Friday, May 2, 2008

Ormat Technologies, The Pure Play On Geothermal

Ormat Technologies ticker NYSE:(ora) might be looking a little pricey at first glance with it's 75 p/e, but with earnings coming up on May 6, 2008 after the close, we will soon know if the run up the past 3 months really has legs to break through it's 52 week high of $57.93. Here is their chart since becoming publicly traded...

Now for some background information in case you are not familiar with Ormat Technologies. The company designs, develops, owns and operates geothermal and recovered energy-based power plants around the world. Additionally, the company designs, manufactures and sells geothermal and recovered energy power units and other power-generating equipment, and provides related services. Ormat Technologies has more than four decades of experience in the development of environmentally-sound power, primarily in geothermal and recovered-energy generation.

The coming election is increasingly looking like alternative energy is going to win no matter if a Democrat or Republican is elected. Sure, there is Solar, but a lot of people don't realize the potential of geothermal and heat recovery systems. Ormat is the only pure play, just look at these numbers...

They also have just recently announced two deals one in Montana...

Montana-Dakota Utilities Co. have announced that Ormat has entered into an Engineering, Procurement and Construction (EPC) agreement to build a 5.3 MW recovered energy generation facility to be located in Morton County, North Dakota. The facility, which is expected to be completed in the fourth quarter of 2009, will produce electricity without burning additional fuel. The project, subject to regulatory approvals, will increase the utilization of the energy content by approximately 25 percent and will produce enough renewable energy to supply about 5,000 residential electric customers in Montana-Dakota's service territory.

And one in Nevada... I particularly like this side of Ormat's business... retrofitting existing power plants and turning the heat that is given off as waste into energy!

Energy Holdings Company, and Ormat Technologies Inc. have announced plans to build a six-megawatt (MW) waste-heat recovery renewable energy project in the Goodsprings area south of Las Vegas. The project, subject to regulatory approvals, is scheduled to be completed in 2010 and will produce enough renewable energy to supply 1,200 residential customers in southern Nevada. The best part about these waste-heat recovery systems is that they will generate additional power with no increase in emissions. Check out this slide that shows the dependability and cost effectiveness of various forms of energy...

If that wasn't enough, I also like Ormat's Dividend policy which is for an annual payout ratio of at least 20% of the Company’s net income, subject to Board approval. That means that as Ormat grows it's dividend will grow right along with it, always nice for long term investors like me.

The conclusion that I come to is that Ormat is a great long term investment, but always around an earnings report I urge caution. Make sure never to buy all at once and slowly build your position in a stock. Develop a good cost basis and you should do find... take advantage of the dips and ride this one out, because this is a big part of the future of energy.

To learn even more about Ormat Technologies visit their website or check out Stock Picky's Tapping The Earth With Ormat!

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