Centre of the Earth may power your portfolio - Richard Blackwell

While solar, wind and alternative fuels get most of the attention in green power investing, geothermal is often left out.

Five of the seven public North American geothermal firms trade on Canadian exchanges, and those five have offices in Canada. But there is really only one serious geothermal power exploration site in Canada - in south-central British Columbia.

The companies are based in Canada, analysts say, because several went public through reverse takeovers of TSX Venture Exchange-based mining firms, and because the Canadian junior markets are a good place to raise capital for what are essentially natural resource exploration firms.

Geothermal power is hardly a new technology - the first geothermal power plant was built in the early 1900s in Italy - but the industry has a higher profile now that it is seen as a potentially important source of reliable and emission-free electricity.

Essentially, the process taps hot water and steam trapped up to three kilometres below ground, usually in areas with active tectonic activity. The heated water is pumped to the surface, and used to power turbines that generate electricity.

The United States is the world's biggest producer of geothermal power - about 3,000 megawatts - but that amounts to less than 1 per cent of its electricity generation.

In North America, the biggest publicly traded player is Ormat Technologies Inc. , a Reno, Nev.-based company that trades on the New York Stock Exchange and has annual revenue of about $270-million (U.S.). It runs six geothermal plants in the United States and several others around the world.

The Canadian-listed firms are at much earlier stages of their development.

Western GeoPower Corp., based in Vancouver and traded on the TSX Venture Exchange, is the only one of the group that has a Canadian project in the works. It is testing a potential geothermal site in the South Meager region, about 170 kilometres north of Vancouver, but its main focus is on a 25.5-megawatt project in California north of San Francisco. That plant is set to come online in 2010, and it has recently signed an agreement to sell the power to Pacific Gas & Electric Co.

Other geothermal companies listed on the TSX Venture Exchange include Nevada Geothermal Power Inc., which is drilling test wells in northern Nevada, U.S. Geothermal Inc., working on projects in Idaho and Oregon, and Sierra Geothermal Power Corp., which is exploring sites in Nevada and California.

The one company with a listing on the TSX senior exchange is Polaris Geothermal Inc., which has offices in Toronto although most of its operations are in Nicaragua. It already has about 10 megawatts in production there, and the company generated about $3-million in power revenue last year - along with almost $400,000 from the sale of carbon credits.

Polaris hit a setback in February when the new Nicaraguan government said it was going to review the rights to develop the property. Those issues were resolved last week and an expansion of the project to 66 megawatts is now going ahead.

Fraser Mackenzie analyst Vic Vallance, who had put an "under review" flag on Polaris stock when the dispute arose, has reinstated his "strong buy" and a one-year target price of $2.25. Polaris closed on Friday at $1.15.

Geothermal power companies are for patient investors, said John McIlveen, an analyst who followed alternative energy for several years at Dundee Securities and now works for Jacob and Co., a startup investment bank specializing in the renewable power sector.

"It's almost like real estate investing," he said. "You're not looking for a flip tomorrow. This is a two- to four-year hold."

Still, Mr. McIlveen said, there are potentially huge returns for those willing to put their money in and sit tight. The big gains will come when certain milestones are reached - such as the completion of a positive feasibility study, or the signing of a power purchase agreement with a utility.

"[The shares] will go sideways for a year, until something happens, then all of a sudden a whole year's worth of appreciation will get into the stock in a couple of weeks," he said.