Geothermal startup Fervo Energy raises 33% in IPO boosted by demand for AI data centers

Geothermal startup Fervo Energy saw its market valuation surpass $10 billion in its public market debut, a surge driven by demand for artificial intelligence data centers — and the energy that can power them.

Fervo raised $1.89 billion in a large initial public offering on Wednesday, which initially valued the company at about $7.6 billion. Demand for Fervo shares was so great that the company and its bankers increased the supply several times, selling an additional 14.6 million shares while raising the price range twice, eventually settling on $27 per share.

The stock, which trades under FRVO on the Nasdaq, rose another 33% when it first began trading on Wednesday, pushing its valuation past $10 billion.

“We were asked several times in the roadshow, ‘Why aren’t you raising more money?’” Sarah Jewett, senior vice president of strategy at Fervo, told TechCrunch. “When we saw the demand coming in, there were enough signs that increasing volume was not only within the realm of possibility, but within the realm of encouragement.”

Like many other energy companies, Vervo benefited from growing demand from data centers and artificial intelligence companies, which were desperate to secure electricity to power their facilities. It’s the second energy stock to receive a warm welcome in the past few weeks, with nuclear energy startup X-energy raising $1 billion in its massive IPO.

The basic concept of geothermal energy — using the Earth’s heat to get energy — has been around for decades, but Fervo is part of a new class of startups developing improved geothermal energy, which digs deeper to take advantage of hotter rocks. To make the most of this attractive geothermal field, Fervo uses industry-leading directional drilling techniques.

“We’re replicating the rules of the shale energy industry but with an answer key,” Jewett said.

Fervo’s IPO netted the company $500 million more than expected, a cash cushion that will give the company more room to maneuver as it develops the Cape Station power plant in Utah, which is scheduled to come online this year. Ultimately, the company plans to generate 500 megawatts upon completion of the first phase of the Cape plant, which it expects to take about three years.

The 500MW Cape plant size was driven by the amount of grid connection the company was able to secure, but Fervo is permitted to develop 2GW of geothermal power at the Cape plant, and the company has applied to increase its interconnection size accordingly. However, even this may be a conservative estimate. A third-party engineer reported there was enough heat at the site to reach 4 gigawatts, Jewett said.

The added electricity could flow into the grid if the size of the interconnection increases. But if not, Fervo has been fielding inquiries from companies looking to connect directly. “We are seeing an increasing amount of business interest behind the counter,” Jewett said.

Fervo is already under development on another project. The Korsak station in Nevada, from which Google will purchase 115 megawatts of electricity.

Part of the appeal of geothermal power is that the technology can provide what is called base load power, a source that can generate electricity 24/7, regardless of weather conditions. Data center operators who value high uptime are willing to pay a premium these days for consistent power. This has helped transform geothermal energy from just another clean energy technology competing for space on the grid to a technology of choice among technology companies and now investors.

The Houston-based company is 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 drill and cost more than $1,000 per foot. After drilling 14 wells, the company was able to reduce drilling time and cost per foot by two-thirds.

This IPO was perhaps overdue, despite the growing interest in energy, and its timing could not have been better.

Fervo announced in December that it had closed a $462 million round, and climate and energy technology investors TechCrunch spoke with late last year nearly anticipated the company’s IPO. Demand from high-speed companies coupled with data from its Cape Station project suggests the company has successfully navigated the ‘valley of death’. With an IPO in its back burner, it looks like Fervo is now firmly on the other side.