U.S. Geothermal Shifts Gears To Aggressive Growth

[ACCESSWIRE]

REDONDO BEACH, CA / ACCESSWIRE / July 6, 2016 / This undervalued New York Stock Exchange company has consistently under promised and over delivered the kind of growth that savvy and risk averse investors are always searching for; and after more than 2 years of planning and building a larger and stronger foundation, management is now moving forward to accelerate growth with the goal to become a billion dollar market cap company in the fast growing renewable energy sector.

In 2009, U.S. Geothermal (NYSE: HTM) reported extraordinary revenue growth of 875 percent; in 2012 the company reported growth of 200 percent; and in 2013 they reported growth of 180 percent. After a short break to consolidate gains, the company is now resuming robust growth again with a target of increasing their core business from 45 Megawatts to 230 Megawatts, and their market cap from $90 million to $1 billion by 2020. Now that the company has a detailed plan for the next leg of high growth, management is not keeping it a secret. Their web site currently reads, "Our mission is to become the largest pure play independent geothermal power producer, targeting 200 MW by 2020 and a market cap in excess of $1 billion."

Current And Planned Operations

U.S. Geothermal's most recent 10-Q describes 3 power plants in operation, 6 under development, and 9 in exploration phase:

Current Operations

Projects Currently Under Development

Projects Under Exploration for Development
U.S. Geothermal lists 9 new projects being explored for development of which 5 are already well known and under development for earlier phases.

Total current operations combined with projects under development equal 141 MW by the end of 2018, and if the projects under exploration are developed, U.S. Geothermal has the potential to substantially exceed their 200 MW goal by 2020 with up to 304 MW.

Strong Management

Producing over 30,000 MW, Calpine Corp. (NYSE: CPN) is the largest independent power producer in the United States. Dennis Gilles, the CEO of U.S. Geothermal, worked with Calpine for over 23 years and was with them when they built their very first Megawatt geothermal power plant. Mr. Gilles went on to manage Calpine's portfolio of 750 geothermal Megawatts, and the entire Western region that generated close to 8,000 Megawatts. Dennis is a senior executive with over 30 years experience in the management, operations, maintenance, engineering, construction and administration of power and petrochemical plants and their related facilities. He holds an MBA and a Bachelor of Science in Mechanical Engineering. Mr. Gilles is also very experienced in the identification, evaluation and acquisition of existing renewable projects or portfolios, as well as heading development of new green-field opportunities that is of high importance to future growth of U.S. Geothermal.

Doug Glaspey, a co-founder of U.S. Geothermal, has served as a director of U.S. Geothermal since March 2000, Chief Operating Officer of the Company since December 2003, and President of the Company since September 2011. Mr. Glaspey has 36 years of operating and management experience in the natural resources industry and holds a Bachelor of Science in Mineral Processing Engineering. Mr. Glaspey has founded two public companies. His experience includes public company financing and administration, production management, planning and directing resource exploration programs, preparing feasibility studies and environmental permitting.

As illustrated in the project descriptions above, management has a clear vision and a detailed plan to achieve their goals of meeting 200 MW and a market cap of $1 billion by 2020.

Growing Demand For Renewable Energy Versus Fossil Fuels

Renewable Portfolio Standards have been implemented in several States to reduce energy produced from traditional fossil fuel energy plants that are known to emit excessive carbon into the atmosphere, and increase production of energy from renewable energy sources, such as wind, solar, and geothermal.

A few examples of states taking action to create more energy from renewable sources are California, Nevada, and Oregon. Governor Brown signed into law SB-350 that requires 50% renewable energy by 2030, the closure of 2,200 MW San Onofre nuclear power plant, and the retirement of 19,000 GWh of coal burning power plants. Nevada SB-123 requires closure of ~1200 MW of Coal plants replaced with at least 600 MW of renewables. Oregon SB-1547 requires 50% renewable energy by 2040 and discontinues coal generation by 2030.

Goldman Sachs Group Inc. (NYSE: GS) sees renewable energy replacing fossil fuels. The investment bank's analysts expect the greatest market dislocations to occur between 2015 and 2025.

Waning Demand For Fossil Fuels

A few examples of hundreds of traditional fossil fuel companies that may be impacted by the Renewable Portfolio Standards are Alon USA Energy, Inc. (NYSE: ALJ), EXCO Resources, Inc. (NYSE: XCO), Abraxas Petroleum (NASDAQ: AXAS), and Cloud Peak Energy, Inc. (NYSE: CLD).

Wind And Solar

General Electric Company (NYSE: GE) is a leader in renewable energy and was the first to commercialize geothermal energy in New Zealand in 1950. In 2002, GE began with just one wind turbine model that has grown to a full suite of turbines created for a variety of wind environments as well as solar solutions.

Sky Solar Holdings, Ltd., (NASDAQ: SKYS) an independent power producer, develops, owns, and operates solar parks worldwide. It develops projects; and generates and sells electricity in the downstream solar market.

8point3 Energy Partners LP, (NASDAQ: CAFD) together with its subsidiaries, acquires, owns, and operates solar energy generation projects. As of November 30, 2015, it owned interests in six utility-scale solar energy projects, two commercial and industrial solar energy projects, and a portfolio of approximately 5,900 residential solar installations with a total capacity of 432 megawatts.

With more than 10 gigawatts installed worldwide, First Solar, Inc. (NASDAQ: FSLR) is the leading global provider of PV energy solutions. First Solar operates the largest grid-connected PV power plant in the world.

Elon Musk is entertaining a new idea to combine Tesla Motors, Inc. (NASDAQ: TSLA) with SolarCity Corporation (NASDAQ: SCTY) to deliver a solar system with battery storage to more efficiently distribute power to the grid to help offset the intermittent availability of solar energy.

Geothermal Advantages Over Wind and Solar

Geothermal is by far the most reliable form of renewable energy. Unlike the intermittent sunshine and wind, geothermal energy taps into the hot water and steam from below the surface of the earth that is continuously being generated from the earth's magma and provides the most consistent and continually available base load power 24 hours a day, and every day except for short maintenance down times in the spring.

Geothermal power availability exceeds 90% compared to 25% for solar at 6 hours per day, and 34% for wind at 8.25 hours per day.
Geothermal power plants have a smaller land footprint compared to wind and solar and have a minimal impact to wildlife.

Geothermal Disadvantages Compared To Wind and Solar

Geothermal has longer development lead times, and higher exploration risks and costs than wind and solar.

Geothermal Provides Lower Cost And More Stable Power To Utilities Compared To Wind and Solar

The following table compiled by California Public Utilities Commission for 2013 illustrates the low cost of geothermal energy paid by electric utilities compared to all other renewable sources.

Source: Section 910, CPUC

Geothermal power plants have no fuel costs, and over a typical 30-year plant life, the fuel costs for a natural gas or coal plant can represent twice their initial capital cost. Over the life of the plant, when capital costs and total fuel costs are weighed, geothermal projects are proving to be a sound investment.

Also consider that while solar and wind technology may continue to advance in efficiency and decrease in capital cost, geothermal operates 24 hours a day and every day of the year while solar and wind are intermittent and deliver far less availability.

Financing U.S. Geothermal Growth Plan

Financing management's goals is critical to success. U.S. Geothermal has strong banking relationships, and success in financing new projects and is on schedule with the announcement that a $50 million debt facility from Prudential Capital was just closed with the first $20 million drawn down to support project developments.

"U.S. Geothermal has proven itself to be one of the leading developers and operators of geothermal projects," said Wendy Carlson, Managing Director of Prudential Capital Group's Energy Finance Group - Power. "We are excited to provide capital, which will in turn be used to support the Company's growth prospects. This investment reflects our strategy of being a reliable provider of capital to high quality developers with proven track records in the North American power industry."

Today's low interest rates are very attractive to U.S. Geothermal as the initial $20 million loan has a fixed interest rate of 5.8% per annum. The loan principal amortizes over twenty years, with a seven-year term. With low interest rates forecast for the foreseeable future, debt financing is working in this company's favor.

Conclusion

With a favorable risk to reward ratio, U.S. Geothermal (NYSE: HTM) is a worthy consideration for investment in the renewable energy space where demand is growing fast, and where the company has staked out a growth plan with projects in a pipeline that are well understood. Revenues from geothermal power generation are fixed and predictable, and are guaranteed by 25-year contracts with utilities. Management is proven, highly regarded, and has a clear plan.

When compared to Calpine Corp., Revenues Per Share and Price Earnings Ratio, U.S. Geothermal shares are undervalued. With approximately 112 million shares outstanding, and a current market share price of $.83, U.S. Geothermal currently carries a market cap of about $92 million. Knowing that debt financing will be necessary to fund growth and that equity financing at higher share prices will also very likely be part of the equation, investors may want to take a closer look at U.S. Geothermal sooner rather than later.

Investors are encouraged to perform their own due diligence by visiting the company's web site. For more information see www.usgeothermal.com

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SOURCE: Emerging Growth LLC