Abraham Gaines

Five Reasons to Buy Raser Technologies

Dear alphaMS,
1) there is nothing to stop them from filing another shelf. They still need more money to continue their drilling - that is not new news to anyone. My point was simply this: what if they find other sources for the capital and don't need to do another shelf? Perhaps they can do a debt deal? Simply stated: if someone considered the existence of the ATM deal and them consistently selling stock every day to be an overhang, that is gone. If an investor thinks they dont need to raise money, they're wrong.
However, the company has talked about things like "prepaid PPAs" and other similar deals which would give them some more capital upfront, and would therefore reduce their cash needs.
Cash needs by themselves aren't awful - once the Street can see RZ's ability to generate profits and cash on each individual deal, they will be more willing to give them money. Until then, it feels like a bottomless pit.
2) regarding other things they have said - I would not hold the current management team accountable for things the prior team said about the automotive business. Regarding the ML committment - you are partially correct. If you recall, they first drilled at Truckee NV - that was supposed to be the first plant and that was what the ML committment letter was based around. That resource is adequate, but RZ decided to pursue Thermo because it had more near-term promise. They started drilling on that a short while ago and will be putting that plant into service Oct/Nov. So...yes, the ML financing for Truckee didn't happen in the timeframe they expected - so it is "late" - something I cited above in my initial comments. However, one of the beauties of the RZ model is its portfolio approach. Since Truckee was only so-so, they moved onto thermo and here we are with a very hot resource.
I have no reason to doubt what Geothermix said about the resource. I suppose that Geothermix, who is one of the most well-respected authorities in the industry would have a lot to lose from lying about this resource. Further, I suspect that at some point the report will be made public (though I don't know for sure) and you can see for yourself how important it is vs. others in the past 25 years in NA.
Regarding its value....if you just assume what RZ's numbers suggest (and these figures are all available from the 8k they filed in January around the Truckee financing committment which, by the way was signed when PPA prices were far lower than they are today - so the values have likely gone up)....the NPV is $25m for every 10mhw. At 238mhw, that would be a market value of $595m. Further, although I don't have my notes handy (I'm typing on a laptop and it's Sunday evening...so pardon my rough calc here)...but I recall that Ormat with a value of roughly $2 billion had something like 300-400mhw in production. That's a value of $5 per mhw. If you apply $5 to the 238mhw, that's a market value for Thermo of $1.19 billion. Let's be conservative and only use the p90 value of 130mhw - that's a $650m value.
I hope you don't think, as you point out, that I am "making anything up."
Last - you questioned the math on the $25m in NPV. All the figures are in their 8k - payments to RZ every year for years 1-25 are there. I used a discount rate of 15% to calc the $25m NPV.
Also, the non-reimbursed development costs you highlight are a very good point. However, you have the numerator (costs), but not the denominator (number of wellfields this represents). This could be Truckee, Thermo (multiple sites there), and some driling at other locations - we just don't know. What we do know however, from general work in the geothermal industry, is that a 5-hole wellfield costs "approximately" $5 million. Some are less (like Lightning Dock) and others are more (if they are deep or they encounter problems at the site). There are ample places out there which will confirm that a general wellfield costs about $5 million.
I hope that helps - please let me know if I can provide more information or color.