Ormat Sees $230 Million Charge as Geothermal Plant Disappoints

Andrew Herndon, Bloomberg
January 24, 2013 | 4 Comments

Ormat Technologies Inc., a U.S. developer of geothermal energy, will record a charge of as much as $230 million because its North Brawley plant is producing about half as much power as expected.

The impairment charge will be in the fourth quarter of 2012, resulting in a loss during the period and for the full year, the Reno, Nevada-based company said today in a statement.

The plant in southern California has been operating at capacities between 20 megawatts and 33 megawatts, which compares with its design capacity of 50 megawatts, Ormat said.

Southern California Edison Co., the utility that buys the power produced by North Brawley, has refused to give Ormat permission to explore a replacement power purchase agreement with higher electricity prices, Ormat said. As a result, Ormat said it doesn’t plan to invest to boost capacity at the plant and will continue to operate it at the current level of about 27 megawatts.

“Additional investment to increase generation is not economically justified,” Ormat Chief Executive Officer Dita Bronicki said in the statement.

The impairment charge won’t affect the company’s ability to repay debts and won’t “materially adversely impact” its future results, according to the statement.

Separately, Ormat said its Israel-based parent company Ormat Industries Ltd. also expects to record a $30 million to $40 million impairment charge during the fourth quarter related to its Jersey Valley power plant in Nevada, according to the statement.

“Jersey is operating at lower levels than its 12 megawatt contract capacity due to injections constraints,” Bronicki said today on a conference call. “The power plant is operating now at an annual average of 7 megawatts.”

Lead image: Geothermal plant via Shutterstock

4 Comments

terry hallinan
January 31, 2013

Anonymous,

"It seems to me that there have lately been quite a few disappointments in the field of geothermal development. I would like to know if there is a commonality in the causes"

Sure.

There are also site specific problems as in the rare, if not unique, geological stratigraphy of the Salton Sea area where the Brawley project is located.

The vast overhyping of the worst forms of renewable energy - solar and wind - and near abandonment of geothermal power because of vampire management after hostile takeover by oil companies about half a century ago has led to poor recognition, unfair taxation, a boom and bust cycle resulting in poorly equipped novice engineers and other specialists. The risk in any drilling is compounded by primitive technology and usurious interest rates by financial predators on high initial capital costs. Even religious superstition, as in Hawaii and Japan, has impeded development.

It is no accident poor countries most hungry for low cost power are where geothermal power is making the greatest inroads.

Best, Terry

Paul Kangas
January 26, 2013

Such companies usually over sell their harebrained ideas.
Real companies focus on developing a feed-in tariff and solar.
That is where the real future is.

Berlin is now 51% powered by solar & renewables.
Every other house has 50 solar panels.
Germany has the most advanced solar policy in the world. They require the big 4 Utilities to buy all solar energy anyone feeds into the grid.
Germany has shut down half their nukes.
Germany is the greenest state in the world.

There are 69 states in the world that have a solar Feed-in tariff.
Today, the states that pay the most are Germany, China, Japan and Denmark.
They all pay about $0.54 kwh for solar.
That is a real source of wealth for the homeowners, for the unions and for the governments.
This creates million of jobs.
This creates $$ billions of cash flow for society.
This allows these states, like Germany to shut down f atomic energy and go into solar power rapidly.

ANONYMOUS
January 25, 2013

This science is really "science and speculation, whereas PV, CPV, wind and even TD power can be "more speculated upon" due to previous builds, more exact science and plain old experience.

Stuff happens....companies will always assume more than they know will happen...then pay a penalty...they still make money..just less.

We need all that we can deliver...otherwise...we die as a planet within 10 or twenty generations....let the money move "from business to business" this is human need and greed....let's just keep moving in this direction.

Thanks-

ANONYMOUS
January 25, 2013

It seems to me that there have lately been quite a few disappointments in the field of geothermal development. I would like to know if there is a commonality in the causes, or not. If there is, what can be done to fix the problem?