Geodynamics puts expenditure on hold for Pacific geothermal projects
Geodynamics informs that it has no plans for further significant expenditure on the company's geothermal projects in Vanuatu and the Solomon Islands, due to current market conditions.
In its Annual Report for 2015, Australian Geodynamics provides an update on its geothermal ambitions. The company announced earlier this year a diversification away from its geothermal activities. At the same time news from some of the company’s geothermal projects in the Pacific got scarce.
So it is now likely no surprise, that the company announces that it has “no plans for further significant expenditure on the Pacific projects but will work with the national governments to explore potential Public Private Partnership (PPP) structures.”
Entering 2015, the company “had a clear plan for each of our geothermal assets focused on completing specific activities necessary to progress each project to achieve key commercial “gates” (such as Power Purchase Agreements (PPA), Joint Venture Agreements or financing agreements) that would support progressing through each identified gate towards further development. This structured process emphasises careful spending and a deliberate approach to creating value while developing subsurface assets such as a geothermal reservoir.
Geodynamics acknowledge the work of its team in achieving key milestones during 2015, professionally and very cost effectively. Of note were the completion of the Environmental and Social Impact Assessment for the Takara Project in Vanuatu and the receipt of environmental approvals for the exploration stage of this project, including the completion of shallow ground temperature profiling to confirm feasibility of reduced cost drilling options.
The company states that commercial conditions remain weak making a progress with its geothermal projects difficult. It names slowing economic growth, low power demand growth, and strained government finances having prevented progress in securing the required PPA’s to progress the Savo Island Project in the Solomon Islands and the Takara Project in Vanuatu beyond their current stage.
“In both these countries the impact of cyclones in the last 18 months has seen government focus on rebuilding basic housing, health, transport and civil infrastructure with reduced emphasis on improving power supply and transitioning away from expensive diesel sourced power. The reduction in world oil prices has also contributed to this, reducing the immediate need to address the transition away from diesel, with competition from other renewable energy sources (solar PV and hydro) also playing a role. However, there is clear intention from these nations to move towards greater reliance on indigenous renewable energy, supported by programs from the EU, UN and Alliance of Small Island States.
Geodynamics though still believes that its Pacific geothermal projects represent excellent geothermal resources and present very significant economic and social benefits to the national stakeholders, at this stage though the company has no plans for further significant expenditure on the Pacific projects but will work with the national governments to explore potential Public Private Partnership (PPP) structures that can better align project ownership with the long term benefits, and utilising the strengths of the key stakeholders including access to low cost development finance.
Source: Geodynamics Annual Report 2015