U.S. Geothermal Inc.
U.S. Geothermal Inc. Provides Update on Development and Expansion Projects
U.S. Geothermal Inc. (the "Company") (NYSE MKT: HTM), a leading and profitable renewable energy company focused on the development, production and sale of electricity from geothermal energy, is pleased to provide an update on its development and expansion projects.
"During 2016 we were able to advance many of our development projects", said Dennis Gilles, Chief Executive Officer, "Through a combination of an excellent pipeline of projects and a favorable legislative environment, we believe that we will improve our year-over-year performance and advance the Company to achieve our 2021 goal of over 200 MWs.
DEVELOPMENT PROJECTS (90 Megawatts)
WGP Geysers, California (30 Megawatts)
The Conditional Use Permit from Sonoma County, which approves the construction plan for the WGP Geysers power plant, was received on December 16, 2016. Combined with the Large Generator Interconnection Agreement that was received from the California Independent System Operator and Pacific Gas & Electric, this completes the long lead permits and agreements that are needed for the project. Once final engineering design is finished, and a PPA is executed, an air quality permit and building permit will be needed before on site construction will begin.
Engineering optimization of the new, hybrid power plant design is continuing and budgetary quotes for the major equipment have been received. Our engineers and consultants are working in concert with EPC contractors to examine all aspects of the construction cycle with a focus on reducing construction costs. The hybrid design will dramatically increase the volume of water available for injection back into the reservoir, which will result in increased power generation over the life of the project.
Recent discussions have been held with a number of potential power purchasers in California for the generation from the WGP Geysers plant and are continuing. Interest has been expressed by a number of them for base load, renewable power to replace fossil fuel based power generation that is being phased out of their portfolios.
San Emidio Phase II, Nevada (35 Megawatts)
The updated reservoir model (announced January 11th) resulted in a significant increase in the potential size of the San Emidio Phase II reservoir of up to 47 net megawatts. Data from flow tests that took place in late 2016 from two wells were incorporated into a Probabilistic Power Density model, which estimates the Net generation potential of a reservoir. The power density model is not a Monte Carlo style "heat in place" estimate. Based on the flow rate and temperature produced by the two wells, and by measurement of pressure response both in the wells and across the wellfield, the model estimates that the Most Likely Outcome (50% probability) is 47 net megawatt of generation capacity within a 1.4 square mile area. The Minimum level of generation capacity (90% probability) occurs in a 0.18 square mile area, and has 18.8 net megawatts of generation capacity.
These two wells are approximately 1,700 feet apart, along the new structural trend identified in the Southwest Zone which is still open for expansion. Temperature gradient well data and seismic information indicate a potential strike length for the Southwest Zone of up to 2,700 feet. This compares to a strike length for the primary producing wellfield at San Emidio Phase I of 800 feet, suggesting the potential for a much larger resource in this Southwest Zone. Permits to deepen three remaining temperature gradient wells were received from the Bureau of Land Management in December 2016. These three wells will be deepened to the targeted reservoir depth to further explore the Southwest Zone when weather allows. If successful, it will extend the length of the productive reservoir by 1,000 feet.
The three power plant units that were purchased in 2016 are available to provide this project with the major, long lead equipment requirements for 35-45 net megawatts of power (depending upon cooling system used). The increased San Emidio II reservoir capacity with a 320°F+ temperature fits the design range of the equipment. These new, unused components represent approximately 70% of the equipment needed for a complete facility similar to the Company's Neal Hot Springs operation.
Given the larger resource capacity at San Emidio II, we have cancelled our Small Generator Interconnection Agreement that was completed in 2016, and are preparing to apply for a Large Generator Interconnection Agreement in support of the higher expected output. Additionally, transmission studies that contemplate power sales into Southern California will also be conducted, since there is now a transmission path from Northern Nevada going south on the new 500KV, 800 megawatt transmission line that was completed in January 2014.
In July 2016, the Company was awarded a $1.5 million Department of Energy cost share grant under the "Development of Technologies for Sensing, Analyzing, and Utilizing Novel Subsurface Signals in Support of the Subsurface Technology and Engineering ("SubTER") Crosscut Initiative". The program approved under the grant includes using new subsurface technologies at both San Emidio and Crescent Valley to identify fluid flow paths in the geothermal resource. The data collection phase of the program was completed at San Emidio in December. The data is being interpreted to determine whether viable targets have been identified. Upon approval from the DOE, a second phase of the grant program is designed to confirm the findings by drilling. The total program cost is $1.9 million with the Company providing $400,000 in cost share.
El Ceibillo, Guatemala (25 Megawatts)
On January 10, 2017, the Guatemalan government, through the National Electrical Energy Commission (COMISIÓN NACIONAL DE ENERGÍA ELÉCTRICA-"CNEE"), announced that it is preparing to issue an RFP later this year for 420 megawatts of power, of which 40 megawatts is to be reserved specifically for geothermal energy. When the RFP is issued, the El Ceibillo project will be bid into the process.
With the commercial shallow resource now proven, in 2017, a deep well to test the producing structure down dip from well EC-5 is planned to a projected depth of 1,970 to 2,300 feet (600-800 meters). EC-5 was completed to a depth of 1,450 feet (442 meters) and intersected a high permeability zone at 1,299 feet (396 meters) with a temperature of 388°F (198°C). Chemical analysis of fluid samples taken from EC-5 at the end of a flow test indicate a potential, deep reservoir temperature of 450 to 523°F (232 to 273°C). A deeper intersection in the reservoir could increase the reservoir capacity and production temperature, and change the design of the power plant. Well EC-1, which was drilled in 2013 to a depth of 5,650 feet (1,722 meters) found a measured bottom-hole temperature of 526°F (274°C), but did not intersect permeability. The comparative geology between EC-5 and EC-1 suggests a fault or other structure feeding the reservoir may be located in the area between the two wells.
EXPANSION PROJECTS (4-6 Megawatts)
Neal Hot Springs, Oregon - Hybrid Cooling (3 Megawatts)
A third water supply well for the project was drilled in December, but due to extreme winter weather, the well has not been completed and tested to date. Productive water zones were intersected in the well, but a liner must be installed before the well can be flow tested. A fourth site has been selected and will be drilled once weather allows. The project currently has one well available from drilling in 2015 that can supply approximately 170 gallons per minute. The minimum amount of water needed for a hybrid cooling system is approximately 200-300 gallons per minute for each unit.
The ability to use water cooling during the 5-6 months of summer and fall would increase power generation, when current air cooling results in a lower plant output. An initial engineering evaluation of various hybrid cooling methods was completed by Power Engineers Inc., which confirms the economic viability of hybrid cooling if enough water can be found.
Raft River, Idaho - Wellfield Optimization (1-3 Megawatts)
Additional production is now planned from well RRG-5, an idle well with significant permeability that has been used for injection in the past. Flow testing and reservoir modeling was performed during the 4th quarter 2016 to evaluate the well for conversion to production. Flow test results showed an initial flowing temperature of over 249°F, which is expected to increase once under production to approximately 265°F. Reservoir modeling shows that RRG-5 is capable of producing up to 1,000 gpm, yielding approximately 1.5 to 2 additional net megawatts of generation from the plant. A production pump has been ordered, and is expected to be installed by the end of the first quarter 2017. Generation is expected to ramp up during the second quarter as the production wellfield is rebalanced to maximize its output. Additional sources of geothermal fluid from other wells on the project are also under study to further increase the generation level of the plant.
The initial effort to expand the output of Raft River from its current 10 megawatts to its maximum contracted level of 13 megawatts began with the drilling of a second production leg at RRG-2 in June 2016. The second production leg was drilled to a depth of 5,605 feet and was completed at the end of July. Several small zones of permeability were encountered in the new production leg. After testing the well, a new pump was installed and the well resumed production in early September. The well temperature has plateaued at approximately 277°F, down from the original production temperature of 283°F, and the well is now producing approximately 180 gallons per minute less flow than before drilling. It is believed that during drilling operations, the original production leg of the well was damaged by scale formation, which blinded off its producing fractures. Despite these results, the overall production at the plant has returned to normal levels and current production is believed to be coming mostly from the newly drilled production leg. Operations to recover the damaged production leg with an industry standard chemical treatment will be considered in the future.
Well RRG-9, which has been used as part of an $11.4 million thermal stimulation grant primarily funded by the Department of Energy, has significantly increased the injection capacity to 1,200 gallons per minute from an original level of 20 gallons per minute. This increase in injection capacity provides all of the additional volume needed to accept the flow from well RRG-5 without requiring any new drilling.
About U.S. Geothermal Inc.:
U.S. Geothermal Inc. is a leading and profitable renewable energy company focused on the development, production and sale of electricity from geothermal energy. The Company is currently operating geothermal power projects Neal Hot Springs, Oregon, San Emidio, Nevada and Raft River, Idaho for a total power generation of approximately 45 MWs. The Company is also developing an additional estimated 90 MWs of projects at: the Geysers, California; a second phase project at San Emidio, Nevada; at Crescent Valley, Nevada; and the El Ceibillo project located near Guatemala City, Guatemala. US Geothermal's growth goal is to reach 200 MWs of generation by 2021 through a combination of internal development and strategic acquisitions.
The information provided in this news release may contain forward-looking statements within the definition of the Safe Harbor provisions of the US Private Securities Litigation Reform Act of 1995. Readers are cautioned to review the risk factors identified by the company in its filings with US and Canadian securities agencies. All statements, other than statements of historical fact, included herein, without limitation, statements relating to the future operating or financial performance, development schedules or estimated resources of U.S. Geothermal, are forward-looking statements. Forward-looking statements are frequently, but not always, identified by words such as "expects", "anticipates", "believes", "intends", "estimates", "potential", "possible", and similar expressions, or statements that events, conditions, or results "will", "may", "could", or "should" occur or be achieved. These forward-looking statements may include statements regarding perceived merit of properties; interpretation of the results of well tests; project development; resource megawatt capacity; capital expenditures; timelines; strategic plans; or other statements that are not statements of fact. Forward-looking statements involve various risks and uncertainties. There can be no assurance that such statements will prove to be accurate, and actual results and future events could differ materially from those anticipated in such statements. Important factors that could cause actual results to differ materially from U.S. Geothermal's expectations include the uncertainties involving the availability of financing in the debt and capital markets; uncertainties involved in the interpretation of results of well tests; the need for cooperation of government agencies in the development and operation of properties; the need to obtain permits and governmental approvals; risks of construction; unexpected cost increases, which could include significant increases in estimated capital and operating costs; and other risks and uncertainties disclosed in U.S. Geothermal's Annual Report on Form 10-K for the year ended December 31, 2015 filed with the United States Securities and Exchange Commission and Canadian securities regulatory authorities and in other U.S. Geothermal reports and documents filed with applicable securities regulatory authorities from time to time. Forward-looking statements are based on management's expectations, beliefs and opinions on the date the statements are made. U.S. Geothermal Inc. assumes no obligation to update forward-looking statements if management's expectations, beliefs, or opinions, or other factors, should change.
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