Investing in Geothermal Stocks

When it comes to investing in geothermal stocks, there are only a handful of choices out there.

The purpose of this article, then, will be to present all your options for investing in geothermal stocks, as well as some guidance on which ones are most likely to return nice gains.

Here we go. . .

Investing in Geothermal Stocks

Before we get into specific geothermal stocks, let’s first briefly cover some of the major industry statistics.

From 2000 to 2007, installed geothermal capacity grew from 7,417 MW to 9,218, for a nominal 24% growth.

But by 2012, there are expected to be 13,022 MW installed, meaning we’re in for 41% growth in the next five years.

It’s not the same Cinderella story being carried out by the wind and solar sectors, but it’s a nice chunk. And with fewer players than those other sectors, the profits will more concentrated and easier to come by.

With that in mind, let’s cover the public geothermal companies operating in North America.

U.S. Geothermal Companies

Right now, there are 241 geothermal power plants either completed, planned, or under construction.

Of those, Ormat Technologies (NYSE: ORA) is involved in 56, making them participants in 23% of all geothermal projects. . . ever.

What’s more, they were involved in some of the earliest geothermal plant, going all the way back to 1961, and in the largest geothermal plant in the world–the 426 MW Mak-Ban in the Phillipines.

And the company is currently supplying turbines to projects that will have a total capacity of 419.5 MW.

This company is truly the geothermal king. And it’s a bargain under $32.00, as it’s recently been beaten down with the broader market from its near $60.00 highs.

The next logical player in this game is Calpine (NYSE: CPN). And while don’t produce geothermal turbines or parts, they do own 15 geothermal power plant. They are all in California, and have a total capacity of 1,348 MW, or 1.35 GW!

After flirting with bankruptcy some time ago, this company has made a strong rebound. And its portfolio of geothermal assets makes me confident in buying this stock under $8.00.

Next on the list is U.S Geothermal (AMEX: HTM), which, despite only having two geothermal projects online, is bargain priced at $.60

U.S. Geothermal’s two active projects, Raft River in Idaho and San Emidio in Nevada, have a combined capacity of 17.8 MW. Raft River just came online earlier this year.

But it’s an undeveloped project that offers the most hope for this company. U.S Geothermal’s Neal Hot Spring project, located in eastern Oregon, has been tested by an independent firm and will likely have a capacity of 26 MW, more than the other two combined.

When that electricity starts being sold is when U.S. Geothermal really takes off.

Speculative Geothermal Companies

With the three obvious choices for geothermal investment out of the way, I want to offer you a few speculative geothermal stocks.

First up is Nevada Geothermal (OTCBB: NGLPF).

They recently signed an amendment to an existing 20-year power purchase agreement for their first geothermal project, dubbed Faulkner I. The amendment was to increase the plants capacity to 50 MW, which will greatly improve the economics of the project.

That plant is expected to come online by the end of 2009.

Nevada geothermal expects to sell around $530 million of electricity during the 20-year life of the amended contract. Plus, the Faulkner I project will also benefit from the recent extension of the Production Tax Credit (PTC) to January 1, 2011, qualifying for a credit of $21.00 per MWh over the full ten-year term of the PTC.

I’d be buying this one under $0.50 and waiting it out until the plant comes online.

The other geothermal stock I’ll touch on here is Sierra Geothermal (TSX.V: SRA).

Sierra recently announced that it has satisfied all requirements for a 100% interest in the Reese River geothermal power project in Lander County, Nevada.

Here’s a piece of the press release:

The Reese River Project was highlighted earlier in the year in a news release dated June 17, 2008, in which the results of an independent report by GeothermEx Inc. doubled the resource estimate to a 90% probability (confidence level) of generating at least 26 megawatts (net) (MW) for 20 years and a 50% probability that the reserve can support a plant of at least 58 MW.

SRA’s top five projects have a combined resource capacity of approximately 150 MW at the 90% confidence level and 320 MW at the 50% confidence level, enough to power approximately 120,000 to 250,000 homes. Total combined estimated resource capacity in the pipeline is 500 MW.

The company has over $4.7 million in working capital with no debt, and reiterates that is more than enough to continue operations at their geothermal sites.

This is a similar story to Nevada Geothermal, once those plants come online, the rest of the world will take notice. I’d be buying under $0.12 and holding.

To green energy, and green profits,

Chris
Clean Energy Sector