Project already largely developed; could power 26,000 homes
SONOMA COUNTY and LAKE COUNTY — U.S. Geothermal Inc, a geothermal energy company with offices in Boise, Idaho, has announced plans to acquire a late stage development at the Geysers that has shown promise for enough steam production to power up to 26,000 homes.
Currently under ownership of Reno, Nev.-based Ram Power Corp., the project, encompassing 3,800 acres, includes permits and design plans for a proposed power plant and five production-ready geothermal steam wells. U.S. Geothermal announced an agreement to buy the project for $6.4 million in cash, acquiring assets and subsidiaries associated with its development and leasing of related lands.
The sale is expected to close on or before April 30, according to announcements from the companies.
Ram and its subsidiary, Western GeoPower, have collectively invested over $90 million in the site since Western GeoPower first began researching its potential as an independent company in 2006, according shareholder reports from Ram. The Western GeoPower subsidiary will transfer to U.S. Geothermal in the sale. The company does not break down its employment by subsidiary, but had 122 employees overall at the end of 2013.
Ram could not be reached for comment on the sale, but noted an overall desire to refocus resources on other existing projects as part of its 2013 annual report.
“We committed to monetizing the Geysers project, which frees additional capital into the company allowing for the strategic process to be completed in 2014,” said Antony Mitchell, Ram’s executive chairman, in an announcement of the sale.
Ram’s decision to sell the project despite those expenditures highlights the current economics of new plant construction in the world of geothermal power, where relatively expensive facilities must compete on a per-megawatt basis against sources with a cheaper cost of entry, said Ken Speer, assistant general manager of generation at the Northern California Power Agency. The plant was to be the first new facility at the Geysers in 25 years, an area where a handful of companies produces around 800 megawatts of power across nearly 20 power plants.
The NCPA, which itself owns and operates four geothermal power facilities at the Geysers, agreed in 2008 to purchase all power produced at the site for 20 years at a cost of $520 million. A revised power purchase agreement in 2011 to support the feasibility of the project expired in March of 2013.
“As Ram went in and tried to develop — even at the higher power purchase price, it wasn’t going to be profitable,” Mr. Speer said.
Western GeoPower had originally estimated wells at the site to be sufficient for more than 30 megawatts of production, but revised that estimate downward as exploratory drilling continued in the following years.
The NCPA also declined the first option to pursue development of their own facilitiy at the site, with Mr. Speer citing the public agency’s ineligibility for a significant federal tax credit as a major factor. The agency produces and purchases power on behalf of a number of small municipal utilities in California, including utilities in the North Bay cities of Healdsburg and Ukiah.
U.S. Geothermal announced two approaches to the project — either selling produced steam to another operator, or construction of a new plant.
“If they’re looking to develop the site and sell the power, we’ll certainly talk to them,” Mr. Speer said.
The site off Geysers Road in the Mayacamas Mountains of northeast Sonoma County was once home to a Pacific Gas & Electric Co. facility producing 64 megawatts of electricity, one of several in the Geysers operated by PG&E and a number of other companies at that time. The utility dismantled the plant in 1989 amid a decline in steam pressure across the broader Geysers area, and ultimately sold its remaining plants to other operators.
Yet sites like that of the former PG&E facility have shown renewed promise following subsequent projects to pump treated wastewater from the adjoining counties into the Geysers underground aquifer. The effort stabilized the declining pressure and brought new potential to wells that had formerly lost production capacity.
“We are very pleased to add this advanced stage development project to our portfolio,” said Dennis Gilles, chief executive of U.S. Geothermal, in an announcement. “Acquiring this project having five completed wells available for immediate production with roughly 30 megawatts of total steam behind pipe is a significant near-term growth opportunity for our company.”
Today there are three plant operators in the Geysers area, the largest of which being Houston, Texas-based Calpine Corp. The company’s 15 geysers facilities produced approximately 18 percent of California’s renewable energy as a whole in 2012, according to Calpine’s latest filing with the Securities and Exchange Commission.
Calpine has itself acquired permits to construct two additional plants at the Geysers, each capable of an estimated 49 megawatts of ongoing power generation. Construction will hinge on demand, with each project estimated to produce 190 construction jobs for a 30-month period and up to 19 ongoing full-time jobs combined.
Power produced via the natural occurrence of high-pressure underground steam at the Geysers is lauded for both its renewable energy attributes and reliability. Companies producing power at the site sell to a wide range of providers, including an agreement between Calpine and Sonoma Clean Power to supply 10 percent of the power agency’s needs through 2023.
U.S. Geothermal, a Canadian corporation that trades publicly in both the United States and Canada, also announced in April that it had acquired development rights for a potential geothermal project in Vale, Ore. The company had net income of $1.9 million and revenue of $27.4 million in 2013, and operates geothermal power projects in Oregon, Nevada and Idaho.
Ram , a Canadian corporation headquartered in the United States, currently has an operating geothermal project in Nicaragua and development interests in California, Nevada and British Columbia, Canada. Ram, traded publicly in Canada, had revenue of $46.2 million and a loss of $50.9 million in 2013.
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