Ocean Power: Small-Cap Makes Big Waves

12/17/2013 7:00 am EST


Wave power is the most concentrated form of renewable energy; it is predictable and dependable, explains Konrad Kuhn, editor of the small-cap advisory The KonLin Letter.

Ocean Power Technologies (OPTT) is a pioneer in wave energy technology that harnesses ocean wave resources, to generate clean and environmentally-beneficial electricity.

Its proprietary PowerBuoy system is based on modular, ocean-going buoys that capture and convert wave-energy into clean electricity. The company has a strong track record, with 15 years of in-ocean experience.

Working in conjunction with the US Navy and Hawaii Electric Co., Ocean Power's 40 kilowatt PowerBuoy—located at the Marine Corps Base in Hawaii—became the first-ever grid-connected wave energy device in the US.

Ocean Power and Lockheed Martin entered into a teaming agreement, with the goal of developing a 19 megawatt wave energy project, to provide power to up to 10,000 local residents in Portland, Oregon, and in the state of Victoria, Australia, which would be one of the largest wave energy projects in the world.

Revenues for fiscal 2013 (ended April) declined to $3.6 million, with a decrease in the net loss to $1.42 per share. The decline in revenues, and favorable decrease in net loss, related primarily to its Oregon project.

Meanwhile, Ocean Power and Mitsui Engineering & Ship Building (MIESF) announced an agreement to commercialize OPTT's PowerBuoy technology. On October 31, 2013, OPTT was awarded a $2.6 million contract by MIESF, for development of a Japan Utility PowerBuoy system.

In addition, Ocean Power's project in Spain achieved an important milestone. The development of a new wave prediction model assesses the characteristics of incoming waves before they reach the PowerBuoy, thereby providing more time for OPTT's electronic timing capability to react.

This is expected to boost the power output of their cutting-edge PowerBuoys and reduce cost-per-megawatt hour of energy produced.

We originally recommended the stock at $2.91 a share in February 2012. It has been in a bottoming process, making higher lows, and we re-recommended the shares at $1.70 in October. We continue to recommend purchase up to $2.10 a share.

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