Update Ormat Technologies (ORA)
On February 23 Ormat Technologies (ORA) reported fourth quarter results that paid the price of the global economic slowdown and of delays in any U.S. plan to promote alternative energy sources.
In the company’s first business segment, electricity generation from its geothermal power plants, Ormat reported an increase in revenue of just 2.9%. Electricity generation went up 14.2% in the quarter but the average price per megawatt hour fell by 12%. That’s exactly what you’d expect in this slow economy.
In the company’s other, much smaller, products segment, the company reported revenues of $31.4 million from the sale of generating equipment to other geothermal power producers. Order backlog climbed to $90 million from $70 million.
The two segments added up to $95.3 million in revenue, essentially flat with the fourth quarter of 2008. Earnings for the quarter came to 35 cents a share. The positive surprise of four cents a share was due to higher than expected revenue in the company’s products segment.
Ormat isn’t projecting any improvement for 2010. Total revenue for the year will fall between $350 and $370 million, down from $415 million for 2009.
I’m generally in favor of waiting when a long term trend takes longer to assert itself than expected. Ormat is still the preeminent geothermal company in the world in my opinion and when the world get’s serious about doing something about global climate change Ormat will occupy a very profitable position.
The question, though, isn’t how long I can wait, but how long Ormat can.
From squeeze to glut for solar silicon makers
Soleil Securities analyst Paul Lemming has issued a note warning of a polysilicon glut that will hit the solar industry in 2010, according to a post by Eric Savitz on the Barron’s Tech Daily Trader blog.
Over the next three quarters, he calculates, the amount of polysilicon available to the solar cell makers will increase by about 70% because every major producer of polysilicon will ramp new capacity in the first half of 2010. That will send the spot price of polysilicon to the mid $30s per kilogram over the next six months from the current $50 to $55 range. (Read more of Savitz’s post here http://blogs.barrons.com/techtraderdaily/2009/12/09/solar-huge-poly-glut-coming-in-2010-soleil-analyst-says/ ) Spot polysilicon sold for a high of $450 per kilogram at its peak in 2008 and for $130 to $150 per kilogram in February 2009.
The effects of this will be devastating on polysilicon suppliers who will see the price for the silicon that they deliver to solar cell makers drop. Already in February polysilicon maker MEMC Electronic Materials (WFR) announced that had renegotiated its contract with solar cell maker Suntech Power (STP).
Buy Ormat Technologies (ORA)
Procrastination and mindless delay can create profits for investors.
The example I use in my book The Jubak Picks is the environment.
It’s not that we don’t recognize environmental problems; it’s just that it takes so long for us to do anything about them. And then, of course, we rush to find the fastest fix. That delay and then the rushed fix shapes what technologies, what industries, what companies profit from whatever we do to protect the environment—and what technologies and companies get filed under “Great idea. Maybe next universe.”
Well, guess what, we’re doing it again. Environmental delay, that is. And the delay is rearranging where and when the profits lie among environmental industries.
One winner from delay is Ormat Technologies (ORA). The company’s has built, either for itself or for other owners, about 10% of global installed geothermal power capacity. The 27% of the company’s revenues that don’t come from geothermal come from selling or operating power plants that produce electricity from “waste” heat. The company’s recovered energy generation clients include oil pipeline companies, cement makers, and utility companies. (Ormat’s parent company Ormat Industries trades on the Tel Aviv stock exchange, but Ormat Technologies trades on the New York Stock Exchange.)
I think both those technologies are clear winners from global climate change delay.
