GEOTHERM A GOOD BET

Geothermal Energy: The Most Economical Long-term Energy Solution
Justin Kuepper, May 17, 2011 (The OTC Investor)

"…[Geothermal energy is] one of the most economical energy solutions…[It] is thermal energy that originates from radioactive decay of minerals, volcanic activity and solar energy absorbed by the Earth’s surface…[There are] 10,715 MW of geothermal power online across 24 countries…[T]he Earth’s internal thermal energy flows to the surface at a rate of 44.2 TW and is replenished at a rate of 30 TW…[This is] more than double the current amount of energy consumption worldwide from all primary sources…

"…[G]eothermal energy involves no fuel cost or commodity price risk…[It has] the highest base load power and capacity factors of any power source…[M]ore than half of the costs [are] 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."

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"A typical well in Nevada can generate 4.5 MW at a cost of about $4 million to drill, or roughly $4.5-5 million per MW in total initial costs, with a 20% failure rate. As a result, the business is well-suited for public companies, able to raise the large amount of upfront capital and deliver a high long-term return on investment over time to shareholders…

"The largest public geothermal company is Ormat Technologies (NYSE: ORA), with a market capitalization of over $1 billion and projected revenues of between $395 and $410 million in 2011. With more than 300 MW under construction and development, the company is well-positioned within the sector and continues to add new land projects to its portfolio to support future growth."

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"Investors looking for an emerging play may want to consider Nevada Geothermal Power (OTCBB: NGLPF). With a strong management team and one 49.5 MW geothermal plant under its belt, the company is well-positioned to unlock value over the medium-term…[T]he firm also has a joint venture with Ormat for a new power plant on the Crump Geyser that could nearly double its capacity…

"…[Due to a] recent drop in the geothermal sector, many stocks appear to be significantly undervalued…Nevada Geothermal’s current enterprise value currently stands at around $200 million, while its production is currently at 35-37 MW (net) or 46-48 MW (gross). This means that the market is valuing the company at $6/W installed, which is significantly less than the valuations seen in solar and wind. A more typical valuation… would represent the fact that geothermal plants are base load and can produce at 90% capacity…[The] low valuation of NGLPF’s assets put the company’s stock in the bargain bin for potential investors."