News

Islandsbanki with new report on the future of US Geothermal Development

Islandsbanki report, August 2011 (source: Islandsbanki)
Alexander Richter 18 Aug 2011

Icelandic bank Islandsbanki releases new report that looks at the North American geothermal energy industry, reviewing the performance of publicly traded companies and providing thoughts on the future of the sector.

Icelandic bank Íslandsbanki has published a new report on the North American geothermal energy industry. The report reviews the performance of publicly listed companies in recent years and offers thoughts on the future of the sector.

The recent poor share performance of North American listed geothermal energy companies broadly reflects the general state of the sector. Low natural gas prices in the United States have affected power prices and squeezed the price at which utilities are willing to buy power. Operational difficulties with individual projects have resulted in negative news flow which, coupled with high perceived project risk, has made it difficult for companies to obtain financing, especially for early stage development. These challenges, made worse by weak share prices, have raised serious concerns about the capability of companies to bring additional MWs online in the near future.

So the question where the industry goes from here is tried to be answered by the bank in the report.

In key highlights the bank refers to the slowing pace of development with the value of publicly trade companies having declined sharply.

The bank also refers to the the “misperception of development risk and misunderstanding of where projects lay in the development cycle, which are likely to blaime for the industry’s ability to persuade investors to value geothermal energy reserves.”

Furthermore the report also asks the question if the industry might have to “rethink its business model”, referring to the ambitions of small cap publicly traded companies maybe having to give up their public status or IPP ambitions.”

The full report is available for download at www.islandsbanki.is/energy