Ann: Moten Power Update , page-14

Interesting discussion guys. PAX is definitely in the bargain bin at these levels. I wish I had more cash to buy and just chuck them in the bottom drawer.

I rate PAX as the second best value geothermal at present, after EHR. Both of these companies have multiple valuations at 10- 25 times their current price. EHR has the edge IMO because the government and regulatory side of things is looking better in Argentina than Indonesia, plus management is more impressive. For these types of companies it is all about getting finance and EHR seems correctly focused on ticking boxes for the financiers (several high quality PPA customers that are household names in Argentina, at least one of which is looking to come 'upstream' and get in on the project). PAX have Molten who are looking ok but not setting the world on fire.

As far as Penola goes, I can't see that going anywhere for 3 or 4 years and that is fine. Volcanic projects like PAX's in Indonesia, KEN's in Vanuatu and EHR's in Argentina are the low hanging fruit in geothermal and will underpin later growth in Australia. With decent feed-in tariffs and the need to replace diesel power these projects are no-brainers. Plus in some cases there is an economic development angle as well which can bring in funding (KEN's Vanuatu project for example may get World Bank funding).

The number one problem for geothermal in Australia is the cost of drilling. I believe this will come down over time and hopefully the CEFC can come up with some innovative ways to assist, for example by providing drilling insurance or by funding a ckk drill rig to bring down the cost of drilling. At $20m per well, with every second well failing, deep geothermal is just not economic yet. In 2 or 3 years, there will be 2 demo plants running (PTR and GDY), the ARENA and CEFC money will come on line and hopefully ckk will be bringing down drilling costs. Also, more expensive lessons may be learnt by GDY and PTR which PAX may benefit from. If companies like PAX and KEN are getting their first cashflow from OS projects around that time, they will have shown they can deliver and will be a better prospect for finance.

Over the next 6-12 months I am looking to accumulate the following stocks to get my portfolio looking like this:

EHR- 40%
CKK- 20%
PAX- 10%
PTR- 10%
KEN- 10%
CFU- 10%

After a year or two, if some of the early OS projects are on track and I have made some big gains, I may bump up the Aussie geothermals but I really can't see GDY, PTR or KEN taking off for a couple of years yet.

Good luck to long term PAX holders!