Ormat Technologies, Inc. ORA recently announced that it has agreed to sign an Engineering, Procurement and Construction (EPC) contract with Contact Energy, involving geothermal energy. This contract, valued at $200 million, entails the development of the 101-megawatt (MW) Te Mihi Stage 2 geothermal power plant in New Zealand.
Te Mihi Stage 2 will gradually replace the outdated Wairakei geothermal station and is slated to be completed by mid-2027.
ORA’s Position in Geothermal Generation
With the effects of climate change becoming increasingly evident, the shift to renewable energy sources like geothermal has increased in recent times to effectively reduce greenhouse gas emissions. Since geothermal plants can provide power to the grid constantly unaffected by weather or daylight, this source of energy serves as a flexible and reliable form of backup power during major electricity outages or disruptions.
This is likely to have prompted Grand View Research to forecast a compound annual growth rate (CAGR) of 3.1% for the global geothermal energy market during the 2024-2030 time period.
Ormat Technologies, being a forerunner in generating electricity from geothermal energy, stands to gain significantly from the aforementioned market growth prospect. The latest EPC contract is the fourth major geothermal project in New Zealand, highlighting its expertise in binary technology, which works well for high-temperature geothermal sites.
Ormat Technologies expects its year-end Product Segment backlog to exceed $300 million following the contract signing. Most of the revenues from this deal will be recognized in 2026 and 2027. The Te Mihi Stage 2 project, along with 160 MW of other projects underway in New Zealand, strengthens ORA’s position as one of the leading companies contributing to this nation’s renewable energy capacity expansion.
Subject to final investment decision, Contact Energy is planning a second phase of development named Te Mihi Stage 3, which is expected to come online by mid-2031. ORA is expected to clinch another EPC contract for this facility, which, in turn, is likely to boost its future revenues.
Opportunities for ORA’s Peers
Some other companies, which are increasing investments in geothermal generation and are expected to gain from the expanding global geothermal market, are discussed below.
Baker Hughes Company BKR: It has been working on geothermal energy for more than 40 years, with projects in more than 30 countries around the world. The company has developed a prototype metal-to-metal mud motor with a mud-lubricated bearing assembly and a titanium transmission for harvesting energy from an enhanced geothermal system in Iceland.
The company has a long-term (three to five years) earnings growth rate of 25.9%. The Zacks Consensus Estimate for BKR’s 2024 sales indicates year-over-year growth of 8.4%.
Halliburton Company HAL: It provides a wide range of products, technology and integrated services to help reduce costs and manage risks in geothermal projects. The company works closely with clients to develop the best solutions for various types of geothermal energy projects.
The company has a long-term earnings growth rate of 2.7%. The Zacks Consensus Estimate for HAL’s 2025 sales indicates year-over-year growth of 3.2%.
ORA Stock’s Price Movement
Shares of ORA have gained 3.4% in the past month compared with the industry’s 11% growth.
Image Source: Zacks Investment Research
ORA’s Zacks Rank & Stock to Consider
ORA currently carries a Zacks Rank #3 (Hold).
A better-ranked stock in the same industry is FuelCell Energy FCEL. It currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
FuelCell Energy delivered an average earnings surprise of 18.75% in the last four quarters. The Zacks Consensus Estimate for 2025 sales is pinned at $191.9 million, which indicates year-over-year growth of 86.9%.
7 Best Stocks for the Next 30 Days
Just released: Experts distill 7 elite stocks from the current list of 220 Zacks Rank #1 Strong Buys. They deem these tickers "Most Likely for Early Price Pops."
Since 1988, the full list has beaten the market more than 2X over with an average gain of +23.7% per year. So be sure to give these hand picked 7 your immediate attention.
See them now >>Halliburton Company (HAL) : Free Stock Analysis Report
FuelCell Energy, Inc. (FCEL) : Free Stock Analysis Report
Ormat Technologies, Inc. (ORA) : Free Stock Analysis Report
Baker Hughes Company (BKR) : Free Stock Analysis Report
To read this article on Zacks.com click here.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
