Fervo Energy, a geothermal energy startup, saw its market cap surpass $10 billion in its public market debut, a growth driven by demand for AI data centers and the energy that can power them.
On Wednesday, Fervo raised $1.89 billion in an initial public offering that initially valued it at $7.6 billion. Demand for Fervo stock was so great that the company and its bankers doubled the offering, selling an additional 14.6 million shares while doubling the price range, eventually settling at $27 per share.
The stock, which trades under FRVO on the Nasdaq, gained another 33% in early trading on Wednesday, surpassing $10 billion in value.
“We were asked several times at the roadshow, ‘Why don’t you raise more money?'” Sarah Jewett, Fervo’s senior vice president of strategy, told TechCrunch. “As we saw demand coming in, there were enough signals to suggest that the upside was not just in the realm of opportunities, but in the realm of incentives.”
Like many other energy companies, Fervo has been buoyed by growing demand from data centers and AI companies desperate for electricity to power their facilities. It’s the second energy stock to receive a warm welcome from nuclear startup X-energy in the past few weeks. It attracts $1 billion in its own incremental IPO.
The basic concept of geothermal energy — harnessing the Earth’s heat for power — has been around for decades, but Fervo is part of a new class of startups developing advanced geothermal, drilling deeper to tap hotter rocks. To make the most of the attractive geothermal field, Fervo uses directional drilling techniques pioneered by the oil and gas industry.
“We’re repeating a textbook from the shale energy industry, but with an answer key,” Jewett said.
Fervo’s IPO brought the company $500 million more than it expected, which will give the company more room to maneuver as it develops the Cape Station power plant in Utah, which is slated to begin operating this year. Ultimately, the company plans to generate 500 megawatts once the first phase of the Cape Station is completed. about three years.
Cape Station’s 500 megawatt size was governed by the size of the grid connection the company could provide, but Fervo is allowed to develop 2 gigawatts of geothermal power at Cape Station, and the company applied to increase the size of the interconnection accordingly. However, this may be a conservative estimate. Jewett said a third-party engineer provided enough heat on site for up to 4 gigawatts of power.
If the size of the interconnection grows, the added electricity can drain into the grid. But if that’s not the case, Fervo sends inquiries directly from companies that want to connect. “We’re seeing an increasing amount of behind the counter commercial interest,” Jewett said.
Fervo is already working on another project. Korsak Station in Nevada, where Google will buy 115 megawatts of electricity.
Part of geothermal’s appeal is that the technology can provide so-called baseload power, which can generate electricity 24/7 regardless of weather conditions. Data center operators who value high uptime are willing to pay a premium for consistent power these days. This has helped transform geothermal from just another clean energy technology vying for a place on the grid to a favorite technology companies and now investors.
The Houston-based company is racing to cut costs by cutting the time it takes to drill a new well. Fervo’s first wells took dozens of days to complete and cost more than $1,000 per foot. After drilling 14 wells, the company reduced both drilling time and cost per foot by two-thirds.
This IPO was perhaps overdue, although with the growing interest in energy, its timing could not have been better.
Fervo announced its closure in December 462 million dollarsand climate tech and energy investors that TechCrunch spoke to late last year almost universally expected company’s IPO. Combined with demand for hyperescalators and data from the Cape Station project, the company said it would “death valley.” With the IPO in its rearview, Fervo is now firmly on the other side.
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