Of all the  countries we cover, the Philippines has the best outlook: More than 6% GDP growth forecast for 2015 and 2016, coupled with low inflation (2.6%), a solid trade balance, and a currency that’s held up relatively well (down only 5% against the greenback in the past year). My favorite stock in the Philippines? Energy Development Corporation (OTC: EGDCY), the world’s largest vertically integrated geothermal power company.

Generated by the earth’s heat (in the form of active volcanoes, geysers and hot springs), geothermal energy has a major advantage over other types of “green” energy: It’s relatively cheap to produce, so it’s economically viable without government subsidies—provided the geothermal sources are sufficiently large and accessible, which they are in the Philippines.

During the next 15 years, power consumption in the Philippines is expected to rise as much as 80% (per a KPMG study). EDC is well-positioned to benefit from demand for cleaner energy, both in its home country and abroad.

At home, EDC is an established company and politically well-connected. Founded in 1983 as part of the Philippine National Oil Corp., EDC went private in 2006, and since 2007 has been 50.1% owned by First Gen, a Philippine conglomerate formed in 1998 to hold the power generation assets of the Lopez Group, a prominent Philippine family. (Federico Lopez is Chairman and CEO of EDC).

Currently, EDC produces about 9% of the electricity in the Philippines through contracts with Manila Electric and the National Power Company. The company operates geothermal steam fields in 14 service areas, adding up to 1,164 megawatts in total installed geothermal capacity. EDC also operates the largest wind-power project in the Philippines, the 150 megawatt Burgos Wind project, and has 10 wind energy service contracts. It’s also becoming active in solar power, with a 4.2 megawatt facility next to Burgos and plans to add 30 megawatts in capacity shortly and another 100 to 150 megawatts in three to four years.

Heating Up Globally

Since the 1970s, EDC has worked with GNS Science, a New Zealand government research organization, on locating geothermal power opportunities; this August it signed a new agreement with GNS to develop geothermal power plants throughout the Pacific.

EDC has used its renewable energy expertise to acquire five concessions in Chile and Peru and is in negotiations in Indonesia. This October, EDC will begin preliminary drilling (cost of about $70 million) at its Mariposa geothermal concession in Chile, where it will own 70% of the output.

Recent Chill is Temporary

EDC’s stock price has nose-dived this year due to an earnings shortfall, which we think is temporary. For the first half of 2015, EDC’s income was down 14%, primarily due to unreliable production at its Tongaman geothermal plant, which caused it to go offline. The company described the setback as “significant but temporary.” We’re encouraged that revenues rose 10%, due to contributions from the Burgos wind plant and the Nasulo geothermal plant, both commissioned toward the end of 2014.

Currently, EDC shares are priced at close to 12 times earnings for the past 12 months and just under 10 times earnings estimated for 2016 (by four analysts).

The stock is priced at a relatively high 2.6 times book value, but EDC in the last four quarters has had a stellar return of 5.9% on assets and 23.4% on equity, while its net debt to equity ratio of 1.17 times seems reasonable. Dividends have risen 10% annually the past five years, and based on 2015 dividends of $0.45 per ADR (1 ADR = 100 shares), EDC yield 3.4%.

Stable Outlook

In emerging markets such as the Philippines, political stability is just as important as the economy. We are encouraged that current President Benigno Aquino has run a pro-business, fiscally responsible administration; importantly, the two leading candidates for the next election – in May 2016—both have ties to his administration.

EDC offers one of the world’s few opportunities to invest in a financially sound green energy company, with a strong increase in demand forecasted and a very reasonable valuation based on current earnings. As such, EDC is likely to energize Pacific Wealth portfolios for years to come.