FRVO: Initiate at Outperform, $46 PT

Research evidence excerpt

FRVO: Initiate at Outperform, $46 PT

ve a compounding benefit on power output AllPricedvaluesas ofin priorUSD unlesstradingotherwiseday's marketnoted.close, EST (unless otherwise noted).

due to improving system efficiency. We estimate this advantage alone

results in a >35% improvement in development costs to <$3,500/kW

and translates to sub-$65/MWh LCOE - arguably the cheapest source of

baseload power in the U.S. Future design and drilling refinements could

unlock even greater productivity improvements and cost reductions.

• Growth outlook is supported by a healthy and growing pipeline.

Fervo has significant revenue visibility with ~1 GW of mature projects

underpinning growth through 2030. In the near-term, the pipeline is

derisked with $7.2bn in contracted revenue (658 MW) through binding

PPA agreements. Cape III (2029 est. COD) remains uncontracted, but

we believe the company is making significant progress in securing

transmission capacity or contracting a BTM customer. Long-term growth

visibility is reinforced by a 3 GW framework agreement with Google,

and we estimate there could be ~8 GW under negotiation with potential

buyers including utilities/load serving entities, large load industrial

buyers, and BTM/co-location users. We believe the strong opportunity

set coupled with FRVO’s ability to provide cost competitive baseload

power positions it to scale the portfolio to ~5 GW in 2035E.

• Derisked tech. FRVO has been operating its 3 MW pilot since 2023 and

has observed consistent, stable temperatures, in line with modeling and

expectations. This gives us confidence in successful scaling as it prepares

to bring on the 100 MW Cape Phase I project later this year.

• Upsized IPO proceeds provide optionality. FRVO raised an incremental