The TSX Venture Exchange appears to have become a hotbed for geothermal energy, with four listed companies working on projects here, the United States and Central America. Polaris Geothermal Inc. ( TSXV: GEO), trading at about $1, is furthest ahead–it's actually making electricity at its plant in Nicaragua. But the others are working toward turning on their lights–and those of their customers.
Western GeoPower Corp. ( TSXV: WGP), headquartered in Vancouver, is the only one with a project based in Canada. It's developing the geothermal resources at South Meager Creek, about 170 kilometres north of Vancouver, which it believes has the potential to support plants generating 100 to 250 megawatts of electricity. The estimated cost would be more than $340 million for the first 100 MW plant. If successful, Meager Creek will be the first commercial geothermal generating plant in Canada. While analysts like Vic Vallance at Fraser Mackenzie Ltd. in Toronto says the project has “significant potential,” there is not enough evidence to determine if the wells will be commercially viable. “In the meantime, the company is quickly burning through cash,” adds Vallance, who in April changed his rating on Western to Underperform from Market Perform. In July, Western GeoPower announced a consultant's study indicates the latest well drilled is commercial, and could generate from 4 MW to 9.8 MW. That hasn't been enough to lift the stock, which traded at more than $2 in the summer of 2004, from current levels of about 50¢ a share.
U.S. Geothermal Inc. ( TSXV: GTH) is further along, developing geothermal resources at its Raft River site in Idaho. It expects to be in production with a 10 MW plant by 2006, and 60 MW by 2010. A 2004 consultant's report indicated up to 90 MW could be developed. On the upside, analysts like the fact that U.S. Geothermal, with its headquarters in Boise, has a good location–near transmission lines, existing infrastructure and markets–and already has signed contracts with the local power utility to buy power for 20 years. Vallance has a Strong Buy recommendation on the company–the stock trades in the 75¢ range, and he has a target of US$1.35.
Nevada Geothermal Power Inc. ( TSXV:NGP) owns interest in three properties in Nevada and one in Oregon, including a 100% stake in the Blue Mountain geothermal project in north-central Nevada. It initially plans to build a 30 MW plant there by 2007, subject to further feasibility studies, and is now looking to sign a power purchase agreement with a utility. Analysts like that the Vancouver-based company is headed by Brian Fairbank, a respected 30-year veteran of the geothermal industry. Vallance notes the development is in its early stages, and water temperatures at Blue Mountain are at the lower end of what is commercially viable. However, the site's close location to the power grid, along with the flat terrain and favourable geological conditions, he says, are “positive factors that will mitigate the development costs.” He has a Speculative Buy recommendation and $1.25 target on Nevada Geothermal shares, now trading close to a 52-week high of $1.11.
