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KUTh Energy receives geothermal production license in Vanuatu

Minister James Bule signs and hands over Production License to KUTh Managing Director David McDonald with Chief Ameara (Takara) in attendance (source: KUTh Energy)
Alexander Richter 23 Jan 2013

Australian KUTh Energy receives geothermal production license for its Efate project in Vanuatu with a guaranteed minimum electricity price at US$0.253/ kWh.

This morning, Australian development company KUTh Energy announces that “the Vanuatu Government Minister of Lands and Natural Resources has issued KUTh Energy (Vanuatu) Limited (KVL) – a 100% subsidiary of KUTh Energy Ltd – with a Production Licence to carry out geothermal development on the main island of Efate.

The Licence is issued in accordance with the Geothermal Energy Act and includes the following key points: a license term of 30 years with renewal options, to exclusively develop and commercialize geothermal energy resources in the license area and the right to earn carbon credits.

The license also establishes a minimum tariff for geothermal power of 23.9 vatu/ kWh (US$0.253/kWh) that is adjusted for inflation on an annual basis.

On completion of the Power Purchase Agreement with the UNELCO as utility, the company is committed to a program of exploration and development that will lead to the commencement of construction of a geothermal power plant within 36 months of the signing of the PPA.

“The granting of the Production Licence is a key milestone for the company and a critical part of its development risk mitigation strategy. The Licence creates long term geothermal development and commercialisation rights for the company and, importantly, establishes a minimum base tariff that underpins the commercial viability of the project.

The company is now poised to progress the next stage of the project – deep drilling and resource assessment. Fundamental to this next step is the completion of agreements with key stakeholders including the landowners and UNELCO.

The company will be required to finalise terms with landowners once the resource has been delineated and the exact location of production drilling and power plant construction are identified. In the interim, the company will agree terms with landowners for exploration drilling with options for long term lease if successful. The company has maintained an active community consultation process in the area planned for drilling and will step this up further during the March quarter. The government has also increased its engagement with the community to promote local awareness of the project and its benefits.

UNELCO and KUTh are currently negotiating the final terms of the PPA. UNELCO have advised the government of these negotiations and in cooperation with UNELCO the company expects to finalise the terms during the March quarter.

In a further development UNELCO has commenced extension of the transmission infrastructure along the coastal ring road which will bring the transmission lines within approximately 10 kilometres of the proposed geothermal plant at Takara. Once resource confirmation is complete the arrangements for connecting up Takara will be initiated.

Commenting on the recent signing KUTh Managing Director David McDonald said “Our approach to the development has been to make sure that we have the commercial and regulatory setting in place to establish project viability. We are very conscious that with a small

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development it is important to get this settled before undertaking the investment in rig mobilisation and drilling of the resource target. In this project we are now well on our way to the de-risking of supply, price and rights for power production and while there is still a long way to go, the issue of the Production Licence is an important platform to launch from. The resource exploration data collected to date has been reviewed by Sinclair Knight Merz and again as part of the recent World Bank Report involving specialist geothermal personnel from New Zealand. This extensive due diligence undertaken on the exploration data provides the company with confidence on the resource targets identified. ”

Source: release sent by email