U.S. Geothermal Management Delivers 16 Consecutive Quarters of Profit & Is Executing on 10-fold Growth Plan
December 13, 2016 2:11 pm ET
U.S. Geothermal, Inc. (NYSE: HTM) management has delivered 16 consecutive quarters of positive cash flow and has also embarked on a 5-year plan to increase power output from 45 MW to over 200 MW with a tenfold projected increase in market cap from under $100 million to $1 billion by 2021.
For most companies, this would be a tall order, but U.S. Geothermal’s seasoned management has built and managed far larger projects in their careers lending confidence to their shareholders.
Management Has Done This Before
Producing nearly 27,000 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 of experience in the management, operations, maintenance, engineering, construction and administration of power and petrochemical plants and their related facilities. Mr. Gilles holds an MBA and a Bachelor of Science in Mechanical Engineering. He 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 since March 2000, Chief Operating Officer of the Company since December 2003, and President of the Company since September 2011. Mr. Glaspey has 38 years of operating and management experience in the natural resources industry and holds a Bachelor of Science in Mineral Processing Engineering and an Associate of Science in Engineering Science. His experience includes public company financing and administration, production management, planning and directing resource exploration programs, preparing feasibility studies and environmental permitting.
John H. Walker is Chairman of the Board of U.S. Geothermal, is a National Director of Trout Unlimited Canada, is a Director of Genalta Power Inc, and serves as a Managing Director of Kensington Capital Partners Ltd responsible for Kensington’s infrastructure business.. Mr. Walker has a 40-year history in energy security, power plant development, and urban planning, in Ontario and internationally as well as experience on both public and private sector boards. Mr. Walker was a founding director of the Greater Toronto Airports Authority in 1992 and chaired the first Planning and Development Committee of the Board which provided oversight in the construction of CDN$4.4 billion terminal complex at Toronto Pearson Airport completed in 2004. He was instrumental in the development of a 117 megawatt cogeneration power plant at Toronto Pearson Airport which commenced operations in 2005. Additionally, he was a founding Director of the Borealis Infrastructure Fund which is now owned by Ontario Municipal Employee Retirement System (OMERS). Mr. Walker has worked in the financial services community as an investment banker with Loewen Ondaatje McCutcheon and has served on the Board of Directors of Sheridan College Institute of Technology and Advanced Learning. His background includes 10 years at Ontario Hydro where he was responsible for site selection, alternative energy and international market development. Mr. Walker has also acted as a senior advisor to Falconbridge on the Koniambo project, a CDN$3 billion nickel smelter, mine, power plant and port project in New Caledonia. Mr. Walker advises corporations on matters related to infrastructure and energy development and acts as a developer of power plants. Mr. Walker is a Registered Professional Planner in the Province of Ontario and a member of the Canadian Institute of Planners. Mr. Walker has a BSc. from Springfield College and a Masters of Environmental Studies (Urban and Regional Planning) from York University. Mr. Walker’s qualifications to serve as a director of the Company include his many years of senior leadership and management experience in international business development.
Following is management’s well-defined plan to achieve their goals of `meeting 200 MW and a market cap of $1 billion by 2021:
Current and Planned Operations
U.S. Geothermal has 3 power plants in operation, 6 under development, and 9 in exploration phase:
|Neal Hot Springs||Oregon||22 MW||60%|
|San Emidio Unit 1||Nevada||10 MW||100%|
|Raft River Unit 1||Idaho||13 MW||95%|
Projects Currently Under Development
|Raft River||Idaho||3 MW||100%||Q1 2017|
|Neal Hot Springs||Oregon||3 MW||60%||Q3 2017|
|Nevada||10 MW||100%||Q4 2018|
|WGP Geysers||California||30 MW||100%||Q4 2018|
|Guatemala||25 MW||100%||Q2 2019|
|Nevada||25 MW||100%||Q4 2019|
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.
|Neal Hot Springs||Oregon||10 MW||100%|
|Raft River Unit 2||Idaho||13 MW||100%|
|Lee Hot Springs||Nevada||20 MW||100%|
|Ruby Hot Springs|
|TOTAL||163 MW|| |
Total current operations combined with projects under development equal 141 MW by the end of 2019, and if the projects under exploration are developed, U.S. Geothermal has the potential to substantially exceed their 216 MW goal by 2021 with up to 304 MW.
Strong Growth Ahead for Renewable Energy
Renewable energy is attracting increasing investment because 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. Renewable Portfolio Standards require increased 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, the announced closure of the 2,200 MW Diablo Canyon nuclear power plant, the planned closure or repower of nearly 20,000 MW’s of once-through cooled project on the California coast, 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.
The Annual U.S. & Global Geothermal Power Production Report dated March 2016 says, “The EPA’s Clean Power Plan rule became final and could create new opportunities for geothermal energy in states that need cleaner power sources to comply with the new rules if it survives court challenges. States which contain geothermal resources but have not developed them may consider adding new geothermal power plants to their portfolio to meet carbon dioxide reduction requirements.”
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.
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 2015 illustrates the low cost of geothermal energy per kWh paid by electric utilities compared to all other renewable sources.
Source: Section 910, CPUC
Like wind, solar and hydro, geothermal 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.
Wind and Solar Providers
General Electric Company (NYSE: GE) supplies a wide range of wind turbines. First Solar, Inc. (NASDAQ: FSLR) and Solar City Corporation (NASDAQ: SCTY) are two large solar energy providers. SunPower Corporation (NASDAQ: SPWR), Canadian Solar Inc. (NASDAQ: CSIQ), and Trina Solar Limited (NYSE: TSL) also compete in this space.
Duke Energy (NYSE: DUK) North Carolina-based utility generates more than 2,100 megawatts of wind power at 18 farms around the nation.
Financing U.S. Geothermal Growth Plan
Financing management’s goals is critical to success. U.S. Geothermal has established banking relationships, and is on schedule with the announcement that a $50 million debt facility from Prudential Capital was closed this year 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."
U.S. Geothermal enjoys an experienced and proven management team that has been delivering uninterrupted success in the renewable energy sector and is well positioned for substantial growth over the next five years. The company has announced its billion-dollar growth plan with a project pipeline that is well defined and well understood. Revenues are fixed and predictable, and are guaranteed by 25-year contracts with utilities.
Morgan Stanley published “Investors Guide to Climate Change” that found 81% of asset owners and 68% of asset managers viewed climate change as a material risk or opportunity across their entire investment portfolio. Investors with nearly $800 billion in assets have shifted money into more climate-friendly investments such as geothermal, wind and solar energy.