Fervo Energy (NASDAQ:FRVO) experienced a significant stock surge on Tuesday, climbing 28.4% after announcing an expanded power purchase agreement (PPA) with Google (NASDAQ:GOOGL). The stock closed the session at $19.75, with a trading volume of 35.1 million shares, reflecting strong investor enthusiasm. In pre-market trading on Wednesday, shares were slightly lower at $19.56, a 0.96% decline from the previous close, according to Yahoo Finance.
Google's Expanded Commitment
The new agreement adds 396 megawatts (MW) of geothermal power to Google's contracted portfolio, bringing the total capacity Fervo has secured under binding PPAs to 1,054 MW as of June 30. This new contract represents 60% of Fervo's previously disclosed binding capacity of 658 MW, underscoring the scale of Google's commitment. The PPA applies to electricity generated by a 396 MW facility at Cape Station in Utah, which is expected to become operational in 2028.
Google also retains an option to increase its purchase by approximately 600 MW, which could bring the total volume close to one gigawatt by June 2030, subject to certain conditions outlined in Fervo's September 1 Form 8-K filing.
Financing Implications
The deal directly addresses Fervo's principal financing hurdle. The company anticipates that Cape Station Phase II will require approximately $2.2 billion in capital expenditures through 2028, with a significant portion to be secured as project debt, according to its SEC quarterly filing. As of June 30, Fervo reported holding $2.106 billion in unrestricted cash and projected capital expenditures of $850 million to $900 million in the second half of 2026.
Investors are pricing in future production rather than current profits. Fervo posted second-quarter revenue of just $113,000 and a net loss of $55.9 million. With 294.7 million shares outstanding, its equity valuation stands at $5.82 billion as of Tuesday's close, reflecting the market's confidence in the company's growth trajectory.
Project Milestones
The first test for Cape Station comes sooner. Fervo projects its first unit will supply test power in the fourth quarter of this year, with the entire first phase of three blocks, totaling 100 MW, expected to be fully operational in early 2027. The second phase, comprising eight 50 MW blocks, aims for completion in 2028.
This agreement builds on a longstanding partnership between Fervo and Google. Project Red began supplying power to Nevada's grid in 2023, and in 2024, Fervo reached a 115 MW deal with Google and NV Energy. The Utah agreement represents a significant scale-up in their collaboration.
Executive Commentary
Chief Executive Tim Latimer stated in the company announcement, "This agreement reinforces that EGS is ready to power the next generation of computing infrastructure." Enhanced Geothermal Systems (EGS) are seen as a key technology for providing reliable, carbon-free power to data centers.
Risks and Outlook
Despite the positive news, risks remain. Delivery could be hindered by transmission restrictions, permitting issues, drilling outcomes, or construction slowdowns. Fervo also cited ongoing weaknesses in its financial controls in its quarterly report. Failing to meet milestones may increase financing costs or necessitate additional equity issuance.
The upcoming operational demonstration is expected ahead of Google's Utah delivery. Fervo plans to bring Cape Station online this quarter, aiming for about 100 MW by early 2027. Contract volumes have increased, but progress on execution needs to keep pace to maintain investor confidence.
