Fervo Energy, a geothermal energy startup, achieved a market valuation exceeding $10 billion during its public market debut, fueled by demand for AI data centers and their energy needs.
Fervo raised $1.89 billion in an upsized initial public offering, initially valuing the company at approximately $7.6 billion. Intense demand for Fervo stock prompted multiple increases in the offering size and price range, finally setting the price at $27 per share.
Listed under FRVO on the Nasdaq, the stock rose by 33% when trading started, boosting its valuation past $10 billion.
“We received several inquiries during the roadshow asking why we weren’t raising more funds,” Sarah Jewett, Fervo’s senior VP of strategy, told TechCrunch. “With the demand indications, upsizing was not only possible but encouraged.”
Fervo has benefited from increasing demand from data centers and AI companies seeking reliable electricity. This follows another recent warm reception for an energy IPO, with nuclear startup X-energy raising $1 billion.
Geothermal energy, using Earth’s heat for power, has been around for years, but Fervo is among new startups developing enhanced geothermal by drilling deeper into hotter rock. Fervo employs directional drilling techniques from the oil and gas industry.
Fervo’s IPO brought in $500 million more than expected, providing flexibility as it advances its Cape Station power plant in Utah, set to start operations this year. The plan is to generate 500 megawatts in the first phase, expected to take about three years.
Cape Station’s planned 500 megawatts resulted from the available grid connection but Fervo can develop up to 2 gigawatts of geothermal energy and has applied to increase its interconnection size. A third-party engineer estimated the site’s heat could support up to 4 gigawatts.
Additional electricity might enter the grid with a larger interconnection. If not, Fervo is receiving inquiries from companies interested in direct connections.
Fervo is also developing Corsac Station in Nevada, where Google will purchase 115 megawatts of electricity.
Geothermal energy’s appeal includes its ability to provide constant baseload power, vital for data centers requiring high uptime, thus making it a preferred choice for tech firms and investors over other clean energy technologies.
The company aims to cut costs by shortening drilling times. Initially, Fervo’s wells took dozens of days and cost over $1,000 per foot. After 14 wells, they have reduced both time and cost per foot by two-thirds.
This IPO may have been anticipated, and interest in energy remains high.
In December, Fervo announced closing a $462 million round, and energy investors anticipated the company’s IPO. With solid data from the Cape Station project and an IPO completed, Fervo appears to have navigated the “valley of death” and is moving forward successfully.