Petratherm and its joint venture partners receive US$58 million

Alexander Richter 9 Nov 2009

In an announcement by the company, “Petratherm and its joint venture partners Beach Petroleum and TRUenergy Geothermal announce that the Paralana Geothermal Energy Project has been awarded a $62.762 million (exclusive of GST and around US$58 million) Renewable Energy Demonstration Program (REDP) grant.

Earlier this morning the Federal Minister for Resources, Energy & Tourism, the Hon Martin Ferguson AM, MP, announced that MNGI Pty Ltd’s (a wholly owned subsidiary of Petratherm that owns the licences that cover the Paralana project) application for a grant under REDP was approved.

The grant is conditional on the successful negotiation of a Funding Deed with the Department of Resources, Energy & Tourism within 30 days of receipt of the offer.

The $62.762 million grant monies are to be applied to the development of a 30 MW geothermal demonstration project post the proof of concept stage currently underway at the Paralana project.

Petratherm’s Paralana project’s longer-term aim is to develop Australia’s first large-scale (260+ MW) base load geothermal power station to deliver zero emission electricity to the National Electricity Market.

The Funding Deed will include a project milestone schedule against which grant monies will be drawn down as milestones are achieved. The milestone schedule and project budget submitted in the successful application are consistent with the milestones outlined in the joint venture agreement between Petratherm (MNGI), Beach Petroleum and TRUenergy Geothermal.

The funding provided under REDP is on a 2:1 basis, where the joint venture will invest $2 for $1 provided under the government grant. The REDP funding is in addition to the recent $7 million Geothermal Drilling Program grant funding awarded to the project earlier this year. Under the Paralana joint venture (refer summary overleaf), the JV partners can increase their equity stake in the project following the achievement of milestones.

Should those options be fully exercised, Petratherm would retain a 34% share of an operating 30 MW geothermal power project and 34% of the Paralana geothermal resource. Under the JV arrangements, with a $200 million investment for the demonstration project, this would result in minimal investment from Petratherm. The joint venture partners are confident that the REDP Funding Deed will be successfully negotiated and executed within the 30 day period.”

Source: Company announcement