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Date: 3/30/2015Source: Seanica Otterby, National Association of Farm BroadcastersAudio with Lisa Daniels, Midwest Wind Energy Center Director (MP3 2.1 MB). Download Windows Media Player. Time: 00:02:18.
The Rural Energy for America Program was estab…
by Debra Fiakas CFA
Last week I spent the better part of a day listening to
presentations of energy companies at the Wall Street Analyst Forum
in New York. Although I had heard the management of US Geothermal (HTM:
NYSE) tell the company’s story before, I was impressed to hear about
the progress the company has made in squeezing profits from
electricity produced with turbines run by underground steam.
Management called it gratifying!
The company reported $31 million in sales in the year 2014,
delivering $14.9 million in net income to the bottom line.
That is something to celebrate!
Sales in 2014 grew 13.1% year-over-year compared to $27.4
million. Production profits also increases to 48.5% of sales,
up just a pinch from the year before when profits were 48.3%.
Unfortunately operating expenses rose during the year leaving
profits at that level at $4.6 million or 14.8% of sales. What
really drove net income in 2014 was a $12.0 million tax benefit as
the company amortized tax assets built up in previous years when the
company experienced losses.
As is almost always the case with young companies, even ones that
have achieved profitability, it makes sense to look carefully as the
company’s ability to generate cash. As confusing as US
Geothermal’s profits and loss profile might be, its report of
operating cash flow is illuminating. In 2014, the company’s
operations generated $12.8 million in cash, which tops 2013 cash
generation of $10.6 million.
It is exciting seeing cash in the bank and even more gratifying when
management finds something productive to do with it. US
Geothermal has a history of buying up thermal assets. The
company acquired new leases for its Vale project, but the real
excitement has been in two other acquisitions.
In 2014, the company bought the WGP Geysers project from Ram Power (RAMPF:
OTCBB)for what appears to be a very attractive price of $6.4
million. WGP Geysers is a developed site with four wells in
the larger Geysers project in California. A recent engineering
report suggests the project can generate 30 megawatts
annually. The company has received approval to build a
38.5 megawatt power plant.
Then in December 2014, US Geothermal issued stock to acquire Earth
Power Resources, which included geothermal assets in Nevada that
could give rise to three power projects. A third party has
estimated there is sufficient heat in place to generate 71 to 186
megawatts of power. The company began drilling the first
production well in December 2014.
The company is projecting nearly 200 megawatts of power by 2020 from
the current 45 megawatts. Management has told analysts who
follow the company that it can generate $100 million in EBITDA
(earnings before interest, depreciation and amortization).
Against such a prognosis, HTM shares appear grossly
undervalued. Unfortunately, investors are unconvinced. A
review of recent trading patterns found in a point and figure chart
suggests a very bearish sentiment prevails in trading of HTM
shares. An investor taking a bull case position in the stock
may have some time to wait for appreciation of the shares.
Debra Fiakas is the Managing
Director of Crystal Equity
Research, an alternative
research resource on small capitalization companies in selected
Neither the author of the Small Cap
Strategist web log,
Crystal Equity Research nor its affiliates have a beneficial
interest in the companies mentioned herein.
Governor Jerry Brown made something of a stir last weekend with a crisp appearance on Meet the Press. After months of repeatedly saying he’s not runni…
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Bottom line: A new second wave of
consolidation is likely to occur in China’s solar panel sector
later this year, with money-losing companies like Yingli and
ReneSola as the most likely acquisition targets.
Looming signs of new trouble are brewing in the solar panel
sector, with shares of Yingli Green Energy
taking a bath after the company reported widening losses and
slowing revenue growth. The 15 percent sell-off saw Yingli’s
shares re-approach an all-time low from just 2 and a half years
ago, as the company joined a small but growing club of US-listed
solar panel makers whose shares now trade in the $1-2 range.
Yingli’s announcement makes it the last of China’s major solar
panel makers to report their fourth-quarter results, painting a
picture that hints of more consolidation on the way for a sector
that has already undergone a painful restructuring over the last 2
years. Two camps are emerging: One that is profitable, including
names like Canadian Solar (Nasdaq: CSIQ)
and Trina (NYSE: TSL);
and one that is losing money, which includes Yingli and ReneSola
which became the charter member of the $1 club when its shares
sank below $2 last November.
The broader solar sector took a beating in the latest trading day
on Wall Street, with Yingli and ReneSola leading the downward
charge with the 15 percent and 7.5 percent declines, respectively.
Shares of both companies are now near all-time lows. The
profitable Canadian Solar and Trina were both also down, but by
smaller amounts in the 3-4 percent range. Both of those companies’
stocks still trade well above their all-time lows, and don’t
appear to be in danger of joining the $1 club anytime soon.
Investors were clearly spooked by the bottom line in Yingli’s
latest results, as it reported a net loss of 609 million yuan
($100 million) for the quarter. (company announcement; English article) That figure was actually an
improvement over the company’s 806 million yuan loss for the
fourth quarter of 2013, but it also marked a 4-fold increase from
its loss of 138 million yuan in the third quarter of last year.
All of China’s solar panel makers, and most of the global
industry in general, fell sharply into the red at the height of a
sector downturn that began in 2011 and didn’t really start to ease
until 2013. Companies like Canadian Solar and Trina were some of
the first to return to profitability, and the pair have just
reported relatively solid profits in their latest quarterly
In terms of top line, all of the companies are reporting that
revenue growth is slowing sharply as prices start to decline after
a relatively long period of steady gains during the recent
recovery. Yingli predicted its shipments in terms of production
capacity would only grow 7-16 percent this year. But if prices
fall, that means actual revenue could grow by much less or even
start to fall. ReneSola has forecast similar anemic growth this
year, while Trina and Canadian Solar have forecast much stronger
All of this brings us back to the question of whether a new
shake-out is looming for the industry, and whether money-losing
companies like ReneSola and Yingli might become attractive
takeover targets. The recent sell-off of both companies’ shares
has made each a relative bargain for any interested buyers.
ReneSola’s current market value stands at just $150 million, while
Yingli’s is about twice that amount at $360 million.
The bigger question is whether anyone would want to buy these
companies, since such money losers aren’t exactly that attractive.
I suspect the answer to that question is “yes”, as Beijing and
local governments could provide some incentives to spur more
consolidation that is still needed to put the sector on a
longer-term sustainable footing. Accordingly, I would expect to
see at least 1 or 2 mid-sized players to disappear later this
year, most likely through acquisitions, before the sector returns
to more solid footing in 2016.
Doug Young has lived and worked in China for 15 years, much of
that as a journalist for Reuters writing about Chinese companies.
He currently lives in Shanghai where he teaches financial
journalism at Fudan University. He writes daily on his blog, Young´s
China Business Blog, commenting on the latest
developments at Chinese companies listed in the US, China and Hong
Kong. He is also author of a new book about the media in China, The
Line: How The Media Dictates Public Opinion in Modern China.
The world needs to put the brakes on climate change. But any plan to tackle climate change can’t sacrifice economic growth if we hope to end extreme poverty, reduce inequality, and ensure that poor people gain access to energy. We need to de…
The March 24 opinion from the U.S. District Court for Nevada granted in part and denied in part Ormat’s motion to dismiss an action brought by ex-Ormat employees under the False Claims Act. The ex-employees are alleging fraud by Ormat in its preparation of three Section 1603 [hyperlink: appended below] cash grant (Cash Grant) applications for geothermal projects. In theory, either party could appeal, but that seems unlikely.