The Rude Awakening
Pittsburg, Pennsylvania
Thursday, June 5, 2007 ------------------------- - Subterranean fireworks spark the "Governator's" interest,
- Geothermal Energy - The BIG Player to watch,
- Energy & Scarcity Investor Free Offer - Final Day!
------------------------- Eric Fry, back in Laguna Beach, reports… Yesterday evening, your editor spent a few moments on a California hillside watching fireworks bursting over the Pacific Ocean. Meanwhile, Byron King, editor of Outstanding Investments, spent a few moments contemplating the red-hot energy source that resides BENEATH the hillsides of California. Read on for the details…. --- The Agora Financial Reserve - Final Day --- Find out how you can grab a free subscription to our newest $995 Energy & Scarcity Investor service AND lock in all our best investment ideas…for life. The Agora Financial Reserve is off the table MIDNIGHT TONIGHT! Details Here: The Agora Financial Reserve -------------------------------------------------------- A Steamy Investment
By Byron King Compared to wind power and solar energy, geothermal power attracts very little attention…for the moment. But this unique, renewable energy source has embarked on a renaissance that will soon attract widespread attention…and investor interest. Just last week, I urged the subscribers of Outstanding Investments to purchase shares in Ormat Technologies, Inc. (NYSE:ORA), one of the world's leading makers of equipment used in geothermal power operations. Ormat also produces electricity by harnessing geothermal energy from deep within the crust of the Earth. Due to changes in government policy worldwide, the alternative energy industries are on a tear and this includes the geothermal business. Well the timing was right on for Ormat, because just this week the Nevada-based company announced a major power purchase agreement (PPA) with one of the nation's largest public utility companies, Southern California Edison (SCE).
On July 2, Ormat announced that it had signed a 20-year PPA with SCE to purchase 50 megawatts (MW) of clean energy output from the Brawley I Project, which is currently under construction by Ormat in Imperial County, California. The PPA includes an option to increase capacity to 100 MWs at Ormat's discretion, all subject to the approval of the California Public Utilities Commission (CPUC). When completed, the Brawley I Project will increase the total output supplied from Ormat to SCE to approximately 190 MWs. The PPA arose in response to a request for proposal from SCE, as California's legislature was formulating a bill that effectively bans the use or sale of electricity derived from coal-fired power plants, also known as "brown power." When Gov. Arnold Schwarzenegger signed the bill, it had the effect of placing brown power at a distinct disadvantage in the California market, due to a new policy that discourages emissions of excessive amounts of carbon dioxide (CO2) during electricity generation operations. There were at least 15 coal-fired power plants on the drawing boards or in the permitting process in numerous Western states that instantly became obsolete with the passing of the California bill. And it is not just power plants that will not get built. It is coal that will never be mined, trains that will not run, power lines that will not be strung, and an entire cascade of effects. Thus does energy policy have its ripple-effects throughout the economy. This new energy policy in California has created an entirely new niche for "green power," of which geothermal energy sources are among the greenest. Of interest, the rates to be charged by Ormat for power sales to SCE may not exceed the 2006 "Market Price Referent" as approved by the CPUC. Hence the cost for power to California consumers will remain competitive with that supplied from brown power plants (and cheaper than generating power by using depleting natural gas). But the new proposed rates will still increase Ormat's revenues from sales of power by about 18%. According to Pedro Pizarro, Senior Vice President for Power Procurement at SCE, "This is one of the largest contracts SCE is entering into as part of its 2006 solicitation. It is an important part of meeting our renewable energy goals…We are very pleased that our counterparty is Ormat Technologies -- a good business partner and leader in the renewable energy industry. SCE had been procuring geothermal power from Ormat-developed projects for the last 20 years and we consider them an exceptional supplier of green base load energy." The term "load energy" refers to the base load of power that a utility must supply just to, literally, "keep the lights on" during typical days. The comments by the SCE representative are quite high praise for Ormat's ability to supply energy into a demanding market. Other renewable energy sources, such as wind power or solar, are also useful but just do not offer the same degree of reliability to meet base load demand. Wind power works as long as the wind is blowing, but is off-line for much of the time. And solar power cannot work at night, and is degraded by weather conditions. But geothermal power comes from the crust of the earth, and offers high reliability. Ormat stock is up about 6% in the past few days, in part based of this recent news. Our view of Ormat is that it is a long-term player in the geothermal power business, and the stock should be a part of any balanced energy portfolio. Ormat stock does have a relatively high price-earnings ratio (P/E), but that reflects its unique business niche and strong prospects going forward. As we described in more detail in last week's report, Ormat is a vertically-integrated company primarily engaged in the geothermal and recovered energy power business. Ormat designs, develops, builds, owns and operates geothermal and recovered energy power plants using Organic Rankine Cycle (ORC) technology. Additionally, Ormat designs, manufactures and sells geothermal and recovered energy power units and other power generating equipment, and provides related services. Ormat is a pioneer and a leader in the manufacture of ORC power equipment and its products and systems are covered by approximately 70 patents. Ormat currently operates the following geothermal power plants: in the United States -- Brady, Heber, Mammoth, Ormesa, Puna and Steamboat; in the Philippines -- Leyte; in Guatemala -- Zunil; in Kenya -- Olkaria; and in Nicaragua -- Momotombo. In the U.S., Ormat owns and operates four OREG1 Recovered Energy Generation plants. As one of the major players in the global geothermal energy industry, Ormat stands to benefit from the growing interest in geothermal power. But Ormat would not be the only beneficiary of the geothermal renaissance. A wide variety of companies, both large and small, are vying to profit from the renewed interest in this renewable energy source. We'll be watching… Joel's Note: Remember the days when oil was at 20 bucks a barrel? Remember when energy bills were less than phone bills and when alternative energy was the domain of granolahead hippies? Times are changing…and so are investment themes. That's why we bring you columns like the one you've just read. It's always a pleasure to bring Byron King's work to you…and it's not just because we happen to like the guy. As readers of Outstanding Investments will attest, Byron's diligence and, let's be honest, freakish aptitude for tracking down energy related stories (he recently reported from Alaska's North Slope…just so he could deliver a first hand account of the place) leads to not only an insightful read, but also rock solid investment opportunities for you. For the next few hours, you can secure a free subscription to Byron's newest service, Energy & Scarcity Investor (reg. $995/year). It's part of our final day's promotion of our premier package deal - The Agora Financial Reserve. Simply put, the Reserve is a lifetime subscription to all our very best research and investment services, including all of Byron's work, for a one off price of less than you'd pay for all of them for a single year. There is a catch, of course. We can only hold the doors open to the reserve until midnight tonight. If you're interested in locking in your subscription, I'd strongly advise doing so now to avoid disappointment. The Agora Financial Reserve - Final Day P.S. If you are already enjoying an Agora Financial subscription, you should be aware that you might be eligible for a further discount. Read on here to learn how packaging your services together can save you a good deal more money: Package Deal For Existing Agora Financial Subscribers | 
