Capstone Green Energy Corp (CGEH)

[moores2009]

i copied this off the yahoo message board,


Re: Transcript of meeting with Capstone CEO 5/7/08 (Dantes)
Worth another read! "Cramerized is the term that DJ used. I think it is appropriate once more. Only this time Sam is right. In my view there will be no long-term effect to it ,only temporary aggravation and possible amusement. At some point the scramble will be on by shorts. Ought to be interesting.


Transcript of meeting with Capstone CEO 5/7/08

May 07,2008
OTC conference, Houston, TX ~1:20-2:00

So I flew to Houston today to check out Capstone at the Oil Technology Convention and was fortunate enough to talk to and pick the brain of a VERY sharp, interesting, professional, personable man named Darren Jamison (DJ) the CEO of Capstone. There was also a C200 on display, I asked if it worked but they said it was gutted to take out the weight but that they will have a working one on display in June at a conference in Europe that they will then deliver to a German buyer.
-its hard to keep all the info in order but here's the gist of my time with him:
-Keep in mind this was 4hrs ago so nothing is quoted word for word
-anything in () is when my memory is hazy and i dont' want to put words in his mouth that i'm not certain of

me: 'Looking forward, what sector going to be the biggest part of CPST, Oil & Gas, Housing, Landfills, HEV buses'
DJ: 'Definitely Oil & Gas and HEV buses. Gazprom and Petrobras are currently probably our two biggest clients. With our C200kw that is also going to be packaged as a 1MW, we're selling 2-5MW at a time. With each C200 going for about 200k a piece that adds up fast. We have more revenue from the C200 this year, which won't even start being rolled off line until September, then we have in the past 2yrs combined on the C30, and we've also already tripled our sales on the C30 this year compared to last year. In fact we've stopped calling ourselves Microturbines because they are getting bigger and a lot of our product line is not micro anymore.' (he was very excited from the start)

me: 'How many C200's can you get made this year?'
DJ: '50'
*another CPST rep pitched in that they had already sold out of 2008 production

me: 'how many C200's can you get made next year?'
DJ: (either 150 or 160-i forget which one he said, but then he said this) 'just with a quick glance at the #'s thats 150 units at 200,000$ a piece so at least 30mil in rev next year just off this product line

me: 'What if anything could go wrong with the C200 rollout?'
other Capstone rep after a few second of thinking: 'well if there are component issue or the materials aren't up to our quality standard' (didn't seem worried at all)

me: 'can you scale your current assembly up enough to do this'
DJ: 'oh yes, we are only running at about 1/3 capacity right now. That’s why we currently have a low profit margin (might have said negative) for each turbine, but our overhead will basically stay the same when we are running full production so our profit margin per unit will reflect that'

me: 'Who is Capstone's biggest competitor in the field?'
DJ: 'No one. We have more products in the field now then any competitor, ~7200 operational units, and control over 80% mkt share in this category. When we compete against other turbine manufacturers for jobs we have the benefit of data from years of study of our turbines in the line of work. Most other competitors only have data about how their microturbine 'should' work because it hasn't actually been tested in field conditions yet'

me: 'It seems like distributed power on oil rigs is such an obvious choice in lieu of attaching it to a grid, what other technology does CPST compete with in this field?'
DJ: 'Traditional engines, CAT has a 2.5MW engine in the other arena (on display at the OTC conference) and its a piece of metal the size of a bus that does essentially the same job. However on an oil rig, weight & space are both very important. That engine could certainly power an oil rig and is made to do that, but if that goes down to a maintenance problem, all 2.5MW are out of commission. In the same scenario the CPST turbines are smaller, lighter, require less maintenance, and if you have a set up of 10-200kw engines to output the 2MW, if one happens to go down, you still have 1.8MW of output until its back up.'

me: 'Why wouldn't every new Green building being built be powered at least partially by Microturbines, because solar can't power it alone. Are there any other Green ways to power a home that your competing with?'
DJ: 'With LEED certification they actually get credits towards their certification status because the microturbine is up to 93% efficient when used as a CHP (cooling/heating/powering) and they get more points because its a new technology.' I actually just hired a former congressman to help us lobby to get more government friendly for implementing microturbine technology. It doesn’t matter which party wins in the fall, both sides should help us’

me: 'So you and Sanjay must be buds now, that was a nice mention that he had for ya'll on CBNC the other day, but he left off the ticker!'
DJ: 'ha! Sanjay just called me yesterday and we talked for a while, he's got 2 new institutions that just bought in and he wanted to check in and see how things were going I don't think that its a big deal that he didn't mention our ticker, its pretty easy to look up.'

(DJ also mentioned how he saw Sanjay a few days before CNBC mention and thought it was cool how he steered the conversation away from solar to mention them)
**link for the cnbc mention http://www.cnbc.com/id/15840232?video=719205891&play=1 around 3:15
**i asked if Vanguard was one of the institutions and he said he thought so http://www.mffais.com/cpst.html
**also mentioned that they currently have 3 analysts covering their Co and that they would like around 6.
**also that there was approx 30% institutional ownership so far and he's looking for 50%+

me: 'What about that Cramer mention a few years ago, i was actually in CPST at the time and banked on it'

DJ: 'groans.. I really hope that we don't get Cramerized again. He just didn't have the facts straight at the time, it was 1 Wal-Mart test center in Aurora and wasn't like we had just got contracts to install them at all their stores. I really don’t want to get Cramerized again' (he said it several times)
** he really disliked the Cramer piece on them and talked about every part of that show on them that he didn't agree with

me: 'DJ how long have you been the CEO?'
DJ: '15months now, i used to be a distributor for them at Northern Power'

**then he told me the following story when he was a distributor but I’m going to use my own words cause it was kind of long

Basically he said that Capstone's service used to be essentially non existent, and that they tried going behind their distributors backs to sell directly to a client (i believe Gazprom) and actually pissed off DJ who was then working for the distributor (Nothern Power) so that he ended up putting an Elliot turbine into the project instead of a Capstone turbine. He said that there used to be a 38% turnover in Capstone employees before he arrived, now its closer to 11%. There used to be literally no service for the turbines, so that a turbine might run perfectly for ever, but then when it would go down it would take CPST a month to send someone out to look at the problem. There are only 2 old CPST members left (i took this to mean above production level) and that he had basically cleaned house. Now instead of around 17 unhappy suppliers they have around 30 that are very motivated to sell their product and they make a commission on each turbine sold. Clients are coming back for 2nd, 3rd, 4th orders now.
Then he told me that his background was in finance and that his previous jobs have been lots of sales and that the old management had been so focused on R&D and just didn't really know how to sell a product. Which was probably a good thing while the product was still in development. But DJ is definately a salesman and really focused on continuing to bring on new distributors and keep his current ones as happy as he can (commissions).

MY THOUGHTS: It was great how DJ looked me in the eye the entire conversation, must have spent 25-30 minutes with him. He was incredibly personable, easy to laugh, knew his product inside and out, knew his company inside and out, appears to know how to market a product and has connections globally that he continually referred to throughout the conversation. I came into the day with high expectations and still left very impressed by everything- how the material was presented, how much interest they had in the 1hr I was at the trade show- all 3 of the Capstone reps (including DJ) seemed very excited about the future, especially the C200 and how it can be formed into MW’s with ease.


**interesting sidenote, but at the end of our conversation someone came up to DJ and said 'congrats on make the news last night' turns out the local Houston station came in to interview a couple of the exhibitors and of the literally hundreds if not 1k exhibitors they chose to highlight 'the only GREEN company there' CPST! ((if anyone has this please send it to me and I’ll get in on youtube! -it would be from May6 on a local Houston station))