Ormat Technologies to Acquire U.S. Geothermal for $109.9M

Ormat Technologies Inc.  ORA entered in an agreement to acquire U.S. Geothermal, Inc. HTM , engaged in the development, production and sale of electricity, produced from renewable geothermal energy. Shareholders of U.S. Geothermal will receive $5.45 per share in cash. 

Ormat Technologies is going to pay $109.9 million to U.S Geothermal including its option holders. The transaction is expected to close in the second quarter of 2018 subject to the approvals of regulatory authority, major shareholders and customary closing conditions. 

Ormat Technologies' Gain 

This definitive agreement to acquire U.S. Geothermal will enhance Ormat Technologies efficiency and capability of clean power generation. Developing projects of U.S. Geothermal, at the Geysers, California; a second phase project at San Emidio, Nevada; at Crescent Valley, Nevada; and the El Ceibillo project located near Guatemala City, Guatemala are likely to add another 115 MW of power generation capacity to the existing fleet. 

U.S. Geothermal is a leading renewable energy company with geothermal power projects for net output of 45 megawatt (MW). The company has been developing projects to increase production in the future. 

Renewable Energy 

Thanks to declining prices of energy generation from renewable sources and focus on lowering emission from electricity generation have increased usage of alternate sources. 

Per a recent release from the U.S. Energy Information Administration ("EIA"), electricity generation from renewables in all sectors (including utility- and small-scale generators) will decline 3% in 2018 and improve 7% in 2019. This information clearly indicates the rising popularity and acceptance of renewable energy as a source of power generation. 

Electricity generated from wind, water, geothermal is reducing the demand for coal. The companies dealing with non-renewable energy are likely to grow in the near future. 

Mergers & Acquisitions 

In addition to organic growth, merger and acquisition (M&A) activities are common in Utility space. M&A activities allow the companies to increase operation scale, expand market reach, enjoy cost synergies and enable better utilization of resources. Larger companies will have more access to funds essential for vital infrastructure upgrades. 

Recently, Dominion Energy D and SCANA Corporation SCG announced an agreement to combine in a stock-for-stock merger. Including assumption of debt, the value of the transaction is nearly $14.6 billion. The combined entity will serve around 6.5 million electric and natural gas customers in eight states. 

Price Movement 

Shares of Ormat Technologies have returned 27.6% in the last year outperforming the industry 's 3.7% rally.


Zacks Rank 

Ormat Technologies currently has a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here 

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