Sierra Geothermal will Benefit from Green Stimulus Spending

While many companies are struggling during the recession, many green companies are positioned to benefit from energy-oriented stimulus spending.

For some companies, like Sierra Geothermal Power Corp., the global recession will be a catalyst for enhanced growth as it capitalizes on the renewed interest in green power sources.

In May, President Obama announced an investment of over $467 million, under the auspices of the American Reinvestment and Recovery Act, to expand and develop geothermal and solar energy. The proposed stimulus package also includes a three-year extension of the production tax credit. This would mean incentives for geothermal and other industries will remain in place through 2013.

Sierra, based in Vancouver, British Columbia, intends to submit several of its projects for consideration under Department of Energy Funding Opportunity Announcements (FOAs). One FOA from the Geothermal Technologies Program has a funding ceiling of $5 million per application. The grant will fund between 50 and 80 percent of a program’s cost. Sierra also intends to submit its Reese River project for two FOA grants with funding ceilings of $5 million and $25 million per application which would fund 80 percent and 50 percent of a program’s costs respectively.

The Recovery Act gives preference to activities that can rapidly assist in economic recovery. The Department of Energy (DOE) states that it will give “special consideration to projects that promote and enhance the objectives of the [Recovery Act], especially job creation, preservation and economic recovery, in an expeditious manner.” Sierra Geothermal has three projects with completed environmental assessments and a fourth project with its environmental assessment nearing completion. Sierra believes that having these completed environmental assessments (a process which can take more than two years) will help the company in DOE’s evaluation of grant applications since they will be able to start work quickly.

Gary R. Thompson, Sierra’s President and CEO, said, “We believe we are well-positioned to meet the objectives set forth by the DOE. For example, with several of our projects ‘drill-ready’, we are prepared to quickly put grant funding to work, meeting one of the DOE’s criteria for selecting projects.”

With over 90,000 acres of geothermal properties in Nevada and California, Sierra Geothermal Power’s projects have a combined total estimated capacity of nearly 600-mw. All of Sierra Geothermal’s projects are located within close proximity to transmission infrastructure.

Each 30-mw of power generates about $25 million a year for the company. By 2012, the company is projecting a cash flow of $40 million a year which should grow to $160 million a year by 2015. The company’s strategy is to have a complete range of projects at each stage of development, power generation, construction, advanced stage, intermediate stage and early exploration stage projects.

Analysts are looking at the company’s stock favorably, given its steady projected cash flow and anticipated 25% return on equity. Most of the general finance market doesn’t understand geothermal power yet, but there are a number of analysts starting to learn about it and geothermal is gaining momentum.

For more information, visit the company’s website at: http://www.sierrageopower.com.