6 month Ormat (ORA) Stock Chart

Today, despite the earlier dilution from a secondary offering on the public market, Ormat’s market capitalization has surged past $2B. That puts the P/E ratio at nearly 95 trailing twelve months. Ormat is a good company in a hot market. But, does the company’s performance justify this sort of premium? Caveat Emptor.

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NREL published an interesting paper this month exploring the dynamics of renewable energy supply and demand. The conclusion of the report was demand, driven by fiat (renewable portfolio standard) and choice (voluntary renewable power supply) were likely to exceed supply by as much as 8,000,000 MWh by 2010.

Chart of Supply vs. Demand for Renewables


One other item of note, in the table below, you can see the impact of capacity factor. Note the nameplate installed MW of wind vs. the output of MWh. Then compare that to geothermal, you’ll see that significantly less nameplate capacity of geothermal leads to a disproportionate output of MWh. This is due to capacity factor.

Table of Renewable Electricity Generation Sources 2004

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Mock-up of Kite Generation site


This idea is proof that the renewable sector is overheating. There are good wind harvest ideas, and then there is this. If it even proved practical, anyone want to hazard a guess what the O&M cost would be on this approach? My guess is far more than the unit produces. We love innovation, we love new ideas, but there needs to be some there, there. If you’re interested in new ideas in wind generation, we suggest that aeroelastic flutter harvest is a far superior approach.

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So you’ve been thinking about exchanging those hot incandescent lightbulbs for lower wattage compact fluorescent lamps but there’s one nagging thought you worry about: Mercury. Yes, it’s true that there is between 4-6mg of mercury per cfl. You worry, what happens if the lamp breaks? How do I recycle them post usage? Well, the good folks at Energy Trust published an informative article about these issues recently. The chart below is from their article, showing that even with the mercury in the bulb, over a 5 year burn, the CFL still results in less mercury than an incandescent bulb.

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Ormat, the largest “pure play” geothermal company in the US, yesterday announced that it would place 3 million shares on the public market. This will increase Ormat’s outstanding shares to 41.13M and effectively dilutes current shareholders by 7.8%. Unsurprisingly, the stock price dropped yesterday nearly that same percentage and seems to be creeping up incrementally today. This move should raise over $140M (less underwriter’s fees) to be used for general corporate purposes including paying down debt levels, exploration, and new geothermal plant development.

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