The 10Q Detective has followed the alleged progress of the Company for more than three years. As we said back in December 2005, Raser is a stock-promoter's dream--hyped PR with no content.
Since re-inventing itself as a builder of geothermal power plants almost five years ago, Raser has accumulated deficits of about $96.2 million—on cumulative revenues of approximately $1.0 million! In addition, at March 31, 2009, negative working capital totaling $58.7 million.
“There are some people so addicted to exaggeration that they can’t tell the truth without lying.” ~ American humorist Josh Billings (1818 – 1885)
Listening to the promulgations of chief executive Cook, one might think that Raser would single-handedly reduce the country’s dependence on OPEC crude. To date, the company has opened one facility, the Hatch Geothermal Power Plant, located in Beaver County, Utah, commonly referred to as the Thermo No. 1 project. In April 2009, Raser began selling electricity generated by the Thermo No. 1 geothermal power plant to the City of Anaheim, pursuant to a power purchase agreement previously entered into with Anaheim. Management expects the Thermo No. 1 Plant to be fully operational in the third quarter of this year [doubtful]. At full capacity, the plant is expected to produce up to 12 megawatts of geothermal power (enough to light up about 9,000 homes in Anaheim).
Despite the new financing, existing shareholders have about as much chance of seeing a return on their common shares as a Paleolithic Era caveman had of stumbling onto a copper cooking pot! The balance sheet is a mindless mess. In addition to owing $9.3 million in long-term debt obligations due in November 2009, the balance sheet is riddled with millions in warrants (most with reset pricing features). The company has also guaranteed cost overruns in construction-in- progress agreements with a plethora of sub-contractors—from drillers to vendors of transmission and cooling tower equipment. No sense even asking what the contingent exposure is, as the company has historically settled outstanding invoices and overdue promissory note obligations through the issuance of additional stock and warrants.
In additions, rumors are surfacing that service providers, tiring of late payments—if received at all—are walking away from some of the eight geothermal projects currently under development.
Raser’s business outlook is ambitious, including expectations to finish construction on additional geothermal power plants that will add an additional 50 megawatts, 40 megawatts, and 125 megawatts of electricity sold to utilities during 2010, 2011, and 2012. By 2013, Raser expects to have geothermal capacity totaling 377 megawatts of electricity for sale.
“An exaggeration is a truth that has lost its temper.” ~ Lebanese American poet Khalil Gibran (1883 – 1931)
Given its relentless struggle to improve its liquidity situation, a more likely scenario is that Raser curtails operations or liquidates assets. In any case, existing shareholders have a right to lose their tempers, for exaggeration is a bitter pill to swallow.
Editor David J Phillips does not hold a financial interest in any stocks mentioned in this article. The 10Q Detective has a Full Disclosure Policy.