Nevada Geothermal Power facing financial challenges and political heat

Blue Mountain Faulkner-1, geothermal power plant, Nevada (source: Nevada Geothermal Power)
Chris Lekkas 10 Jul 2012

Recent statements by its auditors, don´t seem to make life easier for Nevada Geothermal Power, facing financial difficulties and political heat surrounding its $98 million DOE loan guarantee for its Blue Mountain geothermal power plant in Nevada.

Recent news report that Canadian geothermal developer Nevada Geothermal Power (NGP) is facing financial difficulties after it’s auditors have announced that the geothermal provider is facing financial problems and could be forced out of business.

The news are mostly focused on the DOE loan guarantee that the company received and the fear that this might result in the loss of this amount for the U.S. tax payer. In this context NGP is thrown together with solar manufacturing players having failed previously with lots of attention.

NGP was awarded a $98.5 million loan guarantee from the US Department of Energy’s Loan Guarantee Program. NGP now looks set to face political heat after having incurred $98 million in losses over the past seven years and its CEO already was heard in a Senate committee looking at the DOE loan guarantee program.

Despite the financial difficulties of the company, he clearly stated that there is no danger of a complete loss of the guaranteed loan amount. It is also crucial to state that we are talking about assets and an energy resource here in the U.S. and not an already flawed manufacturing business model in competition with Chinese manufacturers like in the case of the often named solar manufacturing company.

“The company’s ability to continue as a going concern is dependent on its available cash and its ability to continue to raise funds to support corporate operations and the development of other properties,” NGP auditors said in a financial statement for the period ending March 31.

“Consequently, material uncertainties exist which cast significant doubt upon the company’s ability to continue as a going concern,” the statement said.

Republicans argue that the loan guarantee served as nothing more than a bailout for a company already struggling to survive. In 2010, House Representative Frank Guinta (R – New Hampshire) questioned the logic of a government loan for NGP just a year after it received financing to commission its plant.

“I don’t see it’s a good practice for the Department of Energy to use taxpayer-subsidized loans to provide to an entity that already has an existing facility,” he said. House Representative Jim Jordan (R – Ohio) also argued that more than 20 loan guarantees were given to companies averaging a “junk” BB- credit rating, meaning that they were vulnerable to default if economic or business conditions changed. NPG was rated BB+, which is considered speculative or junk and a step below investment grade.

Brian Fairbank, president and CEO of NGP argues that NGP is making its payments on the federally-backed loan: “The loan is in good shape. The loan is fully supported,” he said. … and important to state here we are talking about a loan guarantee and NOT a loan from the government, so there is so far no money at loss from the company. Politically it is being naturally being used in the overall discussion about renewable energy support, but those loan guarantees have been crucial developing projects, such as the Blue Mountain project of Nevada Geothermal Power. While faced with challenges in the sustainability of its resource, the company is making efforts to make it fully efficient in utilizing its installed capacity and produce renewable base-load electricity in Nevada.