Reading the PTR website you could be forgiven for thinking that renewable energy has a positive outlook and thus, it must be considered a good investment. I think there will come a time when it will be a good investment, but I would suggest that its a long way off. The attached figure comes from the PTR 'hot rocks' presentation on the 23rd Feb 2009. The company highlights the positive funding and licensing for this industry. The bad news however is that its going to come from major energy companies like British Gas/Origin Energy, Santos, and others. I can see in the medium term that investment in the smaller players is just going to evaporate. Maybe it already has because they are already putting their hands out for government funding. You might ask yourself is the government going to put money into renewable energy to stimulate the domestic economy. I would suggest that the Australian government is more likely to subsidise home insulation or wind farms than 'hot rock' technology. The reason for suggesting this is that the technology is tangible, the visual presence is far greater (wind farms on the horizon - so like as they are in Bourke's backyard), and it will create more jobs. I think hot rocks will get token funding so Kevin Rudd can appear green nevertheless. The presentation provided a list of all the current players in the industry:
1. Geodynamics 2. Petratherm (PTR.ASX)
3. Geothermal Resources 4. Green Rock Energy
5. Torrens Energy 6. Eden Energy/Terratherma
7. Panax 8. Pacific Hydro
9. Teck Cominco (Canada) 10. Granite Power
11. Gradient Energy 12. AGL (w/Torrens Energy)
13. TRU Energy (w/ Petratherm) 14. Tata Power (w/ Geodynamics)
15. ASX Listed International SX Listed 16. Tri-Star Energy
17. Clean Energy Australasia 18. Osiris Energy
19. Origin Energy 20. Callabonna
21. Deep Energy 22. Inferus (Southern Gold)
23. A-B-L-R Joint Venture 24. AAA Energy
25. Earth Heat 26. New World Energy
27. Near Surface Geothermal 28. Stuart Petroleum
29. Beach Petroleum
I have added a red line to the image above to highlight the probability that, as more money goes in, the corresponding share price for the remaining hot rock companieswill fall. The best prospects will be those companies which are able to affiliate with some major companies. The final result will be that they will be absorbed by those enterprises. The implication is that there is a lot of money to be spent before any of these companies realise a profit. The next 4-5 years is going to be a period of low energy prices which means there will be less justification for this greenfields exploration. There will come a time when the industry has appeal, though it remains to be seen whether any small player will be significant enough to justify an investment in this sector. The capital investment is significantly more than coal seam methane.
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Andrew Sheldon www.sheldonthinks.com
3. Geothermal Resources 4. Green Rock Energy
5. Torrens Energy 6. Eden Energy/Terratherma
7. Panax 8. Pacific Hydro
9. Teck Cominco (Canada) 10. Granite Power
11. Gradient Energy 12. AGL (w/Torrens Energy)
13. TRU Energy (w/ Petratherm) 14. Tata Power (w/ Geodynamics)
15. ASX Listed International SX Listed 16. Tri-Star Energy
17. Clean Energy Australasia 18. Osiris Energy
19. Origin Energy 20. Callabonna
21. Deep Energy 22. Inferus (Southern Gold)
23. A-B-L-R Joint Venture 24. AAA Energy
25. Earth Heat 26. New World Energy
27. Near Surface Geothermal 28. Stuart Petroleum
29. Beach Petroleum
I have added a red line to the image above to highlight the probability that, as more money goes in, the corresponding share price for the remaining hot rock companieswill fall. The best prospects will be those companies which are able to affiliate with some major companies. The final result will be that they will be absorbed by those enterprises. The implication is that there is a lot of money to be spent before any of these companies realise a profit. The next 4-5 years is going to be a period of low energy prices which means there will be less justification for this greenfields exploration. There will come a time when the industry has appeal, though it remains to be seen whether any small player will be significant enough to justify an investment in this sector. The capital investment is significantly more than coal seam methane.
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Andrew Sheldon www.sheldonthinks.com
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