Capstone Management Presentation

July 2009

Safe Harbor Statement

During the course of this presentation, we may make projections or other forward-looking statements regarding future events or financial performance of the Company within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, including: reference to the potential market for our products; future results of operations and achieving profitability; sales expectations; distribution capabilities and agreements with certain new distributors; manufacturing improvements and cost reductions; increased production capacity; low emissions, energy efficiency and reliability of our products; our business initiatives and relationships with third parties and related expanded market opportunities; the advantages of our products over our competitors and competing technologies; expanded aftermarket service and remanufacturing business; compliance with government regulations; new products and product platforms, including our C200 and C1000 products; the application of our products in the solar market; and the value and savings to be realized by our customers. These forward-looking statements are subject to numerous assumptions, risks and uncertainties which may cause Capstone's actual results to be materially different from future results predicted or implied in such statements, including: our expectations about expansion into additional markets may not be met; new applications of our products may not be realized; certain strategic business initiatives may not be sustained and may not lead to increased sales; we may not be able to reduce costs, improve customer satisfaction, or increase our cash flow or profitability; our release of new products may be delayed or new products may not perform as we expect; we may not be able to comply with all applicable government regulations; we may not be able to obtain or maintain customer, distributor and other relationships that result in an increase in volume and revenue; and we may not be able to retain or develop distributors or dealers in our targeted markets, in which case our sales would not increase as expected and product quality expectations may not be met. We refer you to the Company's Form 10-Q, Form 10-K and other recent filings with the Securities and Exchange Commission for a description of these and other risk factors. Because of the risks and uncertainties, Capstone cautions you not to place undue reliance on these statements, which speak only as of today. We undertake no obligation and specifically disclaim any obligation to release any update or revise any forward-looking statements to reflect events or circumstances after the date of this presentation or to reflect the occurrence of unanticipated events.
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President Signs Stimulus Package

Long-Term Extension and Modification of Renewable Energy Production Tax Credit. Certain wind facilities would qualify for the renewable energy production tax credit if placed in service by Dec. 31, 2012 and certain other qualifying facilities involving biomass, geothermal, small irrigation, hydropower, landfill gas, waste to energy and marine renewable facilities will qualify if placed in service by Dec. 31, 2013. The estimated cost over 10 years is $13.1 billion. (Waller Lansden; February 2009)

With Democrats committed to aggressiv efforts to curb oil consumption and put th US on track to reduce emissions of greenhouse gases, business hostility to proposals to cap emissions is giving way t efforts by industriesto profit from a green tilt in government policy. (WSJ, November 5, 2008; A4) Demand for electricity in the U.S. is increasing three times as fast as resources are being added. U.S. is on track for a shortfall of about 81 GW in 2015 (equivalent to 160 large power plants). (North American Electrical Reliability Corporation; 2006)
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Building operations account for 43% of U.S. greenhouse gas emissions. More than either the transportation or industrial sectors. (Oak Ridge National Laboratory; 2005)

Capstones Microturbine
96 U.S. technology patents
Air bearing technology One moving part No coolants, oils or grease

Flexible and economic clean technology

Flexible configuration Lightweight & small footprint Multi-fuel capability Ultra-low emissions

Capstones product family

C30 30kW C65 65kW C200 200kW (First shipment August 2008) C1000 Series 600kW, 800kW, 1,000kW (First shipment January 2009)

MicroTurbine Competition
Turbec (100kW) Ingersoll-Rand (250kW)

Elliott Energy Systems (100kW)

MicroTurbine Industry Leader With Majority Market Share
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Current Market Segments

Large Retailers

Hospitals

Telecom

Office Buildings

Hotels & Schools

U.S. Govt

Data Centers

Hybrid EV

Landfills

Digesters

Waste Water Plants

Oil & Gas

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New C200 & C1000 Products

3,500 M ark et P otential $ M illions 3,000 2,500 2,000 1,500 1,000 500 0 28-300 kW .3-1 MW 1-5 MW 5-10 MW 10-20 MW 20-50 MW

Competitive Pricing Low maintenance High reliability High efficiency Ultra low emissions Built-in redundancy Small Footprint
C200/C1000 Market Expansion

Microturbine Market

Source: Resource Dynamics Corporation (extrapolated based on industrial uses)

Piston Engine Price, Fuel Cell Emissions, Turbine Reliability

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United Technologies (NYSE: UTX)

Worldwide OEM Partner for PureComfort

Private labeling Capstone Microturbines Match with Carrier Absorption Chiller for CHP/CCHP Markets Focus on big customers:
Wal-Mart Tesco Marriot International/Ritz Carlton

Development Partner for C200 Systems

$12.8 in cash and engineering support
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Value Comparison
F irst C st o
$10,000 $9,000 $8,000 $7,000 $P K er $6,000
$ Pe k r W

Total C ost of O nership w

$ ,0 0 4 0 $ ,0 0 3 0 $ ,0 0 2 0 $ ,0 0 1 0 $ S la P o r V $ ,0 0 (1 0 ) $ ,0 0 (2 0 ) $ ,0 0 (3 0 ) $ ,0 0 (4 0 ) F e C lls ul e W d in R cip C P e H M tu in C P icro rb e H

$5,000 $4,000 $3,000 $2,000 $1,000 $S olar P V F el C u ells Wd in M icrotu e rbin R ecip

$ ,0 0 (5 0 ) $ ,0 0 (6 0 )

Equivalent Cars Removed (CO2) for 1 MW Project

1,200

Best Value Proposition

1,000

1. Microturbine Combined Heat & Power

Number of Cars 800

2. Reciprocating Combined Heat & Power 3. Wind Turbine 4. Fuel Cells 5. Solar PV
Assumptions: Capstone C200 System, Combined Heat and Power Systems, Natural Gas Fueled,
Solar PV Wind Recip Fuel Cells Microturbine

600

400

200

Source: CA Statewide SGIP Program Statistics

California Emission Standards, Initial Investment Data: CA Statewide SGIP Program 8 Statistics through Q4 2007, Analysis assumes no incentives

Gas Turbine Comparison

40 38 36 34
C tone C 00 aps 2 C tone C 000 aps 1 G n ral E ctric G 5 (D N ee le E -1 L ) S mn S T 0 ie e s G -1 0 So r T in C nta 5 la urb es e ur 0 So r T rbine C ta r 4 la u s en u 0 O R T rb es O 1 P A u in P 6-3B (D E) L S olar T rb es Sa rn 2 u in tu 0 K asa G B1 aw ki P 5D R olls R yce 5 1 B5 o 0 -K S R lls R o oyce 5 1 7 0 -KB S D Ka asa G w ki PB60 S olar T rb es M rcu 5 u in e ry 0

E lectrical E fficienc

32
Ellio T 0 tt A1 0R

30 28 26 24 22 20 18

Ing rso R n M 2 0 e l ad T5

Ka a w saki G B3 D P 0

D sse a d KG -3 re r-R n 2 E

16 14 0 1

D sser-R n KG -3 re ad 2 C

P er O ow utput (M ) W

Capstone offers the highest efficiency alternatives below 4.5 MW

Source: Company Websites. Data and results are based on publicly available information from manufacturers and except for Capstones products, not from Capstone tests. 9

Capstone Value Proposition

6 hrs planned maintenance per year Scheduled/unscheduled maintenance $0.015 / kW-hr Average uptime 99%
Op. Hours 8,000 20,000 40,000 Item Air/Fuel Filters, Igniter Injectors, Batteries Engine/Generator, Injectors, Batteries Action Inspect, Replace Replace Overhaul

120 hrs planned maintenance per year Scheduled/unscheduled maintenance $0.018 to 0.022 / kW-hr Average uptime 82%
Op. Hours 1,000 2,000 1,500 20,000 40,000 Item Air & Oil Filters, Oil, Spark Plugs Top End Top End Bottom End Action Inspect or Replace Inspect Overhaul Overhaul

Maintenance Costs 25% Lower on Average = Lower TCO

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Capstone Value Proposition

Relative NOx Emissions
CARB Natural Gas Emission Standard Units 2003 2007 Reduction 0.5 0.07 86% NOx lb/MWh 6.0 0.10 98% CO lb/MWh 1.0 0.02 98% VOC lb/MWh
US Grid Avg

CARB 2007 - extremely stringent emissions standard that exceeds the requirements of federal standards CARB 2010 C30 internal testing complies with standard Only Microturbines, Fuel Cells, Solar and Wind meet standard

NG Recip

C200
Source: EPA and ASME

Capstone Emissions Less Than 1/10th of Internal Combustion Engines

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Growing Product Backlog

80 70 60 50
Mw

40 30 20 10 0
Q1'08 Q2'08 Q3'08 Q4'08 Q1'09 Q2'09 Q3'09 Q4'09
C30 C200 C60 Series C1000 Series

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Y/Y Net Revenue Growth

$13.1 $11.5 $9.2 $7.5 $5.6 $7.2 $9.3 $11.8

Q1

Q2 FY'08

Q3 FY'09

Q4

C200 Unit Production Ramp

48 36

19 12 4 Q2'09 A Q3'09 A Q4'09 A Q1'10 E Q2'10 E

Clear Path to Profitability

Product Acceptance

Increased Production

Profitability

FY09 Backlog $61.5 million

C200/C1000 production rates Increased Robotics Tier One Suppliers

C200/C1000 direct material improvement of 30% through FY2010

Y/Y Revenue 40% growth

Just in Time Deliveries Significant Inventory Reduction 4,000 unit maximum capacity

Overhead reductions in FY2010 Gross margin 35-40% by end FY2010 Operating expense lower by 15% in FY2010
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Multiple Markets Not experiencing order cancellations

Positioned For Growth

Strong International market drivers U.S. Policy now focusing on energy efficiency and renewable power Positioned as Green ultra low emission and highly efficient technology New C200/C1000 product enables megawatt solutions in a $4 Billion Annual Market Backlog as of March 31, 2009, up 120% from March 31, 2008
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