Capstone Invests In Expanding Rental Fleet

05 October 2020

Microturbine manufacturer Capstone Turbine Corp. plans to expand its long-term rental fleet from 8.6 MW to 21 MW as part of a plan to develop as an Energy as Service (EaaS) business.

To do that, the company issued US$20 million in additional senior secured notes, now totaling US$50 million. All US$50 million will now bear an interest at LIBOR Rate plus 8.75% per annum, payable on the last day of each interest period. The entire principal amount under the NPA is due and payable on Oct. 1, 2023.

Under the new NPA, Capstone agrees to use the US$20 million of net proceeds to expand what Capstone called its “high-margin, long-term rental fleet” and general corporate purposes. Expanding Capstone’s aftermarket business, which includes the new long-term rental program, is an important element for the Capstone to achieve its near-term profitability goal, the company said.

“We have worked diligently over the last 18 months to increase our focus on developing an Energy as a Service (EaaS) business around our core microturbine technology,” said Darren Jamison, Capstone’s president and CEO. “As we continue to execute on this EaaS strategy, it should lead to more predictable and stable cash flow, despite product orders and backlog experiencing variability quarter to quarter.

“We recently delivered a positive adjusted EBITDA quarter despite COVID-19, which acutely demonstrated the importance and positive impact EaaS could have on profitability during difficult economic conditions. Increasing our long-term rental fleet from today’s 8.6 MW to 21 MW with support from Goldman Sachs will help us continue to execute our EaaS strategy.”

The NPA contains customary covenants, including, among others requiring the company to expand its long-term rental fleet by at least 6.25 MW by the 9-month anniversary of the closing date and 12.5 MW by the 18-month anniversary of the closing date. The NPA also includes financial covenants with respect to the company’s consolidated liquidity and consolidated adjusted EBITDA.

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