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Best energy ideas: Is U.S. Geothermal (UGTH) ready for the big time?

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To limit risks when investing in alternative energy, Keith Fitz-Gerald notes, "We look for companies that have an actionable business model, a strong financial position, and an actual revenue stream."

The contributing editor to Monday Morning, a daily global news service, says, "One company that meets all these objectives is U.S. Geothermal (NASDAQ: UGTH). The firm has been in start-up mode for a few years now, but it's now set for the big time.

"Since I started following this tiny dynamo, the stock price has risen 278%. Even so, we're just starting to experience this company's true power -- pun absolutely intended.

"As its name implies, U.S. Geothermal is a renewable energy company focused on the production of electricity using geothermal energy. To break this down very quickly, geothermal power utilizes naturally heated underground water springs to turn turbines above ground by injecting water into the ground and pulling out steam.

"The company is sitting on two geothermal sites. There's the Raft River site (8.2 square miles), which is about 200 miles south of Boise, Idaho (formerly a geothermal test site for the Carter administration), and the Neal Hot Springs site in eastern Oregon (8.5 square miles).

"The company is sitting on two geothermal sites. There's the Raft River site (8.2 square miles), which is about 200 miles south of Boise, Idaho (formerly a geothermal test site for the Carter administration), and the Neal Hot Springs site in eastern Oregon (8.5 square miles).

"Both projects will be constructed in phases. Raft River Phase I is set to yield 13 MW, (enough to power over 10,000 homes) and will be operational within the quarter. Phase II of Raft River and Phase I of Neal Hot Springs will achieve full operating capacity as early as 2009.

"Technically speaking, the company is pretty small with a market cap of just under $200 million, but we're willing to overlook that because its shares are trading on decent and accelerating volume. UGTH has been in start-up mode – undiscovered and uncovered -- for a few years now, but it's now ready for the prime time. And here are the top reasons why:

  • After several years of development, U.S. Geothermal plans to begin power production within the quarter.
  • Even though the company has been in the developmental stage, it's already inked deals for its output with both Idaho Power and the Bonneville Power. This means that the moment U.S. Geothermal flips the switch, it's got revenue.
  • U.S. Geothermal has, for the most part, already recognized its expenses. This means the geothermal-power firm won't sucker-punch shareholders with nasty surprises in the form of ongoing development costs.
  • UGTH is an 'orphan.' It's largely undiscovered by investors and has little following on Wall Street. That means the proverbial herd hasn't latched onto its potential -- at least, not yet.

"The company is in the right place at the right time. It's well funded and is making all the right moves as it transitions from start-up to operational status. Revenue will be strong from the outset, and will gain in strength and magnitude as conventional energy prices continue to rise and the need for alternative energy grows in the months and years to come."

Each day, Steven Halpern's TheStockAdvisors.com features the latest investment commentary and favorite stocks of the nation's leading financial newsletter advisors.

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Last updated: November 12, 2009: 02:38 AM

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