Sun Mar 13, 2011 10:30am EDT

* Clean, reliable and cheap source of renewable power

* Geothermal shares down 20-50 pct in past year

* Development is slow, risky and expensive at first

* Google, Buffett are investors in geothermal sector

By Nicole Mordant

VANCOUVER, March 13 (Reuters) - As renewable energies go, geothermal energy has a lot on its side.

The naturally occurring heat trapped deep in the earth can be pumped up to the surface to produce electricity that's clean, is always available without the fickleness of wind and solar, and, according to some studies, is even cheaper than coal-fired power.

So why is the industry, whose North American financial base is now on Bay Street, struggling so hard to get respect?

At a time when oil prices are rallying and governments and people think more about alternative energies, shares of geothermal companies continue to slide on the Toronto Stock Exchange and show few, if any, signs of a rebound.

Over the past year, shares of Magma Energy Corp (MXY.TO), Ram Power Corp (RPG.TO) and US Geothermal (GTH.TO) have lost between 20 percent and 50 percent of their value and company chief executives say raising finance remains tough despite easier credit conditions.

"It is not that we are bearish on geothermal as a concept or a technology but we think it is more of a niche technology at this point," said John Segrich, portfolio manager of Gabelli SRI Green Fund, a New York-based fund investing in sustainable businesses.

The problem for geothermal developers is that expansion, or "adding megawatts", is a slow, technically complex and expensive process.

"We are bearish on geothermal stocks. All the geothermal developers really are independent power producers. If you're not adding any megawatts as an IPP, and there's no earnings' growth, then they are not very attractive investments," Segrich said.

RISKY, AND RETURNS HO-HUM

Developing a geothermal resource starts off a lot like a mining project. Drill to find a resource, then drill some more to firm up its size.

The mining link is one of the reasons companies such as US Geothermal, Magma and Nevada Geothermal Power Inc (NGP.V), whose projects are not in Canada, have sought out Bay Street, a venue that is comfortable with mining finance and its risks.

http://www.reuters.com/article/2011/03/13/column-canada-markets-idUSN1112330520110313?feedType=RSS&feedName=financialsSector&rpc=43