The World Leader in Microturbine Power Generation

Transcription

1 The World Leader in Microturbine Power Generation Capstone Management Presentation October 2008

2 Safe Harbor Statement During the course of this presentation, we may make projections or other forward-looking statements regarding future events or financial performance of the Company within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, including: reference to the potential market for our products; future results of operations and achieving profitability; sales expectations; distribution capabilities and agreements with certain new distributors; manufacturing improvements and cost reductions; increased production capacity; low emissions, energy efficiency and reliability of our products; our business initiatives and relationships with third parties and related expanded market opportunities; the advantages of our products over our competitors and competing technologies; expanded aftermarket service and remanufacturing business; compliance with government regulations; new products and product platforms, including our C200 and C1000 products; the application of our products in the solar market; and the value and savings to be realized by our customers. These forward-looking statements are subject to numerous assumptions, risks and uncertainties which may cause Capstone's actual results to be materially different from future results predicted or implied in such statements, including: our expectations about expansion into additional markets; new applications of our products may not be realized; certain strategic business initiatives may not be sustained and may not lead to increased sales; we may not be able to reduce costs, improve customer satisfaction, or increase our cash flow or profitability; our release of new products such as the C200 and C1000 may be delayed or new products may not perform as we expect; we may not be able to comply with all applicable government regulations; we may not be able to obtain or maintain customer, distributor and other relationships that result in an increase in volume and revenue; and we may not be able to retain or develop distributors or dealers in our targeted markets, in which case our sales would not increase as expected and product quality expectations may not be met. We refer you to the Company's Form 10-Q, Form 10-K and other recent filings with the Securities and Exchange Commission for a description of these and other risk factors. Because of the risks and uncertainties, Capstone cautions you not to place undue reliance on these statements, which speak only as of today. We undertake no obligation and specifically disclaim any obligation to release any update or revise any forward-looking statements to reflect events or circumstances after the date of this presentation or to reflect the occurrence of unanticipated events. 1

3 Capstone History Established in 1988 Early Stage First successful test in a hybrid vehicle application Sale of the first commercial Microturbine system Capstone Initial Public Offering Listed on the NASDAQ exchange (ticker: CPST) in June 2000 Commercialization Stage C30 and C60 products are launched and operating in the field Over 4,000 units shipped with over 19 million operating hours Mean Time Between Failures (MTBF) of 14,000 hours for the C60 Series and over 15,000 hours for the C30 Development of sales, service and distribution channel Repositioned as Green technology Introduction of C200 and C1000 products 2

4 Management Team Darren Jamison CEO Edward Reich Finance James Crouse Sales Shelby Ahmann Service Mark Gilbreth Engineering Leigh Estus Operations Management Experience 60+ years of direct distributed generation and co-generation experience Successfully sold competing products including GE Jenbacher, Caterpillar, Deutz, Waukesha and Elliott Microturbines Proven industry track record of managing high growth organizations Growth Drivers Maturing distribution channel Expand and develop new markets Launch of new C200/C1000 Increase service contracts Expand remanufacturing business Leverage fixed cost structure Licensing and component sales Strategic partnerships 3

5 Capstone Highlights Established in 1988 with a focus on the hybrid vehicle market Today Capstone is the world leader in microturbine solutions Recent introduction of C200 and C1000 models increased the addressable market to approximately $4 billion annually 1 Backlog at record levels: $42.7M as of June 30 th, up 53% from March 31 st and up over 700% year over year Proven technology: 4,000+ units shipped / 20,000,000 operating hours; 100+ U.S. and foreign patents; 1 moving part Overhauled distribution channel and added new distributors: Now have 28 in North America and 32 international Strong global market drivers support continued product adoption The Company s microturbines provide green, reliable energy with ultra low emissions and can operate on a variety of fuel sources 1 Integrated Energy Systems (IES) for Buildings: A Market Assessment prepared for the U.S. Dept. of Energy (September 2002) 4

6 Capstone s Microturbine Over $100M invested in product development 95 U.S. Technology Patents Air bearing technology One moving part No coolants, oils or grease Flexible and economic technology Flexible configuration Lightweight & small footprint Multi-fuel capability Cost competitive positioning Capstone value proposition Low total cost of ownership Ultra low emissions High reliability Minimal scheduled maintenance Spring Foil Shaft 5

7 Technology Comparison Sample Installed Cost Sample Net Benefit of Ownership Over 10 Years $10,000 $4,000 $9,000 $3,000 $ Per Kw $8,000 $7,000 $6,000 $5,000 $4,000 $ Per kw $2,000 $1,000 $- $(1,000) Solar PV Fuel Cells Wind Recip CHP Microturbine CHP $3,000 $(2,000) $2,000 $1,000 $- Solar PV Fuel Cells Wind Microturbine Recip Equivalent Cars Removed (CO2) for 1 MW Project $(3,000) $(4,000) $(5,000) $(6,000) Number of Cars 1,200 1, Assumptions Capstone C200 System Combined Heat and Power Systems Natural Gas Fueled California Emission Standards Initial Investment Data: CA Statewide SGIP Program Statistics through Q Analysis assumes no incentives 0 Solar PV Wind Recip Fuel Cells Microturbine Source: CA Statewide SGIP Program Statistics 6

8 Microturbines vs Piston Engines Capstone Microturbines Traditional Piston Engines Ultra low emissions C65/C200 CARB Certified Scheduled maintenance Six times in 5 years On board digital electronics Integrated utility protection & synchronizing Lightweight & small footprint Local air permits and exhaust cleanup required Scheduled maintenance Approximately bi-weekly External controls without power electronics Requires external relays & control equipment More than twice the weight & footprint 7

9 Ultra Low Emissions Relative NOx Emissions CARB Natural Gas Emission Standard Units Reduction NOx lb/mwh % CO lb/mwh % VOC lb/mwh % CARB 2007 is an extremely stringent emissions standard that exceeds the requirements of federal standards US Grid Avg NG Recip Only Microturbines, Fuel Cells, Solar and Wind meet standard Source: EPA and ASME C200 8

10 Market Drivers Rising Energy Prices 2005 much of the Eastern U.S. and California experience double digit increases in energy costs 2006 constraints in capacity pushed energy prices to record levels 2007 Consolidated Edison releases an RFP for 158 MW of demand reduction Grid Capacity Constraints 2006 report by the North American Electric Reliability Council Warned demand for electricity in the U.S. is increasing three times as fast as resources are being added (20% from 2006 to 2015) Estimated that the U.S. is on track for a shortfall of about 81 GW in 2015 (equivalent to 160 large power plants) Power Security According to the Electric Power Research Institute, power outages and disturbances cost the U.S. economy $188 billion per year The 9/11 attacks, the 2003 Northeast blackout, and repeated major weather events have brought attention to the need for secure power Climate Change National greenhouse gas regulation is a stated goal of both U.S. Presidential candidates, and a U.S. cap-and-trade program is expected during the next Administration More than 180 countries have ratified the Kyoto Protocol In the USA, state and regional initiatives are being implemented to control greenhouse gas emissions and global warming 9

11 Presidential Candidates Green Platform During the course of this presidential campaign, both Senator John McCain and Senator Barack Obama outlined their detailed energy plans and their climate & green platforms. Senator John McCain: John McCain believes that energy security, economic security, environmental security and national security are linked together and that the United States must be a leader in each category. The market-based cap-and-trade system will be the beginning of a McCain Administration s transition away from an oil-addicted economy and toward an energy supply that is secure, diverse and domestic. John McCain s climate plan will reduce our dependence on oil. It will provide the incentives for our nation s energy producers to develop low carbon alternative fuels. The plan also provides greenhouse gas emission targets and timetables: By 2050, 60 percent below 1990 levels (66 percent below 2005 levels) Senator Barack Obama: Offer incentives to accelerate private sector investment in commercial scale zero-carbon coal facilities. Help create new jobs by strategically investing $150 billion over the next ten years to catalyze private efforts to build a clean energy future. Within 10 years save more oil than we currently import from the Middle East and Venezuela combined. Ensure 10 percent of our electricity comes from renewable sources by 2012, and 25 percent by Implement an economy-wide cap-and-trade program to reduce greenhouse gas emissions 80 percent by

12 Climate Change & Green Building Green building growth accelerating 15 million new buildings are projected to be built in the U.S. alone by (U.S. Green Building Council, 2007, Buildings and Climate Change) China is building the equivalent of Japan s entire building area every three years. (World Business Council on Sustainable Development, 2007, Energy Efficiency in Buildings) UK government goal that all new homes built after 2016 will be carbon-neutral. (BBC, December 2006) Greenhouse gas emissions Building operations account for 43% of U.S. emissions. More than either transportation or industrial sector (Oak Ridge National Laboratory, 2005) CO2 emissions Conventional U.S. buildings Emissions equal the combined emissions of Japan, France and the UK. (U.S. DOE, 2006, Buildings Energy Data Book) Consume 71% of U.S. electricity output. (U.S. DOE, 2006, Buildings Energy Data Book) Emissions from buildings are projected to grow faster than any other sector over the next 25 years. (U.S. Green Building Council, 2007, Buildings and Climate Change) LEED Leadership in Energy and Environmental Design 42,000 LEED certified architects in the U.S. Federal Government agencies require Silver level on all new buildings. Many new buildings are requiring some level of certification (Silver, Gold, Platinum). Installation at Colorado Court, Santa Monica, CA LEED Certified Building 11

13 Green Building - Oregon Health & Science University U.S. Green Building Council awarded Platinum LEED certification The highest level of certification granted 16 Story 400,000 SF medical facility Grand Opening January 19, 2007 Five C60-ICHP s Units provide 300kW of power and building heating 12

14 Cogeneration Market 3,500 CHP/CCHP Market Potential By Size C200/C1000 Market Expansion Market Potential $ Millions 3,000 2,500 2,000 1,500 1, Microturbine Market kw.3-1 MW 1-5 MW 5-10 MW MW MW Source: Resource Dynamics Corporation (extrapolated based on industrial uses) Introduction of the C200 and C1000 will increase addressable market by over approximately $4 billion annually 1 Integrated Energy Systems (IES) for Buildings: A Market Assessment prepared for the U.S. Dept. of Energy: 16.8GW demand by 2010 Over 35.5GW demand by % straight CHP 1 Integrated Energy Systems (IES) for Buildings: A Market Assessment prepared for the U.S. Dept. of Energy (September 2002) 13

15 C200/C1000 Benefits High efficiency Superior load matching Pricing competes with piston engines Built-in redundancy Integrated package Small footprint - 8 x 30 ISO Stackable Multi-pack to 10MW Ultra low emissions 1/10 th of best-in-class piston engine Low maintenance High reliability Efficiency (%) C1000 C1000 ISO Efficiency Part Load Efficiency Sequence Efficiency Typical Turbine Efficiency Power (kw) Piston Engine Price, Fuel Cell Emissions, Turbine Reliability 14

16 Gas Turbine Comparison Solar Turbines Mercury Capstone C200 Capstone C1000 Electrical Efficiency (%) Elliott TA100R Ingersol Rand MT250 OPRA Turbines OP16-3B (DLE) Solar Turbines Saturn 20 Kaw asaki GPB15D Solar Turbines Centaur 50 Kaw asaki GPB30D Solar Turbines Centaur 40 Rolls Royce 501-KB5S General Electric GE5-1 (DLN) Siemens SGT-100 Rolls Royce 501-KB7S Kaw asaki GPB60D 18 Dresser-Rand KG2-3E 16 Dresser-Rand KG2-3C Power Output (MW) Capstone offers the highest efficiency alternatives below 4.5 MW Source: Company Websites. Data and results are based on publicly available information from manufacturers and except for Capstone s products, not from Capstone tests. 15

17 Vertical Applications 16

18 Current Market Segments Large Retailers Hospitals Telecom Office Buildings Hotels U.S. Gov t Schools Hybrid EV Landfills Digesters Waste Water Plants Oil & Gas 17

19 PureComfort TM Solutions Aurora, CO 360kW, 160RT 1 Outdoor installation San Francisco, CA 240kW, 120RT 1 Outdoor installation Simi Valley, CA 960kW, 420RT 1 Outdoor installation Mount Kisco, NY 240kW, 120RT 1 Roof-mounted skid 1 RT = refrigeration tons Providence, RI 240kW, 120RT 1 80kW trigen Indoor mechanical room Mississauga, Ontario 240kW, 120RT 1 Indoor mechanical room 18

20 Resource Recovery Case Study: BP Offshore Platform The Issues: Provide a reliable power source in a hazardous oil and gas application on an offshore platform in the Gulf of Mexico Recover value from onsite flare gas which is normally lost to the environment The Solution: A Capstone microturbine, UL certified for hazardous oil and gas applications The microturbine runs on onsite unprocessed wellhead gas which is normally flared, providing a power source to the platform The microturbine cut maintenance time substantially compared to reciprocating engine generators The microturbine ran almost non-stop for 25,000 hours Capstone has microturbines running on other platforms in the Gulf of Mexico, Gulf of Alaska, Bay of Campeche, the North Sea, Mediterranean Sea, and South China Sea 19

21 Hybrid Electric Vehicle Case Study: DesignLine / Hybrid Buses The Issues: Run low emission vehicles in densely populated areas Increase fleet efficiency Reduce maintenance Improve reliability The Solution: The buses' Capstone turbines generate electricity to charge batteries, which run electric motors. The batteries are charged overnight and the turbine system recharges them when operating. The vehicles are fitted with remote monitoring, which means Designline engineers can talk to the on-board computers monitoring performance and carry out diagnostic checking. 20

22 Building Momentum Net Revenue ($ Millions) Backlog ($ Millions) $10 $50 $8 $40 $6 $30 $4 $20 $2 $10 $- Q1'08 Q2'08 Q3'08 Q4'08 Q1'09 $- Q1'08 Q2'08 Q3'08 Q4'08 Q1'09 $50 $40 $30 $20 $10 Net Revenue/Backlog + ($ ($ Millions) $- Q1'08 Q2'08 Q3'08 Q4'08 Q1'09 Note: Fiscal Year ends March 31 21

23 Stock Price Reflects Momentum Institutional ownership Approximately 45% Analyst Coverage Lazard Capital Markets Ardour Capital Investments Northland Securities Merriman Curhan Ford & Co. Broadpoint Capital Wachovia Capital Markets 22

24 Path to Profitability Product Acceptance Increase Production Rates & Yields 2008 Maximize Margin & Inventory Turns Backlog $42.7 Million Unit backlog as of June 30 th C units C units C units Adding multiple shifts Working to reduce touch labor 2,000 unit current capacity 4,000 unit maximum capacity Increase prices Reduce costs Target increased gross margin Target increased inventory turns 23

25 Capstone Summary Experienced management team Strong global market drivers Green ultra low emission technology New C200 product enables megawatt solution Benefiting from restructured distribution Q1 09 backlog up over 700% from Q1 08 Path to Profitability 24