News
Aug 23, 2011Geothermal Power Picks Up Steam
Source: TheOTCInvestor.com On Thursday August 18, 2011
Ormat Technologies Inc. (NYSE: ORA), the largest producer of geothermal power in the world, reported higher revenues and a record $225 million backlog during the second quarter. These promising developments have also boosted hopes for Nevada Geothermal Power Inc. (OTCBB:NGLPF, TSX-V:NGP), Alterra Power Corp (CVE: AXY), U.S. Geothermal Inc. (AMEX: HTM) and Ram Power Corp (TSE: RPG).
Key Highlights
Picking Up Steam - The geothermal power industry appears to be picking up steam after industry leader Ormat Technologies Inc. (NYSE: ORA) reported a record backlog and its largest ever order from New Zealand worth more than $130 million.
Significantly Undervalued - The geothermal industry appears significantly undervalued due to a basic lack of investor understanding. For instance, companies like Nevada Geothermal Power Inc. (OTCBB: NGLPF, TSX-V:NGP) are trading with a valuation of less than $6/W installed.
Now's the Time to Buy - Given these two factors, investors may want to consider taking a stake in the geothermal power industry. Those looking for an industry leader may want to check out ORA, while those looking for a value play may want to see NGLPF.
Strong Interest Seen in Geothermal Worldwide
Last quarter, Ormat Technologies Inc. (NYSE: ORA) received the largest order in its 46-year history from New Zealand. The $130 million contract highlights the fact that geothermal energy is rapidly replacing other forms of conventional and even renewable energies. Similar evidence can be seen in a recent $410 million loan to build a 340-megawatt geothermal plant in Sumatra, Indonesia.
Geothermal energy is considered one of the most cost effective sources of power on the planet, with more than half of the total costs being for initial drilling. The typical breakeven point for a geothermal power plant in 2007 was approximately $0.054 per kWh, while the average cost of U.S. residential electricity was $0.12 per Kwh in 2009, leaving a healthy long-term profit margin.
Lack of Understanding Yields Cheap Valuations
Despite the growth and effectiveness of geothermal power, there are only five companies operating in the space that are publicly traded either in the United States or Canada, including Ormat Technologies Inc. (NYSE: ORA), Nevada Geothermal Power Inc. (OTCBB: NGLPF, TSX-V:NGP), Alterra Power Corp (CVE: AXY), U.S. Geothermal Inc. (AMEX: HTM) and Ram Power Corp (TSE: RPG).
Many of these stocks are significantly undervalued due to a lack of investor understanding, trading with almost no value given to their underground assets. Meanwhile, companies like Nevada Geothermal Power Inc. (OTCBB: NGLPF, TSX-V:NGP) are trading with a valuation of just $6/W installed, which is significantly less than the valuations seen in the solar and wind industry.
A Great Time to Invest in Tomorrow's Energy Industry
With heightened interest in geothermal power and low valuations, investors may want to consider taking a stake in the industry. Those looking for a safe industry leader may want to check out Ormat Technologies Inc. (NYSE: ORA), while those looking for a deep value play that carries a little more risk may want to see Nevada Geothermal Power Inc. (OTCBB: NGLPF, TSX-V:NGP).
