February 5, 2009 - Ormat Technologies Inc. (ORA-NYSE) and its subsidiaries engage in the geothermal and recovered energy power business in the United States and internationally. The company operates in two segments, Electricity and Products.

The company was founded in 1965 and is based in Reno, Nevada. Ormat Technologies, Inc. is a subsidiary of Ormat Industries, Ltd.

The term geothermal comes from the Greek geo, meaning earth, and therine, meaning heat, thus geothermal energy is energy derived from the natural heat of the earth. The earth's temperature varies widely, and geothermal energy is usable for a wide range of temperatures from room temperature to well over 300°F. For commercial use, a geothermal reservoir capable of providing hydrothermal (hot water and steam) resources is necessary. Geothermal reservoirs are generally classified as being either low temperature (<150°C) or high temperature(>150°C).

More than you ever wanted to know about geothermal energy but necessary for an understanding that this is technology that uses the earth's natural, renewable resources to create energy. And Ormat is very good at it.

In the first quarter, Ormat's revenues jumped by 44% over the first period in 2007, going to $99.9 million. Most of the improvement came from the Products division which saw sales almost triple thanks to new contracts from Nevada and New Zealand. The figure would have been even higher except there was a delay at one of the company's plants (North Brawley) which prevented additional capacity to come online. Total revenues for 2009 are projected to be $405 million.

Earnings are moving ahead smartly as well. First quarter results were 33% above last year's first period. For the second quarter, the consensus estimate from 11 analysts is for 29 cents, only a penny ahead of last year. But for all of 2009, look for $1.35, well above the $1.12 for 2008. Next year, consensus is for $1.66. For the next 5 years, estimates are for earnings to grow annually at an average rate of 24.66%.

Those earnings will come from high demand for its Products offerings, healthy margins from its maintenance business and a strong backlog. Lower commodity costs are also part of the equation.

The delay in the North Brawley plant, a 50 megawatt project, puts the start- up date at the end of September, about 3 months behind schedule. There was a sand leak into the geothermal unit that caused havoc. Management reassured investors that this type of problem won't happen again.

With demand already strong, with sales and profits gaining nicely, there's even more good news: the company should benefit from the new stimulus program. The company applied for a 30% cash grant, upon completion of the North Brawley plant, to help with future projects. The cash plus traditional debt financing would build more geothermal plants. The injection of new cash would expedite plans for geothermal energy plants already on the drawing boards, adding capacity more quickly.

More numbers: Market cap is $1.71 billion. Forward P/E is 22.67. Price to Book is 1.97. In the last 12 months, Operating margin was 18% while Profit margin was 14.5%. There's cash of $42.17 million, making 94 cents a share. Total debt is $464.64 million. Current ratio is 1.152. Book Value is $18.94. Beta is high at 1.44, meaning this can be a volatile stock. The 52-week high was $51.40, the 52-week low at $21.83. There are 45.35 million shares outstanding with a float of 19.55 million. Insiders own 56.64% of the stock. Institutions have 40.4%. There's a dividend of 24 cents, giving a yield of .6%.

Take a look at this company that's in the right place at the right time. It should benefit from the movement to more renewable energy sources. But many investors have already discovered this jewel and valuations are high. And remember it has a noteworthy beta so be prepared for some real movement in the stock.

Company Web site: www.ormat.com

- Ted Allrich