热力提升……给予Fervo Energy跑赢大盘评级的首次覆盖

+1 917 344 8422bob.brackett@bernsteinsg.com .+1 9173448503sunaina.ocalan@bernsteinsg.com OutperformPrice Target +1917 344 8306anshika.bajpai@bernsteinsg.com FRVO +1 917 344 8574minnie.xu@bernsteinsg.com Heat and Raise... initiating on Fervo Energy with an Outperformrating We initiate coverage on Fervo Energy with an Outperform rating and a target price of $47/share. Theopportunity ina sentence:EGS(Enhanced Geothermal Systems) leverages thetrillionsof dollars spent drilling & completing shale gas & oil wells and applies the technology toabundantgeothermal resources whichcan cyclesteamunexposedtothe surfacethroughasimple exchange system generating small-footprint,quick-to-market clean securebaseloadelectricity. CO2), (2) baseload, (3)domestically secure,(4) well located, (5)quickerto market and (6) costcompetitive. The opportunity in a visual nutshell (Exhibit 8 to Exhibit 10).A surface facility the sizeofamuseumwingcanextractgeothermalenergyfromanareathesizeofCentralParkandsupport 30 years of residential demand of half a million Americans. The opportunity on a napkin (Exhibit 11). Current modular economics (50 MW) deploy ~$200mlnof capex to deliver~$40mln of EBITDA generating ~$400 mln of NPV. The complete story follows. The demand for US power is rapidly inflecting. Afterdecades of flat US power demand growth,a number of long-term drivers (including Al datacenters)are changing that.Not all power is created equal.Electrons area commodity,but the delivery of electricity is not - clean baseload power will command a premium price.Geothermalpower satisfies.EGSleveragesapreviousrevolution.EnhancedGeothermalSystems (EGS) leverage trillions of dollars of R&D spend from the shale industry.EGS Fervo Energy has(1)a proven product, (2) locked-in contracts (PPAs of~600 MWsupporting ~$7 bln of revenue),(3)intellectual property, and (4) early mover advantage (5)Leasesof~600,000acreswith~40GWofheat inplace. Station I(4Q), (2)validation of 15 MW wells,and (3) PPA and permitting momentum. WeUS geothermal powerto outpace the growth of all US nuclear power in both2030 and 2035Learning curve effects and a conservative culture point towards Fervo exceeding targets.Wealsobelieve in the ability of EGS to scale faster than conventional geothermal. this technology. Execution risk is mitigated by modular design philosophy. Regulatory riskscould slow future projects, which we believe is mitigated by bilateral support for EGS. Longterm well performance could disappoint requiring higher capital in the out years. Concernsaround seismicity andwateraccess have been raised butaremanageable in our view. Weare OutperformonFervowithapricetargetof S47/share.Conventional geothermal has been slow to scale largely because of"exploration"risk -needing to find a naturallypermeable spot. Enhanced Geothermal takes the exploration risk out since it's a man-madefracked reservoir. HowEGSgeothermalworks.6The opportunity in a visual nutshel.....10Valuation...13Sanitizing capital forecasts..16Leadership team...18Geothermal power is in demandFervo EGS is well located...21USgeothermal issmall versusotherpowertypesbutestablishedandEGSisthegrowthengine..22CurrentstateofUSgeothermal..22The US (especially the west) is well suited for EGS....25Drilling EGS wells has been demonstrated.25Completing EGS wells has been demonstrated...27Flowing EGS wells is demonstrated.....31Extracting electricityfrom geothermal wells (the ORC system) is established.32Learning Curves for modular industries are demonstrated....32Risks...33Wateracce.33Seismicity...33Thermaldepletion..34Competitors...34Legal Challenges...36Future Opportunities37 DETAILS Inafewsentences, we summarize our view.Ultimately,U.S.(and global)powerdemand israpidly approaching an inflectionIn addition, investment in the U.S. grid has failed to prepare.Wenow seewait timesto add traditional power solutions takingyears.Wearguethatnotallelectrons arecreated equallyandso“EGs"(Enhanced Geothermal Systems)offeranopportunity.EGSdelivers"superior"electrons (validatedbyPPApricesachieved).EGS alsoleverages proprietarytechnologybornfrom shale. The grid isn't equipped to deal withthis level of growth due to a lack of investment over the last decade. Interconnection queues are~4+years for all regions,cAisois worst served region... Generation solution needed-structural solution to waitingfor grid power The US needs a balance of allforms of energy to meet demand. EGS(EnhancedGeothermal Systems)"win"across anumberofdimensions.Specifically,onreliability("baseload"24/7power)andalsoemissions (nearzeroemissions)butalsopotentiallyontimetomarket. HOWEGSGEOTHERMALWORKS The process begins with drilling deephorizontal wells,leveraging advanced shale technology to access subsurfaceresourcesmore effectively.Oncethe wells are in place,hydraulic fracturing is usedto fracture the rock and create a large,connectednetworkunderground.This network enhances permeabilityandenables efficientheat exchange within theformation