,000 and $6,402,000 at September 28, 1996 and
    September 30, 1995, respectively, was restricted by the terms of certain
    Operating Companies' lease and financing agreements.

         Restricted funds in the accompanying balance sheet represent
    amounts held in trust for lease and debt payments and working capital
    requirements, as required by certain of the Operating Companies' lease
    and financing agreements, and are invested in money market accounts.
    Restricted funds that are not expected to be used within the next fiscal
    year are classified as long-term in the accompanying balance sheet.

         All cash equivalents and restricted funds are carried at cost,
    which approximates market value.

    Inventories

         Inventories consist of raw materials, fuel, operating supplies,
    spare parts, and include, where applicable, materials and overhead.
    Inventories are stated at the lower of cost (on a first-in, first-out or
    average basis) or market value. Work in process and finished goods were
    not material at fiscal year-end 1996 and 1995.

    Available-for-sale Investments

         Pursuant to Statement of Financial Accounting Standards (SFAS)
    No. 115, "Accounting for Certain Investments in Debt and Equity
    Securities," the Company's investments in long-term debt and marketable
    equity securities are accounted for at market value (Note 3).

                                       11PAGE
<PAGE>
    Thermo Ecotek Corporation
    Notes to Consolidated Financial Statements

    1.   Nature of Operations and Summary of Significant Accounting Policies
         (continued)

    Property, Plant and Equipment

         The costs of additions and improvements are capitalized. The
    Company provides for depreciation and amortization using the
    straight-line method over the estimated useful lives of the property as
    follows: electric generating facilities - 25 years, property under
    capital lease - the life of the asset, leasehold improvements - the
    lesser of the term of the lease or the life of the asset, and machinery
    and equipment - 3 to 7 years. Property, plant and equipment consist of
    the following:

    (In thousands)                                          1996        1995
    ------------------------------------------------------------------------
    Land                                                $  3,479    $  3,479
    Electric generating facilities (Notes 10 and 13)     200,425     200,324
    Property under capital lease                          47,020      47,020
    Machinery and equipment                                4,369       4,232
    Leasehold improvements                                15,032      14,445
    Construction in process (Note 4)                      39,059       3,297
                                                        --------    --------
                                                         309,384     272,797

    Less: Accumulated depreciation and amortization       46,618      28,047
                                                        --------    --------
                                                        $262,766    $244,750
                                                        ========    ========

    Other Assets

         Other assets in the accompanying balance sheet include certain
    costs associated with the development, pre-operation, and startup of the
    Company's alternative-energy facilities; prepaid rent relating to an
    Operating Company's lease agreement; and goodwill that arose in
    connection with the acquisition of an Operating Company. In fiscal 1996,
    other assets also include deferred debt expense relating to the Company's
    March 1996 issuance of subordinated convertible debentures (Note 13), and
    patents, licenses, and other intangible assets arising from the Thermo
    Trilogy acquisition (Note 4). These assets are being amortized using the
    straight-line method over their estimated useful lives, which range from
    5 to 30 years. These assets were $12.2 million and $9.2 million, net of
    accumulated amortization of $4.5 million and $3.7 million, at fiscal
    year-end 1996 and 1995, respectively.

         In addition, other assets include an investment in a joint venture
    in fiscal 1996 and an investment in KFx, Inc. (Note 3) in fiscal 1995.



                                       12PAGE
<PAGE>
    Thermo Ecotek Corporation
    Notes to Consolidated Financial Statements

    1.   Nature of Operations and Summary of Significant Accounting Policies
         (continued)

    Other Deferred Items

         Other deferred items in the accompanying balance sheet include rent
    that has been recognized ratably for financial reporting purposes in
    connection with an Operating Company's lease agreement (Note 9) and
    deferred income in connection with the termination of a power-sale
    agreement (Note 12).

    Revenue Recognition

         The Company earns revenues primarily from the operation of
    alternative-energy facilities. Revenues from plant operations are
    recorded as electricity is delivered. The Operating Companies have
    long-term power supply arrangements with local utilities, expiring
    between 2005 and 2020, to sell all the output of the plants currently in
    operation at established or formula-based defined rates (Note 11). Under
    certain of these arrangements, in the event of service termination by the
    Operating Companies prior to the end of the obligation period, the
    Operating Companies may be required to reimburse the utilities to the
    extent that cumulative revenue calculated at established rates exceeds
    the amounts calculated at the utilities' "avoided cost" rates. Management
    does not expect to incur any obligation under these provisions in the
    foreseeable future.

         The Woodland plant has conditions in its nonrecourse lease
    agreement that require the funding of a "power reserve" in years prior to
    2000, based on projections of operating cash flow shortfalls in 2000 and
    thereafter. The power reserve represents funds available to make lease
    payments in the event that revenues are not sufficient after the plant
    converts to avoided-cost rates in March 2000. This funding requirement
    will significantly limit future profit distributions that Woodland may
    make to the Company. Accordingly, beginning in the first quarter of
    fiscal 1997, the Company will record as an expense, the funding of
    reserves required under Woodland's nonrecourse lease agreement to cover
    projected shortfalls in lease payments beginning in 2000. Consequently,
    the Company expects that the results of the Woodland plant will be
    reduced to approximately breakeven beginning in fiscal 1997 and
    thereafter. During fiscal 1996, the Woodland plant contributed $5.1
    million of operating income.

    Repairs and Maintenance

         The Company charges routine repairs and maintenance to expense in
    the period the costs are incurred. The Company accrues for major
    maintenance and overhauls in anticipation of scheduled outages. Other
    accrued expenses in the accompanying balance sheet includes approximately
    $4.7 million and $2.5 million at fiscal year-end 1996 and 1995,
    respectively, in anticipation of major maintenance and overhauls.
                                       13PAGE
<PAGE>
    Thermo Ecotek Corporation
    Notes to Consolidated Financial Statements

    1.   Nature of Operations and Summary of Significant Accounting Policies
         (continued)

    Income Taxes

         The Company and Thermo Electron have a tax allocation agreement
    under which the Company is included in the consolidated federal and
    certain state income tax returns filed by Thermo Electron. The agreement
    provides that Thermo Electron charges or pays the Company amounts based
    on the Company's relative contribution to Thermo Electron's tax
    liability. If Thermo Electron's equity ownership of the Company were to
    drop below 80%, the Company would be required to file its own tax
    returns.

         In accordance with SFAS No. 109, "Accounting for Income Taxes," the
    Company recognizes deferred income taxes based on the expected future tax
    consequences of differences between the financial statement basis and the
    tax basis of assets and liabilities calculated using enacted tax rates in
    effect for the year in which the differences are expected to be reflected
    in the tax return.

    Earnings per Share

         Primary earnings per share have been computed based on the weighted
    average number of common shares outstanding and common stock equivalents
    where dilutive, except for the effect of options granted during 1994
    which, in accordance with Securities and Exchange Commission rules, was
    reflected in earnings per share for 1994. Common stock equivalents in all
    periods represent the effect of the assumed exercise of stock options,
    where material. In addition, in fiscal 1996, common stock equivalents
    include the assumed conversion of the noninterest-bearing subordinated
    convertible debentures. Fully diluted earnings per share assumes the
    exercise of stock options and the assumed conversion of the Company's
    subordinated convertible debentures, and elimination of the related
    interest expense.

    Stock Split

         In September 1996, the Company declared a three-for-two stock split
    in the form of a 50% stock dividend, payable on October 16, 1996, to
    shareholders of record as of October 2, 1996. All share and per share
    information, except for share information in the accompanying balance
    sheet, has been restated to reflect the stock split.

    Use of Estimates

         The preparation of financial statements in conformity with
    generally accepted accounting principles requires management to make
    estimates and assumptions that affect the reported amounts of assets and
    liabilities, disclosure of contingent assets and liabilities at the date
    of the financial statements, and the reported amounts of revenues and
    expenses during the reporting period. Actual results could differ from
    those estimates.
                                       14PAGE
<PAGE>
    Thermo Ecotek Corporation
    Notes to Consolidated Financial Statements

    1.   Nature of Operations and Summary of Significant Accounting Policies
         (continued)

    Presentation

         Certain amounts in fiscal 1995 and 1994 have been reclassified to
    conform to the fiscal 1996 financial statement presentation.


    2.   Unaudited Comparative Results

         The following unaudited financial information for the nine months
    ended October 1, 1994 is presented to provide comparative results for
    fiscal 1995, included in the accompanying statement of income.

                                                                    Nine
                                                                Months Ended
                                                                 October 1,
    (In thousands except per share amounts)                         1994
                                                                ------------
    Revenues                                                      $102,081
                                                                  --------

    Costs and Operating Expenses:
      Cost of revenues (includes $3,178 to related parties)         75,732
      General and administrative expenses (includes $1,276 to
        related parties)                                             7,104
                                                                  --------
                                                                    82,836
                                                                  --------

    Operating Income                                                19,245

    Interest Income                                                  1,116
    Interest Expense (includes $2,101 to parent company)            (8,377)
                                                                  --------
    Income Before Provision for Income Taxes and Minority
      Interest                                                      11,984
    Provision for Income Taxes                                       3,799
    Minority Interest Expense                                          810
                                                                  --------
    Net Income                                                    $  7,375
                                                                  ========

    Earnings per Share:
      Primary                                                     $    .37
                                                                  ========
      Fully diluted                                               $    .28
                                                                  ========

    Weighted Average Shares:
      Primary                                                       20,106
                                                                  ========
      Fully diluted                                                 30,921
                                                                  ========
                                       15PAGE
<PAGE>
    Thermo Ecotek Corporation
    Notes to Consolidated Financial Statements

    3.   Available-for-sale Investments

         The Company accounts for certain investments in accordance with
    SFAS No. 115, "Accounting for Certain Investments in Debt and Equity
    Securities." In accordance with SFAS No. 115, the Company's marketable
    equity securities are considered available-for-sale investments in the
    accompanying balance sheet and are carried at market value, with the
    difference between cost and market value, net of related tax effects,
    recorded currently as a component of shareholders' investment titled "Net
    unrealized gain on available-for-sale investments." As of September 28,
    1996, the Company held one long-term available-for-sale investment, an
    investment in the common stock of KFx, Inc. (KFx), described below. 

         In August 1995, the Company purchased 1,500,000 shares of KFx
    common stock representing an approximate 7% equity interest in KFx. The
    cost of the purchase was $3,000,000. In fiscal 1996, the Company
    purchased an additional 1,500,000 shares of KFx common stock for
    $3,000,000, bringing its total equity interest in KFx to approximately
    14%. This investment was not accounted for as an available-for-sale
    investment in fiscal 1995 due to certain restrictions on the resale of
    the stock, which expire on January 1, 1997. The fair market value of this
    investment at September 28, 1996 was $20,254,000. Pursuant to the
    purchase agreement, the Company has the right, but not the obligation, to
    purchase an additional 1,250,000 shares of KFx common stock for $2.00 per
    share at any time from December 1, 1996 through January 31, 1997, if such
    shares are made available by KFx. Simultaneously with the execution of
    the purchase agreement, KFx granted to the Company a warrant to purchase
    an additional 7,750,000 shares at $3.65 per share, as well as a warrant
    to purchase further shares of the common stock of KFx at market value,
    defined so that the number, when added to all other shares of such common
    stock owned by the Company, would result in the Company owning 51% of the
    common stock of KFx on a fully-diluted basis. These warrants are
    exercisable from January 1, 2000 through July 1, 2001, but would
    terminate in the event that the Company did not purchase the shares made
    available by KFx as described above.


    4.   Acquisition and Projects Under Development

    Acquisition

         In May 1996, the Company, through two wholly owned subsidiaries,  
    acquired the net assets of the biopesticides division of W.R. Grace & Co.
    (renamed Thermo Trilogy) which develops, manufactures, and markets
    environmentally friendly products used for pest control, for $8.1 million
    in cash. In addition, the Company will pay a royalty fee of seven percent
    on annual sales of the acquired business in excess of $14 million through
    the year 2000.

         This acquisition has been accounted for using the purchase method
    of accounting and its results of operations have been included in the
    accompanying financial statements from the date of acquisition. The
    aggregate cost of this acquisition approximated the fair value of the net
                                       16PAGE
<PAGE>
    Thermo Ecotek Corporation
    Notes to Consolidated Financial Statements

    4.   Acquisition and Projects Under Development (continued)

    assets acquired and is subject to adjustment upon finalization of the
    purchase price allocation. Pro forma data is not presented since this
    acquisition was not material to the Company's results of operations and
    financial position.

    Projects Under Development

         In August 1995, the Company, through two wholly owned subsidiaries,
    entered into a Limited Partnership Agreement with KFx Wyoming, Inc., a
    subsidiary of KFx, to develop, construct, and operate a 500,000-ton-per-
    year subbituminous coal-beneficiation plant near Gillette, Wyoming. The
    Company is committed to provide approximately $48 million for the design,
    construction, and operation of the plant and will have a 95% equity
    interest in the project. Construction began in August 1995 with
    commercial operations expected to begin in the first half of fiscal 1997.
    As of September 28, 1996, the Company is committed to fund an additional
    $9.3 million to complete construction of the facility. The Company has
    also made an investment in KFx (Note 3).

         In July 1995, the Company entered into an agreement to invest $15
    million in a 185-megawatt combined cycle, steam-turbine electric
    generation facility located in Puerto Plata, Dominican Republic, owned by
    Smith/Enron Cogeneration Limited Partnership (SECLP). Under the terms of
    the agreement, the Company will acquire both a general and limited
    partnership interest in Smith Cogeneration Dominicana L.P. (Smith
    Cogeneration), which through its investment in SECLP, owns approximately
    50% of the project. The Company will receive a minority interest in Smith
    Cogeneration equivalent to a specified percentage of all project cash
    flow and profits and losses. The Company's exact percentage interest in
    Smith Cogeneration will not be finally determined until six months after
    the funding of the Company's investment, which is expected to occur
    during calendar 1997, assuming certain conditions are met.


    5.   Shareholders' Investment 

         In June 1996, the Company sold 330,000 shares of its common stock
    in a private placement at $16.08 per share, for net proceeds of $5.0
    million.

         In February 1995, the Company sold 3,500,334 shares of its common
    stock in an initial public offering at $8.50 per share, for net proceeds
    of approximately $27.5 million.

         Substantially all of the net assets of the Company represent net
    assets of the Operating Companies. The net assets of certain Operating
    Companies are generally restricted as to the amounts that can be
    transferred to the parent company in the form of dividends, loans or
    advances, pursuant to certain lease or debt agreements. As of September
    28, 1996, net assets of certain subsidiaries of approximately $73.3
    million were not restricted from distribution.
                                       17PAGE
<PAGE>
    Thermo Ecotek Corporation
    Notes to Consolidated Financial Statements

    5.   Shareholders' Investment (continued)

         At September 28, 1996, the Company had reserved 12,731,796 unissued
    shares of its common stock for possible issuance under stock-based
    compensation plans and for issuance upon possible conversion of the
    Company's convertible obligations.


    6.   Stock-based Compensation Plans

         The Company has stock-based compensation plans for its key
    employees, directors, and others. Two of these plans, adopted in 1990,
    permit the grant of nonqualified and incentive stock options. A third
    plan, adopted in 1994, permits the grant of a variety of stock and
    stock-based awards as determined by the human resources committee of the
    Company's Board of Directors (the Board Committee), including restricted
    stock, stock options, stock bonus shares, or performance-based shares. To
    date, only nonqualified stock options have been awarded under the
    Company's plans. The option recipients and terms of options granted under
    these plans are determined by the Board Committee. Options granted under
    these plans are exercisable immediately and expire seven to twelve years
    after the date of grant. However, the shares acquired upon exercise are
    subject to certain transfer restrictions and repurchase by the Company at
    the exercise price, upon certain events. These restrictions and
    repurchase rights generally lapse ratably over periods ranging from five
    to ten years after the first anniversary of the grant date, depending on
    the term of the option, which may range from seven to twelve years.
    Nonqualified options may be granted at any price determined by the Board
    Committee, although incentive stock options must be granted at not less
    than the fair market value of the Company's stock on the date of grant.
    To date, all options have been granted at fair market value. The Company
    also has a directors' stock option plan, adopted in 1991, that provides
    for the grant of stock options to outside directors pursuant to a formula
    approved by the Company's shareholders. Options awarded under this plan
    are exercisable six months after the date of grant and expire three to
    seven years after the date of grant. In addition to the Company's stock
    option plan, certain officers and key employees may also participate in
    stock-based compensation plans of Thermo Electron or its majority-owned
    subsidiaries.








                                       18PAGE
<PAGE>
  Thermo Ecotek Corporation
  Notes to Consolidated Financial Statements

  6.   Stock-based Compensation Plans (continued)

       No accounting recognition is given to options granted at fair market
  value until they are exercised. A summary of the Company's stock option
  information for fiscal 1996, fiscal 1995, and 1994 is as follows:

                               1996              1995              1994
                         ----------------  ----------------  ---------------
                                 Range of          Range of        Range of
                                   Option            Option          Option
                         Number    Prices  Number   Prices  Number   Prices
  (In thousands except       of       per      of       per      of      per
  per share amounts)     Shares     Share  Shares     Share  Shares    Share
  --------------------------------------------------------------------------
  Options outstanding,             $ 4.00-           $4.00-          $4.00-
    beginning of period  1,491     $ 6.00  1,539     $6.00   1,289   $5.50
                                    10.18-                            5.83-
      Granted              309      16.49      -         -     292    6.00
                                     4.00-            4.00-
      Exercised           (349)      6.00    (22)     5.83       -       -
                                     5.50-            4.00-           5.50-
      Lapsed or cancelled  (12)     10.18    (26)     5.83     (42)   6.00
                         -----             -----             -----
  Options outstanding,             $ 4.00-           $4.00-          $4.00-
    end of period        1,439     $16.49  1,491     $6.00   1,539   $6.00
                         =====             =====             =====
                                   $ 4.00-           $4.00-          $4.00-
  Options exercisable    1,439     $16.49  1,491     $6.00   1,539   $6.00
                         =====             =====             =====
  Options available for
    grant                  365               662               636
                         =====             =====             =====


  7.   Employee Benefit Plans

  401(k) Savings Plan and Employee Stock Ownership Plan

       Substantially all of the Company's corporate, full-time employees are
  eligible to participate in Thermo Electron's 401(k) savings plan and employee
  stock ownership plan (ESOP). Contributions to the Thermo Electron 401(k)
  savings plan are made by both the employee and the Company. Company
  contributions are based upon the level of employee contributions. The Company
  contributed and charged to expense for these plans $114,000, $66,000, and
  $138,000 in fiscal 1996, fiscal 1995, and 1994, respectively. Effective
  December 31, 1994, the ESOP was split into two plans: ESOP I, covering
  employees of Thermo Electron's corporate office and its wholly owned
  subsidiaries, and ESOP II, covering employees of certain of Thermo Electron's
  majority-owned subsidiaries, including the Company. Also, effective December
  31, 1994, ESOP II plan was terminated and as a result, the Company's
  employees are no longer eligible to participate in an ESOP.

                                       19PAGE
<PAGE>
    Thermo Ecotek Corporation
    Notes to Consolidated Financial Statements

    7.   Employee Benefit Plans (continued)

         Employees of the Operating Companies who meet eligibility
    requirements may participate in a separate defined contribution plan.
    Contributions to the plan are made by both the employee and the Operating
    Companies. The Operating Companies' contributions are based on the level
    of employee contributions. The Company contributed and charged to expense
    for these plans $165,000, $91,000, and $131,000 in fiscal 1996, fiscal
    1995, and 1994, respectively.

    Employee Stock Purchase Plan

          Prior to November 1, 1996, the Company's eligible corporate
    employees could participate in an employee stock purchase plan sponsored
    by Thermo Electron, under which employees could purchase shares of Thermo
    Electron common stock. Effective November 1, 1996, substantially all of
    the Company's employees may participate in employee stock purchase plans
    sponsored by the Company and Thermo Electron, under which employees can
    purchase shares of the Company's and Thermo Electron's common stock.
    Under these plans, shares of common stock may be purchased at the end of
    a 12-month plan year at 95% of the fair market value at the beginning of
    the plan year, and shares purchased are subject to a six-month resale
    restriction. Prior to November 1, 1995, shares of Thermo Electron's
    common stock could be purchased at 85% of the fair market value at the
    beginning of the plan year, and shares purchased were subject to a
    one-year resale restriction. Shares are purchased through payroll
    deductions of up to 10% of each participating employee's gross wages.


    8.    Income Taxes

          The components of the provision for income taxes for fiscal 1996,
    fiscal 1995, and 1994 are as follows:

    (In thousands)                                 1996      1995      1994
    -----------------------------------------------------------------------
    Currently payable (refundable):
      Federal                                   $ 2,899   $ 1,647   $(1,957)
      State                                       1,286       393      (467)
                                                -------   -------   -------
                                                  4,185     2,040    (2,424)
                                                -------   -------   -------

    Deferred:
      Federal                                     2,485     3,257     5,766
      State                                         601       730     1,630
                                                -------   -------   -------
                                                  3,086     3,987     7,396
                                                -------   -------   -------
                                                $ 7,271   $ 6,027   $ 4,972
                                                =======   =======   =======


                                       20PAGE
<PAGE>
    Thermo Ecotek Corporation
    Notes to Consolidated Financial Statements

    8.    Income Taxes (continued)

          The provision for income taxes in the accompanying statement of
    income for fiscal 1996, fiscal 1995, and 1994 differs from the amounts
    computed by applying the statutory federal income tax rate of 34% to
    income before provision for income taxes and minority interest, due to
    the following:

    (In thousands)                                  1996      1995      1994
    ------------------------------------------------------------------------
    Provision for income taxes at
      statutory rate                              $8,951   $5,929    $5,352
    Increases (decreases) resulting from:
      State income taxes, net of federal tax       1,245      741     1,078
      Minority interest expense                     (434)    (390)     (380)
      Tax losses and credits benefited            (2,528)    (270)   (1,100)
      Nondeductible expenses                          37       17        22
                                                  ------   ------    ------
                                                  $7,271   $6,027    $4,972
                                                  ======   ======    ======

          Tax losses and credits benefited during fiscal 1996 relate to the
    resolution of certain tax contingencies.

          Prepaid income taxes and deferred income taxes as of fiscal year-
    end 1996 and 1995 consist of the following:

    (In thousands)                                           1996       1995
    ------------------------------------------------------------------------
    (Deferred) prepaid income taxes:
      Depreciation                                      $(40,924)   $(36,355)
      Partnership allocations                               (577)       (922)
      Available-for-sale investments                      (5,487)          -
      State tax net operating loss carryforwards           1,789       1,535
      Capitalized costs                                    5,253       3,887
      Other reserves and accruals                          2,994       2,847
                                                        --------    --------
                                                         (36,952)    (29,008)
      Less: Valuation allowance                           (3,665)     (3,037)
                                                        --------    --------
                                                        $(40,617)   $(32,045)
                                                        ========    ========

          The valuation allowance relates to uncertainty surrounding the
    realization of certain state tax loss carryforwards and stock option
    exercises not benefited. The increase in the valuation allowance in
    fiscal 1996 relates to an increase in state tax losses not benefited and
    other state tax assets. State tax loss carryforwards of approximately $20
    million will begin to expire in 1997. Of the fiscal 1996 valuation
    allowance, $898,000 will be used to increase capital in excess of par
    value when previously unrealized stock option benefits are recognized.
    The long-term due from parent company in the accompanying balance sheet
    represents amounts due from Thermo Electron for tax benefits arising from
    the Company's operations.
                                      21PAGE
<PAGE>
    Thermo Ecotek Corporation
    Notes to Consolidated Financial Statements

    9.    Commitments

    Leases

          The Company has leased its office facilities from Thermo Electron.
    The agreement called for the Company to pay rent based on Thermo
    Electron's occupancy costs per square foot. The accompanying statement of
    income includes expenses of $177,000, $143,000, and $176,000 in fiscal
    1996, fiscal 1995, and 1994, respectively. The Company plans to move its
    office facilities in fiscal 1997 and has signed a seven-year fixed rate
    lease agreement with a third party that expires in 2003. The Company's
    commitment under this new lease agreement will be approximately $300,000
    per fiscal year, net of sublease income of $178,000 per fiscal year.

          Certain Operating Companies have operating lease agreements for
    their facilities expiring in various years through 2010. The lease
    agreements provide for renewal of each of the leases for additional
    periods ranging from one to five years at the Operating Companies'
    option. In general, renewal options are at the lower of a predetermined
    percentage of the average annual lease rental during the lease terms or
    the fair market rental as determined by an independent appraisal. In
    general, at the end of the lease terms or renewal terms, the Operating
    Companies have a right of first refusal or an option to purchase the
    facilities, at their fair market value, as determined by an independent
    appraisal. During fiscal 1995, the Company amended an existing facility
    operating lease, which resulted in the agreement being treated as a
    capital lease (Note 13).

          Lease payments under the operating leases are made to the owner of
    the facility only to the extent that power revenues exceed essential
    operating expenses, as defined, up to certain specified maximum levels
    (Note 10). Subject to the foregoing, as of September 28, 1996, the
    contractual amounts payable pursuant to the lease agreements total
    approximately $164,253,000 over the remaining initial lease terms,
    averaging approximately $16,000,000 per year. The Company recognizes rent
    expense ratably over the respective lease terms. The accompanying
    statement of income includes expenses from operating leases (excluding
    the operating lease with Thermo Electron) of $15,233,000, $13,402,000,
    and $23,385,000 in fiscal 1996, fiscal 1995, and 1994, respectively.

    Fuel Supply

          The Operating Companies have entered into fuel supply agreements
    with various suppliers guaranteeing the purchase of certain minimum
    quantities of acceptable fuel at negotiated prices and terms. The
    Operating Companies purchased $20,013,000, $13,804,000, and $22,615,000
    of fuel under such contracts in fiscal 1996, fiscal 1995, and 1994,
    respectively. The agreements call for price adjustments based on certain
    published indices or stated rates over their terms expiring between 1997
    and 2005. See Note 10 for fuel supply agreements with related parties.
                                       22PAGE
<PAGE>
    Thermo Ecotek Corporation
    Notes to Consolidated Financial Statements

    10.   Related Party Transactions

    Corporate Service Agreement

          The Company and Thermo Electron have a corporate services
    agreement under which Thermo Electron's corporate staff provides certain
    administrative services, including certain legal advice and services,
    risk management, certain employee benefit administration, tax advice and
    preparation of tax returns, centralized cash management, and certain
    financial and other services, for which the Company pays Thermo Electron
    an amount equal to 1.0% of the Company's revenues. The Company paid an
    annual fee equal to 1.20% and 1.25% of the Company's revenues in calendar
    year 1995 and 1994, respectively. The annual fee is reviewed and adjusted
    by mutual agreement of the parties. For these services, the Company was
    charged $1,570,000, $1,286,000, and $1,678,000 in fiscal 1996, fiscal
    1995, and 1994, respectively. Management believes that the service fee
    charged by Thermo Electron is reasonable and that such fees are
    representative of the expenses the Company would have incurred on a
    stand-alone basis. The corporate services agreement is renewed annually
    but can be terminated upon 30 days' prior notice by the Company or upon
    the Company's withdrawal from the Thermo Electron Corporate Charter (the
    Thermo Electron Corporate Charter defines the relationships among Thermo
    Electron and its majority-owned subsidiaries). For additional items such
    as employee benefit plans, insurance coverage, and other identifiable
    costs, Thermo Electron charges the Company based upon costs attributable
    to the Company.

    Fuel Supply

          A portion of the fuel used by the Operating Companies' facilities
    is obtained under agreements with related parties of the Operating
    Companies or their joint venture partners (Note 9). During fiscal 1996,
    fiscal 1995, and 1994, the Company paid $4,563,000, $2,946,000, and
    $4,331,000, respectively, under these agreements.

    Management Fees

          One of the Operating Companies has entered into management
    agreements with a related party of its joint venture partner for the
    day-to-day operation of its facility and the procurement and management
    of fuel. During fiscal 1996, fiscal 1995, and 1994, the Company paid
    $350,000, $253,000, and $322,000, respectively, under these agreements.

    Thermo Electron Guarantees

          Thermo Electron has issued an operating standards support
    agreement for each of the facilities leased or financed by the Operating
    Companies. These agreements provide that Thermo Electron will loan the
    Operating Companies, on a subordinated basis, enough funds to meet their
    lease or debt payments in the event the power plants are unable to
    generate power at a designated level and such inability is related to the
    design, construction, operation or maintenance of the plants and not
    caused by certain uncontrollable circumstances.

                                       23PAGE
<PAGE>
    Thermo Ecotek Corporation
    Notes to Consolidated Financial Statements

    10.   Related Party Transactions (continued)

          Thermo Electron has also guaranteed the lease payments of one of
    the Operating Companies under certain events. Under the terms of this
    guarantee, Thermo Electron will loan funds to the Operating Company to
    cover any shortfall in its lease payment in the event and to the extent
    the terms of the Operating Company's power purchase agreements are
    changed by Public Service Company of New Hampshire (PSNH) (Note 11). No
    such payments have been required under this guarantee.

          The Company and Thermo Electron have entered into a Master
    Reimbursement Agreement through which the Company will reimburse Thermo
    Electron in the event that Thermo Electron is required to make any
    payments pursuant to guarantees, including those guarantees described
    above.

    Operating Lease

          See Note 9 for a description of the Company's operating lease with
    Thermo Electron.

    Long-term Obligations

          See Note 13 for long-term obligations of the Company held by
    Thermo Electron.

    Repurchase Agreement

          The Company invests excess cash in a repurchase agreement with
    Thermo Electron as discussed in Note 1.


    11.   Contingencies

         Two of the Operating Companies have Rate Orders from the New
    Hampshire Public Utilities Commission (NHPUC) to sell all of their power
    to PSNH. An agreement between Northeast Utilities, parent to PSNH, and
    the State of New Hampshire, arising from the settlement of PSNH
    bankruptcy proceedings, contains language to the effect that PSNH will
    seek to renegotiate some of the terms of certain rate orders with small
    power producers and that the state will support PSNH in such efforts.
    PSNH has commenced discussions with these two Operating Companies and
    other small power producers through which it is seeking to renegotiate
    the rate orders applicable to the Company's and other facilities. The
    state, acting through NHPUC, has indicated that it supports such efforts.

         Based on negotiations between the Operating Companies and PSNH, the
    Company believes that this matter may reach resolution in fiscal 1997,
    although final resolution is subject to approval of the NHPUC. Should the
    matter not reach resolution, the Company does not believe that PSNH has
    the right to take unilateral action to reduce the price of purchased
    power under such arrangements. Rejection of the Company's rate orders
    would result in a claim for damages by the Company and could be the
    subject of lengthy litigation. Although unfavorable resolution of this
    matter could materially affect the Company's results of operations and
                                       24PAGE
<PAGE>
    Thermo Ecotek Corporation
    Notes to Consolidated Financial Statements

    11.  Contingencies (continued)

    cash flows, the Company believes that any resolution will not have a
    material adverse impact on the Company's financial position. 

         The Company is contingently liable with respect to lawsuits and
    matters that arose in the normal course of business. In the opinion of
    management, these contingencies will not have a material adverse effect
    on the financial position or results of operations of the Company.


    12.  Termination of Power-Sales Agreement

         On August 2, 1993, in exchange for a cash settlement, the Company
    agreed to terminate a power-sales agreement with a utility, which
    required the utility to purchase the power that was to be generated by
    the Company's 55-megawatt natural gas cogeneration facility under
    development in Staten Island, New York.

         Under the agreement, the Company has received $17.1 million through
    fiscal 1996, with a future payment due of $900,000 on May 1, 1997, plus
    interest at 5.8%. The payment due in May 1997 is included in other
    current assets and note receivable in the accompanying balance sheet as
    of September 28, 1996 and September 30, 1995, respectively.

         The Company would be obligated to return $8.2 million of this
    settlement if the Company elects to proceed with the Staten Island
    facility and the plant commences commercial operation before January 1,
    2000. Accordingly, the Company has deferred recognition of $8.2 million
    of revenues, pending final determination of the project's status. The
    deferred revenue is included in other deferred items in the accompanying
    balance sheet.





                                       25PAGE
<PAGE>
    Thermo Ecotek Corporation
    Notes to Consolidated Financial Statements

    13.   Long-term Obligations

          Long-term obligations as of fiscal year-end 1996 and 1995 consist
    of the following:

    (In thousands)                                          1996        1995
    ------------------------------------------------------------------------
    8.3% Nonrecourse tax-exempt revenue bonds,
      Series 1989, payable in semi-annual
      installments, with a final payment in
      December 2000                                     $ 24,700    $ 28,900
    8.3% Nonrecourse tax-exempt revenue bonds,
      Series 1990, payable in semi-annual
      installments, with a final payment in
      December 2000                                       26,500      30,200
    6.0% Nonrecourse tax-exempt revenue bonds,
      Series 1991, payable in semi-annual
      installments, with a final payment in
      June 2000                                           43,500      49,700
    4.0% Subordinated convertible debentures,
      due January 2001, convertible at $6.33
      per share, due to Thermo Electron                   68,500      68,500
    Noninterest-bearing subordinated convertible
      debentures, due March 2001, convertible at
      $13.56 per share                                    31,727           -
                                                        --------    --------
                                                         194,927     177,300
    Less: current portion of long-term obligations        16,800      14,100
                                                        --------    --------
                                                        $178,127    $163,200
                                                        ========    ========

          The annual requirements for long-term obligations are as follows:

                   (In thousands)
                   ----------------------------------------------
                   1997                                  $ 16,800
                   1998                                    26,100
                   1999                                    18,100
                   2000                                    19,200
                   2001                                   114,727
                                                         --------
                                                         $194,927
                                                         ========

          The Company's noninterest-bearing subordinated convertible
    debentures are guaranteed on a subordinated basis by Thermo Electron. In
    fiscal 1996, $5.3 million principal amount of the debentures was
    converted into 388,862 shares of the Company's common stock.


                                       26PAGE
<PAGE>
    Thermo Ecotek Corporation
    Notes to Consolidated Financial Statements

    13.   Long-term Obligations (continued)

          The tax-exempt revenue bonds were issued by the California
    Pollution Control Financing Authority to finance the construction of the
    Delano I and Delano II facilities. The obligations are credit-enhanced by
    a letter of credit issued by a bank group. Repayment of the debt is an
    obligation of Delano and the obligations are nonrecourse to the Company.
    As of September 28, 1996, Delano I and Delano II plant and equipment
    totaling approximately $173.0 million were collateral for this debt.

          On June 30, 1995, the Mendota Operating Company entered into a
    First Amendment to its Project Lease. The Amendment, effective April 1,
    1995, modified, among other terms of the lease, the lease term, the base
    rent, the application of cash flow from the facility, and the lessee's
    option to purchase the facility. The terms of the lease, as amended, met
    the requirements for treatment as a capital lease and accordingly, the
    facility has been recorded as an asset of the Company in the amount of
    $47.0 million and is included in property, plant and equipment, net in
    the accompanying balance sheet.

          The future minimum lease payments under the amended lease are as
    follows:

               (In thousands)
               --------------------------------------------------
               1997                                       $12,033
               1998                                        12,033
               1999                                        12,033
               2000                                        12,868
                                                          -------
                                                           48,967

               Less: amount representing interest           9,807
                                                          -------
               Present value of minimum lease payments     39,160

               Less: current portion                        8,006
                                                          -------
               Long-term capital lease obligations        $31,154
                                                          =======

          See Note 15 for information pertaining to the fair value of the
    Company's long-term obligations.



                                       27PAGE
<PAGE>
    Thermo Ecotek Corporation
    Notes to Consolidated Financial Statements

    14.   Significant Customers and Concentrations of Credit Risk

          Revenues from three electric utility customers as a percentage of
    total revenues were approximately 21%, 36%, and 36% in fiscal 1996; 22%,
    36%, and 36% in fiscal 1995; and 20%, 40%, and 33% in 1994.

          At fiscal year-end 1996 and 1995, substantially all accounts
    receivable due to the Company were from its four electric utility
    customers. The Company does not normally require collateral or other
    security to support its accounts receivable. Management does not believe
    that this concentration of credit risk has or will have a significant
    negative impact on the Company.

    15.   Fair Value of Financial Instruments

          The Company's financial instruments consist mainly of cash and
    cash equivalents, restricted funds, accounts and note receivable,
    long-term available-for-sale investments, due from parent company,
    current portion of long-term obligations, accounts payable, due to parent
    company, long-term obligations, and interest rate swaps. The carrying
    amounts of these financial instruments, with the exception of long-term
    available-for sale investments, due from parent company, long-term
    obligations, and interest rate swaps, approximate fair value due to their
    short-term nature.

          The Company's long-term available-for-sale investments are carried
    at fair value in the accompanying balance sheet. The fair value was
    determined based on a quoted market price. See Note 3 for the fair value
    information pertaining to this financial instrument. The carrying amount
    of due from parent company in the accompanying balance sheet approximates
    fair value.

          The fair value of long-term obligations was determined based on
    quoted market prices and on borrowing rates available to the Company at
    the respective year ends. The fair value of convertible obligations at
    fiscal year-end 1996 and 1995 exceeds the carrying amount primarily due
    to the market price of the Company's common stock exceeding the
    conversion price of the convertible obligations. The carrying amount and
    fair value of the Company's long-term obligations and off-balance sheet
    financial instruments at fiscal year-end 1996 and 1995 are as follows:

                                             1996                1995
                                     -------------------  -----------------
                                     Carrying       Fair  Carrying      Fair
    (In thousands)                     Amount      Value    Amount     Value
    ------------------------------------------------------------------------
    Long-term obligations:
      Convertible obligations        $100,227   $199,696  $ 68,500  $114,600
      Other long-term obligations     109,054    111,727   133,860   137,651
                                     --------   --------  --------  --------
                                     $209,281   $311,423  $202,360  $252,251
                                     ========   ========  ========  ========
    Off-balance-sheet financial
      instruments:
        Interest rate swaps payable             $  2,673            $  3,792
                                                ========            ========
                                       28PAGE
<PAGE>
    Thermo Ecotek Corporation
    Notes to Consolidated Financial Statements

    15.   Fair Value of Financial Instruments (continued)

         Interest rate swap agreements are in place on the borrowings
    associated with the Delano I and Delano II facilities and are with a
    different counterparty than the holders of the underlying debt. These
    swaps have terms expiring in December 2000 commensurate with the final
    maturity of the debt. The swaps have effectively converted floating rate
    debt to fixed rate borrowings. Interest expense is adjusted with changes
    in the interest rate and management believes any credit risk is remote.
    The notional amount of the swap agreements was $95.7 million and $110.0
    million at fiscal year-end 1996 and 1995, respectively. The fair value of
    such agreements is the estimated amount that the Company would pay upon
    termination of the contract, taking into account the change in market
    interest rates and creditworthiness of the counterparties. During fiscal
    1996 and fiscal 1995, the average variable rate received under the swap
    agreement was 3.6% and 3.8%, respectively.


    16.   Unaudited Quarterly Information 

    (In thousands except per share amounts)

                                           Three Months Ended
                              --------------------------------------------
                              Dec. 30,   March 30,   June 29,   Sept. 28,
    Fiscal 1996                   1995        1996   1996 (a)        1996

    Revenues                   $34,296     $33,505    $35,316     $46,959
    Gross profit                10,107       6,945     10,852      20,289
    Net income                   3,052         609      3,024      11,095
    Earnings per share:
      Primary                      .13         .02        .11         .41
      Fully diluted                .10         .02        .09         .31


                                          April 1,    July 1,   Sept. 30,
    Fiscal 1995                               1995       1995        1995

    Revenues                               $31,015    $34,044     $42,080
    Gross profit                             5,347      9,576      18,119
    Net income                                 411      2,076       7,777
    Earnings per share:
      Primary                                 0.02       0.09        0.33
      Fully diluted                           0.02       0.07        0.24

    (a) Reflects the May 1996 acquisition of the biopesticides division of
        W.R. Grace & Co.


                                       29PAGE
<PAGE>
    Report of Independent Public Accountants


    To the Shareholders and Board of Directors of Thermo Ecotek Corporation:

         We have audited the accompanying consolidated balance sheet of
    Thermo Ecotek Corporation (a Delaware corporation and majority-owned
    subsidiary of Thermo Electron Corporation) and subsidiaries as of
    September 28, 1996 and September 30, 1995 and the related consolidated
    statements of income, shareholders' investment, and cash flows for the
    year ended September 28, 1996, the nine months ended September 30, 1995,
    and the year ended December 31, 1994. These financial statements are the
    responsibility of the Company's management. Our responsibility is to
    express an opinion on these consolidated financial statements based on
    our audits.

         We conducted our audits in accordance with generally accepted
    auditing standards. Those standards require that we plan and perform the
    audit to obtain reasonable assurance about whether the financial
    statements are free of material misstatement. An audit includes
    examining, on a test basis, evidence supporting the amounts and
    disclosures in the financial statements. An audit also includes assessing
    the accounting principles used and significant estimates made by
    management, as well as evaluating the overall financial statement
    presentation. We believe that our audits provide a reasonable basis for
    our opinion.

         In our opinion, the consolidated financial statements referred to
    above present fairly, in all material respects, the financial position of
    Thermo Ecotek Corporation and subsidiaries as of September 28, 1996 and
    September 30, 1995 and the results of their operations and their cash
    flows for the year ended September 28, 1996, the nine months ended
    September 30, 1995, and the year ended December 31, 1994, in conformity
    with generally accepted accounting principles.



                                           Arthur Andersen LLP



    Boston, Massachusetts
    November 1, 1996










                                       30PAGE
<PAGE>
    Thermo Ecotek Corporation


    Management's Discussion and Analysis of Financial Condition and Results
    of Operations

         Forward-looking statements, within the meaning of Section 21E of
    the Securities Exchange Act of 1934, are made throughout this
    Management's Discussion and Analysis of Financial Condition and Results
    of Operations. These statements involve a number of risks and
    uncertainties, including those detailed immediately after this
    Management's Discussion and Analysis of Financial Condition and Results
    of Operations under the caption "Forward-looking Statements."

    Overview

         The Company earns revenues primarily from the operation of
    independent electric power generation facilities through joint ventures,
    limited partnerships, or wholly owned subsidiaries (the Operating
    Companies). Each Operating Company sells power under a long-term power-
    sale agreement. The profitability of operating the Company's facilities
    depends on the price received for power under the power-sale agreements
    with power purchasers, on plant performance or availability, on the
    degree to which utilities exercise curtailment rights granted under
    power-sale agreements, and on the fuel, operating, and maintenance costs
    for the facilities. Curtailment rights allow a utility to require an
    Operating Company to curtail power output up to pre-established annual
    levels during periods of low system demand. A utility commonly
    experiences low system demand during periods when hydroelectric power is
    available, generally following periods of heavy rain or snow. The
    contractually allowable maximum for such curtailment at both the Woodland
    and Mendota plants is 1,000 hours per year. The Company experienced
    approximately 930 and 950 hours of curtailment at each of the two plants
    during fiscal 1996 and fiscal 1995, respectively. In 1994, the Company
    experienced no curtailment at these two plants. The Company earns a
    disproportionately high share of its income from May to October due to
    the rate structures under the power-sale agreements for its California
    plants, which provide strong incentives to operate during this period of
    high demand. Conversely, the Company has historically operated at a loss
    or marginal profitability during its second fiscal quarter due to the
    rate structure under these agreements. The Company's profitability is
    also dependent on the amount of development expenses that it incurs.

         The Company is expanding beyond biomass power generation into other
    environmentally responsible products and processes. Through two wholly
    owned subsidiaries, the Company acquired the biopesticides division of
    W.R. Grace & Co. (renamed Thermo Trilogy), which develops, manufactures,
    and markets environmentally friendly products used for pest control.
    Derived from seeds of the tropical "neem" tree and specially developed
    microbials, these biopesticides safely and effectively control insects,
    fungi, and mites on numerous crops. The Company has also entered the
    field of engineered "clean" fuels through a partnership agreement with
    KFx, Inc. (KFx). The Company is committed to provide approximately $48
    million for the design, construction, and operation of the first
    full-scale coal production facility to use a patented "clean coal"
    technology (K-Fuel technology). Once completed, the Gillette, Wyoming,
    facility will use the K-Fuel technology to transform high-moisture,
    low-energy coal into a low-moisture, high-energy, solid fuel.
                                       31PAGE
<PAGE>
    Thermo Ecotek Corporation


    Overview (continued)

         The Company plans to expand its operations into international
    markets and has begun business development efforts in India, Italy, and
    the Czech Republic. The cost of business development efforts is expected
    to increase as the Company expands into these markets due to increased
    complexity inherent in foreign development. In addition, the amount of
    cash required to fund equity investments is expected to increase, due to
    the financing requirements of lenders in foreign markets.

    Results of Operations

         In June 1995, the Company changed its fiscal year end from the
    Saturday nearest December 31 of each year to the Saturday nearest
    September 30 of each year. Accordingly, the results of operations for
    1996 compares the year ended September 28, 1996 (fiscal 1996) with the
    unaudited year ended September 30, 1995 (1995). The results of operations
    for 1995 compares the nine months ended September 30, 1995 (fiscal 1995)
    with the unaudited nine months ended October 1, 1994 (fiscal 1994).

    Fiscal 1996 Compared With 1995

         Revenues in fiscal 1996 were $150.1 million, compared with $139.3
    million in 1995, an increase of $10.8 million. The increase was primarily
    due to higher contractual energy rates in fiscal 1996 at all of the
    Company's facilities, except the Hemphill plant, as well as fewer days of
    scheduled and unscheduled outages at the Delano plants, and the inclusion
    of $1.7 million in revenues from Thermo Trilogy, which was acquired in
    May 1996. Pursuant to the Company's utility contracts for its four plants
    in California, there will be no further contractual energy rate increases
    beginning in calendar 1998.

         The gross profit margin increased to 32% during fiscal 1996 from
    29% in 1995. The improvement results largely from the effect of higher
    energy rates in 1996 and, to a lesser extent, lower fuel costs.

         The Company's plants have power-sales agreements under which
    utilities presently purchase power at fixed rates. Certain of these
    arrangements contain provisions under which the utilities will convert
    from fixed rates to "avoided-cost" rates at specified dates. Avoided-cost
    rates are currently substantially less than the Operating Companies'
    fixed rates. The Woodland plant, which converts to avoided-cost rates in
    March 2000, has conditions in its nonrecourse lease agreement that
    require the funding of a "power reserve" in years prior to 2000, based on
    projections of operating cash flow shortfalls in 2000 and thereafter. The
    power reserve represents funds available to make lease payments in the
    event that revenues are not sufficient after the plant converts to
    avoided-cost rates.
                                       32PAGE
<PAGE>
    Thermo Ecotek Corporation


    Fiscal 1996 Compared With 1995 (continued)

         Although it is difficult to predict future levels of avoided costs,
    based on current estimates, avoided costs are expected to be lower in
    2000 than the rates currently being paid. If the Woodland plant were to
    operate at projected avoided-cost levels, substantial losses would
    result, primarily due to nonrecourse lease obligations that extend beyond
    2000. Absent sufficient reductions in fuel prices and other operating
    costs, under such circumstances the Company would either renegotiate its
    nonrecourse lease for the Woodland plant or forfeit its interest in the
    plant. Beginning in the first quarter of fiscal 1997, the Company will
    record as an expense the funding of reserves required under Woodland's
    nonrecourse lease agreement to cover projected shortfalls in lease
    payments beginning in 2000. As a result, the Company expects that the
    results of the Woodland plant will be reduced to approximately breakeven
    beginning in fiscal 1997 and thereafter. During fiscal 1996, the Woodland
    plant contributed $5.1 million of operating income.

         Public Service Company of New Hampshire (PSNH) is seeking to
    renegotiate the rate orders applicable to the Company's two New Hampshire
    facilities. The Company is currently negotiating with PSNH and believes
    that this matter may reach resolution in fiscal 1997, although final
    resolution is subject to approval of the New Hampshire Public Utilities
    Commission. Should resolution not occur, the Company does not believe
    that PSNH has the right to take unilateral action to reduce the price of
    purchased power under the rate orders. An unfavorable resolution of this
    matter could materially affect the Company's results of operations and
    cash flows, although the Company believes that any resolution will not
    have a material adverse impact on the Company's financial position.

         General and administrative expenses as a percentage of revenues
    were 8% in fiscal 1996, compared with 7% in 1995. The change results
    primarily from an ongoing increase in business development efforts and
    the inclusion of higher general and administrative expenses as a
    percentage of revenues at Thermo Trilogy.

         Interest income increased to $5.1 million in fiscal 1996 from $3.3
    million in 1995, primarily due to interest income earned on invested
    proceeds from the issuance of subordinated convertible debentures in
    March 1996 (Note 13) and the Company's initial public offering in
    February 1995. Interest expense increased to $14.7 million during fiscal
    1996 from $13.3 million in 1995, primarily due to the conversion of the
    Mendota plant lease to a capital lease effective April 1995.

         The effective tax rates were 28% and 34% in fiscal 1996 and 1995,
    respectively. The rates in both years reflect the exclusion of income
    taxed directly to minority partners, as well as the benefit of tax
    credits and loss carryforwards, offset in part by state income taxes. The
    decrease in the effective tax rate in fiscal 1996 is due to the
    recognition of tax loss and credit carryforwards as a result of the
    resolution of certain tax contingencies. The Company expects the
    effective tax rate in fiscal 1997 to decline due to tax credits resulting
    from production at the Company's coal-beneficiation facility.
                                       33PAGE
<PAGE>
    Thermo Ecotek Corporation


    Fiscal 1996 Compared With 1995 (continued)

         Minority interest expense in fiscal 1996 and 1995, represents the
    allocation of income from plant operations to a minority partner in an
    Operating Company.

    Fiscal 1995 Compared With Fiscal 1994

         Revenues in fiscal 1995 increased 5% to $107.1 million from $102.1
    million in fiscal 1994. The increase was primarily due to the Whitefield,
    New Hampshire plant operating for the full 1995 period. During fiscal
    1994, this plant did not operate for most of the first six months due to
    major damage to the turbine-generator. The plant returned to normal
    operations late in the second quarter of fiscal 1994. In addition, higher
    contractual energy rates in fiscal 1995 at all of the Company's
    facilities, except the Hemphill plant, were largely offset by
    approximately 950 hours of utility-imposed curtailment of power output at
    the Mendota and Woodland plants in fiscal 1995, compared with no
    curtailment at these plants in fiscal 1994.

         The gross margin increased to 31% in fiscal 1995 from 26% in fiscal
    1994. Fiscal 1995 operating expenses were lower than fiscal 1994 largely
    due to reduced fuel prices at two plants in California. The effect on the
    gross profit margin of higher contractual energy rates in fiscal 1995 was
    largely offset by utility imposed curtailment of power output at the
    Mendota and Woodland plants. Lower lease expense in fiscal 1995 due to
    the conversion of the Mendota operating lease to a capital lease (Note
    13) was more than offset by higher depreciation expense on the facility.
    Despite a loss of revenues in fiscal 1994 resulting from the Whitefield
    turbine-generator damage, the gross profit margin in fiscal 1994 was
    largely unaffected due to the Company's business insurance coverage.

         General and administrative expenses as a percentage of revenues
    were 7% in fiscal 1995 and fiscal 1994.

         Interest income increased to $2.8 million in fiscal 1995 from $1.1
    million in fiscal 1994 due to interest income earned on invested proceeds
    from the Company's initial public offering (Note 5) and higher prevailing
    interest rates. Interest expense increased to $10.6 million in fiscal
    1995 from $8.4 million in fiscal 1994 largely due to the conversion of
    the Mendota lease to a capital lease, offset in part by lower outstanding
    debt at the Delano facilities.

         The effective tax rates were 35% and 32% in fiscal 1995 and fiscal
    1994, respectively. The effective tax rates were affected by the benefit
    of tax credits and loss carryforwards and the exclusion of certain income
    taxed directly to minority partners, offset in part by the effect of
    state income taxes.

         Minority interest expense in fiscal 1995 and fiscal 1994,
    represents the allocation of income from plant operations to a minority
    partner in an Operating Company.
                                       34PAGE
<PAGE>
    Thermo Ecotek Corporation


    Liquidity and Capital Resources

         Working capital increased to $76.2 million at September 28, 1996
    from $58.4 million at September 30, 1995. The Company had cash, cash
    equivalents, and current restricted funds of $82.2 million at September
    28, 1996, compared with $61.2 million at September 30, 1995. At September
    28, 1996 and September 30, 1995, restricted funds held in trust pursuant
    to certain lease and debt agreements totaled $18.9 million and $12.0
    million, respectively. The use of cash and cash equivalents of $7.6
    million and $6.4 million at September 28, 1996 and September 30, 1995,
    respectively, was also restricted by the terms of certain lease and
    financing agreements. These restrictions limit the ability of the
    Operating Companies to transfer funds to the Company in the form of
    dividends, loans, advances, or other distributions. In addition, until
    such time, if ever, as projections of avoided costs change, all cash
    flows from the Woodland Operating Company, other than cash distributed to
    the Company for taxes on the income of the Operating Company, will be
    restricted from distribution to the Company. During fiscal 1996, the
    Company's operating activities provided cash and restricted funds of
    $52.0 million.

         The Company received $35.9 million of net proceeds from the
    issuance of $37.0 million principal amount of noninterest-bearing
    subordinated convertible debentures in March 1996 (Note 13) and $5.0
    million of net proceeds from the issuance of its common stock in a
    private placement in June 1996 (Note 5). The Company used cash of $21.3
    million for the repayment of long-term obligations and payments under
    capital lease obligations related to two of its California plants. During
    fiscal 1996, the Company distributed $0.9 million to a minority partner
    of one of its Operating Companies.

         The Company's investing activities, other than fixed asset
    additions, have historically related to equity investments and plant
    acquisitions. Fixed asset additions and routine maintenance are generally
    financed through plant operating funds. During fiscal 1996, the Company
    used cash of $3.0 million to purchase an additional 1,500,000 shares of
    KFx common stock, bringing its total equity interest in KFx to
    approximately 14%. Pursuant to the purchase agreement, the Company has
    the right, but not the obligation, to purchase an additional 1,250,000
    shares of KFx common stock for $2.00 per share in fiscal 1997, if such
    shares are made available by KFx, and to purchase up to a total 51%
    equity interest in KFx in fiscal 2000. During fiscal 1996, the Company,
    through its Limited Partnership Agreement with KFx Wyoming, Inc.,
    expended $35.7 million for the construction of a coal-beneficiation
    facility near Gillette, Wyoming. The Company is committed to fund an
    additional $9.3 million to complete construction of the facility. Cash to
    complete construction increased approximately $6.0 million primarily due
    to changes in certain portions of the construction project. In addition,
    the Company expended $8.1 million for the purchase of the net assets of
    the biopesticides division of W.R. Grace & Co. (Note 4), and $0.9 million
    on the purchase of other property, plant and equipment.
                                       35PAGE
<PAGE>
    Thermo Ecotek Corporation


    Liquidity and Capital Resources (continued)

         The Company is committed to contribute $15 million for a minority
    interest in a 185-megawatt combined cycle, steam-turbine electric
    generation facility located in Puerta Plata, Dominican Republic. Funding
    is expected to occur during calendar 1997, assuming certain conditions
    are met.

         The Company has also entered into a memorandum of understanding
    concerning a coal-fired plant under development in Gouripore, India, that
    may require the Company to make up to $60 million in equity investments
    between 1996 and 1998 should development efforts be successful. In
    addition, the Company is developing a gas-fired plant near Mysore, India,
    which if successful, would require an equity contribution from the
    Company of between $35-$60 million. In September 1996, the Company,
    through a wholly owned subsidiary, formed a joint venture with
    Marcegaglia Group of Mantova, Italy to develop, own, and operate
    biomass-fueled electric power facilities in that country, which may
    require significant equity investments if development efforts are
    successful. In January 1996, the Company, through a wholly owned
    subsidiary, entered into a joint development agreement with EMD Praha
    Spol s.r.o. in the Czech Republic, which may require significant equity
    investments if development efforts are successful.

         The Company's short-term financing requirements at September 28,
    1996 consisted primarily of $35.3 million, due in fiscal 1997, of
    principal and interest payments related to the long-term financing
    provisions for the Mendota and Delano projects. The Company expects that
    the cash flows of its Mendota, Delano I, and Delano II plants will be
    sufficient to make future lease and debt payments. The Company believes
    that its short-term liquidity needs will be met through cash flows from
    operating activities. While the Company does not currently have any firm
    available credit facilities, it does not expect to require funding for
    currently existing operations in the foreseeable future. Should the need
    for short-term funding arise, however, the Company expects that such
    funds would be available from Thermo Electron, although there is no
    agreement under which Thermo Electron is obligated to lend funds to the
    Company. The Company is in the early stages of developing projects in
    India, Italy, and the Czech Republic. Equity investments required by the
    Company for these development efforts, if successful, are uncertain, but
    may be significant. Although the Company's projects are designed to
    produce cash flow over the long-term, the Company will have to obtain
    significant additional funds from time to time to complete acquisitions
    and to meet project development requirements, including the funding of
    equity investments. As the Company acquires, invests in, or develops
    future plants, the Company expects to finance them with nonrecourse debt,
    internal funds, additional equity or through borrowings from third
    parties or Thermo Electron. While Thermo Electron has expressed its
    willingness to provide funds to the Company to help finance acquisitions
    and equity investments in future projects, the Company has no agreements
    with Thermo Electron or third parties that assure funds will be available
    on acceptable terms or at all.
                                       36PAGE
<PAGE>
    Thermo Ecotek Corporation


    Forward-looking Statements

         In connection with the "safe harbor" provisions of the Private
    Securities Litigation Reform Act of 1995, the Company wishes to caution
    readers that the following important factors, among others, in some cases
    have affected, and in the future could affect, the Company's actual
    results and could cause its actual results in fiscal 1997 and beyond to
    differ materially from those expressed in any forward-looking statements
    made by, or on behalf of, the Company.

    Development Risks

         Uncertainty of Project Development. The process of locating,
    developing, permitting, financing, and constructing power plants is
    complex, lengthy, and expensive. Only a small percentage of the projects
    that the Company evaluates and pursues ultimately results in operating
    projects. As a result, the Company may not recover any expenses that it
    incurs in the evaluation and development of many projects.

         Although all the plants currently operated by the Company utilize
    biomass as fuel, the Company is not currently considering the development
    of further biomass-fueled projects in the United States due to high fuel
    costs and the relatively high costs of constructing and operating
    biomass-fueled plants. The Company is considering the development of
    biomass-fueled projects internationally in countries where market
    conditions may support profitable biomass operations. The Company has
    also expanded its development focus to include international clean
    combustion opportunities, engineered clean fuels, and other
    environmentally sound technologies. In this regard, the Company has
    established offices in Calcutta and Bangalore, India and Prague, Czech
    Republic and Italy. The completion or success of these projects and new
    ventures is subject to a number of significant conditions, including
    obtaining financing, negotiating key contracts with partners and other
    third parties, and further due diligence. No assurance can be given that
    these projects or new ventures will be completed on a timely basis, or at
    all. Any failure by the Company to successfully develop new projects
    would have a material adverse effect on the future growth of the Company.

         Uncertainty Regarding K-Fuel Plant. The Company has entered into a
    limited partnership agreement with KFx Wyoming Inc., a subsidiary of KFx
    Inc. (the "Partnership"), to develop, construct, and operate a
    subbituminous coal beneficiation plant near Gillette, Wyoming. The plant
    will utilize certain patented clean coal technology (the "K-Fuel
    technology") to produce low moisture, high energy fuel with reduced
    sulfur. The total cost to construct the plant is expected to be
    approximately $48 million which the Company is committed to provide. A
    tax credit is available with respect to qualifying alternative fuels
    produced and sold by a facility placed in service before July 31, 1998
    pursuant to a binding written contract in effect before December 31,
    1996. Although the Gillette, Wyoming facility is scheduled to begin
    commercial operations in the first calendar quarter of 1997, no assurance
    can be given that it will be placed in service before 1998. If the
    Company is not eligible for this tax credit, the profitability of the
    Partnership would be materially adversely affected. In addition, the
    plant will be the first large-scale use of the K-Fuel technology, and no
                                       37PAGE
<PAGE>
    Thermo Ecotek Corporation


    Forward-looking Statements (continued)

    assurance can be given that the plant will not experience technical or
    operating problems or that the plant will be successful in producing fuel
    with the desired physical characteristics. Further, the Company currently
    has an agreement for the sale of only 33% of the plant's anticipated
    output for the first three years of operation and, at the purchaser's
    option, the plant's entire output from the fourth through the tenth year
    of operation. No assurance can be given that the purchaser of the fuel
    will exercise its option in years four through ten or that the Company
    will be able to enter into additional contracts for the sale of fuel on
    acceptable terms, or at all. Demand for the fuel produced by the plant is
    expected to result in large part from the requirement that coal-burning
    utilities comply with the future scheduled sulfur dioxide emissions
    restrictions contained in the Clean Air Act. If the fuel produced by the
    plant does not allow the achievement of desired emissions reductions, or
    if regulations relating to emissions become less restrictive in the
    future, demand for the plant's fuel output would be materially adversely
    affected.

         Uncertainty of Access to Capital. The Company has sought to finance
    the debt portion of each of its clean combustion projects in a manner
    that is substantially nonrecourse to the Company. To minimize its equity
    commitment, the Company must borrow substantial amounts from third party
    lenders. The borrowings are typically secured only by the applicable
    project assets and the capital stock of the appropriate Operating
    Company. The Company anticipates that it will require substantial
    financing to fund both the equity and debt components of future projects.
    No assurance can be given that financing for future projects will be
    available on acceptable terms, or at all. Any failure by the Company to
    obtain adequate amounts of financing on acceptable terms would have a
    material adverse effect on the future growth of the Company.

         Dependence on Terms of Power-Sales Agreement. The profitability of
    any of the Company's clean combustion facilities is heavily dependent
    upon the power-sales agreement that it has entered into with the electric
    utility or other customer. Most of the Company's existing power-sales
    agreements were obtained as a direct negotiation with the purchasing
    utility. However, in recent years, in the United States such agreements
    have increasingly been awarded as a result of competitive bidding.
    Consequently, obtaining a power-sales agreement in the United States has
    become progressively more competitive and expensive and, in many cases,
    less profitable. In the future, foreign power-sales agreements also may
    increasingly be subject to competitive bidding. In addition, the passage
    of the National Energy Policy Act of 1992 has removed certain barriers to
    entry into the independent power market by utilities and others, and is
    expected to increase competition in that market. There can be no
    assurance that power-sales agreements entered into by the Company in the
    future will not be less profitable than the power-sales agreements to
    which the Operating Companies are currently parties.
                                       38PAGE
<PAGE>
    Thermo Ecotek Corporation


    Forward-looking Statements (continued)

         Risks Associated with Doing Business Outside the United States. The
    Company believes that the most significant growth opportunities in the
    power market exist outside of the United States. In that regard, the
    Company is pursuing projects in India, Italy, the Czech Republic, the
    Dominican Republic, and Italy, and intends to identify other countries in
    which to develop power projects. Doing business in many foreign countries
    exposes the Company to many risks that are not present in the United
    States, including political, military, privatization, currency exchange
    and repatriation risks, and higher credit risks related to the utility
    purchaser. In addition, it is possible that legal obligations may be more
    difficult for the Company to enforce in foreign countries and that the
    Company may be at a disadvantage in any legal proceeding with the local
    entity. Local laws may also limit the ability of the Company to hold a
    majority interest in some of the projects that it develops or acquires.

         Intense Competition for Projects. The Company believes that there
    are almost 200 companies that are actively engaged in the worldwide
    non-utility power market. Many of the companies in the power market have
    substantially greater financial and technical resources than the Company.
    Domestic competition in this market is expected to intensify as a result
    of deregulation at the federal and state levels, and due to the trend
    toward awarding contracts based upon competitive bidding.

         Uncertainty of Community Support. Development, construction and
    operation of a clean combustion project requires numerous environmental,
    siting, and other permits. The process of obtaining these permits can be
    lengthy and expensive. In addition, local opposition to a particular
    project can substantially increase the cost and time associated with
    developing a project, and can potentially render a project unfeasible or
    uneconomic. The Company may incur substantial costs or delays or may be
    unsuccessful in developing clean combustion projects as a result of such
    opposition.

    Operating Risks

         Expected Price Reductions under California SO#4 Contracts. The
    power-sales agreements for the Company's Woodland, Mendota, and Delano
    plants in California are so-called standard offer #4 (SO#4) contracts,
    which require Pacific Gas & Electric (PG&E), in the case of Woodland and
    Mendota, and Southern California Edison (SCE), in the case of Delano I
    and Delano II, to purchase the power output of the projects at fixed
    rates until 2000. However, with respect to Woodland and Mendota, PG&E has
    asserted that the fixed rates under its agreements will terminate
    mid-1999, although the Company disputes this assertion. Thereafter, the
    utility will pay a rate based upon its avoided costs (as determined from
    time to time by the California Public Utility Commission). Avoided-cost
    is determined pursuant to a formula that is intended to estimate the
    price that the utility would, but for its contract with the power
    producer, be paying for the same amount of energy. The rate fluctuates
    with the price of fuels and certain other factors. At present, the
    avoided-cost is substantially lower than the payments currently being
    made by PG&E and SCE. Although it is difficult to predict future levels
    of avoided-costs, based on current estimates, avoided-costs are expected
                                       39PAGE
<PAGE>
    Thermo Ecotek Corporation


    Forward-looking Statements (continued)

    to be lower in 2000 than the rates currently being paid by PG&E and SCE.
    If the Woodland plant were to operate at projected avoided-cost levels,
    substantial losses would result primarily due to nonrecourse lease
    obligations that extend beyond 2000. The nonrecourse debt for the Mendota
    and Delano plants will be paid by 2000. Absent sufficient reductions in
    fuel prices and other operating costs, under such circumstances the
    Company would draw down power reserve funds to cover operating cash
    shortfalls and then, should such funds be depleted, either renegotiate
    its nonrecourse lease for the Woodland plant or forfeit its interest in
    the plant. Beginning in the first quarter of fiscal 1997, if projected
    avoided-costs rates remain at current levels, the Company expects to
    expense the funding of reserves required under its nonrecourse lease
    agreement at Woodland to cover projected shortfalls in lease payments
    beginning in 2000. As a result, the Company expects that the results of
    the Woodland Operating Company will be reduced to approximately
    break-even beginning in fiscal 1997. During fiscal 1996, Woodland
    contributed $5.1 million of operating income.

         Potential Decreased Power-Sales due to Power Curtailments. The
    power-sales agreements between the Woodland and Mendota Operating
    Companies and PG&E allow PG&E to curtail the quantity of power purchased
    under each of these agreements by up to approximately 1,000 hours of
    generating capacity annually. PG&E generally exercises its curtailment
    rights during periods when cheaper hydroelectric power is available,
    which generally occurs following periods of heavy rain or snow.
    Curtailment reduces the power payment received by the Operating Companies
    and, therefore, has an adverse effect on the financial results of those
    Operating Companies. During fiscal 1996, the Company experienced
    approximately 930 hours of utility imposed curtailments at each of these
    plants.

         Potential Increased Fuel Prices and Reduced Availability of Fuel.
    The profitability of the Company's plants is dependent in part upon the
    difference between the price the Company receives from its utility
    customers for power and the price the Company pays for the fuel. The
    Company has typically entered into long-term fuel supply agreements for a
    significant portion of its fuel requirements. These agreements generally
    provide for prices based upon pre-determined formulas or indexes. If fuel
    prices rise significantly, the Company will be required to pay higher
    prices on the spot market. The Company's existing power-sales agreements
    do not adjust to account for changes in the Company's fuel prices.
    Therefore, the profitability of these agreements, and any future
    power-sales agreement that do not provide for such an adjustment, could
    be materially adversely affected by increases in the Company's fuel
    prices. In addition, future fuel shortages could adversely affect the
    Company's ability to deliver power, and therefore receive payments,
    pursuant to its power-sales agreements.

                                       40PAGE
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    Thermo Ecotek Corporation


    Forward-looking Statements (continued)

         Operating Difficulties. The financial performance of each of the
    Company's plants depends to a significant extent upon the ability of each
    plant to be capable of performing at or near capacity. If a plant is
    unable to perform at these levels, payments under the power-sales
    agreement will be reduced, possibly significantly. The Company has in the
    past experienced mechanical problems with the boilers at its Mendota and
    Woodland plants and suffered major equipment damage at its Whitefield
    plant. Although the Company believes that these problems have been
    corrected, no assurance can be given that these or other plants will not
    experience operating problems in the future. No assurance can be given
    that business interruption insurance will be adequate to cover all
    potential losses, or that such insurance will continue to be available on
    reasonable terms.

         In July 1995, the Company entered into an agreement to invest $15
    million in a 185 megawatt combined cycle, steam-turbine electric
    generation facility located in Puerto Plata, Dominican Republic, owned by
    Smith/Enron Cogeneration Limited Partnership. Under the terms of the
    agreement, the Company may acquire a general and limited partnership
    interest in a partnership that holds approximately a 50% interest in the
    project. For this investment, the Company will receive a minority
    interest equivalent to a specified percentage of all project cash flow
    and profits and losses. The Company's exact percentage interest in
    Smith/Enron Cogeneration will not be finally determined until six months
    after the funding of the Company's investment, which is expected to occur
    during calendar 1997, assuming certain conditions are met. There can be
    no assurance either that the conditions to investment will be met in the
    future or that the Company will make its cash investment in the facility.

         Dependence on Utility Customers. Each of the Company's projects
    relies upon one power-sales agreement with a single electric utility
    customer for the majority, if not all, of its revenues over the life of
    the power-sales agreement. During fiscal 1996, PG&E, PSNH, and SCE
    accounted for 36%, 21%, and 36%, respectively, of the Company's revenues.
    The failure of any one utility customer to fulfill its contractual
    obligations could have a substantial negative impact on the Company. No
    assurance can be given that a particular utility will not be unwilling or
    unable, at some time, to make required payments under its power-sales
    agreements.

         Potential Earthquake Damage. The Company's California plants are
    located in areas where there is a risk of potentially significant
    earthquake activity. Projects that the Company develops in the future may
    also be located in areas, including India, where there is earthquake
    risk. The Company's earthquake insurance is not sufficient to cover all
    potential losses and there can be no assurance that such insurance will
    continue to be available on reasonable terms.
                                       41PAGE
<PAGE>
    Thermo Ecotek Corporation


    Forward-looking Statements (continued)

    Regulatory Risks

         Potential Rate Reduction by PSNH. PSNH is currently required to
    purchase the electricity produced by two of the Company's Operating
    Companies under long-term power purchase rate orders issued by the New
    Hampshire Public Utility Commission (NHPUC). An agreement between
    Northeast Utilities (NU), parent to PSNH, and the state of New Hampshire,
    arising from the settlement of PSNH bankruptcy proceedings, contains
    language to the effect that PSNH will seek to renegotiate some of the
    terms of certain rate orders with small power producers and the state,
    acting through NHPUC, has supported such efforts. The two affected
    Operating Companies have reached an agreement in principle with PSNH to
    settle the renegotiation of their rate orders. The settlement agreement
    is subject to the approval of the NHPUC on terms acceptable to both PSNH
    and the Operating Companies and the satisfaction of certain other
    conditions. The principal terms of the agreement generally call for the
    two affected Operating Companies to reduce the amount of power sold
    annually to PSNH to 70% of the plants' capacities, and to reduce the
    price per kilowatt paid by PSNH to $.06 per kilowatt hour, escalating
    three percent per year for the remainder of the term of the original,
    applicable rate order. In consideration of these reductions, the
    Operating Companies would receive certain cash settlement payments, paid
    over several years. The settlement, if approved and executed, is not
    expected to have a material impact on the Company's consolidated results
    of operations or financial condition. The Company expects this matter may
    reach resolution in fiscal 1997. Should the settlement not be approved
    and executed, the Company does not believe that PSNH has the right to
    take unilateral action to reduce the price of purchased power under such
    arrangements. Any such unilateral action, therefore, would result in a
    claim for damages by the Company and could be the subject of lengthy
    litigation. An adverse resolution of any such claim could materially
    affect the Company's operations and cash flows.

         Potential Effects of Loss of QF Status or Changes to PURPA. The
    Company 's existing facilities are subject to the provisions of various
    laws and regulations, including the Public Utility Regulatory Policies
    Act of 1978, as amended (PURPA). PURPA provides to Qualifying Facilities
    (QFs) certain exemptions from substantial federal and state legislation,
    including regulation as public utilities. PURPA also requires electric
    utilities to purchase electricity generated by QFs at prices not
    exceeding the costs that would otherwise have been incurred by the
    purchasing utilities in generating the own electricity or in purchasing
    it from other sources (known as "avoided-cost"). Any future changes to
    PURPA could have a material adverse effect on the Company.

         The Public Utility Holding Company Act of 1935 (PUHCA) regulates
    public utility holding companies and their subsidiaries. The Company is
    not and will not be subject to regulation as a holding company under
    PUHCA as long as the domestic power plants it operates are QFs under
    PURPA. If a power plant were to lose its QF status, the Operating Company
    owning or leasing that plant could become a public utility company, which
    could result in the Company becoming a public utility holding company. In
    addition, loss of QF status, regardless of the Company's ability to avoid
                                       42PAGE
<PAGE>
    Thermo Ecotek Corporation


    Forward-looking Statements (continued)

    public utility holding company status, could be a default under many of
    the Company's facility lease and power-sales agreements. In the event of
    any such default, the other parties to such agreements could seek various
    remedies against the Company or could seek to renegotiate such agreements
    on terms more favorable to such parties.

         Potential Increased Competition Due to Regulatory Changes. The
    Company believes that certain regulatory changes are likely to have a
    significant impact on the domestic power market over the next five years.
    The National Energy Policy Act of 1992 exempts a new class of facilities
    from certain federal utility regulation and liberalizes access for
    non-utility generators to the utility power transmission grid. In
    addition, many states are considering the elimination of many of the
    regulations that currently limit the ability of power generators to
    negotiate power-sales agreements directly with industrial and commercial
    customers. The Company believes that the effect of these regulatory
    changes will be to increase competition for the sale of power.

         Limitations Imposed by Environmental Regulation. Federal, state,
    and local environmental laws govern air emissions and discharges into
    water and the generation, transportation, storage, and treatment and
    disposal of solid and hazardous waste. These laws establish standards
    governing most aspects of the construction and operation of the Company's
    facilities, and often require multiple governmental permits before these
    facilities can be constructed, modified, or operated. There can be no
    assurance that all required permits will be issued for the Company's
    projects under development or for future projects, or that the
    requirements for continued environmental regulatory laws and policies
    governing their enforcement may change, requiring new technology or
    stricter standards for the control of discharges of air or water
    pollutants, or for solid or hazardous waste or ash handling and disposal.
    Such future developments could affect the manner in which the Company
    operates its plants and could require significant additional expenditures
    to achieve compliance with such requirements. It is possible that
    compliance may not be technically or economically feasible.

    Risks Associated with Biopesticides Business

         Uncertainty of Market Penetration. The Company's sales growth is
    dependent on the penetration of its products into new markets. The
    primary competition to the Company's products are chemical pesticides,
    and the Company must educate customers that the cost effectiveness and
    efficacy of the Company's products are superior to chemical pesticides in
    order to gain acceptance for application on new crop types in different
    parts of the world. No assurance can be given that the Company's products
    will gain increased acceptance in new market segments.

         Need for Regulatory Approval. The Company's products cannot be sold
    unless the Environmental Protection Agency grants the Company a
    registration for each pesticide product it intends to manufacture or
    sell. The Company must submit extensive toxicological studies and results
    of field testing as well as other studies to the EPA to apply for a
    product registration. The EPA may take many years to approve a
                                       43PAGE
<PAGE>
    Thermo Ecotek Corporation


    Forward-looking Statements (continued)

    registration application. Pesticide registrations under state laws and
    regulations must also be obtained. In addition, pesticide registrations
    must be obtained from foreign governments before the Company's products
    can be sold in the country, and these countries may also require costly
    and extensive studies to support the registration application. There is
    no assurance that the EPA, states, or foreign governments will grant any
    pesticide registrations to the Company. Pesticide registrations may also
    be revoked if the Company violates regulations regarding the
    manufacturing, sale, or labeling of the Company's products.

         Dependence on Proprietary Technology. The Company's products
    incorporate patented, licensed and unlicensed proprietary technology.
    There is no assurance that the Company's patents or licenses will provide
    sufficient protection or commercial benefits, or that competitors will
    not independently develop substantially equivalent or more economical and
    effective technology. There is also no assurance that foreign governments
    will protect the Company's patent rights to the same extent as in the
    U.S. or that the Company's unpatented trade secrets will remain
    confidential or will not be discovered by competitors. There is no
    assurance that the Company will be able to develop new proprietary
    technology to provide the Company with new products which cannot be
    offered by the Company's competitors.

         Highly Competitive Markets and Technological Change. The markets in
    which the Company operates are highly competitive and subject to rapid
    technological change. Many of the Company's products are in research and
    development, testing, or early marketing stages. Many of the Company's
    competitors are large chemical companies with greater financial,
    marketing, and technological resources than the Company. There is no
    assurance that competitors will not develop new products that will render
    the Company's products noncompetitive.

         Product Liability. Application of the Company's pesticide products
    to crops and farm lands could expose the Company to product liability
    claims. Product liability claims could result in Company exposure for
    crop damage or personal injury. Run-off of excess concentrations of
    pesticide products could also expose the Company to claims and
    liabilities for water pollution, including governmental fines and
    penalties.

         Reliance on Third Party Manufacturers and Producers. The Company
    relies on overseas producers of the raw materials for its products and on
    third party toll manufacturers to manufacture and package the raw
    material into a saleable product. There is no assurance that the Company
    will have an uninterrupted supply of raw material or that producers and
    toll manufacturers will produce the products at competitive prices.
                                       44PAGE
<PAGE>
    Thermo Ecotek Corporation


    Forward-looking Statements (continued)

    Other Risks

         Significant Quarterly Fluctuations in Operating Results. The
    Company's operating results fluctuate significantly from quarter to
    quarter based on a number of factors, primarily seasonal energy demand in
    California, which results in higher payments under the Company's
    California power-sales agreements in the months of May through October,
    and lower payments during the remainder of the year, and seasonal demand
    for its biopesticide products. The Company historically has operated at a
    loss or marginal profitability during its second fiscal quarter due to
    the rate structure under these agreements. In addition, the Company's
    operating results can be affected by utility imposed curtailments or by
    any operating problems that cause a plant to operate at less than normal
    capacity, and with respect to its biopesticide business, by agricultural
    conditions such as pest pressure and infestation, amount of rain, the
    occurrence of natural resistance factors, and the increase or decrease in
    agricultural plantings and produce prices.

         Limitation on Access to Operating Company Assets and Cash Flow. The
    Company's operations are conducted through the Operating Companies, and
    the Company's cash flow is contingent on the ability of the Operating
    Companies to make dividends or other distributions to the Company. The
    terms of certain leases and financial agreements to which the Operating
    Companies are parties require that certain funds be held in trust and
    that certain funds be restricted from distribution to the Company. As of
    September 28, 1996, approximately $7.6 million of the Company's cash and
    cash equivalents was restricted from distribution by the terms of certain
    operating companies lease and financing agreements. In addition, until
    such time, if ever, as projections of avoided-cost change, all cash flows
    from the Woodland operation, other than cash required for tax
    distribution, will be restricted from distribution to the Company. The
    inability of the Company to receive distributions from the Operating
    Companies could have a material adverse effect on the future growth of
    the Company.








                                       45PAGE
<PAGE>
Thermo Ecotek Corporation

Selected Financial Information
                                           Nine
                                          Months
                       Year Ended         Ended            Year Ended
                   --------------------  ---------  ---------------------------
(In thousands                            
except per         Sept. 28,  Sept. 30,  Sept. 30,  Dec. 31,   Jan. 1,  Jan. 2,
share amounts)       1996(a)       1995    1995(b)      1994   1994(c)     1993
-------------------------------------------------------------------------------
                             (Unaudited)
Statement of Income Data:
Revenues            $150,076   $139,319   $107,139  $134,261  $117,691 $104,785
Net income            17,780     12,540     10,264     9,651     3,890    2,332
Earnings per share:
    Primary              .70        .58        .46       .48       .19      .12
    Fully diluted        .53        .43        .34       .37       .19      .12
Weighted average
  shares:
    Primary           25,476     21,796     22,477    20,118    19,999   20,016
    Fully diluted     36,315     33,114     33,794    31,193    19,999   20,016

Balance Sheet Data:
Working capital     $ 76,217              $ 58,361  $ 28,418  $ 17,295 $  5,014
Total assets         449,145               390,476   285,970   302,345  101,455
Long-term
  obligations        209,281               202,360   163,800   177,300   20,188
Redeemable
  convertible
  stock                    -                     -         -         -   10,000
Shareholders'
  investment         129,687                92,985    55,146    45,495   31,605

(a) Reflects the March 1996 issuance of $37 million principal amount of
    noninterest-bearing subordinated convertible debentures and the May 1996
    acquisition of the biopesticides division of W.R. Grace & Co.
(b) In June 1995, the Company changed its fiscal year end from the Saturday
    nearest December 31 to the Saturday nearest September 30. Accordingly, the
    Company's 39-week transition period ended September 30, 1995 is presented.
(c) Reflects the issuance of $68.5 million aggregate principal amount of 4%
    subordinated convertible debentures to Thermo Electron and the assumption 
    of $128.5 million of nonrecourse tax-exempt obligations.









                                       46PAGE
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    Thermo Ecotek Corporation

    Common Stock Market Information

         The following table shows the market range for the Company's common
    stock on reported sales prices on the American Stock Exchange (symbol
    TCK) since January 20, 1995, the date the Company's common stock began
    trading on the exchange. Prices have been restated to reflect a
    three-for-two stock split, effected in the form of a 50% stock dividend,
    which was distributed in October 1996.

                                 Fiscal 1996                Fiscal 1995
                           ----------------------     ----------------------
    Quarter                  High          Low           High          Low
    ------------------------------------------------------------------------
    First                  $11 1/6       $ 8 11/12    $ 8 2/3       $ 7 1/3
    Second                  14            10 3/4        9 1/2         8 1/4
    Third                   16 5/6        13 1/6       11 7/12        8 5/6
    Fourth                  16 5/12       13 1/3

         As of November 22, 1996, the Registrant had 778 holders of record
    of its common stock. This does not include holdings in street or nominee
    names. The closing market price on the American Stock Exchange for the
    Registrant's common stock on November 22, 1996, was $14 3/4 per share.

    Dividend Policy

         The Registrant has never paid cash dividends because its policy has
    been to use earnings to finance expansion and growth. Payment of
    dividends will rest within the discretion of the Board of Directors and
    will depend upon, among other factors, the Registrant's earnings, capital
    requirements, and financial condition. See "Management's Discussion and
    Analysis of Financial Condition and Results of Operations" for a
    discussion of certain restrictions applicable to the use of certain
    funds.

    Shareholder Services

         Shareholders of Thermo Ecotek Corporation who desire information
    about the Company are invited to contact John N. Hatsopoulos, Vice
    President and Chief Financial Officer, Thermo Ecotek Corporation, 81
    Wyman Street, P.O. Box 9046, Waltham, Massachusetts 02254-9046, (617)
    622-1111. A mailing list is maintained to enable shareholders whose stock
    is held in street name, and other interested individuals, to receive
    quarterly reports, annual reports, and press releases as quickly as
    possible. Beginning with the 1997 fiscal year, quarterly distribution
    will be limited to the second quarter report only. All quarterly reports
    and press releases are also available through the Internet at the
    Company's home page on the World Wide Web (http://www.thermo.com/subsid
    /tck.html).

    Form 10-K Report

         A copy of the Annual Report on Form 10-K for the year ended
    September 28, 1996, as filed with the Securities and Exchange Commission,
    may be obtained without charge by writing to John N. Hatsopoulos, Vice
    President and Chief Financial Officer, Thermo Ecotek Corporation, 81
    Wyman Street, P.O. Box 9046, Waltham, Massachusetts 02254-9046.
                                       47PAGE
<PAGE>
    Thermo Ecotek Corporation


    Stock Transfer Agent

         American Stock Transfer & Trust Company is the stock transfer agent
    and maintains shareholder activity records. The agent will respond to
    questions on issuances of stock certificates, changes of ownership, lost
    stock certificates, and changes of address. For these and similar
    matters, please direct inquires to:

         American Stock Transfer & Trust Company
         Shareholder Services Department
         40 Wall Street, 46th Floor
         New York, New York 10005
         (718) 921-8200

    Annual Meeting

         The annual meeting of shareholders will be held on Thursday, March
    13, 1997, at 10:00 a.m. at Thermo Electron Corporation, 81 Wyman Street,
    Waltham, Massachusetts.





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