US Geothermal Signs US $30M Construction Deal

U.S. Geothermal Inc. has entered into an agreement for the engineering procurement and construction of a new 8.6-megawatt (MW) modular binary cycle power plant at its San Emidio project.

TAS Energy Inc. will build the plant and the agreement calls for the EPC contractor to provide a non-recourse project loan for the $30 million construction capital together with an Engineering, Procurement and Construction services contract for Phase 1 of the San Emidio project in northern Nevada.

The construction loan is expected to be repaid with long term financing from available sources such as the Section 1705 loan guarantee program from the U.S. Department of Energy (DOE). Under the terms of the agreement, the parties have established an exclusivity period during which final terms and conditions of certain definitive agreements will be negotiated.

“This is a fully financed, turnkey engineering, procurement and construction arrangement,” said Daniel Kunz, president and CEO of U.S. Geothermal Inc. “We are excited to get construction started this year, which will insure that our 35 net MW San Emidio development project qualifies for the special 30% Investment Tax Credit cash grant.”

The project will construct a new water-cooled binary cycle power plant with an estimated output of 8.6 MW of baseload electricity. No well drilling is required for Phase 1 since production and injection wells are currently in use by the existing San Emidio power plant which will be replaced with the new plant. The anticipated Phase 1 commercial operations date is Q4 quarter of 2011.

The $200 million San Emidio project is a planned two-phase development. The $30 million Phase 1 is planned at 8.6 MW and the $170 million Phase 2 is planned at 26.4 MW. Phase 2 is expected to be completed in late 2013, subject to satisfactory completion of new well drilling, a transmission upgrade and obtaining the required permits. Phase 2 reservoir resource expansion efforts are already underway using funding assistance from a $3.77 million DOE Innovative Exploration Grant awarded to U.S. Geothermal in 2009.

Approximately 3 MW of the Phase 1’s output is sold through 2017 under the terms of an existing power purchase agreement (PPA) with Sierra Pacific, a subsidiary of NV Energy. U.S. Geothermal Inc. is currently negotiating with a number of interested parties for a new 35 MW PPA for the project.

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