Raser Technologies eyes sale of equity stake for larger turbines

Raser Technology, Thermo No1 plant, Utah (source: Raser)
Alexander Richter 14 Jul 2010

Raser Technologies is eyeing the sale of an equity stake in its Thermo No. 1 geothermal power plant in Utah to finance the installation of larger, more efficient turbines.

U.S. geothermal development company Raser Technologies Inc., in recent news from the U.S., ” said it may sell an equity stake in its only completed power plant in Utah to finance installation of larger, more efficient turbines.”, so Bloomberg.

“The project was designed with a 10-megawatt capacity, though it’s currently operating at closer to 6 megawatts, Raser spokesman Issa Arnita said today in an interview.

The project, known as Thermo No. 1, began delivering power in April 2009 under a 20-year contract with the city of Anaheim, California, which agreed to pay $78 per megawatt-hour. That rate will increase 2 percent each year over the life of the power purchase agreement.

Raser chose to use smaller, modular turbine generators when constructing the power plant because they have some advantages, according to Arnita, including that they can be installed faster and at less cost.

“Overall, though, they aren’t as efficient as bigger units,” he said. Thermo employs 250-kilowatt Pratt & Whitney PureCycle turbines.

According to Raser, “several unaffiliated geothermal equipment manufacturers” have told the company that the plant could realize its output potential if larger, more efficient turbines were installed.

To defray some of the cost associated with upgrading the plant’s equipment, Raser is considering the sale of equity stakes in the project, or the entire project, according to Arnita. The company became its sole owner in December 2009.

Thermo Projects: If the plant is sold, the company would retain the rights to develop other projects near Thermo, where the company leases 100,000 acres, Arnita said. The geothermal resources in the area have an additional 100 megawatts to 150 megawatts of generating potential, according to Raser.

Raser also said today that it reached an agreement to repay “a substantial portion” of the debt owed to Prudential Capital Group, a unit of Prudential Financial Inc., which provided almost $30 million in late 2008 to finance construction of Thermo.

Prudential will immediately receive $27 million from the project escrow account, according to Raser, and will get an additional payment of $6 million before June 29.

Over the next 12 months, Raser said it plans to sell a part or all of its interest in Thermo or another asset to satisfy its remaining obligations to Prudential.

Following the initial payment to Prudential, about $3 million will remain in the project escrow account to fund operations and other related expenses, according to the company.

Seeking Viability: “If we are able to sell our interests in Thermo No. 1 to a third party with the capital to upgrade the generators at the Thermo No. 1 project, we believe it will further validate the larger Thermo area, demonstrating the viability of the Thermo area resource for additional power plants,” Raser said.

Raser first indicated late last year that Thermo was operating below capacity. At the time, the company said it would spend an additional $10 million to rework some of the project’s existing wells to isolate cooler waters that were thought to be lowering the plant’s output.

The company’s shares declined 1.4 cents to 52 cents today in New York Stock Exchange trading. They have fallen 58 percent this year.

Raser holds leases on about 240,000 acres in four U.S. states where eight projects are in various stages of development. The company also has one property in Indonesia.”

Source: Bloomberg