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US Geothermal secures US$9m bridge finance monitizing ITC cash grant

San Emidio geothermal power plant, Nevada/ US (source: US Geothermal)
Alexander Richter 16 Nov 2011

US Geothermal signs bridge loan agreement with Ares Capital Corp for US$9 million monetizing ITC cash grant for its new Phase 1 plant at the San Emidio geothermal project in Nevada.

U.S. Geothermal Inc., announced the signing of a bridge loan agreement between its wholly owned subsidiary USG Nevada LLC and Ares Capital Corporation. The bridge loan has monetized the Section 1603 ITC cash grant associated with the planned commercial operation of the new Phase I power plant at the San Emidio Geothermal Project, located in Washoe County, Nevada.

The loan agreement provides for payment to the Company of approximately 90% of the total expected cash grant and consists of an initial funding of $7.5 million which has been received by the Company, and a subsequent funding of $1.5 million when the Phase I plant is placed in service. The funds are drawn from a loan facility that includes commercial terms for the payment of interest and associated fees.   Once the placed in service date has been achieved, an application will be submitted to the United States Department of the Treasury for an estimated $10 million ITC cash grant. The cash grant proceeds will be used to repay the Ares Capital bridge loan facility with the remaining balance payable to USG Nevada LLC.

The new 8.6 net megawatt (annual average) Phase I power plant has been under construction since August 2010 by SAIC Constructors, a subsidiary of Science Applications International Corporation (“SAIC”). SAIC is also providing a construction loan to the project. The Phase I power plant, which will replace the existing 3.6 net megawatt plant, is scheduled to be placed in service in December, 2011.

“We are pleased to be able to monetize the Phase I ITC cash grant from our San Emidio project”, said Daniel Kunz, CEO of U.S. Geothermal Inc. “This funding allows us to maintain continuous construction required for the timely development of the Phase II power plant and should allow Phase II, subject to successful completion of the ongoing drilling program, to qualify for the ITC cash grant”.

The San Emidio geothermal project is being developed in two phases under single 19.9 MW power purchase and interconnection agreements. Subject to ongoing production well development, the Phase II power generation plant is scheduled to be on line during the 3rd quarter of 2013.”

Source: Company announcement