VANCOUVER, British Columbia (Reuters) - Taking advantage of investor appetite for renewable energy projects, four geothermal firms said on Wednesday they plan to combine forces to form a single, larger company that will be able to raise funds more easily to develop "green" power projects.
Canadian-based Polaris Geothermal Inc, Western GeoPower Corp and GTO Resources Inc, along with Ram Power, a private U.S.-based geothermal power developer, said they plan to combine operations and try to raise C$100 million ($90 million).
Shareholders of Polaris, which has geothermal projects in Latin America, will end up holding the lion's share of the new company, with a 54.1 percent stake. Western, active in California, will own 29.2 percent, Ram 15.4 percent and GTO 1.3 percent.
"They are looking to consolidate and provide something that compares in diversification and scale to Magma, I would think," said Greg Payne, a portfolio manager at Investeco Financial, an environmental investment company.
Magma Energy Corp, a geothermal company led by well-known mining entrepreneur Ross Beaty, listed on the Toronto Stock Exchange this month after raising C$100 million in an initial public offering that was three times oversubscribed.
Geothermal energy comes from hot water and steam produced deep below the Earth's surface. These are piped up to the surface to drive turbines to generate electricity, and are much cleaner energy sources than traditional options such as coal.
"There is the realization that renewable energy has moved into the mainstream of the utility industry," Ram Power's executive vice-president, Daniel Schochet, told Reuters.
"In the western part of the United States the renewable energy that is most sought after is geothermal," he said, explaining that geothermal energy is a constant source of power compared with wind and solar, which are intermittent.
Ram has several geothermal projects under development in California and Nevada.
The new company will have geothermal projects spanning all development stages from initial exploration to eventual electricity production.
"Single project companies have difficulties (raising funds) because of the perceived risk of single projects," said Schochet, who previously worked for Ormat Technologies, the best-known geothermal company in the United States.
The C$100 million will be raised in a private placement that will give purchasers shares in the combined company. The subscription receipts are expected to be offered at C$3 a GTO share, after a 10-for-one share consolidation.
The geothermal industry has recently received more prominence with financial and tax incentives and loan guarantees being made available to it in the United States by the Obama administration as it pushes a "green" agenda.
"It doesn't hurt that every time Obama mentions wind and solar, he also mentions geothermal," said John McIlveen, research director at Jacob & Co Securities Inc, an investment bank that specializes in renewable energy.
Additional reporting by Pav Jordan in Toronto; editing by Rob Wilson