EAST'S BLACKOUT GIVES BOOST TO CAPSTONE SHARES ELECTRIC ON THE STREET.

Byline: Evan Pondel Staff Writer

CHATSWORTH - Shares of Capstone Turbine Corp. jumped 20 percent Friday, as the alternative power source company received a jolt of attention on Wall Street after the blackout swept through the Northeast.

Capstone shares hit a 52-week high, gaining 32 cents to close at $1.74 on the Nasdaq market. Analysts attributed the spike to the realization that, in times of need, manufacturers of backup power sources are more valuable than they initially appear.

``You don't know when you're going to need a generator until you really need them,'' said Paul Larson, energy stock analyst with Morningstar in Chicago.

The paralyzing power outage affected New York City, its suburbs and parts of at least eight states in the Northeast. Capstone generators were providing backup power at a Frito-Lay facility in Queens and a plastics manufacturer near Rochester, N.Y.

Kieth Field, a spokesman for the Chatsworth company, said that, every so often, a situation will arise when alternative power sources receive attention. Capstone saw similar interest at the height of California's energy crisis in 2001. ``It's sort of a knee-jerk response, but hopefully these situations spur businesses to think they need backup generation,'' he said.

The blackout arrives at an opportune moment for Capstone as shares of the company have been languishing near $1. Capstone recently named John Tucker chief executive officer, a move that analysts say offers brighter prospects for the second half of an otherwise bleak year for the company.

The maker of environmentally sound power systems has been struggling with dismal demand ever since a weak economy zapped interest in the company's product line. With revenues declining and net losses mounting, Jon Quealy, analyst with Adams, Harkness & Hill, said the company could use a little more attention from investors.

``And power outages do bring a lot of eyeballs out, but the implications of a blackout and Capstone won't really be felt until after this event is over,'' Quealy said. ``It depends on how the federal government stands on this issue. They may make some comments that it's time to invest a little money in alternative power sources.''

Capstone's generators differ from others in that they are mostly fueled by natural gas - a characteristic the company focuses on to highlight its product's environmentally sound features. Field said other generators aren't nearly as adept because they often rely purely on diesel fuel.

The problems is, Capstone's product doesn't generate nearly the same amount of power as some of the less ecologically friendly generators. ``And you're having to stack two or three of these things (Capstone generators) together just to get the same power as a diesel generator,'' Quealy said. ``Capstone's product is a technologically based solution. It's when you start moving toward large industrial uses that you enter an entirely new ballpark.''

But, to Capstone's advantage, its generators can supplement over- stressed power grids. ``Our products parallel the grid, allowing a business to control their energy cost and generate some of that power on site,'' Field said.

Capstone is also attempting to draw a little internal energy. As of the six months ending June 2003, the company had cash and cash equivalents of about $126 million. If managed correctly, Quealy said Capstone could channel its bank roll into some positive developments.

Evan Pondel, [phone]

evan.pondel(at)dailynews.com