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July 17, 2012

Capstone Turbine Ramps Revenue, Earnings Not So Much

by Debra Fiakas CFA
Capstone logo.png Capstone Turbine Corporation (CPST:  Nasdaq) made it to the Efficiency Group of our Mothers of Invention Index because of its line of low-emissions micro-turbines.  The company has sold 6,500 of them around the world.  The fruits of this building installed base are evident in Capstone’s top-line, which has increased in each of the last three years and reached $109.7 million in the fiscal year ending March 2012.  The bottom-line has followed in the same direction, but is still in the red.  In the last fiscal year, Capstone recorded an $18.8 million loss.

The $18.8 million loss included a $14.0 million benefit from the change in fair value of warrants Capstone issued in the course of capital raises over the last five years.  Accounting treatment of warrant liabilities is a non-cash item, whether a benefit associated with the write-down of the liability or a charge resulting from a write-up of the liability.  This means the net loss was closer to $32.8 million.  In the previous two years Capstone recorded loss associated with outstanding warrants.

All that marking up and marking down of some illusory warrant liability makes Capstone’s bottom line a bit noisy, not to mention useless.  That is why cash flow from operations is such a valuable measuring stick for companies like Capstone.  In the last fiscal year Capstone used $21.4 million in cash resources to support operations.  The company used a total of $21.9 million in fiscal year 2011 and used $36.6 million in fiscal year 2010.

The take-away from this little stroll through Capstone’s cash flow from operations is this:  the company’s operations are simply not producing the results one might expect for a company with significant installed base.  Investors long in CPST will probably roll their eyes on this statement.

The bull case points to Capstone’s large addressable market and the great promise in the oil and gas industry and manufacturing.  Capstone can point to a variety of applications for its product from powering oil and gas field equipment or providing economical power in remote locations.  Then there is the flexibility of its technology in accepting a variety of fuels from waste gases, to propane, to wet flash gas at gas well heads.

Frankly, I am also impressed with Capstone’s product line.  However, I am disappointed in management’s performance in conserving the company’s ample cash reserves.  Captstone has dipped into the capital market well several times with what has turned out to be dilutive equity offerings.  Total shares outstanding have increased 72% over the last three years.  There are 26.5 million warrants waiting in the wings for exercise that could bloat shares outstanding by another 9%. 

Dilution can be tolerated if at the end of the day there is more value to spread around.  Unfortunately, there is just something about a big bank account that brings the spendthrift out in a management team.  Even if that accusation cannot be made against Capstone’s management them, I would like to see the company undertake a cost-cutting program of some kind and more value falling to shareholders.  Even the Capstone bulls could not disagree with that.

Debra Fiakas is the Managing Director of Crystal Equity Research, an alternative research resource on small capitalization companies in selected industries.

Neither the author of the Small Cap Strategist web log, Crystal Equity Research nor its affiliates have a beneficial interest in the companies mentioned herein. CPST is included in Crystal Equity Research’s The Mothers of Invention Index.

March 28, 2011

Four Green Money Managers' Top Stock Picks

Green money managers' stock picks after the Japanese nuclear crisis.

Even as the nuclear disaster in Japan unfolds, it's clear that the world's energy industry will be forever changed. Russian reactors were never considered safe, but a Japanese to have a nuclear meltdown is an entirely different story.

Market Reaction

Since Monday, nuclear stocks and ETFs have been plummeting. As of Wednesday night, The Market Vectors Uranium + Nuclear Energy ETF (NYSE:NLR), the iShares S&P Global Nuclear Energy Index (NASD:NUCL), PowerShares Global Nuclear Energy Portfolio ETF (NYSE:PKN), and the Global X Uranium ETF (NYSE:URA) are down 17%, 14%, 16%, and 29% respectively.

Yet we still need energy, and when the dangers of traditional energy once again rise in our awareness, the safety of renewable energy gains appeal. Over the same three days, the most liquid of the Clean Energy ETFs, the Powershares Wilderhill Clean Energy ETF (NYSE:PBW), the First Trust ISE Global Wind Energy ETF (NYSE:FAN), and the Guggenheim Solar ETF (NYSE:TAN) gained 1%, 2%, and 11%, respectively, even as the S&P 500 fell 3%.

The market thinks that the outlook for clean energy in general and solar in particular, has improved greatly. This makes sense, because as the Japanese rebuild their energy infrastructure, they will stay away from nuclear, and focus on electricity that's safe, and quick to deploy. Green energy fits the bill.

Stock Picks

If green energy will do well in general, which stocks will do the best? I emailed my contacts among green investment fund managers, and asked them each to pick one stock they thought was particularly well positioned. Here are their picks.

Garvin Jabusch: LDK Solar

Jabusch manages the Sierra Club Green Alpha Portfolio. He thinks that, in the long run, solar will be the big winner, followed by wind. His top pick is LDK Solar (NYSE:LDK), which his fund holds. He also blogs about green investing, and has just finished an article on Japan, Nukes, and Solar.

John Segrich CFA: Capstone Turbine

Segrich manages the top-performing Gabelli SRI Green Growth Fund (SRIGX). Like many contrarian investors, he's not great at following instructions (I asked for no more than three sentences), but he has interesting things to say:

The big beneficiary in the aftermath of the Japan nuclear crisis will be natural gas related companies. In particular Japan is likely to rebuild generation infrastructure with natural gas and in particular liquid natural gas (LNG). The pushback against nuclear will not necessarily be the boon to renewable that many are suggesting. Renewables are not failsafe in a disaster scenario (look at how many solar panels were shattered in the quake) and they cannot replace baseload power. Gas is the logical and cleanest and safest solution and we would expect Japan, Italy, and Germany to build more gas vs increase emphasis on renewable. … one interesting way would be to look at companies whose business model is gas based and can handle local based generation with rapid deployment:

Capstone Turbine (NASD:CPST) makes gas powered microturbines that can be locally installed and can provide immediate efficient and clean power generation for stand alone facilities (hospitals, schools, hotels, critical infrastructure) – we are already seeing deployment on infrastructure in the US to provide constant, reliable, failsafe power. I would expect to see adoption of these solutions for rapid deployment in disaster areas such as Japan at the moment to provide critical power on a local level as needed. Longer term, integrating these turbines as a backup/distributed power solution also makes sense for future emergency planning.

Sam Healey: MEMC Electronic Materials

Sam Healey manages a Cleantech stock portfolio at Lamassu Capital. He thinks MEMC Electronic Materials (NYSE:WFR) has two chances to benefit from the disaster. First, the nuclear renaissance stalls, it will boost to the Solar industry, and MEMC will benefit. By year end WFR will be vertically integrated from Poly [silicon] production through installation via Sun Edison and will be able to capitalize on any global expansion of solar power. Second, and more important in the near term, Japan accounted for 10-20% of the global Poly manufacturing of Semi[conductor] Wafers. Therefore, MEMC, will be able to gain share in the near term as it absorbs some of the demand for Semi Wafers, and perhaps will also have better pricing. MEMC does have one plant in Japan that is currently off line as a result of the earthquake.  The plant does not produce raw poly but was one of MEMC's 8 plants that manufacture 300 MM wafers and 1 of 3 MEMC plants that engage in wafer polishing and slicing.  The risk is that they will not be able to replace this production at their non Japan plants.

Tom Konrad CFA: NGK Insulators

My own pick is NGK Insulators (Tokyo:5333, Pink:NGKIF). NGK has fallen along with the Japanese market, but stands to benefit from the rebuilding of the northern Japanese grid. NGK's manufacturing is located in the central and southern part of the country, so the company should not have been too badly hurt by the earthquake and tsunami. NGK also sells the most mature, high capacity grid-based electricity storage technologies: the Sodium-Sulfur (NaS) battery. Especially on a small island like Japan, electricity storage is very helpful for integrating the variable power from solar and wind, and the Japanese are likely to favor this home-grown technology over foreign rivals.

Solar, distributed Natural gas, Electric grid & storage: they could all be winners. What do you think? The comments are open. I've also started a poll.

This article was published on Tom Konrad's Green Stocks blog on March 18th.

DISCLOSURE: No Positions. I did not ask the money managers interviewed if they own their picks, but we can assume they do.

Past performance is not a guarantee or a reliable indicator of future results.  This article contains the current opinions of the author and such opinions are subject to change without notice.  This article has been distributed for informational purposes only. Forecasts, estimates, and certain information contained herein should not be considered as investment advice or a recommendation of any particular security, strategy or investment product.  Information contained herein has been obtained from sources believed to be reliable, but not guaranteed.

July 09, 2009

$3 Billion For Cleantech & Alt Energy

Charles Morand

The DOE made public earlier today the amount of money that will awarded to clean power projects in lieu of the usual tax breaks: $3 billion.

This will allow project proponents to receive a direct cash grant now instead of a Production Tax Credit or an Investment Tax Credit later on. The guidance document notes the following:

"Section 1603 of the Act’s tax title, the American Recovery and Reinvestment Tax Act, appropriates funds for payments to persons who place in service specified energy property during 2009 or 2010 or after 2010 if construction began on the property during 2009 or 2010 and the property is placed in service by a certain date known as the credit termination date (described more fully below in the Property and Payment Eligibility section). Treasury will make Section 1603 payments to qualified applicants in an amount generally equal to 10% or 30% of the basis of the property, depending on the type of property."
 
This is the cherry on a sundae of cash handouts announced over the past few months for the alt energy and cleantech industries. Solar and wind installations - which account for the lion's share of alt energy investments - have yet to come back to life in any significant way. It is hoped by both government and industry people that this new measure will provide sufficient impetus in the near term to carry the sector through the remainder of the recession.

To be continued... 

May 16, 2006

Capstone Receives $1.2 Million Order

Capstone Turbine Corp (CPST) announced today that it has received an order for a nationally recognized health care facility totaling approximately $1.2 million of Capstone C65 Micro Turbine® energy systems. The multi-pac cogeneration energy system will be installed in one of their facilities in Southern California.

The 65-kilowatt systems are the latest generation of MicroTurbine energy systems developed by Capstone. In addition to a net power output of 65 kilowatts, the Integrated Combined Heat and Power (ICHP) systems have 80% electrical efficiency, and NOx emissions of less than 5 parts per million. [ more ]

March 22, 2006

Elliott Energy, Northern Power Agree to Develop & Distribute Microturbine-based Products for Oil & Gas Market

prtn_logo.gifNorthern Power, a subsidiary of Distributed Energy Systems Corp (DESC), has signed an original equipment manufacturing (OEM) agreement with Elliott Energy Systems (Stuart, FL). The agreement gives Northern Power exclusive worldwide rights to incorporate Elliott technologies in the development of microturbine-based products for the oil and gas industry. Northern Power has also signed a distributor agreement with Elliott to sell and service its existing microturbine-based systems. [ more ]

February 27, 2006

FuelCell Energy and Capstone Achieves Record in Electrical Efficiency

fcel_logo.gifFuelcell Energy Inc (FCEL) and Capstone Turbine Corp (CPTC) announced that its patented Direct FuelCell/Turbine® (DFC/T®) achieved a record-setting performance -- establishing a mark of 56 percent electrical efficiency in the sub-megawatt (sub-MW) class for 800 continuous hours during initial testing.

This significantly exceeds the electrical efficiency of other distributed generation technologies of similar size. For example, gas engines have an electrical efficiency of 30 to 42 percent, low temperature fuel cells have an electrical efficiency of 30 to 35 percent and microturbines have an electrical efficiency of 25 to 30 percent. [ more ]

I always love when these small companies get together and build something that is better than their indvidual efforts alone. The system they have built takes directs the excess heat that is generated by the fuel cell and powers a modified Capstone microturbine.

January 25, 2006

Capstone Products Receive GSA Schedule Listing

Capstone Turbine Corp (CPTC) announced that Capstone-branded products have been approved by the General Services Administration (GSA) and are now on the GSA Schedule.

"As a result of our continuing efforts to place Capstone MicroTurbine® products into large market potentials, we have now created an avenue for the sale of Capstone-branded microturbine products to the U.S. government," said Capstone CEO John R. Tucker. "We are very pleased to receive this GSA approval and recognize the importance of being qualified as a GSA Schedule supplier. We have proactively taken this step, and created this opportunity, to provide Capstone products to one of the largest potential distributed generation buyers worldwide." [ more ]

Shares of Capstone rose 11% yesterday on this news and the stock is up another 1% in pre-market trading this morning.

December 06, 2005

Capstone Introduces a New Generation of MicroTurbine Energy Systems

Capstone Turbine Corp (CPTC) announced that next month the company will begin shipping an enhanced line of 65-kilowatt microturbine models that will replace its popular C60 series of power and heat generators.

The new natural gas fueled C65 and C65-ICHP (with factory-integrated heat recovery) will deliver higher electrical and thermal output without any change to the product's weight and dimensions, which are much lighter and more compact than similar capacity generators. This reduces footprint requirements and enables greater flexibility in indoor, outdoor and rooftop setting. [ more ]

Capstone also released news that the new C65 model will also be retrofitted so that it can use waste gases from landfills and sewage treatment plants as an alternative to natural gas. The stock gapped up this morning over 6% and looks like it is trading nicely off the current near-term support levels of $3.50.

cpst_20051206.png

I will be adding to my current holdings of this stock this morning in the Marketocracy mutual fund. This will bring my total up to 2/3rds of my planned holdings for this stock.


November 15, 2005

Shares of Capstone Rising

Shares of Capstone Turbine Corp (CPTC) are rising sharply this morning with high volume and gapped up with a gain of over 35% this morning. There is currently no news to cause this increase today and I will be digging deeper to find out what is going on. This is good news for the stock and also the portfolio. My holdings are now up over 50% in about 10 days.

If you were thinking of buying the stock now, you should wait till some news confirms this move.

Update at 12:15 EST: The only news I can find on the this move is from the Yahoo message boards and an expected announcement of Wall Mart working with United Technologies to supply the PureComfort CHP system for a store in Colorado. The UTX system utilizes the Capstone microturbine. I place zero reliance on message board posts and feel that this news is not the reason. I will keep digging.

Update at 1:25 EST: The Wall Mart story has been confirmed. At least the rumour of a potential big purchase by Wall Mart story has been confirmed. Well even message board posters can get it right sometimes.

Shares of Capstone Turbine Corp (CPTC) , a maker of microturbine generators powered by natural gas, jumped 36 percent on Tuesday on a television report that Wal-Mart Stores Inc. will place a big order for the company's machines. [ more ]

Update at 5:30 EST I should have known this was a Jim Cramer induced rally. He was the one that floated the Wall Mart rumor last night on his TV show. I don't watch him and don't like his hype. The hype is great for traders because it create volatility. So I fully expect this stock to settle back down over the coming weeks as large owners take profits. If you don't have a position in the stock and want to own it for the long term, I would wait and buy below the $3.00 level. I do believe in this company and I have no plans to sell my holdings, I just would not be a buyer at this price level.

November 04, 2005

Shares in Capstone Purchased

This morning I purchased shares of Capstone Turbine Corp (CPTC) in both my personal portfolio and the mutual fund. I have been waiting for the stock to show some strength after its recent declines. The stock appears to have some nice support at the $2.25 level as a bottom. They will be announcing quarterly earnings on November 10th.

Capstone Turbine developments and manufactures microturbine generators. The company’s microturbines can also be used as generators for hybrid electric vehicle applications. It also offers Model C60 integrated combined heat and power systems (CHP). A one third stake have been purchased at an average price of $2.75.

DISCLAIMER: I am not a registered investment advisor. The information and trades that I provide here are for informational purposes only and are not a solicitation to buy or sell any of these securities. Investing involves substantial risk and you should evaluate your own risk levels before you make any investment. Past results are not an indication of future performance. Please take the time to read the full disclaimer here.

October 17, 2005

Microturbine Article

highlights_microturbine1.jpg
My nine year old daughter still receives Highlights magazine in the mail on a monthly basis. If you have a child and have ever spent any amount of time in a pediatricians office, you have probably logged a fair amount of time flipping through this magazine while waiting to see the doctor.

This weekend I was at home flipping through the November issue of Highlights and was very surprised to find an article about Microturbines.

The introduction gives the basics of how a turbine works. Then the single page article give a very good description of how you can take jet engine technology and shrink it down to provide electricity.

Engineers had to solve several problems to squeeze a jet engine down to the size of a microturbine... Today, a microturbine can fit inside a cabinet the size of a big refrigerator. It makes enough electricity for 10 to 15 homes and helps heat them as well.

highlights_microturbine2.jpg

The amazing idea for me is that it wasn't an article about solar power, or even fuel cells. I understand they may have already covered those topics in past months, I was very surprised and happy to see an introduction to a small niche player in the alternative energy sector. It is also a good indication about this represents the wave of the future. This children's magazine is doing a good job about introducing new ideas and concepts to our children. We are starting to present the wonders of science and alternative energy to the next generation at a young age and I feel this is a great idea.

I'm sure Capstone Turbine Corp (CPTC) is pleased and maybe Keith can let me know if they had a hand in helping to write the article (hint?)

September 16, 2005

Shares of Capstone Down over 11%

Capstone Turbine Corp (CPTC) shares closed the day with a loss of 11.38%. The company said it may end its OEM partnership agreement for its microturbine products with UTC Power LLC (United Technologies UTX.)

From MarketWatch:

Capstone cited certain breaches, including UTC's failure to meet its sales targets for the year, as reason for the potential termination of their OEM deal. Capstone said it has notified UTC that it has 90 calendar days to cure the breaches. [ more ]

The first question that you may ask is, why would this affect Capstone?

The first way to answer this is that Capstone is in the business of developing and manufacturing their microturbine technology. They realized that their core competency was in creating the products, they were not in the business of marketing and commercializing it. This is why they partnered with United in the first place. If they cancel the partnership with UTX, where are they going to sell their products and who is going to be selling it? They could have the most wonderful and most valued products in the world, but if they can't sell them then the current valuations on this stock are too high. Hence the large decline today.

cpst_20050916.gif

An even simpler explanation is that, this stock has been a huge mover over the last couple of months. It could be as simple as taking profits on your 500% gain from this month?

I still believe in this company and it has been on my short list for purchase. I was just looking for a good entry point. I'm not sure this is it, since it could go much lower. I would love to hear from them about a potential replacement to UTX if it comes down to it. Right now the notice has been sent and they have 3 months to fix any problems so this could all be just posturing.

I will be closely looking at the trading of this stock on Monday after this news and any additional news is digested over the weekend. We shall see.

July 12, 2005

Capstone Turbine gets takeover interest

Capstone Turbine Corp (CPTC) said third parties have recently expressed interest in taking over the company. The company said its board has adopted a stockholder rights plan to ensure equal treatment in the event of a takeover attempt. It said its goal is not to prevent an acquisition but to deter coercive takeover tactics. [ more ]

June 20, 2005

Capstone's New York Office Books 2.4 MW of MicroTurbine Orders

Capstone Turbine Corp (CPTC) received orders for 2.4 megawatts of its 60-kilowatt microturbine systems from the company's Brooklyn sales and service office for customers in New York and New Jersey.

These most recent orders are direct sales for Capstone, which will supply, commission and service the systems destined for several locations in the New York and New Jersey region. These units will fulfill various application requirements such as baseload power for daily energy cost reduction, combined heat and power (CHP), back-up power, direct exhaust for food processing and high-pressure steam generation. [ more ]

May 31, 2005

Capstone Turbine Receives Follow-On Order from France for 2.8 MW of Renewable Energy MicroTurbines

Capstone Turbine Corp (CPTC) announced a follow-on order from its distributor in France for 2.8 megawatts of its 30-kW biogas-fueled microturbine products. The new order from Soffimat (www.soffimat.com) is the second major order from the Paris-based energy systems distributor. The previous order seven months ago was for one megawatt of Capstone MicroTurbine(TM) energy systems. [ more ]

April 19, 2005

European Office of Capstone Turbine Receives 3.2 MW of MicroTurbine Follow-On Orders from Russia and Italy

Capstone Turbine Corp (CPST) announced follow-on orders from distributors in Italy and in Russia amounting to 3.2 megawatts of its 60-kW microturbine products.

Capstone's distributor in Russia, BPC Energy (www.capstone.ru), has issued an order for 1.8 megawatts of self-starting, stand-alone microturbine power systems to be deployed at a prestigious ski resort near St. Petersburg. The microturbines will be the sole source of power and heat for a luxury hotel and other facilities of the remote, off-grid resort. The array is anticipated to be online later this year in time for the ski resort's high season. [ more ]

January 11, 2005

Samsung Orders 1.5 MWs of Capstone MicroTurbine Energy Systems

Samsung Corporation placed an order for 1.5 megawatts of microturbines with Capstone Turbine Corp (CPTC) in a deal worth more than $1 million.

Samsung Corporation, the Korean distributor of Capstone MicroTurbine(TM) combined heat and power systems, will install four C60 models at their Samsung Plaza headquarters, 11 at a hospital and 10 at a high-rise apartment complex. Two Capstone C30 units will be deployed in a biogas application project.

November 09, 2004

FPL Studies Microturbine Technology At Tomoka Correctional Institution

fpl_logo.gifFPL Group Inc (FPL) announced that it is working in cooperation with the Electric Power Research Institute (EPRI) and the state's Tomoka Correctional Institution to study microturbine energy technology. The project places a microturbine at the Tomoka Correctional Institution in Daytona Beach.

Microturbines are small combustion generators that efficiently create heat and electricity on-site, conserving grid power. About the size of a refrigerator, the natural gas fueled microturbine at Tomoka has extremely low emissions of smog-forming NOx and other pollutants compared to other energy sources. The Tomoka project is grid-connected to FPL's electric system. It will heat water for the laundry area at the correctional facility. [ more ]

August 01, 2004

Tiny gas turbines could spell end of batteries

Keeping an eye on next generation energy technologies a pair of Aussies are now producing micro turbines that can be used to generate power for many MEMS systems. [ full story at theage.com.au ]

You can learn more about micromachines and microturbines at the following Economist.com link. [ Micromachines: The Engines of Lilliput ]


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