Most Kiwis now rid of Capstone Turbine shares

By NZPA

Wednesday 19th June 2002

Capstone Turbine, the dog of Wall Street after a spectacular decline in its share price last year, may turn out to be the prey of bargain hunters.

An article in the Los Angeles Times today reported that California-based Capstone, the high-tech power generator manufacturer with thousands of New Zealand shareholders, has a pile of cash greater than its stock market value.

However, if it continues to lose money at the current rate the company will have burnt through its funds within about three years.

Capstone has $US164.4 million ($NZ341 million) in cash, compared with its $US145.4 million stock market value as of today and $US12 million in liabilities.

That imbalance means an opportunistic buyer could offer shareholders a premium over the share price, acquire Capstone and then use the company's cash to fund the transaction, the Los Angeles Times reported.

Capstone was one of the hottest stocks to emerge from California's energy crisis, and its shares traded close to $US100 each less than two years ago. Those shares traded today at $US1.88 -- after hitting a low of US1.52 on Friday.

Analysts spoken to by the Los Angeles Times said it was not common for the net cash holdings of a company to exceed the market value of its common stock, opening Capstone up as a highly speculative play.

Capstone spokesman Keith Field told NZPA the company would not comment on whether it had been approached by suitors, or if insiders were talking about a management buy out.

Capstone had an "unusually strong balance sheet, regardless of the valuation by the investment public", Mr Field said.

"We've got enough cash on hand for the next three or four years.

"If you look at the total assets and liabilities of someone like General Electric, they're so closely matched that if you use that as a basis you can only rely on them being around for the next three or four weeks, let alone years."

The board of directors was aware of the situation, he said.

New Zealand shareholders recently faced a costly choice of selling their shares at a huge loss, or paying more just to hang on.

Former Fletcher Energy shareholders ended up with one Capstone share for every 70 Energy shares after the sale of Fletcher Energy to oil giant Shell last year.

Computershare Investor Services held those shares on behalf of shareholders, through CRS Nominees, until the end of May as part of an arrangement with Shell.

To keep their shares, Capstone shareholders had to pay $US30 to get a share certificate in their own name, although that was cheaper than the standard charge of $US125.

Most of the original 18,000 Capstone shareholders from New Zealand, Australia and elsewhere, dating from the Fletcher Energy sale, had already disposed of the shares by selling them or transferring them to their own broker's account.

By May 31, about 4300 had not indicated what they wanted done with their holdings, totalling about 89,000 shares. The largest single holding was 6400 shares, and most were smaller than 10 shares, Computershare Investor Services client manager Sue Adams said.

The distribution of proceeds to the owners, once the shares were sold through CRS Nominees, depends on a court order.

A further 4280 had asked CRS Nominees to sell their shares, and would receive the proceeds, minus a brokerage fee of US5c a share, after June 28, Ms Adams said.

Capstone Turbine listed in June 2000, coinciding with the escalation of California's energy crisis. Investors rushed in, mistakenly believing that high electricity prices and blackouts in California would create demand for alternative power sources.

While Capstone's technology is well regarded, it sells too few generators -- about 1000 a year -- and has been unable to make a profit.

Capstone's cash pile is the remainder of $US426 million raised in various public and private stock offerings over the last decade.

However, the company lost $US12 million on revenue of only $US4.6 million in the first quarter of 2002, and will burn through its remaining cash in three to four years if it continues at that rate.

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