UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange
Act of 1934
Date of Report: January 18, 2016
(Date of earliest
event reported)
US GEOTHERMAL INC.
(Exact
Name of Registrant as Specified in Its Charter)
Delaware |
001-34023 |
84-1472231 |
(State of Incorporation) |
(Commission File Number) |
(I.R.S. Employer Identification)
|
390 E Parkcenter Blvd, Ste 250, Boise, Idaho 83706
(Address of principal executive offices) (Zip Code)
208-424-1027
(Registrants Telephone Number,
Including Area Code)
Check the appropriate box below if the Form 8-K is intended to
simultaneously satisfy the filing obligations of the registrant under any of the
following provisions (see General Instruction A.2. below):
[ ] |
Written Communications pursuant to Rule 425 under the
Securities Act (17 CFR 230.425) |
|
|
[ ] |
Soliciting material pursuant to Rule 14a-12 under the
Exchange Act (17 CFR 240.14a-12) |
|
|
[ ] |
Pre-commencement communications pursuant to Rule 14d-2(b)
under the Exchange Act (17 CFR 240.14d-2(b)) |
|
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[ ] |
Pre-commencement communications pursuant to Rule 13e-4(c)
under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 2.02 |
Results of Operations and Financial
Condition |
On January 18, 2016, the Company issued a press release
confirming its guidance for the year ended December 31, 2015 and announcing
guidance for 2016. A copy of the press release is furnished as Exhibit 99.1 to
this report.
In accordance with General Instruction B.2 of Form 8-K, the
information in this Current Report on Form 8-K, including Exhibit 99.1, shall
not be deemed to be filed for purposes of Section 18 of the Securities
Exchange Act of 1934, as amended (the Exchange Act), or otherwise subject to
the liability of that section, and shall not be incorporated by reference into
any registration statement or other document filed under the Securities Act of
1933, as amended, or the Exchange Act, except as shall be expressly set forth by
specific reference in such filing.
The Company also provided the following operational update:
68 MW of Projects Now Under Development:
|
1) |
WGP Geysers, California, - Well test program completed.
Capable of 30 MW. Interconnection Study to be completed February 2016,
responding to RFPs. |
|
2) |
San Emidio Phase II, Nevada - Continuing drilling
targeting additional 10 MW, anticipate finalizing interconnection process
with NV Energy by the Q2 2016. |
|
3) |
El Ceibillo, Guatemala Concession schedule amendment
approved by Ministry of Energy and Mines, completed drilling of 3
additional wells in support of planned 25 MW development. |
|
4) |
Neal Hot Springs, Oregon, water supply well drilling
continuing in January 2016 in support of hybrid cooling project which
should provide additional 3+ MW. |
Favorable Legislation:
California government passed legislation favoring development
of base load power projects and federal government extends tax credits available
to geothermal plants
NOTABLE HIGHLIGHTS AND ACHIEVEMENTS FOR 2015 INCLUDE
Operations:
− |
Achieved annual average availabilities for the twelve
months for each plant (excluding planned maintenance hours) as follows:
Neal Hot Springs 97.9%, San Emidio 98.6%, Raft River 95.4%.
|
− |
Completed planned annual maintenance outages at all three
operating facilities including a major overhaul (once in 7 years) at Raft
River. |
− |
Generated fleet wide total 332,009 megawatt-hours for the
period, as compared to 339,086 megawatt-hours in the prior year.
|
− |
Finalized settlement agreement with Neal Hot Springs
equipment supplier Turbine Air Systems. |
2
Advanced Development Projects:
− |
Completed flow test of three major steam wells at WGP
Geysers project and independent reservoir report confirmed the WGP drilled
wells are capable of generating approximately 30 megawatts. |
− |
Drilling of well EC-2A confirmed the discovery of a
commercial geothermal resource at the El Ceibillo project. |
− |
Received approval from the Guatemalan Ministry of Energy
and Mines for a modified project construction schedule for the El Ceibillo
project. |
− |
Drilled and tested the first and second water supply
wells at Neal Hot Springs to support the potential hybrid cooling project.
|
− |
Received permits for the temperature gradient wells at
San Emidio for Phase II, and drilled five temperature gradient wells.
|
Strategic:
− |
Signed an agreement to acquire the major and long lead
equipment for three new binary power plants at a deep discount. This
equipment is suitable for use at the San Emidio II and Crescent Valley I
development project power plants. |
− |
Acquired 95% of the Goldman Sachs ownership and cash
flow interest in the Raft River Power Plant, with purchase of their
remaining balance planned at the end of 2017. |
− |
Engaged Marathon Capital to investigate strategic
alternatives. |
− |
Voluntarily delisted from Toronto Stock Exchange (TSX) as
of December 31, 2015 |
OPERATIONS:
Our three operating plants produced 332,009 megawatt-hours
during the twelve months, which compares to 339,086 megawatt-hours during the
same period of 2014. Historically warm temperatures across the west moderated
during the third quarter and turned colder in the fourth quarter, reducing the
negative impact on generation seen earlier in the year. Additionally,
maintenance at Raft River, and work related to the settlement under the
Equipment Supply Agreement (ESA) at Neal Hot Springs was carried out during
the year.
Neal Hot Springs, Oregon
All three units operated smoothly, with annual availability for
the facility at 97.9%. Generation for the twelve months was 176,871
megawatt-hours, compared to 183,394 megawatt-hours for the prior year period.
The reduction in generation is primarily due to Neal being impacted by higher
than average ambient temperatures and a 2.5 day maintenance outage that was
taken on Unit 3 in August to replace a high pressure feed pump under the terms
of the ESA settlement.
A settlement was reached with Turbine Air Systems and five of
their key equipment suppliers under the terms of the Equipment Supply Agreement.
The settlement agreement provided a cash payment to the project company, USG
Oregon LLC, a commitment to finalize equipment repairs and upgrades, and an
extended warranty for equipment that is repaired or replaced.
The PPA has a seasonal pricing structure that pays 120% of the
average price for four months (July, August, November, and December), 100% of
the average price for five months (January, February, June, September, and
October) and 73.3% of the average price for three months (March, April, May). The average price paid under the PPA for
2015 was $106.79 per megawatt-hour. The average price to be paid under the PPA
for 2016 will be $109.27 per megawatt-hour.
3
San Emidio, Nevada
Annual availability of 98.6% . Total generation for the twelve
months was 79,539 megawatt hours, which compares to 76,894 megawatt-hours for
the prior year period.
Under the terms of our PPA, generation during 2015 is paid at
the average contract price of $92.08 per megawatt-hour. There is no seasonal
adjustment under this PPA. The average price to be paid under the PPA for 2016
will be $93.01 per megawatt-hour.
Raft River, Idaho
Annual availability for the facility was 95.4% . Total
generation for the twelve months was 75,599 megawatt-hours, which compares to
78,798 megawatt-hours for the prior year period. Raft River took an unplanned
maintenance outage of 12.5 days to replace the bearings on both power plant
turbines.
The PPA has a seasonal pricing structure that pays 120% of the
average price for four months (July, August, November, and December), 100% of
the average price for five months (January, February, June, September, and
October) and 73.5% of the average price for three months (March, April, May).
The average price paid under the PPA for 2015 was $62.00 per megawatt-hour. The
average price to be paid under the PPA for 2016 will be $63.30 per
megawatt-hour. In addition to the price paid for energy, Raft River currently
receives $4.75 per megawatt-hour under a separate contract for the sale of
Renewable Energy Credits (REC), with the Company preferentially receiving 70%
of the REC income. Starting in January 2018, a new REC contract will take effect
and the price will be $17.00 per megawatt-hour with the project owning 49% of
the RECs and Idaho Power owning 51%.
DEVELOPMENT:
WGP Geysers, California (30 MW)
An extended flow test program of the three production wells
with the highest flow rates was completed in June 2015, confirming that these
wells are still open and ready for production. Based on data generated from the
tests, we believe the
four production wells are capable of initially delivering 458,000 pounds per
hour of steam. Based on current power plant steam conversion rates from a
detailed design for a 28.8 MW (net) power plant we believe these wells should initially
deliver 28.1 MW (gross) or 25.4 MW (net). Using the average steam production
rate from the four wells, and an assumed interference factor of 30%, we believe that an additional 2-3 production wells will be needed to support the
long term operation of a 28.8 MW (net) plant.
Engineering optimization of the power plant design is
continuing with a focus on an innovative hybrid plant design that includes both
water and air cooling. We anticipate this design will dramatically increase the volume of
water available for injection back into the reservoir, providing long term
stable steam production, and will result in increased power generation over the
life of the project.
4
A new Conditional Use Permit was submitted to Sonoma County in
June, reflecting this modified cooling plan. We expect approval during the first
quarter of 2016.
Our transmission interconnection application is proceeding
under the Independent Study Process being conducted by the California
Independent System Operator. The first phase study, the Interconnection System
Impact and Facilities Study Report, was completed on October 8th. The
study shows that the interconnection is feasible and the preliminary cost is
estimated at $1.9 million. Final approval of the Interconnection Study is
anticipated by February 2016.
Discussions with numerous potential off-takers for the power
from our power plant continue, with high interest expressed by a number of them
for base load, renewable power to replace fossil fuel based power generation
that is being phased out of their portfolios. We responded to one Request For
Proposal (RFP) mid-year, but were not selected. An additional RFP was received
before year end with bids due by March, and other RFPs are anticipated in both
Q1 and Q2.
San Emidio Phase II, Nevada (10 MW)
To further define the resource, permitting for an expanded
temperature gradient drilling program for an area south west of the current
resource was initiated, and permits were received for a five hole temperature
gradient drilling program in June. Results from the 2014 drilling program
combined with 1970s era, shallow temperature gradient data, indicate a high
temperature trend into this south-west zone. Geophysical surveys have also
identified structural trends in this area. Drilling commenced on July 27 and the
five, 1,000 foot deep temperature gradient wells were completed with all of the
wells encountering high bottom hole temperatures and anomalously high
temperature gradients. Bottom hole temperatures ranged from 224°F to 274°F and
temperature gradients in four of the wells ranged from 12.4°F per 100 feet to
14.9°F per 100 feet. These results are considered to be indicative of a nearby,
active geothermal system at depth.
A second phase program to deepen the two most prospective
wells, which was expected to be completed during the fourth quarter, is being
permitted with the Bureau of Land Management. We are unable to predict when
those permits will be issued. Additional temperature gradient wells to further
expand the anomaly are also under consideration, but will have to be permitted
separately after additional cultural surveys are conducted.
The second phase interconnection study, called the Facilities
Study, was started in January 2015 and was completed in June pending a decision
by NV Energy on funding upgrades to the system. NV Energy decided not to fund
the upgrades and completed the Interconnection System Impact Restudy on
September 28th. The Restudy determined that the interconnection is
feasible, but with an increase in the estimated cost due to a change in cost
allocation by NV Energy. A meeting with the NV Energy transmission group to
discuss the results and anticipated costs took place in late October resulting
in a reduction of $4.1 million to the estimated cost of interconnection. The
final stage of the interconnection process is anticipated to conclude by the
second quarter of 2016.
Early in the year NV Energy issued a Request for Proposal
(RFP) for a total of 200 megawatts of renewable energy. We submitted a bid for
a power plant to be developed on the Phase II project site. NV Energy shortlisted the top bids from each
renewable technology. While our project was shortlisted, NV Energy elected to
award the total 200 megawatts to two solar projects.
5
El Ceibillo, Guatemala (25+ MW)
The modified development schedule was formally approved and
signed by the Minister of the Guatemalan Ministry of Energy and Mines in July,
and was officially incorporated into the concession agreement on October 13th.
We requested an extension of time for our Memorandum of Understanding for a
Power Purchase Agreement with the regional electricity broker due to the delay
caused by the government approval of the modified schedule, but the extension
was denied.
Drilling began on the project with well EC-2A which tested the
high temperature anomaly defined by the 2014 temperature gradient drilling
program. EC-2A successfully intersected a zone of high permeability at a depth
of 1,300 feet (396 meters). Flow testing indicates that a commercial resource
has been discovered with a flowing temperature of 398°F (198.5°C) .
Based on the discovery at EC-2A, two additional wells were
sited to further extend the resource area. Drilling of well EC-3 began on
October 29 and was completed on November 11, and drilling of well
EC-4 began on November 18 and was completed on December 2. Both EC-3 and EC-4
intersected high permeability zones indicated by total lost circulation of
drilling fluid. EC-3 found permeability at a depth of 1,365 feet (416 meters)
with a measured preliminary static temperature of 392°F (200°C). Well EC-4 found
permeability at a depth of 1,243 feet (379 meters) and is still heating up.
Testing of the completed wells is now underway. Depending upon the results of
the flow tests, a decision will be made on the location for either another slim
hole or a production size well to fully test the resource to determine its size
and production characteristics.
Neal Hot Springs, Oregon (3+ MW)
Two water supply wells were drilled and flow tested for a
period of six weeks. One of those wells achieved steady state production at
approximately 170 gallons per minute. The minimum amount of water needed for a
hybrid cooling system is approximately 200-300 gallons per minute for each unit.
Additional studies were conducted to develop new fresh water drilling targets to
support continued exploration for a reliable water source. A purchase or long
term lease of existing surface water or groundwater rights is also being
studied.
The ability to use water cooling during the 5-6 months of
summer and fall would increase power generation, when current air cooling
results in a dramatic reduction in plant output. Additional water well drilling
is schedule to begin in January 2016.
Crescent Valley, Nevada (25+ MW)
In light of federal legislation that extended the qualification
for the 30% Investment Tax Credit to projects that began construction prior to
December 31, 2014, drilling of the first production CVP-001 (67-3) was initiated
in December of 2014 following completion of gravity surveys, and analysis of
prior temperature gradient drilling data. The well was completed on March 27 and
it exhibited modest permeability. An expanded geophysical and
temperature gradient drilling program has been designed but must be
permitted.
6
LEGISLATIVE UPDATE:
Recent developments in the market are encouraging for the
growth of renewable energy, and more specifically to geothermal energy in our
opinion.
On October 7, 2015 the California Governor signed into law
Senate Bill SB-350, which: 1) increases the Renewable Portfolio Standard in the
California to require 50% of retail sales be procured from renewable energy
resources by the year 2030. The bill requires that retail sales from renewable
energy total 25% by 2016, 33% by 2020, 40% by 2024, 45% by 2027, and 50% by
2030; and 2) provided for the evolution of the Independent System Operator
(CAISO) into a regional organization to promote the development of regional
electricity transmission markets in the western states to improve access for the
customers of California to those markets. The evolution to a Regional
Independent System Operator is required to be completed before the end of
December 2018. We believe these will increase demand for renewable power from
our development opportunities in California as well as from the surrounding
states.
This, in addition to the passage of AB-2363 in 2014 which
required the California Public Utilities Commission to establish the appropriate
adders (integration cost) for each technology that must be used when evaluating
bids for long term wholesale power contracts. We believe this change will add
appropriate costs to wind and solar power generation due to their intermittent
deliveries of power, which then should allow base load renewables like
Geothermal and Biomass to compete for PPAs with Investor Owned Utilities based
on a more accurate comparison of the full cost for power. That has not been the
case in the past.
Also, at year end, the federal government passed legislation
that extended the tax credits available to new geothermal plants. Under the
approved legislation, projects that begin construction before December 31, 2016
would be eligible for an Investment Tax Credit (ITC), or alternatively a 10
year Production Tax Credit (PTC).
MERGERS AND ACQUISITIONS:
Raft River, Idaho
In December we closed on the transaction to purchase a majority
of Goldman Sachs ownership and cash flow interest in the Raft River geothermal
project. Effective on December 14, we own 95% of the project and will receive
95% of the cash flow instead of the previous 0% that we were contracted to
receive until or if the ownership change would occur under the tax equity
structure. In addition to the 95% of the cash flow from the project, we will
also receive 100% of any increased cash flow and tax benefits from any project
improvements.
The purchase price under the agreement was $5.1 million for 95%
interest, with an option to purchase the balance of Goldmans interest for Fair
Market Value at the end of 2017. The purchase unlocks our ability to consider
capital upgrades that may increase output from the facility and potentially reach its design capacity of 13
megawatts. It strengthens our commitment to becoming the North American leader
in geothermal energy.
7
In October of 2015 the final payment of $415,000 was made under
the $1.65 million Repair Services Agreement loan entered into in May of 2011
between the project and the Company. As a result, on a going forward basis, cash
flow previously used for loan repayment will now be available for distribution
to member partners.
The Raft River Geothermal Power Plant is located in Southeast
Idaho and has a designed capacity of 13 megawatts net. The project is currently
operating at approximately 9.4 megawatts. Power from the facility is sold under
a firm price, 25 year contract with Idaho Power Company which allows for the
full 13 megawatt output.
Plans are under consideration to drill for additional
production to increase plant output to its full contract limit.
Power Plant Equipment
We acquired all of the major and long lead equipment for the
construction of three binary geothermal power plants for $1.5 million
(approximately 5% of the equipments estimated original cost of $28 million).
The equipment was part of an order for six power plant units by another
geothermal developer, but only three were installed. The components for the
three units being purchased are all new and unused, and have been held in
storage.
The equipment is from the same manufacturers, and is of a
similar size and design, to that installed at the Companys Neal Hot Springs and
San Emidio power plants. The design output of the acquired units totals
approximately 35 megawatts (MW). Actual output of each unit will be determined
by resource conditions found at the sites at which the equipment is ultimately
installed.
The three equipment packages which represent approximately 70%
of the components needed for the complete plants, will meet the major and long
lead equipment requirements for the Companys proposed Crescent Valley I power
plant (25 MW) and San Emidio II power plant (10 MW). This equipment gives us the
ability to expand our megawatt output at our existing portfolio of advanced
stage development projects at significantly lower cost, and in much shorter
construction timeframes.
Other
We are continuing due diligence on a number of other
opportunities that encompass other companies, operating projects, and advanced
development projects.
SECURITIES UPDATE:
We applied for the voluntary delisting of the Company's
securities from the Toronto Stock Exchange (TSX). The delisting took effect as
of the close of trading on December 31, 2015, and the Companys stock symbol
GTH.TO is no longer effective.
8
The Company's shares will continue to trade under its existing
stock symbol "HTM" on the NYSE MKT LLC ("NYSE").
The decision to voluntarily delist from the TSX was due to the
very limited trading volume of the Company's shares on the TSX over a sustained
period, with more than 97% of trades in the Company's securities over the past
24 months occurring on the NYSE, and only 3% occurring on the TSX.
This Form 8-K contains certain forward-looking statements
regarding the timing of drilling, permits, studies and other development
milestones. Actual events or results may differ materially from those contained
in these forward-looking statements. Among the important factors that could
cause future events or results to vary from those addressed in the
forward-looking statements include without limitation, risks and uncertainties
arising from the possibility that the timing of permitting, studies or project
milestones may not occur as scheduled, . In addition, please refer to the
documents that the Company files with the Securities and Exchange Commission on
Forms 10-K, 10-Q and 8-K. The filings by the Company identify and address other
important factors that could cause events and results to differ materially from
those contained in the forward-looking statements set forth in this Form 8-K and
the Companys other filings. The Company is under no duty to update any of the
forward-looking statements after the date of this Form 8-K to conform to actual
results.
Item 9.01 |
Financial Statements and Exhibits.
|
(d) Exhibits.
9
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
Date: January 22, 2016 |
U.S. Geothermal Inc. |
|
|
|
|
By: |
/s/
Kerry D. Hawkley |
|
|
Kerry D. Hawkley |
|
|
Chief Financial Officer |
10
390 E
Parkcenter Blvd, Ste 250, Boise, ID 83706 |
Tel: 208.424.1027 |
Fax: 208.424.1030 |
January 18, 2016
TRADING SYMBOL:
NYSE MKT: HTM
U.S. GEOTHERMAL PROVIDES
YEAR-END UPDATE AND 2016
GUIDANCE
|
|
Steady Performance of Existing
Operations |
|
|
Additional 68 MW of Projects in Near Term
Pipeline |
Boise, Idaho January 18, 2016 (NYSE MKT: HTM)
U.S. Geothermal Inc., a leading and profitable renewable energy company focused
on the development, production and sale of electricity from geothermal energy,
is pleased to confirm its previous guidance for 2015 and now provide guidance
for the full year 2016. Audited financial statements and Form 10-K for 2015 are
anticipated to be released in mid-March.
While we are pleased with our 2015 performance, said Dennis
Gilles, Chief Executive Officer, Our focus is on advancing our development
projects. We have an excellent pipeline of products and, combined with the
favorable legislative environment, should enable us to improve our year over
year performance and advance us towards our goal of becoming the North American
leader in geothermal.
2016 GUIDANCE AND OUTLOOK SUMMARY
2016 Full Year Guidance for Existing Operations*:
|
Operating Revenues |
$29-34 million |
|
Adjusted EBITDA |
$15-19 million |
|
EBITDA |
$14-18 million |
|
Net Income, As Adjusted |
$3-7 million |
* Refer to
Appendix II for further detail of EBITDA, Adjusted EBITDA, and Net Income, As
Adjusted.
68 MW of Projects Now Under Development:
|
1) |
WGP Geysers, California, - Well test program completed.
Capable of 30 MW. Interconnection Study to be completed February 2016,
responding to RFPs. |
|
2) |
San Emidio Phase II, Nevada - Continuing drilling
targeting additional 10 MW, anticipate finalizing interconnection process
with NV Energy by the Q2 2016. |
|
|
Website: www.usgeothermal.com |
NYSE MKT: HTM |
|
3) |
El Ceibillo, Guatemala Concession schedule amendment
approved by Ministry of Energy and Mines, completed drilling of 3
additional wells in support of planned 25 MW development. |
|
4) |
Neal Hot Springs, Oregon, water supply well drilling
continuing in January 2016 in support of hybrid cooling project which
should provide additional 3+ MW. |
Favorable Legislation:
California government passed
legislation favoring development of base load power projects and federal
government extends tax credits available to geothermal plants
NOTABLE HIGHLIGHTS AND ACHIEVEMENTS FOR 2015 INCLUDE
Operations:
− |
Achieved annual average availabilities for the twelve
months for each plant (excluding planned maintenance hours) as follows:
Neal Hot Springs 97.9%, San Emidio 98.6%, Raft River 95.4%.
|
− |
Completed planned annual maintenance outages at all three
operating facilities including a major overhaul (once in 7 years) at Raft
River. |
− |
Generated fleet wide total 332,009 megawatt-hours for the
period, as compared to 339,086 megawatt-hours in the prior year.
|
− |
Finalized settlement agreement with Neal Hot Springs
equipment supplier Turbine Air Systems. |
Advanced Development Projects:
− |
Completed flow test of three major steam wells at WGP
Geysers project and independent reservoir report confirmed the WGP drilled
wells are capable of generating approximately 30 megawatts. |
− |
Drilling of well EC-2A confirmed the discovery of a
commercial geothermal resource at the El Ceibillo project. |
− |
Received approval from the Guatemalan Ministry of Energy
and Mines for a modified project construction schedule for the El Ceibillo
project. |
− |
Drilled and tested the first and second water supply
wells at Neal Hot Springs to support the potential hybrid cooling project.
|
− |
Received permits for the temperature gradient wells at
San Emidio for Phase II, and drilled five temperature gradient wells.
|
Strategic:
− |
Signed an agreement to acquire the major and long lead
equipment for three new binary power plants at a deep discount. This
equipment is suitable for use at the San Emidio II and Crescent Valley I
development project power plants. |
− |
Acquired 95% of the Goldman Sachs ownership and cash
flow interest in the Raft River Power Plant, with purchase of their
remaining balance planned at the end of 2017. |
− |
Engaged Marathon Capital to investigate Strategic
Alternatives. |
U.S. Geothermal Inc. |
390 E Parkcenter Blvd, Ste 250, Boise, ID
83706 |
208-424-1027 |
www.usgeothermal.com
|
− |
Voluntarily delisted from Toronto Stock
Exchange (TSX) at year end. |
* Refer to Appendix I for
additional corporate information.
About U.S. Geothermal Inc.:
U.S. Geothermal Inc. is a leading and profitable renewable
energy company focused on the development, production and sale of electricity
from geothermal energy and is operating geothermal power projects Neal Hot
Springs, Oregon, San Emidio, Nevada and Raft River, Idaho. The company is
currently developing a project at the Geysers, California, a second phase
project at San Emidio, Nevada, a project at Crescent Valley, Nevada, and a
project at El Ceibillo, in Guatemala.
FOR ADDITIONAL INFORMATION PLEASE CONTACT:
Saf Dhillon - Investor Relations |
|
U.S. Geothermal Inc. |
Please visit our Website at:
http://www.usgeothermal.com |
Tel: 866-687-7059 |
|
Fax: 208-424-1030 |
|
saf@usgeothermal.com |
|
The information provided in this news release may contain
forward-looking statements within the definition of the Safe Harbor provisions
of the US Private Securities Litigation Reform Act of 1995. Readers are
cautioned to review the risk factors identified by the company in its filings
with US and Canadian securities agencies. All statements, other than statements
of historical fact, included herein, without limitation, statements relating to
the future operating or financial performance of U.S. Geothermal, are
forward-looking statements. Forward-looking statements are frequently, but not
always, identified by words such as "expects", "anticipates", "believes",
"intends", "estimates", "potential", "possible", and similar expressions, or
statements that events, conditions, or results "will", "may", "could", or
"should" occur or be achieved. These forward-looking statements may include
statements regarding perceived merit of properties; interpretation of the
results of well tests; project development; resource megawatt capacity; capital
expenditures; timelines; strategic plans; or other statements that are not
statements of fact. Forward-looking statements involve various risks and
uncertainties. There can be no assurance that such statements will prove to be
accurate, and actual results and future events could differ materially from
those anticipated in such statements. Important factors that could cause actual
results to differ materially from U.S. Geothermal's expectations include the
uncertainties involving the availability of financing in the debt and capital
markets; uncertainties involved in the interpretation of results of well tests;
the need for cooperation of government agencies in the development and operation
of properties; the need to obtain permits and governmental approvals; risks of
construction; unexpected cost increases, which could include significant
increases in estimated capital and operating costs; and other risks and
uncertainties disclosed in U.S. Geothermal's Annual Report on Form 10-K for the
year ended December 31, 2014 filed with the United States Securities and
Exchange Commission and Canadian securities regulatory authorities and in other
U.S. Geothermal reports and documents filed with applicable securities
regulatory authorities from time to time. Forward-looking statements are based
on managements expectations, beliefs and opinions on the date the statements
are made. U.S. Geothermal Inc. assumes no obligation to update forward-looking
statements if managements expectations, beliefs, or opinions, or other factors,
should change.
The NYSE MKT does not accept responsibility for the adequacy of
this release.
U.S. Geothermal Inc. |
390 E Parkcenter Blvd, Ste 250, Boise, ID
83706 |
208-424-1027 |
www.usgeothermal.com
|
APPENDIX I
OPERATIONS:
Our three operating plants produced 332,009 megawatt-hours
during the twelve months, which compares to 339,086 megawatt-hours during the
same period of 2014. Historically warm temperatures across the west moderated
during the third quarter and turned colder in the fourth quarter, reducing the
negative impact on generation seen earlier in the year. Additionally,
maintenance at Raft River, and work related to the settlement under the
Equipment Supply Agreement (ESA) at Neal Hot Springs was carried out during
the year.
Neal Hot Springs, Oregon
All three units operated smoothly, with annual availability for
the facility at 97.9% . Generation for the twelve months was 176,871
megawatt-hours, compared to 183,394 megawatt-hours for the prior year period.
The reduction in generation is primarily due to Neal being impacted by higher
than average ambient temperatures and a 2.5 day maintenance outage that was
taken on Unit 3 in August to replace a high pressure feed pump under the terms
of the ESA settlement.
A settlement was reached with Turbine Air Systems and five of
their key equipment suppliers under the terms of the Equipment Supply Agreement.
The settlement agreement provided a cash payment to the project company, USG
Oregon LLC, a commitment to finalize equipment repairs and upgrades, and an
extended warranty for equipment that is repaired or replaced.
The PPA has a seasonal pricing structure that pays 120% of the
average price for four months (July, August, November, and December), 100% of
the average price for five months (January, February, June, September, and
October) and 73.3% of the average price for three months (March, April, May).
The average price paid under the PPA for 2015 was $106.79 per megawatt-hour. The
average price to be paid under the PPA for 2016 will be $109.27 per
megawatt-hour.
San Emidio, Nevada
Plant performance was again exceptional, with annual
availability of 98.6% . Total generation for the twelve months was 79,539
megawatt hours, which compares to 76,894 megawatt-hours for the prior year
period.
Under the terms of our PPA, generation during 2015 is paid at
the average contract price of $92.08 per megawatt-hour. There is no seasonal
adjustment under this PPA. The average price to be paid under the PPA for 2016
will be $93.01 per megawatt-hour.
Raft River, Idaho
Annual availability for the facility was 95.4% . Total
generation for the twelve months was 75,599 megawatt-hours, which compares to
78,798 megawatt-hours for the prior year period. Raft River took an unplanned maintenance outage of 12.5
days to replace the bearings on both power plant turbines.
U.S. Geothermal Inc. |
390 E Parkcenter Blvd, Ste 250, Boise, ID
83706 |
208-424-1027 |
www.usgeothermal.com
|
The PPA has a seasonal pricing structure that pays 120% of the
average price for four months (July, August, November, and December), 100% of
the average price for five months (January, February, June, September, and
October) and 73.5% of the average price for three months (March, April, May).
The average price paid under the PPA for 2015 was $62.00 per megawatt-hour. The
average price to be paid under the PPA for 2016 will be $63.30 per
megawatt-hour. In addition to the price paid for energy, Raft River currently
receives $4.75 per megawatt-hour under a separate contract for the sale of
Renewable Energy Credits (REC), with the Company preferentially receiving 70%
of the REC income. Starting in January 2018, a new REC contract will take effect
and the price will be $17.00 per megawatt-hour with the project owning 49% of
the RECs and Idaho Power owning 51%.
DEVELOPMENT:
WGP Geysers, California (30 MW)
An extended flow test program of the three production wells
with the highest flow rates was completed in June 2015, confirming that these
wells are still open and ready for production. Based on data generated from the
tests, GeothermEx Inc. (a Schlumberger company) reported in September that the
four production wells are capable of initially delivering 458,000 pounds per
hour of steam. Based on current power plant steam conversion rates from a
detailed design for a 28.8 MW (net) power plant these wells should initially
deliver 28.1 MW (gross) or 25.4 MW (net). Using the average steam production
rate from the four wells, and an assumed interference factor of 30%, GeothermEx
estimates that an additional 2-3 production wells will be needed to support the
long term operation of a 28.8 MW (net) plant.
Engineering optimization of the power plant design is
continuing with a focus on an innovative hybrid plant design that includes both
water and air cooling. This design will dramatically increase the volume of
water available for injection back into the reservoir, providing long term
stable steam production, and will result in increased power generation over the
life of the project. A new Conditional Use Permit was submitted to Sonoma County
in June, reflecting this modified cooling plan. We expect approval during the
first quarter of 2016.
Our transmission interconnection application is proceeding
under the Independent Study Process being conducted by the California
Independent System Operator. The first phase study, the Interconnection System
Impact and Facilities Study Report, was completed on October 8th. The
study shows that the interconnection is feasible and the preliminary cost is
estimated at $1.9 million. Final approval of the Interconnection Study is
anticipated by February 2016.
U.S. Geothermal Inc. |
390 E Parkcenter Blvd, Ste 250, Boise, ID
83706 |
208-424-1027 |
www.usgeothermal.com
|
Discussions with numerous potential off-takers for the power
from our power plant continue, with high interest expressed by a number of them
for base load, renewable power to replace fossil fuel based power generation
that is being phased out of their portfolios. We responded to one Request For
Proposal (RFP) mid-year, but were not selected. An additional RFP was received
before year end with bids due by March, and other RFPs are anticipated in both
Q1 and Q2.
San Emidio Phase II, Nevada (10 MW)
To further define the resource, permitting for an expanded
temperature gradient drilling program for an area south west of the current
resource was initiated, and permits were received for a five hole temperature
gradient drilling program in June. Results from the 2014 drilling program
combined with 1970s era, shallow temperature gradient data, indicate a high
temperature trend into this south-west zone. Geophysical surveys have also
identified structural trends in this area. Drilling commenced on July 27 and the
five, 1,000 foot deep temperature gradient wells were completed with all of the
wells encountering high bottom hole temperatures and anomalously high
temperature gradients. Bottom hole temperatures ranged from 224°F to 274°F and
temperature gradients in four of the wells ranged from 12.4°F per 100 feet to
14.9°F per 100 feet. These results are considered to be indicative of a nearby,
active geothermal system at depth.
A second phase program to deepen the two most prospective
wells, which was expected to be completed during the fourth quarter, is being
permitted with the Bureau of Land Management. We are unable to predict when
those permits will be issued. Additional temperature gradient wells to further
expand the anomaly are also under consideration, but will have to be permitted
separately after additional cultural surveys are conducted.
The second phase interconnection study, called the Facilities
Study, was started in January 2015 and was completed in June pending a decision
by NV Energy on funding upgrades to the system. NV Energy decided not to fund
the upgrades and completed the Interconnection System Impact Restudy on
September 28th. The Restudy determined that the interconnection is
feasible, but with an increase in the estimated cost due to a change in cost
allocation by NV Energy. A meeting with the NV Energy transmission group to
discuss the results and anticipated costs took place in late October resulting
in a reduction of $4.1 million to the estimated cost of interconnection. The
final stage of the interconnection process is anticipated to conclude by the
second quarter of 2016.
Early in the year NV Energy issued a Request for Proposal
(RFP) for a total of 200 megawatts of renewable energy. We submitted a bid for
a power plant to be developed on the Phase II project site. NV Energy
shortlisted the top bids from each renewable technology. While our project was
shortlisted, NV Energy elected to award the total 200 megawatts to two solar
projects.
U.S. Geothermal Inc. |
390 E Parkcenter Blvd, Ste 250, Boise, ID
83706 |
208-424-1027 |
www.usgeothermal.com
|
El Ceibillo, Guatemala (25+ MW)
The modified development schedule was formally approved and
signed by the Minister of the Guatemalan Ministry of Energy and Mines in July,
and was officially incorporated into the concession agreement on October 13th.
We requested an extension of time for our Memorandum of Understanding for a
Power Purchase Agreement with the regional electricity broker due to the delay
caused by the government approval of the modified schedule, but the extension
was denied.
Drilling began on the project with well EC-2A which tested the
high temperature anomaly defined by the 2014 temperature gradient drilling
program. EC-2A successfully intersected a zone of high permeability at a depth
of 1,300 feet (396 meters). Flow testing indicates that a commercial resource
has been discovered with a flowing temperature of 398°F (198.5°C) .
Based on the discovery at EC-2A, two additional wells were
sited to further extend the resource area. Drilling of well EC-3 began on
October 29 and was completed on November 11, and drilling of well
EC-4 began on November 18 and was completed on December 2. Both EC-3 and EC-4
intersected high permeability zones indicated by total lost circulation of
drilling fluid. EC-3 found permeability at a depth of 1,365 feet (416 meters)
with a measured preliminary static temperature of 392°F (200°C). Well EC-4 found
permeability at a depth of 1,243 feet (379 meters) and is still heating up.
Testing of the completed wells is now underway. Depending upon the results of
the flow tests, a decision will be made on the location for either another slim
hole or a production size well to fully test the resource to determine its size
and production characteristics.
Neal Hot Springs, Oregon (3+ MW)
Two water supply wells were drilled and flow tested for a
period of six weeks. One of those wells achieved steady state production at
approximately 170 gallons per minute. The minimum amount of water needed for a
hybrid cooling system is approximately 200-300 gallons per minute for each unit.
Additional studies were conducted to develop new fresh water drilling targets to
support continued exploration for a reliable water source. A purchase or long
term lease of existing surface water or groundwater rights is also being
studied.
The ability to use water cooling during the 5-6 months of
summer and fall would increase power generation, when current air cooling
results in a dramatic reduction in plant output. An initial engineering
evaluation of various hybrid cooling methods was completed by Power Engineers
Inc., which confirms the economic viability of hybrid cooling if enough water
can be found. Additional water well drilling is schedule to begin in January
2016.
Crescent Valley, Nevada (25+ MW)
In light of federal legislation that extended the qualification
for the 30% Investment Tax Credit to projects that began construction prior to
December 31, 2014, drilling of the first production CVP-001 (67-3) was initiated
in December of 2014 following completion of gravity surveys, and analysis of
prior temperature gradient drilling data. The well was completed on March 27 and it exhibited modest permeability. An
expanded geophysical and temperature gradient drilling program has been designed
but must be permitted.
U.S. Geothermal Inc. |
390 E Parkcenter Blvd, Ste 250, Boise, ID
83706 |
208-424-1027 |
www.usgeothermal.com
|
LEGISLATIVE UPDATE:
Recent developments in the market are encouraging for the
growth of renewable energy, and more specifically to geothermal energy in our
opinion.
On October 7, 2015 the California Governor signed into law
Senate Bill SB-350, which: 1) increases the Renewable Portfolio Standard in the
California to require 50% of retail sales be procured from renewable energy
resources by the year 2030. The bill requires that retail sales from renewable
energy total 25% by 2016, 33% by 2020, 40% by 2024, 45% by 2027, and 50% by
2030; and 2) provided for the evolution of the Independent System Operator
(CAISO) into a regional organization to promote the development of regional
electricity transmission markets in the western states to improve access for the
customers of California to those markets. The evolution to a Regional
Independent System Operator is required to be completed before the end of
December 2018. We believe these will increase demand for renewable power from
our development opportunities in California as well as from the surrounding
states.
This, in addition to the passage of AB-2363 last year which
required the California Public Utilities Commission to establish the appropriate
adders (integration cost) for each technology that must be used when evaluating
bids for long term wholesale power contracts. We believe this change will add
appropriate costs to wind and solar power generation due to their intermittent
deliveries of power, which then should allow base load renewables like
Geothermal and Biomass to compete for PPAs with Investor Owned Utilities based
on a more accurate comparison of the full cost for power. That has not been the
case in the past.
Also, at year end, the federal government passed legislation
that extended the tax credits available to new geothermal plants. Under the
approved legislation, projects that begin construction before December 31, 2016
would be eligible for a 30% Investment Tax Credit (ITC), or alternatively a 10
year Production Tax Credit (PTC).
MERGERS AND ACQUISITIONS:
Raft River, Idaho
In December we closed on the transaction to purchase a majority
of Goldman Sachs ownership and cash flow interest in the Raft River geothermal
project. Effective on December 14, we own 95% of the project and will receive
95% of the cash flow instead of the previous 0% that we were contracted to
receive until or if the ownership change would occur under the tax equity
structure. In addition to the 95% of the cash flow from the project, we will
also receive 100% of any increased cash flow and tax benefits from any project
improvements.
U.S. Geothermal Inc. |
390 E Parkcenter Blvd, Ste 250, Boise, ID
83706 |
208-424-1027 |
www.usgeothermal.com
|
The purchase price under the agreement was $5.1 million for 95%
interest, with an option to purchase the balance of Goldmans interest for Fair
Market Value at the end of 2017. The purchase unlocks our ability to consider
capital upgrades that may increase output from the facility and potentially
reach its design capacity of 13 megawatts. It strengthens our commitment to
becoming the North American leader in geothermal energy.
In October of 2015 the final payment of $415,000 was made under
the $1.65 million Repair Services Agreement loan entered into in May of 2011
between the project and the Company. As a result, on a going forward basis, cash
flow previously used for loan repayment will now be available for distribution
to member partners.
The Raft River Geothermal Power Plant is located in Southeast
Idaho and has a designed capacity of 13 megawatts net. The project is currently
operating at approximately 9.4 megawatts. Power from the facility is sold under
a firm price, 25 year contract with Idaho Power Company which allows for the
full 13 megawatt output. Reservoir modeling indicates that the geothermal
reservoir can support the full 13 megawatt contract.
Plans are under consideration to drill for additional
production to increase plant output to its full contract limit.
Power Plant Equipment
We acquired all of the major and long lead equipment for the
construction of three binary geothermal power plants for $1.5 million
(approximately 5% of the equipments estimated original cost of $28 million).
The equipment was part of an order for six power plant units by another
geothermal developer, but only three were installed. The components for the
three units being purchased are all new and unused, and have been held in
storage.
The equipment is from the same manufacturers, and is of a
similar size and design, to that installed at the Companys Neal Hot Springs and
San Emidio power plants. The design output of the acquired units totals
approximately 35 megawatts (MW). Actual output of each unit will be determined
by resource conditions found at the sites at which the equipment is ultimately
installed.
The three equipment packages which represent approximately 70%
of the components needed for the complete plants, will meet the major and long
lead equipment requirements for the Companys proposed Crescent Valley I power
plant (25 MW) and San Emidio II power plant (10 MW). This equipment gives us the
ability to expand our megawatt output at our existing portfolio of advanced
stage development projects at significantly lower cost, and in much shorter
construction timeframes.
Other
We are continuing due diligence on a number of other excellent
opportunities that encompass other companies, operating projects, and advanced
development projects.
U.S. Geothermal Inc. |
390 E Parkcenter Blvd, Ste 250, Boise, ID
83706 |
208-424-1027 |
www.usgeothermal.com
|
SECURITIES UPDATE:
We applied for the voluntary delisting of the Company's
securities from the Toronto Stock Exchange ("TSX). The delisting took effect as
of the close of trading on December 31, 2015, and the Companys stock symbol
GTH.TO is no longer effective.
The Company's shares will continue to trade under its existing
stock symbol "HTM" on the NYSE MKT LLC ("NYSE").
The decision to voluntarily delist from the TSX was due to the
very limited trading volume of the Company's shares on the TSX over a sustained
period, with more than 97% of trades in the Company's securities over the past
24 months occurring on the NYSE, and only 3% occurring on the TSX. As such, the
Board considers that the regulatory and other costs (listing, compliance, etc.)
of the Company in maintaining the additional TSX listing should not be
continued.
Canadian shareholders will continue to trade their shares on
the NYSE through Canadian broker-dealers who have U.S. registered broker-dealer
affiliates.
APPENDIX II
EBITDA is calculated as net income before interest,
income taxes, depreciation and amortization, and is not a measurement of
financial performance or liquidity under generally accepted accounting
principles in the United States. EBITDA is presented as a metric commonly used
by securities analysts, investors and other interested parties in the evaluation
of a companys ability to service and/or incur debt.
Adjusted EBITDA reflects EBITDA adjusted to
exclude discretionary exploration costs, non-cash stock compensation as well as
the value assigned to stock options granted, and write-off of discontinued
exploration activities.
Net Income, As Adjusted is calculated as Net Income
Attributable to US Geothermal, adjusted to exclude Income Tax Expense which is
offset by Deferred Tax Asset.
U.S. Geothermal Inc. |
390 E Parkcenter Blvd, Ste 250, Boise, ID
83706 |
208-424-1027 |
www.usgeothermal.com
|
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