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Green Rock Energy joins forces on power development with Pacific Hydro

Snapshot of Memorandum document by GreenRock/ Pacific Hydro
Alexander Richter 4 Aug 2011

Australian Green Rock Energy signs binding agreement to develop conventional geothermal resources for power projects with Australian energy player Pacific Hydro and releases Invitation for Expressions of Interest for its development portfolio of projects in Australia.

In release this morning, Australian geothermal development company Green Rock Energy (ASX: GRK) announces it has signed a binding agreement to develop conventional geothermal resources for power projects with Australian renewable energy company Pacific Hydro.

With an initial letter of intent signed in May this year, the companies now have signed a binding agreement outlining the key steps towards first power production and the rights and obligations of Green Rock and Pacific Hydro.

Both companies are to cooperate on the development of power projects based on geothermal exploration permits and licences held by the companies in the North Perth Basin (“NPB”) and the Great Artesian Basin (“GAB”) in Australia.

Green Rock and Pacific Hydro will jointly develop an Information Memorandum (IM) on the two projects directed at potential upstream ‘farm-in’ partners to substantially fund drilling of the wells required to prove up the conventional geothermal resource. The IM will be marketed globally through our and our advisers’ networks. Potential upstream partners may choose to fund one or both of the projects.

On executing an initial joint venture agreement with an upstream partner Green Rock (for a project in Pacific Hydro’s licences in the GAB) or Pacific Hydro (for a project in the NPB or Green Rock’s licences in the GAB) will have the right to pay $100,000 for a 5% free carried interest in the project up to financial close of a power project. The upstream partner will then fund a substantial part of the drilling program to prove up sufficient geothermal resource to underpin the initial power project of at least 25MW in the NPB or 50MW in the GAB.
Green Rock and Pacific Hydro will have similar rights to further projects up to a total of 250MW in each Basin, but with the free carry no longer applying.

Key terms in the initial joint venture agreement with the upstream partner and in the shareholders’ agreement for the future power project companies are included in the MoU. Pacific Hydro will have the right to at least 51% interest in each power project company, with the buy-out of Green Rock’s and the upstream partner’s interests set according to a valuation formula to be agreed in the initial joint venture agreement.

Green Rock’s Managing Director Richard Beresford said “We believe that working together in this way to provide full capability and experience from geothermal exploration through to power plant operation on extensive and highly prospective conventional geothermal basins should be very attractive to potential upstream investors. We anticipate drilling the first well in one or both basins next year.”

Lane Crockett, Pacific Hydro’s General Manager, Australia, said “We believe there is a compelling opportunity for conventional geothermal to supply Australia with nationally significant renewable baseload generation. Pacific Hydro is delighted to partner with Green Rock and to combine the strong, complementary capabilities of our two companies towards the realisation of this goal.”

Source: Company release and Invitation for Expression of Interest (pdf)