Any discussion of geothermal energy company Ormat Technologies (NYSE: ORA) or of its Israeli parent Ormat Industries (TASE: ORMT) these days revolves around the price of crude oil.
The working assumption of Merrill Lynch analyst Haim Israel is that the crude oil price will stabilize at around $58 a barrel in the first quarter of 2007. The price fell to $52 at the end of last week, a nineteen-month low.
According to Israel, the threat to Ormat from the fall in the oil price is not so much the direct one of cheaper fuel for competing, conventional, power producers as the indirect one that the price fall will mean less enthusiasm on the part of legislators for promoting environmentally friendly electricity generation.
Nevertheless, Israel writes, "Market fundamentals continue to be supportive for Ormat. On top of the project signed in New Zealand on 2 January and the lease of a geothermal field in California, we believe there are opportunities for Ormat in California, Idaho, Arizona and Nevada. In this report, we highlight four possible projects, not in our model yet but that we estimate could be worth $232-307 million to Ormat. We retain our Buy stance and DCF and EVA based price objective of NIS 53."
Ormat shares are currently traded at NIS 47.40 on the Tel Aviv Stock Exchange.
Published by Globes [online], Israel business news - www.globes.co.il - on January 15, 2007
© Copyright of Globes Publisher Itonut (1983) Ltd. 2007