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Capstone Turbine Corporation, the worlds leading clean technology manufacturer of microturbine energy systems, announced today that Lone Star Power Solutions, its exclusive distributor for Texas, Arizona, and the Gulf States, has signed one of the largest Factory Protection Plan (FPP) contracts in Capstones history.
Capstone Factory Protection Plan (FPP)
Provides guaranteed maintenance costs and shields customers from future increases in spare parts pricing, commodity increases, import tariffs, and interest rate changes.
The newly expanded Capstone FPP product enables microturbine end-use customers to have predictable and stable maintenance costs over the entire life-cycle of the equipment and protects the installation from potentially costly unscheduled maintenance. In addition, the program shields microturbine customers from future increases in life-cycle costs associated with changes in replacement spare parts pricing, commodity price increases, import tariffs, and interest rate changes.
These types of long-term service contracts underpin our stated goal of achieving 100% absorption of all operating expenses from the aftermarket service business gross margin by providing a predictable recurring revenue stream, stated Darren Jamison, Capstones President and Chief Executive Officer. Additionally, as I mentioned on our last earnings call, we are seeing more and more large oil and gas customers recognizing the value of the Capstone FPP product offering and we expect several more near-term wins in the oil and gas space for the FPP product, added Mr. Jamison.
The new contract will provide five years of comprehensive maintenance, giving financial peace of mind to this significant oil and gas customer located in the Eagle Ford Shale Basin in South Texas. The 12 systems are used for 24x7 prime power in midstream central gathering facilities. The C1000 microturbines currently have approximately 50,000 operating hours, and by placing them under a service contract, the end-use customer has furthered their commitment to continuing their use of Capstones clean and green microturbine technology for another five years, or approximately 43,000 operating hours.
Since becoming a Capstone distributor in 2018, we have been working very hard at educating our new and existing customer base on the substantial benefits of having their Capstone equipment covered under a factory-backed FPP long-term service program, said Doug Demaret, Lone Stars President and Chief Executive Officer. Signing this substantial FPP confirms both the demand for and the confidence in Capstones products, as well as in our highly skilled and extremely dedicated service professionals, added Mr. Demaret.
We are very pleased to see customers in the oil and gas sector moving towards the adoption of our industry-leading FPP, said Jeff Foster, Capstones Sr. Vice President of Customer Service. Contracts like these underscore the stability our FPP offering provides for the future from Capstones clean energy solutions, in a very unstable and dynamic macroeconomic and geopolitical world, concluded Mr. Foster.