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Fervo Energy, the geothermal energy startup, saw its market valuation surpass $10 billion in its public market debut, an increase driven by demand for AI data centers — and the energy that can power them.
Fervo had raised $1.89 billion in an upsized initial public offering on Wednesday, which initially valued the company at around $7.6 billion. Demand for Fervo stock was so great that the company and its bankers upsized the offering several times, selling an additional 14.6 million shares while lifting the price range twice, ultimately settling on $27 per share.
The stock, which trades under FRVO on the Nasdaq, popped another 33% when it first started trading Wednesday, pushing its valuation past $10 billion.
“We were asked a few times on the roadshow, ‘Why aren’t you raising more money?’” Sarah Jewett, Fervo’s senior vice president of strategy, told TechCrunch. “As we saw the demand come in, there were just enough signals pointing towards upsize being not only within the realm of possibility, but the realm of the encouraged.”
Like many other energy companies, Fervo has been buoyed by surging demand from data centers and AI companies, which have been desperate to secure electricity to power their facilities. It’s the second energy stock offering to receive a warm welcome in the last few weeks, with nuclear startup X-energy raising $1 billion in its own upsized IPO.
The basic concept of geothermal energy — using the Earth’s heat for power — has been around for decades, but Fervo is part of a new class of startups developing enhanced geothermal, which drills deeper to tap into hotter rocks. To make the most out of an attractive geothermal field, Fervo uses directional drilling techniques pioneered by the oil and gas industry.
“We’re repeating the playbook from the shale energy industry but with the answer key,” Jewett said.
Fervo’s IPO netted the company $500 million more than it anticipated, a cash cushion that will give the company more room to maneuver as it develops its Cape Station power plant in Utah, which is slated to begin operation this year. Ultimately, the company plans to generate 500 megawatts when Cape Station’s first phase is complete, which it expects will take around three years.
Cape Station’s 500 megawatt size was driven by the size of the grid connection the company was able to secure, but Fervo is permitted to develop 2 gigawatts of geothermal energy at Cape Station, and the company has applied to increase the size of its interconnection accordingly. Yet even that might be a conservative estimate. Jewett said a third-party engineer reported enough heat on site for up to 4 gigawatts of capacity.
The added electricity could flow to the grid if the interconnection size grows. But if it doesn’t, Fervo has been fielding inquiries from companies looking to connect directly. “We’re seeing an increasing amount of behind the meter commercial interest,” Jewett said.
Fervo is earlier in development on another project. Corsac Station in Nevada, from which Google will buy 115 megawatts of electricity.
Part of geothermal’s appeal is that the technology can provide so-called baseload power, a source that can generate electricity 24/7, regardless of weather conditions. Data center operators that value high uptime are willing to pay a premium these days for consistent power. That has helped turn geothermal from just another clean energy technology vying for space on the grid to a favorite among tech companies and, now, investors.
The Houston-based company has been racing to cut costs by reducing the amount of 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 has reduced both drilling time and cost per foot by two-thirds.
This IPO was perhaps overdue, though with rising interest in energy, its timing couldn’t have been better.
Fervo announced in December that it had closed a $462 million round, and climate tech and energy investors that TechCrunch spoke with late last year almost universally anticipated the company’s IPO. Demand from hyperscalers coupled with data from its Cape Station project suggested the company had made it through the “valley of death.” With an IPO in its rearview, it seems Fervo is now firmly on the other side.
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