I always try to remain objective about the stocks that I write about and invest in. I have experienced the pain of falling in love with a stock that blinds me to its warts and blemishes. I must admit that I am very attracted to the stock that is the subject of this article. I am not in love yet, but if the stock recovers like I believe "Love" may be in the offing.
So much attention is being paid these days to green technologies that one might expect we would be farther along towards energy independence. Alas, we are not. America and the world have had many wake-up calls over the years (OPEC embargoes, shortages, high prices, gas crises, etc.). It is only going to get worse with projections that global energy demand will increase by 45% between 2006 and 2030 — and that $26 trillion in power-supply investments will be necessary simply to meet those needs (International Energy Agency's (IEA) annual World Energy Outlook-2009).
That is the sad and scary truth, but the good news is that investment in alternative energy technologies (wind, solar, biofuels, hydrogen) have soared dramatically over the past few years. Certainly green technology has a friend in the White House when President Obama campaigned on the promise to spend $150 billion over the next 10 years to support alternative energies, like wind and solar.
One company that believes that it has a viable alternative energy technology is Ocean Power Technologies, Inc (OPTT). The company is no flash in the pan. They can trace their roots back to 1994 when Dr. George Taylor and the late Dr. Joseph R. Burns created a company whose vision was to extract the natural energy in the sea. The company has pioneered the technology to create electricity from wave energy.
I do not need a degree in fluid dynamics or mechanical engineering to understand the power of the sea. The kinetic energy present in wave motion of the sea is limitless and constant. That is what Ocean Power Technologies is capitalizing on. Ocean Power Technologies focuses on its proprietary PowerBuoy® technology, which captures wave energy using large floating buoys anchored to the sea bed and converts the energy into electricity. A more complete understanding of Ocean Power Technologies can be gleaned by visiting its website.
The challenges facing Ocean Power Technologies have less to do with "can you do it?" but rather "can you do it cost-effectively?". The major hurdles facing any sea energy project have been the cost per kW of the energy created and the amount of energy created. Typical wind farms currently on the drawing boards usually run between 200 and 300 Megawatts. A typical OPT project might max out at 10 megawatts and currently is not cost effective when compared with wind or solar. Experts indicate that it might be as much as 10 years before sea energy could be price competitive with those other technologies.
While the future is unknown for OPT, there are several positive things that I gleaned during my study of the company, as follows:
- The company appears to have the financial resources to bring their technology to commercialization with their first full-scale commercial project slated to be delivered in 2010.
- The company has over $41 million in cash and equivalents.
- Quick ratio of 8.5:1.
- The company has virtually no long term debt.
- At the current burn rate, the company has several years of cash in the bank.
- The company has current revenues albeit operating at a loss.
- The company holds U.S. and International patents on the most crucial aspects of their technology.
- The company appears to be the technology leader in its field and has beta sites currently in operation.
While the chart is not OPT's friend right now, it could turn quickly. The stock is bearish with the MACD line well below the zero line and not indicating any strong upwards trend. OPT is trading along the bottom of the Bollinger bands and appears to be rebounding from its oversold condition.
Ocean Power Technologies, Inc. is not the only answer to the world's energy problems, but it deserves a place in the pantheon of energy technologies that we hope will deliver the needed energy. It has a number of significant hurdles to overcome before its future is secure. As a short-term stock play, however, Ocean Power Technologies, Inc. bears watching.
Disclosure: No Positions