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Capstone Turbine Corporation has upgraded its International Remanufacturing Facility (IRF), located in Gosport, United Kingdom (UK) designed to improve future aftermarket margins as part of its positive Adjusted EBITDA plan. The new UK expanded IRF operation along with growing the current Capstone factory long-term microturbine rental fleet are the foundation of management's plan to achieve sustainable positive Adjusted EBITDA in the June 2020 quarter and beyond.
The Gosport, UK facility originally opened back in 2011 as a hub for Capstone Field Service Engineers (FSE) and is strategically located close to the ports and shipyards in Portsmouth, with access to both the skilled labor needed to provide depot-level support for Capstone's microturbines and the shipping facilities to support all of Europe, the Middle East, and Africa (EMEA).
Development of Capstone's expansive 73 country worldwide distributor network over the past eight years has since eliminated the need for FSE's, so Capstone launched an initiative in 2016 to retool the facility and the dedicated local team in order to support EMEA distributors with depot-level remanufacturing capabilities, as well as local technical engineering and training support.
The average Capstone factory-certified remanufactured part is typically 40% of the cost of a new Capstone OEM replacement part. Therefore, the result of this multi-year capital investment will be the continued margin expansion of Capstone's aftermarket service business as the Company expands its global remanufacturing operations and the reduction of service parts lead times and spare parts shipping costs.
On December 18th, Capstone, in partnership with its local UK distributor Pure World Energy who teamed with Capstone on the facility upgrades, "cut the ribbon" on a fully capable International Organization for Standardization (ISO) turbine system test facility. The new UK-based test capabilities, which mirror Capstone's US-based testing facilities, comes after two years of adding increasingly complex remanufacturing processes such as turbine powerhead rebuild and balancing operations as well as complete turbine recuperator remanufacturing capabilities. These new local capabilities will further accelerate Capstone's ability to both provide world-class parts and service support in EMEA, and improve aftermarket margins as the remanufactured parts are currently only utilized for Capstone's long-term service contracts, or Factory Protection Plan (FPP) agreements. Capstone currently has 264 MW of microturbines under long-term contracts, of which 28% are in the growing EMEA region, totaling $83.7 million of future service backlog.