Rumors are swirling in the Israeli press that Ormat Technologies (ORA), a leader in geothermal energy, is about to close a large M&A. These rumors are based on an article in Power, Finance and Risk, which is reporting, ” Geothermal developer Ormat Technologies is on the hunt for strategic acquisitions and is working with Lehman Brothers to do so. The company has reportedly looked at a few targets but nothing has yet come to fruition.” The article continues, “Targets on the geothermal side are scant, but one Ormat is said to have chased is Salton Sea, an inland saline lake in Imperial Valley, Calif., with some 500-600 MW of geothermal potential.”

The rumors are that they will offer around $1.1 billion for the Salton Sea project, which will increase Ormat’s output by about 80%.

Funding the acquisition could be another problem. The company, as of 3/31/08,  had about $30.7 million in cash, and in May they sold 3.1 million shares for about $149.6 million. This means that they are going to have to take on a sizable amount of debt to complete an acquisition of this sort.

This move will help placate some large shareholders like Haim Katsman (no relation), who have been pushing for the company to get more aggressive in expanding.

I guess the question is whether taking on such large amounts of debt, is worth the expanded output? I guess only time will tell.

Disclosure: Author’s fund has a position in ORA, he has no position in any other stock mentioned as of 8/04/08.

Please see our Disclaimer HERE.

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Aaron Katsman is Managing Editor of the Israel Opportunity Investor newsletter. He is lead portfolio manager for the Israel Growth Portfolio and Managing Director of America Israel Investment Associates, LLC. For more information, go to www.israelnewsletter.com or call 1-888-327-6179, or email aaron@profile-financial.com.

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The entire interview with Cliff Goldstein of AMIDEX is part of our new subscription newsletter, Israel Opportunity Investor. You can find out more about the product and the opportunities we cover at www.israelnewsletter.com.

Can you tell us how AMIDEX got started?
Cliff Goldstein: I’m a lawyer by trade. In 1998 I saw some really compelling advances being made by Israeli technology companies. I decided to go to brokerage firms to see if I could find a way to invest in this ingenuity. I was specifically looking for a mutual fund that invested in Israeli companies. There wasn’t anything out there. After speaking directly to brokers, it was also clear to me that brokers themselves weren’t really knowledgeable about what was occurring on the ground in Israel. I then went to Israeli Economic Mission to the U.S. to complain about the lack of retail investment opportunities.

Why aren’t there Israeli investment products in the U.S.?
CG: I think part of the problem was that there was no benchmark for those Israeli companies trading in the U.S. There is really no comprehensive index because a significant portion of Israeli marketcap trades in the U.S. and in Tel Aviv. There were indices for the Tel Aviv Stock Exchange (TASE) but not one that included New York as well.We decided in 1999 that we could address this barrier and create our own index that included both U.S. and Tel Aviv listed Israeli companies. As this was a time before Exchange Traded Funds (ETFs) had really developed, we borrowed from the protocols developed by the WEB products. We created an index that included 60% of total Israeli marketcap. To get here, we needed 35 companies to get 60% of the total universe. Most of the companies in the initial index were Israeli companies that traded in the U.S. Given what’s transpired over the past couple of years in the U.S. and the growth of Israeli  businesses, we now see the inverse: about 60% of our firms trade in Tel Aviv and the minority in the U.S. It was these 35 companies that comprised the original AMIDEX35. We could then back test historically and when speaking to investors, this really looked good from a performance point of view. When we launched the actual fund in June of 1999, 68% of the companies traded in the U.S. and the remainder in Israel. We thought that the volatility and risk of political disruption would be highest in Israel so we were comfortable with this mix. It’s interesting to think that soon after we had the meltdown of the dot com boom. (Continue »)

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Globes article that Gazit is buying more Ormat (ORA). We first reported this back in June when Gazit initiated a 12% stake in the clean-tech energy play. Gazit-Globe president Dori Segal told “Globes” that the company believes that cleantech has a long-term upside, and that it has unreserved confidence in Ormat and its executives.

Interesting interview with NICE Systems (NICE) product manager, Brian Spraetz, on the IP communications industry and what NICE is up to.

Forbes reporting that generic pharmaceuticals giant, TEVA (TEVA), spent over $1M on lobbying in 2007. Specifically, the article mentions that TEVA lobbied on funding for Food and Drug Administration’s generic drug office, patent reform legislation, the children’s health insurance program and trade issues.

Blue Square-Israel (BSI) leaks their intention to build-out a big-box presence in the Health Food/Organics market. Read IsraelNewsletter’s Zack Miller’s recent analysis of the move.

What a roller coaster. Protalix BioTherapeutics (PLX) treats first patient in a Phase III trial of prGCD, a drug in research to treat Gaucher Disease. We’ve seen this stock tank over 40% in last week’s trading.

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By Aaron Katsman
www.IsraelNewsletter.com

Rumors are swirling that a foreign institution is eyeing Ormat (ORA) as a potential takeover target, or at least as a possible recipient of a large investment. Ormat shares surged over 11% in Tel Aviv trading earlier today on volume that was 9 times average. In US trading the stock is currently up about 6% on much heavier than average volume.

Colleague Zack Miller had a great post recently about Ormat’s dual personality. On the one hand the company is experiencing compressing margins and on the other, with the global warming craze, Ormat’s geothermal energy provides a way to increase renewable energy production. Zack also mentions that he foresees consolidation in the geothermal industry, and with Ormat continuing to add geothermal assets to its portfolio, this may make for an interesting target.

I think that Zack is right, and we will see consolidation in the industry. As long as global warming remains a fashionable cause, the investor demand for alternative forms of energy will remain strong. Tom Konrad has an informative post on SeekingAlpha, on investing in renewable energy. While I am no big believer in the global warming hysteria, as long as the fad remains in its infancy, money can be made. If correct, Ormat investors may see large gains ahead.

Disclosure: Author’s fund is long ORA as of 6/13/07. He does not hold positions in the other companies listed.

Please see our Disclaimer HERE.

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Aaron Katsman is the lead portfolio manager for the Israel Growth Portfolio and Managing Director of America Israel Investment Associates, LLC. For more information, go to www.israelnewsletter.com or call 1-888-327-6179, or email aaron@profile-financial.com.

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