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CPST: Microturbine Technology and the Distributed Power MegaTrend

CAPSTONE TURBINE CORP REGARDING THE DISTRIBUTED POWER MEGATREND AS THE LEADER IN MICROTURBINE TECHNOLOGY

The alphaDIRECT Insight

The distributed power market has become a significant megatrend for investors in recent years. This includes a variety of renewables as well as conventional energy conversion technologies. The microturbine has been playing an increasing role in this market and Capstone is the clear leader in this technology platform. We believe the microturbine has a number of advantages as a distributed power source with a particular emphasis on the sub-three-megawatt market. We see a number of key drivers that investors should monitor as catalysts for the shares. Perhaps the most important is the drive to profitability and the company’s strategic effort to move to positive cash flow, which has a number of favorable implications for the shares as one would expect. Second is the stabilization and potential modest recovery of the energy markets, which have been a significant driver in recent years, but derailed with lower oil prices. Third is fully leveraging the company’s distribution network and financing entity, which could help to expand revenue growth and take additional market share. We view most of the risk today as execution risk and management’s ability to deliver on the break-even goal. We believe the technology is proven, the distribution network strong and the regulatory environment surrounding emissions to be favorable.

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