CAPSTONE LAUNCHING GENERATOR SALES PUSH POWER SHORTAGE CREATES MARKET.

Byline: Jesse Hiestand Staff Writer

CHATSWORTH - Moving to capitalize on California's energy crisis, Capstone Turbine Corp. said Wednesday it is launching a subsidiary to serve that market while boosting the staff that sells its innovative power generators.

The announcement came as Capstone reported a net loss of $6.4 million, or 8 cents per share, on sales of $7.1 million in the fourth quarter ending Dec. 31.

Ake Almgren, president and chief executive officer, said the state's power crisis has fostered considerable interest in its generators as companies look for ways to avoid potential outages and trim energy costs.

One Capstone official estimated that inquiries are up tenfold, leading to additional orders for its generators.

``Capstone is capable of being part of the solution to California's power supply problems,'' Almgren told Wall Street analysts Wednesday.

The company, which shipped its first MicroTurbine in 1998 after a decade of development, sold 790 units last year, up from 211 in 1999.

It has a pending backlog of 806 units and pending orders for about 900 more, while anticipating that it could sell an additional 2,000 generators this year.

Capstone California will have a staff of 10, eight of them in sales, said spokesman Keith Field.

``Companies are worried about rolling blackouts and brownouts, especially those that have processes that are very sensitive to power quality,'' Field said.

Capstone's MicroTurbines use scaled-down jet engine technology to generate 30 kilowatts or 60 kilowatts in a unit about the size of a refrigerator. The units can run on several types of fuel and are extremely clean-burning, allowing them to be used as a regular source of power by companies in California, which otherwise allows businesses to use more polluting diesel generators less than 200 hours a year.

``Companies have to wait for a power problem to occur and incur a huge loss to their business before they can switch over to a backup generator,'' Field said.

Aside from providing emergency energy, Capstone markets its generators as alternatives to regular electricity for critical computer-driven processes like manufacturing. They are even being used to power some municipal buses, including two for the Los Angeles Department of Transportation.

Its principal competitor in the market is Honeywell International Inc.

Capstone hopes to be profitable by the end of 2002. For the year, it reported a net loss of $591.3 million, or $12.82 per share on 46,107,074 shares, compared with with a net loss of $56.2 million, or $24.53 per share on 2,292,242 shares, for the prior year. Due to public stock offerings in June and November, the weighted average number of shares outstanding in 2000 was significantly lower than the total number of shares outstanding at the end of the year.

The company said it shipped 242 units in the fourth quarter, less than expected because of shortages of electronic components.