Renewed confidence in Ormat?

Shares of Reno, Nev.-based Ormat Technologies (NYSE:ORA) were up nearly 2.5 percent in mid-day trading today to $30.74, on the news that analysts at Jefferies & Co. reported renewed confidence in the geothermal developer.

Vertically integrated Ormat manufactures equipment for its own plants and those of third parties. The company currently has 518 MW of geothermal production capacity, with 75 percent in the United States.

Jefferies & Co. established a price target of $33 and a hold rating, meaning the firm expects Ormat’s shares to provide a total return of +15 percent to -10 percent over the next 12 months. The company’s 52-week range was $44.13 to $27.46.

“Overall, we think investors should keep [Ormat] on their screens as the best-developed pure play on the space,” the analyst note said. “We continue to believe in the long-term growth opportunities within geothermal and see some modest upside in the name for existing holders. Yet, we would wait for better entry points to commit fresh capital, given the lack of visibility on accelerated development time lines and equipment backlog.”

Jefferies & Co. noted that Ormat held the analysts' day as “a confidence-building exercise after several operational and development disappointments that have hurt the stock.”

Just last week, New York-based law firm Bernstein Liebhard filed a class action suit on behalf of purchasers of Ormat’s stock against the company, its CEO Yehudit Bronicki and CFO Joseph Tenne. The suit alleges that company executives violated federal securities laws in order to pad its numbers—a claim the company has denied.

The lawsuit stems from an announcement in February from Ormat, which said it planned to restate its financial statements for the year ending Dec. 31, 2008. The firm also revised certain statements from 2009 that contained information related to the 2008 reports.

The revelation caused Ormat’s stock to plunge 12.81 percent, or $4.25 per share, over a three day period, falling to $28.93 per share on Feb. 26.

Jefferies & Co. said Ormat executives are spreading the message that “geothermal development is a complicated undertaking that includes a significant amount of uncertainty, but that the business is worthwhile if you have an experienced team that can deal with the inevitable disruptions and delays that are endemic to the business.”

Ormat said its biggest bottleneck is getting leasing, exploration and drilling permits from the U.S. Bureau of Land Management because of the large volume of applications thanks to interest in geothermal power (see California, Nevada lead the way in U.S. geothermal growth). The agency hasn’t indicated that it plans to increase its staff, but Ormat is considering opportunities to develop geothermal on non-BLM land.

Ormat has 280 MW of geothermal capacity under construction, with 169 MW expected to be in commercial operation by 2013. The company has picked 25 sites for exploration (see Ormat buys geothermal rights in Alaska).

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