Ormat (ORA) Signs Long-Term Deal With Clean Power Alliance

·3 min read

Ormat Technologies ORA announced that it has entered into a 15-year power purchase agreement (“PPA”) with the Clean Power Alliance to supply 14 megawatt (MW) of clean energy from the Heber South Geothermal facility located in California. This is Ormat’s first agreement with Clean Power and both the companies are expected to sign more agreements in the future to promote the usage of clean energy.

Given increasing focus on lowering emissions, Ormat is trying to improve clean power manufacturing capacity from geothermal production units. In Heber Complex of California, Ormat is replacing steam turbine and older equipment with advanced technology equipment that will add a net capacity of 11 MW. The company is currently in the process of repowering Heber 1 and 2 power plants, which are expected to commence operations at 2021-end.

Long-Term Prospects of Geothermal

Per U.S. Energy Information Administration (“EIA”) release, in 2020, there were geothermal power plants in seven states that produced about 17 billion kilowatthours (kWh), equal to 0.4% of total U.S. utility-scale electricity generation.

Given the rising awareness against carbon emissions and for the production of more electricity from clean sources, geothermal power plants have solid prospects not only in the United States but also in other countries across the globe. Per the International Geothermal Association’s (“IGA”) announcement in January 2021, 29 countries across the globe generated geothermal power at 2020-end, with a total installed power generation capacity of 15,600 MW. IGA expects another 4,000 MW in power generation capacity to get added to the world’s geothermal capacity by 2025.

Ormat expects to add 250-270 MW of geothermal and solar power plants by 2023-end, which will further expand its presence in the geothermal market. Given the huge potential of geothermal projects, Berkshire Hathaway Inc. BRK.B — through its subsidiaries — already has more than a dozen facilities across the United States that harness or produce geothermal power.

Price Performance

Its shares have underperformed the industry in the past six months.

Zacks Rank & Key Picks

Ormat currently carries a Zacks Rank #4 (Sell). Some better-ranked stocks in the same industry include NextEra Energy Partners NEP and Covanta Holding Corporation CVA, having a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

NextEra Partners currently has a long-term earnings growth projection of 18.4%. Its Zacks Consensus Estimate for 2021 and 2022 earnings per unit has moved up 68.5% and 7.8%, respectively, in the past 60 days.

Covanta Holdings currently has a dividend yield of 2.2%. Its Zacks Consensus Estimate for 2021 and 2022 earnings per share has moved up 950% and 120%, respectively, in the past 60 days.

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