Capstone Turbine's Brave Heart

Scotland, about 700 years ago: Subjected to oppressive rule, outnumbered Scots struggle for independence against King Edward I under the leadership of William "Braveheart" Wallace.

California, today: Feeling helpless against the rapid warming of the planet, people everywhere long for an answer to global climate change, and a small manufacturer of low-emission microturbines finds itself engaged in another lopsided struggle.

Not every company really lives
When fighting the English, Scotland faced staggering odds. Capstone Turbine (Nasdaq: CPST  ) appears to be facing an equally insurmountable adversary in its fight against pollution: its own cost structure. Its microturbines sell for less than it costs Capstone to build them.

For its most recent quarter, net losses were $10 million -- $0.06 per share -- on $11.5 million in sales, which increased by almost 25% over the same period last year.

As hopeless as the status quo may seem, microturbine technology is inspirational; it represents freedom from the tyranny of CO2-spewing (but more affordable) power generation alternatives. Capstone is the kind of company many want to see succeed, and it has friends.

Unite the clans
Scotland had help from the Irish, and Capstone counts on United Technologies (NYSE: UTX  ) to cover its back. The latter's UTC Power division uses Capstone's microturbines in its PureComfort cooling, heating, and power systems, and it recently awarded Capstone with its coveted Gold Supplier Award. Capstone also recently secured a $10 million credit line with Wells Fargo (NYSE: WFC  ) .

Aside from its strategic partnerships, Capstone has lobbyists on Capitol Hill vying for lawmakers' attention, and management reports that its political advisers are optimistic about microturbine solutions' role in new clean-energy programs.

In fact, you can think of the Obama Administration as Capstone's Robert the Bruce, with a chance to rewrite history. Now more than ever, Washington has the power either to come to Capstone's rescue, or to allow it to fail.

Freeeeeeedommmmmm (from pollution)
Because of its belief that life, peace, and prosperity mean nothing without freedom from pollution, Capstone, like Braveheart, remains undaunted after enduring many profitless quarters over the years.

Loyal shareholders are united behind this cause, and they're betting that leaders won't let this dream die. Its shares, which traded as high as $94 in 2000, now sell for a meager $0.76. If you believe in the dream, now may be the best time ever to monetize your support for Capstone.

Further kilt-clad Foolishness:

Fool contributor Chris Jones has neither long nor short positions in any of the companies mentioned in this article. Try any of our Foolish newsletter services free for 30 days. The Motley Fool's disclosure policy is seven feet tall, and shoots lightning bolts out of its -- well, never mind.


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  • Report this Comment On May 22, 2009, at 4:51 PM, hrt555 wrote:

    It would be nice if this article had some useful financial insight. I appreciate the creative writing, but saying that a young microturbine company has lost a little money is not analysis; most companies lose money till they don't. Is the situation improving? Getting worse? You write as though they are a charity case, which is ridiculous. They have some sensible products for which there could be demand, and if demand grows, or cost cutting occurs, or certain energy prices rise, or cap and trade changes the economics, or any of several factors they could become profitable the same way other companies turn the corner to profitability. No insight into when or whether that will happen in this article though. In some cases a microturbine is actually cheaper than electricity from the grid, so it's not like only environmental crusaders would be after this. I enjoy the inspired rallying cries for liberty from the power company tyranny (if not energy company tyranny) but you've inspired me so much to exercise my rights for mankind that I'm going to get the heck away from this site and find one that actually provides some financial insight... If the british arrive, the secret signal is one if by land, two if by duhhhh.....

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