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                                                                   EXHIBIT 10.21

                                 [LETTERHEAD OF CATALYTICA ENERGY SYSTEMS, INC.]


February 16, 2001


Ronald L. Alto


Dear Ron:

I am pleased to confirm our offer of employment as a Vice President, Sales and
Services for Catalytica Energy Systems, Inc.(CESI).  As you know, CESI is
entering an exciting period in its growth and we look forward to you
contributing significantly to our future success.

Your start date will be on or about March 1, 2001 and you will be headquartered
in our Scottsdale, Arizona facility.

The information below summarizes the terms of this offer.

Compensation
------------

Your salary will be $11,667 per month, which annualizes to $140,000. We expect
our compensation plan to include an additional annual bonus and stock option
opportunity.  Details of the 2001 plan will be finalized and communicated in the
next few weeks.  As part of your hiring agreement you will be granted options in
the amount of 10,000 shares of Catalytica Energy Systems, Inc. These options
will be granted shortly after your start date and will be priced at the date of
grant.  They will be subject to the standard 4-year vesting schedule. You will
also receive a sign-on bonus of $10,000.  You will receive the sign on bonus on
your start date March 1, 2001.


Note:  Your next merit increase and option grant review will be March of 2002,
----
consistent with our annual compensation process.

Ron, please recognize that stock option values and future bonus awards are not
guaranteed.  They will be based on company and individual performance.

Benefits
--------

Effective upon your date of hire, you and your eligible dependents will be
covered under the Catalytica Energy Systems, Inc. health (medical, dental, and
prescription drugs), long term disability, and life insurance plans. On July 1,
2001 you will be able to participate in the Employee Stock Purchase Plan at a
discounted price.  You will be eligible to participate in the 401(k) retirement
plan on the first of the month following three months of employment.  The 401(k)
plan includes a 60% match (up to 6% of your contribution) and immediate vesting
of all company contributions.  You will be eligible for four weeks paid
vacation; holidays and sick time earned on an accrual basis from your date of
hire.
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Ronald Alto
Page 2 of 2




Your employment with Catalytica Energy Systems, Inc. is on an "at will" basis
which means that either you or the Company can terminate the employment
relationship at any time with or without cause.  This offer is contingent upon
acceptable results of a routine background check and a pre-employment drug-
screening test.  Catalytica must receive results of the drug test before any
start date.  Please contact Regina Machado at (650) 940-6323 to make the
appropriate arrangements with you.

We look forward to you becoming a key member of the Catalytica Energy Systems
Leadership team.  Please indicate your acceptance of this offer by signing below
and returning the original to me.  This offer is valid through Friday, February
23, 2001.


Sincerely yours,


/s/ Craig N. Kitchen
Craig N. Kitchen
CEO and President



I accept the offer of employment with Catalytica Energy Systems, Inc., described
in this letter.  I also understand that this letter is not a contract of
employment.

/s/ Ronald L. Alto      2-19-01
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Ronald L. Alto          Date