Capstone Green Energy Corp (fka CGRNQ)

[Seasound]

There was a recent article, maybe already discussed here, talking about how the low price of natural gas was going to negatively affect the demand for Capstone's turbines. Please comment. Thanks

Low natgas prices are good for Capstone. The historical price link between oil and gas has been broken. I'm not sure which discussion you are referring to but there is a tug of war going on re:US Exports will drive the domestic price up. To that end the power industry and the Sierra Club lobbies have managed to put a temporary halt on all permitting of domestic liquefaction and export facilities until a study is concluded about the what effect exports will have on domestic prices. Sierra Club and the power industry believe that exports would drive the cost up. Only one company Cheniere (LNG) has all the pieces in place and has already sold forward the entire production of the first phase. Other non-permitted facilities have already sold forward capacity.

Korea Gas Says U.S. Exports to Affect Asian Gas Pricing

By Winnie Zhu on June 07, 2012

Korea Gas Corp. (036460), the world’s biggest importer of liquefied natural gas, said U.S. policies will determine how much LNG the country exports and shipments will undermine a 40-year-old oil-linked price mechanism used in Asia.

“There is good potential for the U.S and Canada to export LNG to Asia,” Chief Executive Officer Choo Kang-Soo said in an interview today in Kuala Lumpur, where he is attending an industry conference. “How much they can ship out will depend on the policy of the U.S. and also what American people think.”

Asia’s LNG buyers, which account for more than 60 percent of global demand, are turning to North America because U.S. prices are tumbling amid record production driven by extraction from shale deposits. That’s weakening the so-called Japan Crude Cocktail, the benchmark index used to price long-term contracts across Asia.

“More volumes from the U.S. will affect oil-linked gas pricing,” Choo of Korea Gas said today. Western Canada is also preparing to export LNG, so “we have to see the overall picture,” he said.

Qatar, the world’s largest LNG provider, and Australian producers including Woodside Petroleum Ltd. (WPL) this week played down prospects of large-scale exports from the U.S., where a shale-gas boom has upended global energy markets and brought the country closer to energy independence.

Woodside, operator of the A$15 billion Pluto LNG project in Western Australia, expects the U.S. to export as much as 50 million metric tons of the fuel by 2025. That would meet about 10 percent of global demand. The company last month predicted 65 million to 80 million tons of unmet demand in 2018 to 2020.

Cheniere Energy--

South Korea has agreed to buy 3.5 million metric tons of LNG annually from the U.S. starting 2017, Choo said.

Asian buyers including Korea Gas and GAIL India Ltd. (GAIL) have contracted about 7 million tons of U.S. supplies since last year from Cheniere Energy Inc., the Houston-based company developing what will be the nation’s largest LNG export terminal in Louisiana. Tokyo Gas Co. (9531), Japan’s biggest gas distributor, and Sumitomo Corp. (8053) agreed in April to buy 2.3 million tons annually for 20 years from Dominion Resources Inc. (D) (D)’s Cove Point project.

Buying U.S. gas will allow Asian consumers to pay prices linked to U.S. Henry Hub futures, which dropped 32 percent in 2011 and are down 19 percent in 2012. Futures slumped to $1.90 per million Btu on the New York Mercantile Exchange April 19, the lowest since September 2001. The contract rose 0.4 percent today to $2.43 per million Btu.

“We are studying and recalculating the LNG import plan for future as the whole economy has been changed,” Choo said. “The result may come out at the end of the year.”

Sierra Club wants to curb any exports using the misguided logic that fracking in the shale plays will decrease if the domestic price goes up. I say misguided because if the price goes up the idle rig count will decrease (more drilling and more Capstones) as the gas industry needs 4 - 5 dollar gas to make drilling and building the infrastructure for it to be economical. As far as the power plants go...as the spread between gas and coal decrease they will switch back to coal, although EPA emission rules may prevent that.

A short answer to your question would be "no, lower prices of natural gas will only encourage the use of Capstone Micro-Turbines." I think DJ even said as much during his short cut on MSNBC. If the "glut" of domestic gas priced at Henry Hub causes lower prices in Asia and China it will be even sweeter for Capstone

The gas is going to Asia and China no matter the route. The Kitimat project is going forward Pipeline Planned for Canada Gas Exports...follow the money.

The amount of capital being invested in natural gas projects around the world is unprecedented and continues unabated. There are currently 378 LNG Carriers in operation with another 89 on the order books at about US $202 million a copy.

All of this bodes very well for Capstone IMHO