CPST

[ArtM72]

If anyone has lost patience with IOC but somehow oddly found that a pleasurable experience then do I have a stock for you, Capstone Microturbine.  I've been in it for nearly a decade, watching it slowly go through a series of near death experiences.  Once trading near 100, going through a number of secondaries, almost getting delisted by NASDAQ a few months ago for trading under a buck, the stock is back moving again.  The news?  It is almost ready to make a profit (maybe).

The company sells "microturbine" generators that spin on a cushion of air at around 80,000 rpm.  No lubricants, one moving part.  Natural gas, diesel, sour gas, biogas, propane.  It burns most anything for fuel.  With few exceptions the units work with extremely low maintenance costs.  Wherever you figure you need a genset with a power output of 30KW to 3 MW you are likely to see a place where Capstone has an installation.  Hotels, hospitals, schools, high rises.  Data farms.  Ronald Reagan library.  Take the "waste" heat off the extremely clean turbine exhaust and use to to power chillers for air conditioning (or obviously heating) and you can reach total thermal efficiencies over 80%.

Capstone's recent market growth has been in oil and gas where the turbines are being employed in large numbers in Australia, Russia and the US especially in shale oil and gas fields and their associated pipelines.  Clean, reliable and very portable.  Yachts for the rich and ultra rich.  The machines are quiet and have essentially no vibration.  An article just published about Wrightspeed and its electric trucks http://www.businessweek.com/articles/2013-07-22/wrightspeed-trucks-behind-the-wheel-of-super-fast-electric-delivery-truck doesn't mention Capstone by name, but it is Capstone's microturbine that power the Wrightspeed drive train.  Denver is getting 30 new busses powered by Cappers.  The Charlotte airport has been running hybrid busses powered by Capstone for years.

Here's a link to Capstone's current management presentations:  http://phx.corporate-ir.net/phoenix.zhtml?c=120708&p=irol-presentations  What you will find is a company with a uniform compound annual sales growth rate since 2007of about 35%.  Competing with 100 years of internal combustion engine technology has yet to be profitable, but Capstone might just be turning the corner.

As I intimated, it has been a long hard slog for this investor and I should have pulled more money out earlier.  The technology though is compelling in so many ways I simply fell in love with the company.  Bad to do, yeah I know.   But on the other hand maybe the world could use a small, light, efficient, ultra clean way of turning natural gas or diesel into electricity that provides many options for the high grade heat in its exhaust.  Did I mention the electronics?  These units have been standing alone and operating in parallel connected with the grid or other Capstone generators in a microgrid.  Perfect choice for PNG small towns :-)

Anyway, thought I'd contribute this as an idea.

[admin]

Very interesting, Art. I'll have a look. Why don't you put it up in the competition. Streamingeagle already has me convinced of the potential of XXII

[ArtM72]

As a followup to my quip about powering PNG small towns with Capstone microturbine microgrids here's a recent Forbes article about a Russian power utility doing just that:

http://www.forbes.com/sites/williampentl...ed-energy/

[admin]

Are these Capstone microturbines, Art? Actually I'm reading the July 2013 presentation and it speaks of a $6.4M Russian order, but for a pipeline project.
So many interesting companies, so little time, darn!

[admin]

Interesting 35% GAGR, I have to say, not to mention the product backlog and margin improvement, although cash is down from $50M to $38M in a year and there is something like a 10% in crease in the outstanding shares

[ArtM72]

Are these Capstone microturbines, Art? Actually I'm reading the July 2013 presentation and it speaks of a $6.4M Russian order, but for a pipeline project. So many interesting companies, so little time, darn!

Yes, both the microgrid and pipeline applications are Cappers.  The Russians have been a major adaptor and are now buying the machines and electronics packages but fabricating enclosures etc. themselves to improve margins.  Russian fines for flaring gas from oil wells certainly has helped move sales forward there.  The C30 units can handle I think somewhere around 70,000 ppm of hydrogen sulfide which is pretty damn sour.  The larger units (C65s and C200s) also can handle substantial H2S but not as much.  That, and they readily adapt to different BTU content gas as well as having far better electrical load following characteristics than IC engines.

[ArtM72]

Interesting 35% GAGR, I have to say, not to mention the product backlog and margin improvement, although cash is down from $50M to $38M in a year and there is something like a 10% in crease in the outstanding shares

Yes, yes, yes and yes.  The principle challenge CPST has faced (in my mind anyway) has been the cost of materials and the precision machining operations necessary to build these units.  A little deeper digging will show you Capstone internal costs for the past couple years have been flat even in the face of rising sales due to efficiency improvements at the factory.  The margin improvements have been due to several factors, principally an extended effort to qualify additional suppliers that have the QC necessary to build these units.

I asked several years ago at an annual meeting what happens when the rotor goes out of balance.  The CEO smiled and say it doesn't, if it did,  at 80,000 rpm it would quickly turn itself into a high speed welding machine.

[admin]

It's certainly an interesting company and quite fitting for SHU's smallcap focus, thanks for bringing it to our attention. Personally I love these specialist niche players with strong IP. This could be a German Mittelstand firm, really the backbone of the German economy. Many are not even listed.