Best Investments: Three top geothermal E & P companies

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Three top geothermal E & P companies

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Three Top Geothermal E&P Companies | Alternative Energy Stocks

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Three Top Geothermal E&P Companies Tom Konrad CFA

Last week, I was on a panel at the InsideCommoditiesConference, and spent some time talking with Tyler Mordy,directorof research at Hahn Investment. He's a top-down analyst(and CFA Charter holder) who had recently grown enthusiastic aboutAlternative Energy in general because the sector is so beatendown.

We agreed that the most-beaten down sector of alternative is geothermalpowerstocks, which Tyler finds frustrating because Hahn works withmanaged ETFportfolios, and there simply is no geothermal ETF. Nor isthere likely to be, since one publicly traded company dominates theindustry (OrmatTechnologies[ORA]) and the rest of the geothermal Exploration andProduction (E&P) companies are small to microcaps.

My current enthusiasm for geothermal stocks is why I recentlybegan writing about them again. Last month, I published an overviewofthe eight geothermal power stocks that trade in North America,as well as an in-depthlookat Ormat. I currently don't like Ormat's valuation, soI've been meaning to delve deeper into the five Geothermal E&Pplays to pick the best. I have not yet had the time to write thatarticle, but Martin Katusa at CaseyEnergyOpportunities has been following them for years.

Martin just did an interviewwithThe Energy Report, and here is an excerpt of what he has tosay:

Because there are so few players and [thegeothermal power industry] is sofront-CAPEX extensive, consolidation will have to happen... Whetherit's Ram PowerCorp. (RPG.TO, RAMPF.PK) taking over NevadaGeothermal Power (NGP.V,NGLPF.OB), NevadaGeothermal taking over Ram, Nevada taking over Magma EnergyCorp. (MXY.TO,MGMXF.PK),Magma taking over Nevada or a merger between Ram and Magma—there'sgoing to be consolidation. But the question of who will be theconsolidator is still up in the air.

You want to be in thecompany that's going to have the largest upside. We put NevadaGeothermal, Ram and Magma as buys because they're run by excellentpeople. They're undervalued compared to a year ago. In January, NevadaGeothermal was over $1. We recently wrote about it trading in the $0.50range. Now the company's refinanced its debt and had a recent equityfinancing in which very smart money like Rick Rule participated in (asdid we). It's producing close to 50 MW now and will be growingproduction in the very near future; and, better yet, Ormat Technologies Inc. (NYSE:ORA)just bucked up some big money to farm into one of its other projects. Ayear and a half ago, it wasn't producing; so it's so much cheaper todayand is a much better company.

That's the meat of it: his top picks are Ram Power, Nevada Geothermal, and Magma Energy. Likeme, he's not currently a fan of Ormat. I recommend reading the entire interview;there's a lot more good information about each company, what he likesabout them, and the sector in general.

DISCLOSURE: Long NGP,RPG.
DISCLAIMER: The information andtrades provided here are for informational purposes only and are not asolicitation to buy or sell any of these securities. Investing involvessubstantial risk and you should evaluate your own risk levels beforeyou make any investment. Past results are not an indication of futureperformance. Please take the time to read the full disclaimer here.

Posted by Tom Konrad on November 12, 2010 06:37 PM | Three Top Geothermal E&P Companies

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Comments

Thanks so much for all of this information. Your whole website is very simple, transparent, and informative - a great help to my renewable energy investments.

Posted by: Evan Humphrey

| November 12, 2010 01:56 PM

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