Piper Jaffray Fourth Annual Clean Technology & Renewables

Conference

February 19, 2009

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Safe Harbor StatementDuring 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;• 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 such as the C200 and C1000 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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“With Democrats committed to aggressive efforts to curb oil consumption and put the US on track to reduce emissions of greenhouse gases, business hostility to proposals to cap emissions is giving way to efforts by industries…to 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)

Building operations account for 43%

of U.S. greenhouse gas emissions.

More than either the transportation

or industrial sectors. (Oak Ridge

National Laboratory; 2005)

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)

Capstone’s Microturbine

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• Over $100M invested in product development

• 95 U.S. Technology Patents• Air bearing technology• One moving part• No coolants, oils or grease

• Flexible and economic technology• Flexible configuration• Lightweight & small footprint• Multi-fuel capability• Cost competitive positioning

• Capstone value proposition• Low total cost of ownership• Ultra low emissions• High reliability• Minimal scheduled maintenance

Spring

Foil

Shaft

MicroTurbine Competition

Elliott Energy Elliott Energy Systems (100kW)Systems (100kW)

Turbec Turbec (100kW)(100kW)

IngersollIngersoll--RandRand(250kW)(250kW)

MicroTurbine Industry Leader With Majority Market Share4

Current Market Segments

Hospitals

Hotels Schools

Large Retailers

Oil & Gas

U.S. Gov’t

Landfills Waste Water Plants

Telecom

Digesters

Hybrid EV

Office Buildings

5

C200 & C1000 Product• Competitive Pricing • Low maintenance• High reliability• High efficiency• Ultra low emissions• Built-in redundancy• Small Footprint

Piston Engine Price, Fuel Cell Emissions, Turbine Reliability

0

500

1,000

1,500

2,000

2,500

3,000

3,500

Mar

ket P

oten

tial

$ M

illio

ns

28-300 kW .3-1 MW 1-5 MW 5-10 MW 10-20 MW 20-50 MW

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

Microturbine Market

C200/C1000 Market Expansion

6

7

UTC Relationship• 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• IBM• Marriot International/Ritz Carlton

– Development Partner for C200 Systems• $12.8 in cash and engineering support

PureComfortTM Solutions

San Francisco, CA

240kW, 120RT1

Outdoor installation

Aurora, CO

360kW, 160RT1

Outdoor installation

Simi Valley, CA

960kW, 420RT1

Outdoor installation

Mount Kisco, NY

240kW, 120RT1

Roof-mounted skid

Providence, RI

240kW, 120RT1

80kW trigen

Indoor mechanical room

United Kingdom

130kW

Outdoor installation1 RT = refrigeration tons 8

Value Comparison

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First Cost

$-

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

$7,000

$8,000

$9,000

$10,000

Solar PV Fuel Cells Wind Microturbine Recip

$ Pe

r K

Equivalent Cars Removed (CO2) for 1 MW Project

0

200

400

600

800

1,000

1,200

Solar PV Wind Recip Fuel Cells Microturbine

Num

ber o

f Car

s

Assumptions: Capstone C200 System, Combined Heat and Power Systems, Natural Gas Fueled, California Emission Standards, Initial Investment Data: CA Statewide SGIP Program Statistics through Q4 2007, Analysis assumes no incentives

Total Cost of Ownership

$(6,000)

$(5,000)

$(4,000)

$(3,000)

$(2,000)

$(1,000)

$-

$1,000

$2,000

$3,000

$4,000

Solar PV Fuel Cells Wind Recip CHP Microturbine CHP

$ Per

kW

Source: CA Statewide SGIP Program Statistics

Best Value Proposition

1. Microturbine Combined Heat & Power

2. Reciprocating Combined Heat & Power

3. Wind Turbine

4. Fuel Cells

5. Solar PV

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Gas Turbine ComparisonSolar Turbines Mercury 50

Kaw asaki GPB30D

Dresser-Rand KG2-3E

Capstone C200 Capstone C1000

Siemens SGT-100Ingersol Rand MT250

Elliott TA100R

Rolls Royce 501-KB5S

Kaw asaki GPB15D

OPRA Turbines OP16-3B (DLE)

Solar Turbines Saturn 20

Solar Turbines Centaur 40Solar Turbines Centaur 50

Kaw asaki GPB60DRolls Royce 501-KB7S

Dresser-Rand KG2-3C

General Electric GE5-1 (DLN)

14

16

18

20

22

24

26

28

30

32

34

36

38

40

0 1 2 3 4 5 6

Power Output (MW)

Elec

tric

al E

ffici

ency

(%)

Capstone offers the highest efficiency alternatives below 4.5 MWSource: Company Websites. Data and results are based on publicly available information from manufacturers and except for Capstone’s products, not from Capstone tests.

Capstone Value Proposition

• 120 hrs planned maintenance per year• Scheduled/unscheduled maintenance

$0.018 to 0.022 / kW-hr• Average uptime 82%

• 6 hrs planned maintenance per year• Scheduled/unscheduled maintenance

$0.015 / kW-hr• Average uptime 99%

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Op. Hours Item Action

1,000 – 2,000 Air & Oil Filters, Oil, Spark Plugs

Inspect or Replace

1,500 Top End Inspect20,000 Top End Overhaul40,000 Bottom End Overhaul

Op. Hours Item Action

8,000 Air/Fuel Filters, Igniter Inspect, Replace

20,000 Injectors, Batteries Replace

40,000Engine/Generator,Injectors, Batteries

Overhaul

Maintenance Costs 25% Lower on Average = Lower TCO

Capstone Value Proposition

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• CARB 2007 is an extremely stringent emissions standard that exceeds the requirements of federal standards

• Only Microturbines, Fuel Cells, Solar and Wind meet standard

Units 2003 2007 ReductionNOx lb/MWh 0.5 0.07 86%CO lb/MWh 6.0 0.10 98%VOC lb/MWh 1.0 0.02 98%

CARB Natural Gas Emission Standard

Relative NOx Emissions

US Grid Avg

NG Recip

C200

Source: EPA and ASME

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

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New Products Driving Backlog

0

10

20

30

40

50

60

70

Dec 2007 Dec 2008

C1000

C200, 600, 800

C65

C30

67.1 MW

14.3 MW

Meg

awat

ts

Growing Revenue & Backlog

$-

$10

$20

$30

$40

$50

$60

$70

$80

Q1'08 Q2'08 Q3'08 Q4'08 Q1'09 Q2'09 Q3'09

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Clear Path to Profitability

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IncreasedProduction

ProfitabilityProductAcceptance

• C200 production rates

• Increased Robotics

• Tier One Suppliers

• Just in Time Deliveries

• Significant Inventory Reduction

• 4,000 unit maximum capacity

• Q3 Backlog $57M

• Y/Y Revenue 50% growth

• Multiple Markets

• Not experiencing order cancellations

• C200/C1000 direct material improvement of 30%

• Overhead reductions

• Gross margin 35-40% by end FY2010

• Operating expense lower by 15%

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 product enables a megawatt solution in a $4 Billion Annual Market

• Q3’09 backlog up over 332% from Q3’0816