Capstone Turbine Corp. (Capstone), a manufacturer of microturbine energy systems, has executed an agreement that appoints a new exclusive oil and gas distributor in Russia. Under the terms of the agreement, Capstone will grant Turbine International and its affiliate, MTE Service, the sole distribution rights for Capstone products and services in the Russian oil and gas sector in exchange for US$6.4 million in cash.
MTE Service, is a wholly owned subsidiary of Hispania Petroleum S.A. (Hispania). Hispania is an independent, privately-owned oil and gas company with operations across the globe, ranging from South America, Europe, and Russia.
“This new agreement for the oil and gas distribution rights in Russia completes our multiyear reorganization effort of the Russian marketplace for both the combined heat and power market, renewable energy market, and now the oil and gas market,” said Darren Jamison, Capstone’s president and CEO. “Through this process we have moved from one distribution partner covering multiple verticals, to multiple highly qualified partners for our three major verticals for distribution of our product in Russia and the surrounding CIS states. Capstone is looking forward to revitalizing the Russian oil and gas market with our new partner, and we believe the overall Russian market reorganization should yield long-term positive results with higher future revenue and lower overall business risk.”
Under the terms of the agreement, Turbine International will provide multiple cash payments to Capstone totaling US$6.4 million dollars with three payments totaling US$2.5 million by February 1, 2018, and the remaining US$3.9 million paid over a three-year period starting in August 2018. Turbine International has made a good faith payment of US$100,000 upfront with the balance being secured by a promissory note and corporate guarantee from Hispania.
“As part of the new agreement, Capstone will provide product and spare parts pricing discounts, sales and technical training, along with overall general business support to assist Turbine International and its affiliate, MTE Service, to further develop this key Russian oil and gas market which already has approximately 45MWs of installed Capstone product,” said Jim Crouse, executive vice president of sales and marketing at Capstone. “Additionally, we will also be providing assistance to both companies during the transition of the distributorship to minimize any potential impact and business interruption to critical Russian energy customers.”