The U.S. Navy Loves This Micro-Cap

The U.S. Navy Loves This Micro-Cap

by | published September 3rd, 2013

Marina and I are on our way home from a great trip to Vegas. It included a spectacular helicopter trip into the Grand Canyon and Celine Dion’s last concert this season at Caesar’s Palace (amazing).

We even avoided buying a condo at Trump Towers (long story there). But like any trip to Vegas, there was far too much food and drink.

It seems the only thing that doesn’t stay in Vegas is the weight gain!

However, it wasn’t all sightseeing and fun. The business end revolved around a series of critical meetings I had about a major new development in the oil market.

These meetings are going to make you some big-time money. But there are a few final details that need to be finalized before I can bring them to you. So stay tuned…

What I can talk about today, though, is an exciting new development in renewable energy.

It revolves around a micro-cap stock I’ve been watching for years…

A New Wave in Renewable Energy

This new “wave” in renewable energy harnesses tidal power.

More accurately, it involves using coastal waters and their wave and tidal currents as a continuous source of energy. Several tidal pilot projects have since taken place, indicating that there is considerable potential here for significant power generation.

After all, the concept seems straightforward enough. The ocean moves continuously without incurring any problematic events like lack of wind or sunny days, as is the case in the best-known renewable energy sources.

With a constant source of motion, all that’s needed to generate power is a drive shaft connected to a dynamo.

Of course, the devil is in the details. Infrastructure development requires more than proof of concept. There also needs to be some significant investment. And that has been slow in coming.

To further the cause, the U.S. Department of Energy has entered the discussion by providing a new $16 million round of funding for tidal power. It includes 17 initiatives to improve efficiency, along with some necessary data accumulation and environmental impact studies.

There is no doubt the potential here is impressive…

Current DOE estimates put the possible annual power to be obtained at more than 1,400 terawatt hours of electricity. That would be enough electricity to power millions of homes.

As with most efforts to develop what remains a niche source, most of the attempts thus far have been by smaller companies with limited capital and a restrained ability to stay afloat (no pun intended) until the market expands.

But there is one company that stands out: It’s Ocean Power Technologies Inc. (Nasdaq GM: OPTT).

It is a tiny micro-cap ($16 million market cap) with some success using stationary buoys to generate power. In fact, I have followed this one for some time.

Keep in mind, though, that any move into the tidal wave sector remains a high-risk investment move. Ocean Power Technologies, for example, has lost 67.5% of its value since I began tracking the stock in early April of 2011.

However, there’s still some merit here. In addition to landing one of the new DOE grants, Ocean Power has one pretty important partner in its current projects.

It’s the U.S. Navy.

In fact, through their Ocean Renewable Energy joint project, the two can lay claim to developing the first commercial grid connection for tidal power. The facility has been in operation since 2010 and is located at the Marine Corps Base Hawaii, in Oahu.

In addition, the Navy also recently announced an increase in activity at its related (and already operational) Hawaiian wave power test bed. The objective here, according to a report several months ago from the United States Pacific Fleet (USPACFLFT), is to provide an up-to-date shared Research and Development (R&D) platform for private sector wave power developers.

As the sector leader, Ocean Power Technologies is likely to be the first company to benefit from this decision.

Yet, even the ability to estimate tidal and wave patterns with any accuracy – thereby enabling a realistic efficiency measurement – is several years away.

So any move at this point into companies like OPTT remains a speculative one at best. Still, in the more diversified energy balance emerging, the tides will have their place.

In that case, working with the U.S. Navy is certainly a big plus.

Syrian Crisis Update

Meanwhile, the move to punish Syria has been slower to develop than anticipated last week. As a result, after a major move up, NYMEX futures contract oil prices have subsided 2% over the two trading sessions leading up to Labor Day. No matter. Once the decision is made to attack, the angst will return with force.

Markets dislike uncertainty, and pending military actions present the greatest uncertainty of all. That means there will be volatility moving forward. Expect it will now take at least another week before the U.S. Congress reconvenes to consider the Obama Administration’s request for authorization to proceed.

Thus far, among the “fair weather allies,” only the French appear committed to move. The British Parliament voted down the PM’s request, but has left the door open pending the report from the UN review team.

In the interim, Washington has turned up the heat with several high-level public conclusions, including those by U.S. Secretary of State John Kerry, that clear evidence exists for: (1) Assad government’s use of chemical weapons against his own people, (2) nerve gas (sarin) residue from the attack outside Damascus, with (3) more than 1,400 deaths confirmed as a result of the chemical attack.

There will be more disclosures as the return date for Congress approaches in a concerted attempt to drum up sufficient political support. Absent a UN report showing no chemical weapons were used (virtual impossibility), that support will materialize.

In short, I will have much more to say about what all of this means for the energy sector in due course.

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  1. September 3rd, 2013 at 14:27 | #1

    That would be 1,400 deaths…still horrific. Dave Houser

    Editor’s note: We apologize for the original typo. Thank you for pointing it out to us Mr. Houser.

  2. September 3rd, 2013 at 14:37 | #2

    Was it over 14,000 deaths or over 1,400?

    Editor’s Note: It’s 1,400. We’ve made the correction. Thank you!

  3. Bill Wright
    September 3rd, 2013 at 14:46 | #3

    Why not use the motion of the ship to generate electricity for the ship (and store extra in batteries)?

  4. Alvin
    September 3rd, 2013 at 16:31 | #4

    Has anyone interested in tidal energy generation checked with the Canadians? They’ve had a tidal generating facility off the Bay of Fundy in Nova Scotia (by Annapolis) for over 25 years now.

  5. charles grant
    September 17th, 2013 at 14:36 | #5

    How did opt lose 67% since early 2000, thanks , regards, charlie.

  6. June 5th, 2014 at 20:20 | #6

    Alvin :
    Has anyone interested in tidal energy generation checked with the Canadians? They’ve had a tidal generating facility off the Bay of Fundy in Nova Scotia (by Annapolis) for over 25 years now.


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