Friday, July 20, 2012

Nevada Geothermal Power (NGLPF) Running Out Of Steam

I feel sorry for Nevada Geothermal Power (NGLPF).  I saw them exhibit at the Hard Assets Conference in San Francisco when it was called the Gold Conference years ago (and then briefly the Resource Conference).  I never bought the stock because I couldn't figure out why a company that claimed it had healthy properties wasn't making any money.  Now the other shoe has dropped.

Nevada Geothermal Power is at risk of going out of business, according to its own auditors.  A federal loan guarantee of $98.5M was for naught.  The company will hold an emergency shareholder meeting on July 24 to discuss recapitalization and de-listing from the OTC exchange.  That is a sign of a drowning company.  Exchange listing costs are minimal for a firm with healthy cash flow, so de-listing is a desperate move to buy a month or two.  Recapitalization will probably require a debt-for-equity swap large enough to dilute shareholders into nothing.  The share price is already under a nickel, so a restructure will make the revalued share price not worth measuring on an exchange anyway.

There is good news for any vulture-oriented regional utility (hey, PG&E or Sempra) that wants to add some plant capacity at a bargain price.  NGP has about $124M worth of PPE on its balance sheet that could at least partially satisfy creditors' repayment in the event of bankruptcy.  On second thought, PG&E recently cancelled a geothermal power purchase agreement that would have cost more than 11.25 cents/kWh, so NGP's plants had better operate at less than that to be worth a look.

Geothermal is an awesome technology when dome right but even the biggest players have a hard time giving shareholders a decent return on their capital.  Thanks for trying, NGP.  Maybe they can still pull off a resurrection.

Full disclosure:  No position in NGP (NGLPF), ever.  No position in other companies mentioned at this time.