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http://seekingalpha.com/article/...my-years-this-company-offers-value
U.S. Geothermal Inc. - After Gloomy Years This Company Offers Value Dec. 9, 2013 4:56 PM ET | 16 comments | About: HTM, Includes: ORA
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. (More...)
U.S. Geothermal Inc. (NYSE: HTM) is a small geothermal utility operating three plants in Idaho, Oregon and Nevada. After gloomy years, presently it seems that some important positive changes are taking place in this company. Firstly, at the end of 2012, the biggest plant in HTM's portfolio, Neal Hot Springs in Oregon, became fully operational. This plant, with a net capacity of 22 megawatt, currently produces 34 megawatt-hours of electricity per quarter on average. Putting this facility into operations increased the company's revenue twofold. What is more, this plant is the most profitable in the whole portfolio. The current geothermal portfolio looks like this (only operating projects): 1. San Emidio in Nevada - net capacity: 9 megawatt 2. Raft River in Idaho - net capacity: 13 megawatt 3. Neal Hot Springs in Nevada - net capacity: 22 megawatt. All of these facilities have been built in binary technology and all of them have the long term purchase power agreements (PPA) signed, which will expire between the years 2032 and 2038. This year, after nine months, the company reported a net profit of $455 thousand (last year HTM reported a net loss of $5,080 thousand) and the sales were 300% higher than during nine months of 2012. What is more, the company's operations are more stable, which should be a feature of a sound utility. The company produces 68,500 megawatt-hours per quarter on average. These factors were the main contributors that during nine months of 2013 HTM generated $6,673 thousand of cash flow from operations (last year cash flow from operations was negative). Another very important fact is that some of the company's measures are indicating that HTM has become the typical geothermal utility. These measures, in comparison to Ormat Technologies (ORA) (which is a geothermal sector's flagship) are depicted in the table below: 3rd quarter 2013
HTM ORA revenue / megawatt-hours 91.7 90.0 plant expenses / megawatt-hours 52.5 62.2 Unfortunately, due to the still lasting development period, the company is vulnerable to some technical obstacles. From time to time some failures occur. For example, last quarter, one unit of the newly opened Neal Hot Springs facility was down for 26 days, which had a negative impact on the company's revenue. Another problem HTM has to work on is its costs' structure. Though comparable to Ormat on operational level, HTM still incurs quite high overhead expenses. As for the future, in 2015 the company plans to add another 11 megawatt capacity to its San Emidio plant (doubling its present capacity). The same year, the start of El Ceibillo plant in Guatemala (25 megawatt of capacity) is planned. This plant will be utilizing the steam technology, the oldest one, which has being used in geothermal sector. Summary U.S. Geothermal seems to be an interesting utility emerging in geothermal energy sector. Due to the fact that there are not too many geothermal companies to put investors' money into the company could be a target for some utility oriented investors. In my opinion this small, base load energy producer with a market capitalization of only $41 million and solid and stable revenues, after many years of been out of media interest, now offers some value. These days U.S. Geothermal is out of fashion. For example, while the book value of its plants stands at $161 million, their market value is only $93 million (the discount is 42.2%). But, due to the early stage of the company's operations, the potential investors should keep their eyes on a technical reliability of the currently operating units and the company's costs structure.
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