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U.S. Geothermal Inc. (AMEX: HTM) $61M (MarketCap) Lands Funding from DOE

|Includes: US Geothermal Inc (HTM)

In the wake of the Gulf oil spill, two things will be guaranteed: the government will step up its efforts to dwindle down US dependence on oil and renewable energy will be more deeply explored and considered as a much more viable alternative to domestic oil drilling; and U.S. Geothermal’s loan, backed by the DOE, to build and development an 8.5 square mile project site to extract geothermal heat for renewable energy production. This company is ready for the revolution. While the public adores solar and wind energy sources as a mass-market (but as of now, very expensive) solution for renewable energy, geothermal energy companies are fighting for their establishment and share.

Geothermal energy is the natural heat stored within the Earth’s crust, and this company is extracting that heat from the most concentrated sources in the world, converting it to a renewable power source, and then selling the heat to energy companies that distribute it to the end user, for example, you and I. But that’s not all; the U.S. government is so committed to alternative energy development, it offers subsidies in the form of cash tax credits to those that are in this line of business that the company can turn and sell to competitors or other investors. Additional research is being done on other possible revenue streams for U.S. Geothermal that includes, among other things, redistribution and recycling of the cooled water resources after the first round of extraction through turbines.

The company has exploration and development properties in Idaho, Nevada, Oregon, and the Republic of Guatemala, with two plants in operation and generating revenues and cash, and seven others in the developmental pipeline. Power generation and other energy companies are attractive to investors partly because of the steady revenues that are delivered once a plant is up and fully operational, and U.S. Geothermal is no exception. The company has signed power purchasing agreements to sell power to the Idaho Power Company who has agreed to buy up to 25 megawatts (MW) each year until 2032, and Sierra Pacific Power Corporation, who has agreed to buy 2.5 MW each year with no expiration date listed. In the first quarter report of 2010, filed yesterday, I found some interesting facts about the company.

Department of Energy loan guarantee of $102.2M

Early-stage energy companies (especially those engaged in alternative energy) are at the mercy of many daunting challenges that include high barriers to entry, cut-throat competition, and massive stocks of cash to invest, build, and produce their products – some of which can be obtained by Uncle Sam. With October of 2009 came the height of the American Recovery and Reinvestment Act (unpopularly known as the stimulus plan) payouts, and U.S. Geothermal got their check for $3.77M to fund the exploration and development of its San Emidio geothermal power project using advanced geophysical exploration techniques. Much more government funding is likely in the pipeline.

On February 26, 2009 U.S. Geothermal submitted an application for the Neal Hot Springs project to the DOE’s Energy Efficiency, Renewable Energy and Advanced Transmission and Distribution Solicitation loan guarantee program under Title XVII of the Energy Policy Act of 2005. The company was notified that its project application is complete, the power plant technology choice qualifies as new or improved under the program, and the project has been selected to proceed in the project loan process. Yesterday, the company announced they would be awarded $102.2 under the contract.

The Neal Hot Springs development project is the first geothermal project to be offered a conditional commitment for a loan guarantee under DOE's Title XVII loan guarantee program, putting the company in a unique position to leverage itself as the leading provider of geothermal energy. Senator Ron Wyden from Oregon and Idaho Governor C.L. Otter praised both U.S. Geothermal and the Department of Energy for coming together to create jobs and save the environment.

The project is expected to generate significant economic impact in the Pacific Northwest from its long-term operation. The Neal Hot Springs project site, near Vale, Oregon, not far from the Idaho border, covers 8.5 square miles. The Neal Hot Springs project has been unanimously approved by the Malheur County Planning & Zoning Commission.

"This loan commitment provides our company with access to low cost capital and is a major milestone accomplishment. Neal Hot Springs is one of several important development opportunities for U.S. Geothermal that we believe will emerge over the next year or two, and we are grateful for this critical vote of confidence from the Department of Energy," said U.S. Geothermal President and Chief Executive Officer Daniel Kunz. "We look forward to continued growth as a producer of clean, green electricity to our home region and beyond for years to come."

Disclosure: no positions