NewEnergyNews: GEOTHERM A GOOD BET

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    Friday, May 27, 2011

    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."




    "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."




    "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."

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