Is Ormat a Possible Takeover Target?

Rumors are swirling that a foreign institution is eyeing Ormat (ORA) as a potential takeover target, or at least as a possible recipient of a large investment. Ormat shares surged over 11% in Tel Aviv trading early Wednesday, on volume that was 9 times average. In U.S. trading the stock was up about 6% on much heavier, than average volume.

My colleague, Zack Miller, had a great post recently about Ormat’s dual personality. On the one hand, the company is experiencing compressing margins, and on the other, with the global warming craze, Ormat’s geothermal energy provides a way to increase renewable energy production. Zack also mentions that he foresees consolidation in the geothermal industry, and with Ormat continuing to add geothermal assets to its portfolio, this may make for an interesting target.

I think that Zack is right, and we will see consolidation in the industry. As long as global warming remains a fashionable cause, the investor demand for alternative forms of energy will remain strong. Tom Konrad has an informative post on SeekingAlpha, on investing in renewable energy. While I am no big believer in the global warming hysteria, as long as the fad remains in its infancy, money can be made. If correct, Ormat investors may see large gains ahead.

Disclosure: The author’s fund is long ORA as of June 13, 2007.

ORA 1-yr chart