CAPSTONE SALES SURGE TURBINE MANUFACTURER HELPED BY STATE ENERGY CRISIS.

Byline: Brent Hopkins Staff Writer

CHATSWORTH - Capstone Turbine Corporation has generated major sale increases, which will likely make for a record quarterly earnings announcement today.

According to analysts who follow the manufacturer, today's results should be the company's strongest since its June 2000 public offering. It reported a loss of $6.4 million last quarter, 8 cents per share, though its sales rose to $7.1 million. Gary Holdsworth, a research analyst for Wedbush Morgan Securities, predicted a comparable loss, of $6.7 million, or 9 cents, but a sales boost to $9.3 million. Though Capstone has continually lost money since its 1988 founding, its continuing rise in sales in recent years could soon send its earnings into the black.

The key to success, analysts agreed, lies in the California energy crisis and a nervous private sector looking to guard against future power woes. Capstone's microturbines, which can provide up to 60 kilowatts of power to businesses hit by rolling blackouts and soaring energy rates, have become hot commodities.

``People have been much more inclined to pick up a new turbine recently than keeping the old one and kicking the tires for a few more years,'' said Masroor Siddiqui, vice president at Goldman Sachs & Company. ``The adoption rate has been helped a lot by the California energy crisis.''

So much so that the firm has spun off a wholly-owned subsidiary, Capstone California. The new company handles sales directly, rather than going through middlemen, and has been warmly received. While the parent company sold only two turbines in 1998, sales have zoomed ever since, according to the firm's director of communications, Keith Field. It moved 211 units in 1999 and 790 in 2000, and analysts predict astronomical growth for 2001. Gary Holdsworth of Wedbush Morgan Securities expects sales of at least 2,400 units for the year, with a majority coming in-state.

Capstone's success, he said, lies in greater availability and usefulness than from competitors like Caterpillar and Honeywell.

``We really think California is going to see the lion's share of near-future orders,'' he said. ``They have units available today, when most of the diesel generators are sold out. With the Caterpillar generators, you'd be out of luck for eight months, and large turbines are not that practical. They're a good size, and a good value.''

The power plants have been adopted for a variety of uses, from blackout protection to bus propulsion. On March 21, the Los Angeles Department of Water and Power announced a $4 million order for 141 of the Model 330, which can spin up 30 megawatts of power, to provide for more environmentally friendly generation.

If this trend continues, Capstone's future looks rosy indeed, Holdsworth predicted.

``We have them earnings-positive for next year'' he said. ``We expect diminishing losses each quarter for the next four.''

And though the microturbine has proved its usefulness in a variety of situations, there's one use Capstone doesn't recommend it for.

``We get a lot of calls, but the turbine isn't really suitable for home use,'' Field laughed. ``I just wanted to get that across so we won't be inundated with homeowner calls again.''