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Geothermal Investment Heats Up; Cleantech Bubble Called

This week, CNBC published an article on the hot geothermal stock sector where companies like Ormat (NYSE: ORA) and US Geothermal (AMEX: HTM) are outperforming the S&P last year, Ormat by 40%. There are a number of interesting facts & figures along with a couple of very interesting assertions.

The article states that investment in the sector is now $3B, up 183% year over year. It goes on to say that half of that investment comes from foreign players on US soil, notably from Iceland (Glitnir & Geysir Green Energy) and Italy (Enel.) Another interesting aspect pull out of the article is that the “smart money” in private equity has taken note, pouring in over $400M in 2007.

Of the projects on the board, some $31B of additional investment will be required which will boost geothermal electricity sales to over $11B per year, up from the present level of $1.8B per year.

Switching gears, Arvind Sodhani of Intel Capital warned of a cleantech bubble when recently interviewed by the Financial Times. Sohani’s thesis is simple and logical, when equity valuation becomes disconnected from intrinsic value of assets, a bubble occurs and a crash inevitably follows. Almost certainly there is bubble risk the solar and wind segments, and arguably, the ethanol segment bubble has already popped.

As always, there are conflicting views on the world of cleantech. The facts demonstrate that the industry remains hot and the hope is that it can survive the bubble and thrive in the long-term.

CNBC: Investment In Geothermal Industry Heating Up
FT: Intel Capital Warns of Cleantech Bubble

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