Capstone Turbine: Thinking outside the micro box

If you think the market for hybrid and electric vehicles will explode in the near future and you want to be on board for the ride, or you’re convinced that we’ll still need to rely on hydrocarbon fuels for the foreseeable future and want a stock that gets you into offshore drilling, look no further than Capstone Turbine Corp. (Nasdaq:CPST).

Founded in 1988, Capstone makes microturbines that help in the stationary power distribution generation needed for combined heat and power (CHP) applications, which can be used as primary or backup power sources and a number of Class A office buildings are ordering them.

Because the microturbines require little maintenance, two of Capstone’s biggest customers are Brazilian and Mexican national oil companies Petrobras and Pemex, who use the microturbines for CHP applications on their unmanned offshore drilling platforms.

Other key markets for Capstone’s microturbines include hybrid electric buses and multiple biogas applications. New markets beckoning for microturbine product, according to the company, are the Class A truck market, which is currently squeezed by high diesel prices and stringent emission standards, and the solar energy market, where the microturbines could be powered by solar energy during the day and other fuels at night.

The company’s air cushion technology, which eliminates the need for lubrication and reduces maintenance to near zero, has proven so successful that the turbines are getting to be less micro. Capstone will begin delivering a new 200-kilowatt system in September, adding to the current 30 and 65-kilowatt systems. The Chatsworth, Calif.-based company has already taken its first order for a 1,000-kilowatt system, which can be linked together to form systems as big as 10 megawatts.

For Sanjay Shrestha at Lazard Capital, this means the company’s order backlog is more significant at the moment than earnings. Skyrocketing raw material costs widened the loss for the fiscal fourth quarter ended March 31, to $0.07 . . .

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