Abraham Gaines

Raser Technologies: The Long Case

Gentlemen,
Your point regarding cool water is relevant and important.
Usually, the cool water is used to cool down the refrigerant - that is the butane or the isobutane - that is the secondary fluid which turns into a gas and then moves the turbines.
In areas in which there are cold water resources, the operator of the plant can obviously use this water to cool his refrigerant.
However, as you properly point out, in the desert this can be somewhat more difficult. However, this is not a new issue and certainly is not unique to Raser.
If you were to vist an Ormat plant for example, you'd see huge cooling towers - these are usually air-cooled towers with large fans. Take a look here (www.ormat.com/projects...) you'll see the towers for yourself.
Another way to cool the refrigerant would be to bleed off some of the brine (that's the salty water pulled from the earth) and create what's called a "cooling tower." In a cooling tower, the water is dripped down, fans blow on it, and the evaporation causes the water to cool. This enables cool water to then chill down the refrigerant.
One other thing to note is that when Raser negotiates land deals with folks who have hot water in the ground, they usually (and this is typical) also negotiate rights to the surface water as well - this surface water is typically cool enough to chill down the refrigerant.
You are correct however, in pointing out that because of these obvious thermodynamic items, the plant can produce more electricity in the cooler months than in the summer months.
Chena is a unique example - they do have very cold water which allows them to really chill down the refrigerant. That helps make up for otherwise relatively weak pressure/flow.
I wouldn't claim to be a geologist - so you will have to wait to see what the independent geologists say about the pressure and flow in Raser's wells, but you can read a current geological survey which was written about one of Raser's properties - it's called Lighting Dock - and the report is right here (geoheat.oit.edu/bullet...). This will give you all the pressure, temperature and flow information you'd possibly want.
It will also explain how reinjection wells work. See the thing is, you're not actually chilling the water - you're only chilling the secondary fluid. Sure, this removes some of the heat from the hot water, but it's not enough (if your geologist places the reinjection well in the right spot - typically down the hill) to muck up your hot water source. Again, I'm not a geologist, but folks sometimes reinject at different depths - if they were to reinject cooler water right into the same body of hot water, it'd be like (pardon the vulgarity) pis*ing into the wind. Geologists are usually smart enough to do that - Ormat sure figured that out.
Also, the temperature of the water below the surface is not affected by the ambient temperature - so winter/summer - does not matter.
On the topic of volume....I use a system called Bloomberg. It's typically what most professional investors use. It allows us to examine volume on any particular series of days - we can adjust the start and end dates....pretty easy stuff. I don't really know how Yahoo works...sorry.
Last item - you pointed out that "nowhere does it say that Raser burns that much money." You're right. However, an astute investor who actually reads the cash flow statement will subtract the "one time items" which helped to inflate the cash flow (like exercise of warrants - see that brings cash into Raser) and would conclude that on a pure operating basis INCLUSIVE of the wellfield development, they were burning that much. I apologize if that wasn't entirely apparent, but you'd have to actually parse through the cash flow statement to know it. I'm sorry if I gave folks the credit they didn't actually deserve by assuming they did that.
I hope that answers all of your questions. Once again, please feel free to toss all your "beefs" my way - I'd be happy to answer them. sorry if it sometimes takes me a little while to reply - I actually do have a job :)
Fondly,
Abe

Raser Technologies: The Long Case

Dear AlphaMS,
Thank you for your posts. I will address each of your concerns in order.
1) average daily trading volume - this was an approximation and meant to signal a rough range. Further as you well know, one can look at this over various time-periods. For example, from the period 1/3/06 until the present time, the average trading volume is actually 139,000. If you look at 1/3/07 until the present, the figure is 213k. I wasn't trying to misrepresent the actual trading volume - rather, for an institutional investor - one who tends to purchase in denominations of 50-100k shares, this was meant to represent a range. As institutions, we look at the trading volume and say to ourselves, "I want to make this position x% of my fund - how many days of volume will I represent." By stating "approximately 120k", that would give an investor a rough sense. I sincerely apologize if this item distorted your perception of the article or of my knowledge of the subject matter.
2) Regarding the language I used to describe their business model. You are accurate and the wording should have been "Raser is a development-stage company which seeks to sell steam-based electricity." My tenses were incorrect (by using "sells" instead of "seeks to sell." However, with the signing of the recent power purcahse agreement with the City of Anaheim, they will be selling steam-based energy imminently. I will be glad to use the proper grammar/tense in the future. Please understand, I did not mean to be misleading in that choice of words - most readers would understand that the business description wasn't meant at all to be misleading particularly when I then comment that they have "no" revenue.
3) your point about claiming they have "no" revenue is also accurate - it is a number greater than zero, and therefore my use of the word "no" was misleading. However, my point (similar to the share volume comment) was meant to be directional. Last quarter, the company reported $320,000 of revenue. In the institutional world of money management - particularly for a devopment-stage company, this is effectively zero. While $320k is $320k and it's not "literally" zero, it is close enough to demonstrate the point, which is that to date, the company has effectively generated no revenue from their primary business activities. Biotech companies which receive small sums to fund r&d and call that revenue are still considered to be "pre-revenue" even though they may actually report a modest sum. Once again, please accept my most sincere apologies for not using terms which you find appropriately accurate.
4) Regarding your cash burn discussion, I will unfortunately have to disagree with you. I will admit, that by simply reading the 10Q, some investors wouldn't conclude that the cash burn was as large as I state. However, if you dig through it and start with net income, then remove the cash generated from the warrant/stock and option issuance ($3.8m) as well as the monies spent on wellfield development and power project development deposits ($2.5m and $3.7m, respectively), you get into the range I indicated. An astute investor will further realize that the drilling costs ultimately get reimbursed by the LLC, and so my discussion of the forward-facing cash "burn" would simply be the operating costs, which average approximately $1m per month - I was being generous in suggesting they could get as high as $14m per year.
In summary, some of your points are valid, although only on the semantics. If you wish to debate the merits of the company's business model or any of their claims, I would invite you to lay out your points in a concise and professional manner. I would be happy to address them again - point by point and will make sure to use tenses and grammar which are appropriate. You were comfortable telling me that my essay was a work of fiction - please provide your counter points - raise as many questions as you wish, and I will address them in this very public forum immediately. Good luck.