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Tuesday, 03/26/2013 10:31:10 PM

Tuesday, March 26, 2013 10:31:10 PM

Post# of 29204
Natural gas futures prices @ Henry Hub just notched above $4.00 per MMBTU. It is my feeling, and has been, that higher natgas prices are a double edged sword for Capstone. One one hand the producers will be more inclined to drill new wells (although they are doing quite well with gas liquids and oil right now) which may spur wider use of on-site Capstone power generation. On the other hand higher gas prices for the consumer will dampen demand and take some of the wind out of the NatGas transportation and off the grid power applications.

The current "high" prices in Henry Hub are the result of decreased production (closed wells) and a harsher and longer winter heating season than anticipated and lower storage inventories (imagine that in a country awash in NatGas.) Last year at this time Henry Hub was trading just below 2 bucks.

All of that said I just learned today of some large ship diesel conversions and several new container ships that will utilize duel power, i.e. MDO and NatGas. The market is still out there...Capstone just has to figure out how to sell their "Value Proposition" technology to these new markets. While C1000s won't replace the prime propulsion movers on these vessels there is certainly a big untapped market for Auxiliary power which Capstone could fill, whether it be gas or diesel fuel being used.

I also believe, regardless of fuel price to some extent, that Capstone can still tap the Urban high rise and critical uninterrupted power supply needs of customers seeking a low maintenance, highly reliable power source connected to the NatGas underground infrastructure. I mention "regardless to fuel price" as the grid price will increase as the cost of NatGas does and we are also hearing talk of the power producers switching back to coal believe it or not.

All of the "happy talk" during the last CC and the Roth "Buy" rating has yet to show results in new announced orders or share price. Will Capstone's day in the sun come prior to Q4? Your guess is as good as mine.

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