Capstone Turbine Powers Up With IPO, Raising $130 Million

Capstone Turbine Corp., a Woodland Hills maker of industrial engines that generate electricity and heat, churned out a little heat of its own Thursday when it raised nearly $130 million in an initial public offering and its shares tripled in secondary trading.

The company, whose microturbine engines can turn waste gases from oil drilling and natural gas mining operations into usable power, offered about 9.1 million shares of common stock at $16 per share. The stock surged $31.98 to close at $47.98, an increase of nearly 200%, on the Nasdaq Stock Market. It trades under the ticker symbol CPST.

Capstone’s opening-day success comes despite recent stock market volatility that has prompted a number of companies, from online delivery service Kozmo.com to the parent of House of Blues restaurants, to delay or cancel planned IPOs in the past three months.

Capstone, whose early investors included Microsoft Corp. co-founders Bill Gates and Paul Allen, has never been profitable since it was founded in 1988, and it lost $29.6 million on annual revenue of $6.7 million in 1999. In filings with the Securities and Exchange Commission, executives said they expected growing sales of the engines, which were first offered commercially in 1998, to eventually make the firm profitable, though losses would continue through 2001.

The company and its investors are betting that as the cost of fossil fuel increases, devices that can extract energy from waste substances are likely to become more popular.

Threatening Capstone’s prospects are a host of rivals said to be developing similar products, including Honeywell International Inc., Europe’s Volvo-ABB and Japan’s Mitsubishi Corp.

The company will use funds from the stock sale to pay for tools, marketing and product development, it said in the filings. Executives, who usually are restricted by SEC rules from commenting during the offering period, could not be reached.

Capstone’s microturbine uses heated gases to turn a small wheel and generate 30 kilowatts of electricity, enough to meet the regular energy needs of a small business such as a convenience store. Capstone has shipped about 340 of the machines, each of which weighs about 1,000 pounds and stands 6 1/2 feet tall. Expected to come to market later this year is a Capstone microturbine that generates 60 kilowatts.

Undergoing tests at the Los Angeles County Sanitation District’s landfill in Puente Hills is a version of the generator that uses methane generated from decomposing trash instead of natural gas as a fuel. A county engineer, Ed Wheless, said the device was installed in January and has been reliable.

Another version of the microturbine has been incorporated into energy-efficient buses used by the Los Angeles Department of Water and Power. The company plans to move its production facilities and offices later this year to a 98,000-square-foot plant in Chatsworth.