Capstone Energy Plus, Inc. Common Stock LD Micro 20th Annual Main Event Conference

Wow. Okay, sit down in front. Good morning, everyone. Just a few weeks ago, I walked onto this elevator wearing this exact shirt, my Capstone Energy+ shirt, and there was an elderly lady on the elevator, and I said, "Good morning," and she said, "Good morning." She looked at me, saw my shirt, and said, "Capstone Energy+. What do you do?" Yeah, maybe I'll check that. I said, "Well," I thought about it. I said, "Well, ma'am, we sell newspapers." She looked at me, and she paused, a little confused, and she said, "Oh, is that what the plus is for Energy+?" I kind of chuckled and I said, "Well, kind of." I said, "The reality is our technology has such little routine maintenance that our technicians actually have time to read the newspapers." She found that kind of interesting.

As I think about that this technology has been able to do something very different than other power generation technology. At the end of the day, of course, we don't sell newspapers. In reality, what Capstone does is we exist to provide energy certainty. We do that through thinking beyond and challenging ourselves. Challenging ourselves to think beyond how is it designed for scalability and modularity, thinking beyond how it's engineered through elegant IP that stands the test of time, thinking beyond the simplicity of how this maintenance can be performed. Very low maintenance intervals, very low maintenance intensity, all of those things with a Formula One pit stop mentality in that maintenance event, all of that is what creates that uptime. That plus no friction, no oil, no lubricants, no coolants, no water, that all delivers energy certainty.

Who would've thought, though, this single moving part, riding on a cushion of air, would actually have a role to play on the world stage of today's energy renaissance? When this technology was envisioned almost 40 years ago, we weren't thinking that way. Back then, energy was abundant, and the world was solving a very different problem. It was about growth that followed infrastructure. Most of those years, you could argue that Tesla was right and Edison was wrong. Centralized generation won. Distributed generation existed around the edges, really chasing efficiency, economics, resiliency, or backup power. But we're living in a very exciting time today because that world has changed, and it's changed in a very fundamental way. While Capstone has been transforming itself over the past few years, the world around us has transformed as well. For decades, businesses operated under a very simple assumption.

If you needed more power, the grid would provide it. Build a factory, expand a facility, construct a data center, connect to the grid and grow. For many years, the biggest competitor was the grid. But the grid wasn't doing anything wrong. The grid was doing exactly what it was designed for, which was to provide energy certainty. But that assumption is being challenged today, and the world needs more power. It needs it faster. It needs it cleaner. It needs it reliably. It needs it more resiliently. Increasingly, businesses are discovering access to power itself can determine whether they grow or whether they stand still. That is a profound change, and I believe it creates one of the greatest opportunities in the history of this company, and Capstone was built for this moment. We don't have to wait for the world to discover distributed generation.

The world has actually recognized its legitimacy, and it's rapidly turning to distributed energy solutions for energy certainty. Customers simply aren't asking us, "How much is your turbine?" or "How efficient is it?" They're asking, "How can you give me power? How fast? Can you give me power reliably, cleanly?" In one situation, we just recently had an announcement on a resort in Utah. They asked, "Can you give me the power the grid can't?" That, my friends, is a very different conversation and very interesting. As we think about the grid and how it's under pressure, it's not about Capstone replacing the grid. We think quite differently. It's about distributed generation collaborating with utilities, not competing. Recognizing the energy challenges of today and tomorrow will require work together in ways that we haven't worked like before. We have to help utilities grow demand.

We have to help our customers operate and also expand with confidence. That's what it means to think beyond the grid when the grid is under pressure. Not to think without the grid, but to think about how we can go beyond the limitations of what the energy challenges are today. Because our customers, they don't wake up wanting distributed generation, they wake up wanting energy certainty, and that's what we're here to deliver, especially when energy matters. Capstone isn't defined by the industries we serve. We're defined by the energy challenges that we solve. We don't need to walk through each application. The image on this slide tells that story. But the real takeaway is here is how some of the same technology can serve very different customers, each with a very different challenge and reason for needing energy certainty.

Now, I'd like you to look at these two installations. Both of them are six-unit installations. The one on the left is a natural gas reciprocating application, and the one on the right is Capstone. Both are designed to accomplish the same thing, deliver dependable power. But they get there and they couldn't be more different. Look at everything on the left. Between your oil tanks, your coolant storage, your waste storage, your motor control centers, all of the different equipment that goes into building that. I'd like to share a little story. We had a pharmaceutical company come visit us, and at that time, they were looking at recip engines.

As we were talking, we were going through a TCO model, which I'm going to show you that TCO model in a second, but the lead person asked, "Well, Vince, why do contractors and engineers tell us to use recips and not think about Capstone gas turbines?" I said, "Well, number one, they're used to recips, but number two, look at all the money they make." Because the installation cost of that kind of a system is much more than the installation cost of a Capstone system. That's when they had their aha moment, and that's when they realized that it really is about simplicity and clean and being reliable. So that is a big difference of how we should operate. This is really the financials behind all of that.

There are situations here where we're more expensive than the competitor, and there's other elements to this where we're significantly better. At the end of the day, when you look at the whole problem that you're trying to solve, both in a technical situation and a financial situation, you can see that this type of a solution, clean and elegant, can win out on a total cost of ownership. So let's talk about the opportunity in front of us. This $265 million TAM, quite frankly, is a lot larger than that. We're being a bit conservative here. But the message is clear. We don't need to capture a large percentage of these markets to fundamentally change and transform Capstone. What's exciting to us is this is not just built around data centers. Of course, data centers are one of the more important ones.

At the end of the day, we're all seeing what's happening right now today with data centers. I can't tell you the number of conversations I've had with investors and customers who have said, "I'm glad you're not just focused on data centers." We believe that the electrification of ports is a problem that needs to be solved, and we have some really cool, unique situations for mobile power, temporary power, and permanent power to help the ports solve their problems there. The other major growth market on this list is what we call the utility microgrid. To me, that's the big sleeper. That's where this all comes full circle again. Because at the end of the day, we're not competing with the utilities. They need our help. Utilities could build big power plants. They could build 100-megawatt peaking power plant.

They can build 500-megawatt combined cycle power plants. They can do that in their sleep. Now, granted, it is going to take them years to do that. What they need right now is they need to figure out a way to strengthen their grid in those areas that they are the weakest. Sometimes those are 5, 10, 20-megawatt deployments. We can provide that under this distributed capacity program. There are substations. We saw this in Texas when they had the big freeze. They have now learned to put backup generation at the substation to protect that substation. We also believe field deployed transformers. A lot of times we hear about transformers that have long lead times. If we come in and we protect those transformers, they do not fail. They do not overload and fail.