Ormat Technologies finalizes DOE loan of $350 million
The financing will support clean, sustainable power generation from three geothermal power facilities located in the state of Nevada
Reno, Nev., September 26, 2011 — Ormat Technologies finalized and signed the loan documentation for a 20-year loan for up to $350 million under a financing with John Hancock Life Insurance Co.
The transaction will be guaranteed by the U.S. Department of Energy's Loan Programs Office in accordance with and subject to the DOE's Loan Guarantee Program under Section 1705 of Title XVII of the Energy Policy Act of 2005.
The financing will support clean, sustainable power generation from three geothermal power facilities located in the state of Nevada, which are scheduled to be built in two phases and expected to generate up to 113 MW of power. The capacity of the first phase is expected to be up to about 60 MW.
The second phase development is subject to the feasibility assessment of the geothermal resource, which will be performed following completion of the first phase of each facility, and fulfillment of other conditions in the loan documents.
The three Nevada-based facilities — Jersey Valley, Tuscarora and McGinness Hills — will provide clean and baseload power through 20-year power purchase agreements with Nevada Power Co., a unit of NV Energy.
Construction of the Jersey Valley power plant is substantially completed, while the field development is ongoing. Commissioning of the first phase of the Tuscarora and McGinness power plants is expected in 2012.
In anticipation of the closing, the company had previously entered into several rate lock transactions, as insurance against an increase in the 10-year Treasury Rate, until the funding date of the loan.
These transactions did not qualify for hedge accounting. While precise figures are not yet available, the company expects that if the Treasury Rate remains at its current historic low levels through September 30, 2011, the date on which its rate lock transactions mature, it will incur a pre-tax loss of about $17 million, which will adversely affect the financial results of operation in the third quarter of 2011. $4.7 million of this amount has already been recognized as a pre-tax loss by the company in the six months ended June 30, 2011.