Geothermal Companies

The Renewable Energy Segment Still Under the Radar Screen

Written by Brian Hicks
Posted December 6, 2006

Interested in owning your very own wind energy company?

Goldman Sachs has one for sale. And it’ll only cost you a measly $1.5 billion!

According to the investment banker, this one may be able to throw off $800 million in adjusted earnings before interest, taxes, depreciation and amortization by 2011.

This is based on the assumption that the company, Horizon Wind Energy, controls 14 percent of all wind generation developed in the U.S. since 2000, and 2,100 MW of additional generation capacity by 2010.

Many analysts are looking at this sale as an indication that the market for renewable energy is nearing a top.

But the renewable energy market just isn’t that one-dimensional, and smart investors are keeping close tabs on today's geothermal companies.

One Wind Farm Does Not a Renewable Energy Market Make

The renewable energy market is not a one-trick pony. And Goldman Sachs knows this. Just look at the firm’s recent activity in the market.

Last May, Iogen Corporation got a shot of steroids when Goldman Sachs threw $30 million at the company’s cellulosic ethanol technology. Iogen is the only company operating a cellulosic ethanol demonstration facility in North America. (Royal Dutch Shell also has a stake in Iogen.)

A few months later, SunEdison closed a $26.1 million private equity round led by Goldman Sachs. SunEdison is the Baltimore-based company that launched a $60 million fund to support the installation of new solar electric systems in the U.S.

And just this past August, Goldman Sachs pumped $27 million into a new geothermal company in Idaho that just happens to have access to one of the largest geothermal fields in the world.

The U.S. Department of Energy has actually estimated capacity in this region as high as 1,000 MW.

That’s enough to provide energy for roughly 1 million households.

The most recent U.S. Census data puts less than 400,000 single-family homes in the entire state. So really, this one region, which only one geothermal energy company controls, could potentially provide energy for more than twice as many single-family homes in the entire state of Idaho.

Fortunately, I alerted Green Chip Stocks members to this company before the market was really paying attention. But it woke up pretty soon . . . after the Goldman Sachs deal was announced.

Of course, that was months ago. So why am I telling you about it now?

Because it’s all about to happen again!

You see, I recently attended a dinner in New York with some pretty heavy players. I’m talking about big money. Like Goldman Sachs money! And you wouldn’t believe the way these guys were tripping over each other to get to the CEO of this little geothermal company.

Geothermal Companies Under the Radar Screen

Listen, in the world of renewable energy, few investors have a clue as to just how lucrative the geothermal energy segment is. But the utilities—especially those that are now required to provide a percentage of their generating power from renewables—are signing power purchase agreements left and right with these geothermal companies.

And it’s only going to get better.

In fact, by late January, I wouldn’t be surprised to see this $0.98 geothermal stock trading between $1.60 and $1.80 per share. And by this time next year – an easy $3 or more.

I realize this is a pretty bold prediction. But based on the performance of our last geothermal play, Ormat Technologies, I’m not too worried.

Since our original recommendation, Ormat Technologies has delivered a more than 150% gain. Take a look in the chart below:

Charting Geothermal Companies: Ormat Technologies (NYSE: ORA)

And it's not just geothermal we're bullish on...

Read on to learn how to profit from numerous renewable energy sectors.

Jeff Siegel