Your problem is the unexpected rendering of stderr lines, which inappropriately render as if they were errors.^[1] Do the following to avoid the problem:

• Apply redirection 2>&1 directly to the java.exe call.

  • This merges java.exe's stderr output into PowerShell's success output stream (PowerShell's stdout analog), allowing both stdout and stderr output to be processed in a PowerShell pipeline.

• Pipe the result to a ForEach-Object call that calls the .ToString() method on each resulting object (% is a built-in alias of ForEach-Object)

  • This stringification is necessary, because PowerShell wraps each stderr line in a System.Management.Automation.ErrorRecord instance, which renders as if it were a PowerShell error, which causes the unexpected output you saw. Stringification via .ToString() yields the original stderr text.^[2]

• Apply the redirection to the log file (>>"$JenkinsPath\agent.log") to the latter; since all java.exe output is at that point routed via the success output stream >> is sufficient (i.e. no need for *>> in order to capture all streams).

# java.exe arguments omitted for brevity
& "$Java\java.exe" ... 2>&1 | % ToString >>"$JenkinsPath\agent.log"

Simpler alternative, via Add-Content:

# java.exe arguments omitted for brevity
& "$Java\java.exe" ... 2>&1 | Add-Content "$JenkinsPath\agent.log"

• Add-Content, like Set-Content, implicitly stringifies its input objects via .ToString().

• Character-encoding caveat:

  • In PowerShell (Core) 7, both solutions are equivalent and create BOM-less UTF-8 files, given that this encoding is the consistent default in this PowerShell edition.

  • By contrast, in Windows PowerShell (the legacy, ships-with-Windows edition whose latest and last version is 5.1.x), the redirection operators > / >> are in effect aliases of Out-File, which defaults to UTF-16LE with BOM ("Unicode"), whereas Add-Content / Set-Content use the system's active legacy ANSI code page by default; use the -Encoding parameter as needed, but note that -Encoding utf8 invariably creates a UTF-8 file with BOM.

^{[1] Specifically, it is the first stderr line output by an external program such as java.exe that is rendered this way when a 2> or *> redirection (or a >> variant) is applied to an external-program call. In the console (terminal), subsequent stderr lines render by their text only, but are printed in red too. When redirecting such output to a file, such as in your case, coloring is lost, so it is only the first, error-like representation that stands out. A simple test command:
cmd /c 'echo stderr1 >&2 & echo stdout1 & echo stderr2 >&2' 2>&1
Note that the original output order among the stdout and stderr streams isn't always maintained - see GitHub issue #5424 for a discussion.}

^{[2] By contrast, use of > / >> / Out-File results in implicit stringification that uses the rich for-display representations you also see when outputting to the PowerShell console, via PowerShell's output-formatting system - except when stderr output from an external program isn't captured, i.e. prints directly to the display, in which case stderr lines print normally, as uncolored strings.}