Solar Conquistador

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by Debra Fiakas CFA

320px-PS20andPS10[1].jpg In the last post on Brightsource Energy and its Ivanpah solar thermal power plant in California, I offered no investment opportunity.  Brightsource’s colossal configuration of mirrors and boilers in the Mojave desert is not the first solar thermal power plant using the tower configuration.  The solar subsidiary of Spain’s power generator and transmission leader Abengoa S.A.(ABGB:  Nasdaq) was first to market with a commercial solar thermal tower power plant near Seville.

Since construction first started in 2004, Abengoa Solar has brought a series of solar thermal projects into operation.  The company has five solar thermal projects in Spain.  Abengoa partnered with Hassi-R’mel to build and operate an integrated solar combined-cycle plant in Algeria with a power output of 20 megawatts from a parabolic mirror and another 130 megawatts generated from fossil fuel.  Abengoa is in partnership Total, SA and Masdar in the operation of a 100 megawatt solar thermal power plant near Abu Dhabi.  In 2013, Abengoa went operational with a 280 megawatt installation near Gila Bend, Arizona in the U.S.  The Gila Bend plant relies on the largest parabolic trough in the world.

While NRG Energy may has some reticence about further solar thermal power investment, Abengoa is still moving full steam ahead.  The company has 150 megawatts under construction at two sites in South Africa.  At the beginning of this year the company announced plans to develop a 110 megawatt solar thermal power plant in Chile.  What is even more interesting is that Abengoa already building a 280 megawatt solar thermal power plant near Barstow, California just a few miles down Interstate 15 from the Ivanpah solar thermal power plant being operated by NRG Energy and Brightsource. 

Abengoa shares trade on the Nasdaq Global Select Market, making it enticingly easy to access this excellent Spanish company.  The stock appears dear considering reported earnings.  Yet the company earns a 7.3% operating profit and converts 11.7% of sales to operating cash flow.  Brightsource’s partner in Ivanpah and another operating utility, NRG Energy, earns about the same operating profit but only turns 8.7% of sales to cash.

Brightsource Energy plugged its Ivanpah plant into the electrical grid with some trepidation as the public questioned the economic viability of the plant.  Abengoa appears more confident in its designs and processes.  The corporate tone provides a clue for investors.

Debra Fiakas is the Managing Director of Crystal Equity Research, an alternative research resource on small capitalization companies in selected industries.

Neither the author of the Small Cap Strategist web log, Crystal Equity Research nor its affiliates have a beneficial interest in the companies mentioned herein.

Image: Abengoa’s PS20 and PS10 in Andalusia, Spain . Photo by Koza1983.


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