Ram Power (TSX: RPG) said April 7 that it has signed a Stock Purchase Agreement with U.S. Geothermal Inc. for the purchase of Ram Power’s Geysers project for $6.4m.
The Ram Power subsidiaries covered in the transaction include Western Geopower, Skyline Geothermal Holdings and Etoile Holdings, which, in turn, includes all membership interests in Mayacamas Energy LLC and Skyline Geothermal LLC. The transaction is expected to close on or before April 30.
The acquired Ram subsidiaries possess the full development interest in the project. These interests include all geothermal leases (covering 3,809 acres), development design plans, and permits for a proposed 26-MW (net) power plant.
Also included is land and geothermal mineral rights ownership of the Mayacamas property purchased by Ram in 2010. This property contains four of the five existing geothermal wells immediately available for production or injection.
Finally, the acquisition includes a 50% undivided interest in the geothermal mineral rights relating to the property that contains the fifth existing well also purchased by Ram in 2010. The other 50% interest in this property is contained within an acquired leasehold interest.
“We are pleased with the execution of the stock purchase agreement for the Geysers project,” stated Antony Mitchell, Executive Chairman for Ram Power. “We committed to monetizing the Geysers project, which frees additional capital into the Company allowing for the strategic process to be completed during 2014.”
U.S. Geothermal noted in an April 7 statement that the acquired Geysers project is located at the former Pacific Gas and Electric Unit 15 project site, which once had a 62-MW (gross) power plant. The project is located within the broader Geysers geothermal field located in Sonoma County, Calif., about 75 miles north of San Francisco. The broader Geysers geothermal resource is the largest producing geothermal field in the world, and has been generating greater than 850 MW for more than 30 years.
At the time Western Geopower was merged into Ram, the drilling by Western Geopower had successfully developed an initial steam flow totaling 462,000 pounds per hour. A report prepared in 2012 by Geothermex, a third-party reservoir engineering firm, states that the total initial power capacity from these existing wells is estimated at about 30 MW. The report also estimated that the sustainable long-term production from the resource is conservatively estimated at approximately 30 MW (gross) (26 MW net), assuming only 25% of the withdrawn geothermal fluid is injected back into the reservoir.
U.S. Geothermal’s options are to sell power, or simply steam
“We are very pleased to add this advanced stage development project to our portfolio,” said Dennis Gilles, Chief Executive Officer of U.S. Geothermal. “We are currently evaluating two development approaches for the acquired project. The first involves obtaining a power purchase agreement and constructing a power plant, while the second option involves selling steam to one of several companies currently operating power plants in the Geysers. We are pleased with the terms of the transaction, recognizing that the Ram Power subsidiaries have previously invested over $90 million in the project. We had previously announced that our plan for continued growth would come through a combination of the development of internal projects and growth thru strategic acquisition. This acquisition at the Geysers is a solid first step in the execution of that plan.”
California has the most aggressive Renewable Portfolio Standard in the country, with a requirement that 33% of all retail power sold in California must come from renewable energy sources by 2020. Also, with the recent closure of the San Onofre nuclear power plant by Southern California Edison, as well as other planned power plant closures along the California coast due in part to once-through cooling issues, there is a need for replacement baseload power. U.S. Geothermal said that geothermal power fits well as a replacement since it generates power 24 hours per day, 7 days per week, making it highly predictable and excellent for maintaining grid reliability, unlike other renewables like wind and solar that are intermittent in nature.
U.S. Geothermal is a leading renewable energy company focused on the development, production and sale of electricity from geothermal energy and is operating geothermal power projects at Neal Hot Springs, Ore., San Emidio, Nev., and Raft River, Idaho. The company is currently developing a second phase project at San Emidio, as well as at El Ceibillo, an advanced stage, geothermal prospect located in Guatemala.
Ram Power is a renewable energy company engaged in the business of operating and developing geothermal properties and has interests in geothermal projects in Nicaragua and the United States.