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I have started looking into a couple of stocks in this sector which has taken beating recently and wanted to start a discussion going to see whether I can learn something from some of you have expertise in this area.


From what I can gather, geothermal is, after hydro, perhaps the most economic in the clean renewable energy space, yet it does not get as much love as wind and solar despite it being a steady and more reliable source of power. While there is exploration risk, returns are high (high teens unlevered). With signed PPAs, cashflows are very stable once the projects are up and running and they can be levered up significantly to produce very interesting ROEs.


Exploration risk, high capex and long project gestation periods are the only negatives I can see but the stocks seem to be pricing in a lot of negatives and then some. Getting into these stocks now provides two advantages - we can buy in at significant discounts to the actual development costs incurred; and, we short circuit the long gestation periods as some projects are already coming into fruition.


The stocks are PRG and AXY on Toronto. I will move them to the Ideas category after I have done more work and have some feedback here and still think they make sense.

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