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US Geothermal Inc
Symbol GTH
Shares Issued 106,325,260
Close 2014-10-22 C$ 0.57
Market Cap C$ 60,605,398
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U.S. Geothermal's Neal generates 32,264 MW hours in Q3

2014-10-23 08:18 ET - News Release

Mr. Dennis Gilles reports

U.S. GEOTHERMAL PROVIDES PROJECT UPDATE

U.S. Geothermal Inc. has provided an update on the results of its three operating projects for the third quarter of 2014 and the status of development activities.

Operations

Neal Hot Springs, Oregon

All three units continue to operate well, with third quarter availability for the facility of 99.1 per cent. Generation for this third quarter of 2014 was 32,264 megawatt hours, for a total generation for the first nine months 2014 of 128,945 megawatt hours. This compares with 101,989 megawatt hours for the first nine months of 2013, reflecting a 26-per-cent increase over the prior-year period.

Under the terms of the company's power purchase agreement (PPA), generation for July and August were paid at the seasonally adjusted price of $123.34 per megawatt hour and September was paid at the average 2014 contract price of $102.78 per megawatt hour.

San Emidio, Nevada

The plant continues to operate well, with third quarter availability of 96.1 per cent. Generation for the third quarter of 2014 was 18,240 megawatt hours, for a total generation for the first nine months 2014 of 55,150 megawatt hours. This compares with 55,585 megawatt hours for the first nine months of 2013. Inclusion of higher temperature brine from well 61-21 in late September is expected to result in a moderate increase in power generation at the phase I plant.

Under the terms of the company's PPA, generation during the quarter was paid at the price of $91.18 per megawatt-hour. There is no seasonal adjustment under this power purchase agreement.

Raft River, Idaho

The plant continues to operate well, with third quarter availability of 99.7 per cent. Generation for this third quarter of 2014 was 18,500 megawatt hours, for a total generation for the first nine months 2014 of 58,181 megawatt hours. This compares with 55,610 megawatt hours for the first nine months of 2013, reflecting a 5-per-cent increase over the prior-year period.

Under the terms of the company's power purchase agreement (PPA), generation for July and August was paid at the seasonally adjusted price of $72.86 per megawatt hour and September was paid at the average 2014 contract price of $60.72 per megawatt hour. In addition to the price paid for energy, Raft River currently receives $4.75 per megawatt hour under a separate contract for the sale of renewable energy credits.

"Our operations team has done an outstanding job during this first three-quarters of the year focusing on maximizing production from all of our facilities. Our units are all performing with exceptionally high availabilities, and with output that is at or above what we had expected. The total generation from all of our units for the first nine months of 2014 was 242,276 megawatt hours, compared to 213,184 megawatt hours for the first nine months of 2013, reflecting a 14-per-cent increase over the prior-year period," said Dennis Gilles, chief executive officer of U.S. Geothermal. "As a result of this strong performance, we anticipate our projected year-end results should be at the higher end of the guidance range previously provided."

Development

El Ceibillo, Guatemala

The final lease for surface use of a 97-acre parcel was signed on Oct. 15. Construction of a drill pad, pond and cellar for EC-2, the company's new well, has been completed. EC-2 is located on the new surface leasehold.

Drilling of EC-2 is expected to begin as soon as the approval to extend the development schedule contained in the concession agreement has been obtained from the Guatemalan Ministry of Energy. The company is optimistic that it will receive approval of its application shortly.

San Emidio, Nevada

To further define the resource and confirm that it can support the phase II plant, a drill rig was mobilized to the site on June 26. Two additional wells were completed on the BLM-administered land. Well OW-14 was drilled to a depth of 3,501 feet and had a bottom-hole temperature of 265 F. Well OW-15 was drilled to a depth of 3,716 feet and had a maximum downhole temperature of 300 F. While the wells extended the high-temperature outline of the South zone, neither well encountered the commercial permeability seen in well 61-21 (OW-10). Geologic, geochemical and temperature data generated by the drilling program are being evaluated to determine the next phase of drilling.

A cross-tie pipeline was installed during September between the San Emidio phase I and phase II projects. Well 61-21 has been connected and is producing 630 gallons per minute of 298 F fluid to the San Emidio phase 1 power plant as part of a long-term flow test of the South zone portion of the reservoir.

A request for proposal (RFP) from NV Energy for 100 megawatts of renewable energy was issued on Oct. 1. The company is evaluating the RFP requirements and anticipate submitting a bid for the phase II project if it qualifies. In parallel, the company is investigating pursuing a power purchase agreement with California power offtakers, where power prices are typically higher.

WGP Geysers, California

The company continues to evaluate the detailed design and project costs for two development scenarios: build a new power plant and sell electricity; or build pipelines and sell steam. Discussions are under way with counterparties for both scenarios, and the company is reviewing several California-based renewable energy contract solicitations for which the project may qualify. Designs for each scenario are being optimized, and the company is refining its detailed cost estimates and associated economic models.

Gerlach, Nevada

Preparation is under way to continue evaluation of the Gerlach resource with the deepening of well 18-10A. Drilling is planned to start by early November. The 18-10A well was drilled to a depth of 1,900 feet in 2010, but was not completed at the time. The current drilling plan has a permitted depth of up to 3,000 feet. The original 18-10 well was drilled to a total depth of 2,868 feet in 1994 but was plugged and abandoned in 2006, before the company acquired the property. The original well encountered a very promising, total lost circulation zone at a depth of 2,788 feet, but the well was not flow tested and the resource temperature is undetermined. The U.S. Geological Survey considered the Gerlach resource to be the third largest geothermal resource in the state of Nevada in its assessment of geothermal resources of the United States published in 1975.

Mergers and acquisitions

The company's focus on M&A activities remains very active. As noted previously, the company announced the merger of Earth Power Resources (EPR) into U.S. Geothermal on Oct. 16. The merger is expected to close by the end of November, 2014, following approval of EPR shareholders. The EPR acquisition adds high-quality projects to the company's pipeline.

The company is continuing due diligence on a number of other excellent opportunities that encompass operating projects, advanced development projects and greenfield opportunities.

Regulatory environment update

Recent developments in the market are encouraging to the growth of renewable energy, and more specifically to geothermal energy in the company's opinion. In California, the signing into law of AB-2363 earlier this month by the California governor, will require the California Public Utilities Commission to establish the appropriate adders (integration cost) for each technology that must be used when evaluating bids for long-term wholesale power contracts. The company believes this change will add appropriate costs to wind and solar power generation due to their intermittent deliveries of power, which then should allow base load renewables like Geothermal and Biomass to compete for PPAs based on a more accurate comparison of the full cost for power. That has not been the case in the past.

Similarly, in the state of Nevada, in 2013 the legislature mandated that the utilities in the state must purchase 300 megawatts of renewable energy from independent power producers to replace coal generation that is going to be retired. In response, NV Energy has issued its first of three requests for proposal for 100 MW of renewable energy. This creates a solid market of 100 MW per year for the next three years, which provides the company with a potential path for selling power from both its existing and new projects.

In addition, there are a number of pending bills, both at the federal and state level that could have a favourable impact on future geothermal development. At the federal level, Senate Bill S-2260 would extend the current tax credits available to new geothermal plants for an additional two years. Under the proposed bill, plants that begin construction by Dec. 31, 2015, would be eligible for a 30-per-cent investment tax credit (ITC), or alternatively a 10-year production tax credit (PTC). S-2260 has been approved by the Senate, and is now at a conference committee to be merged with a companion House tax extenders bill.

"We are very pleased with our accomplishments to date, and are optimistic with the growth opportunities that lie ahead for our company and its shareholders," said Dennis Gilles, chief executive officer of U.S. Geothermal. "We are currently well capitalized, and with the addition of our positive cash flows from operations, are well positioned to fund internal development, and growth through strategic M&A activities, as was demonstrated with our most recent Geysers acquisition which we acquired with cash off our balance sheet."

The company expects to release third quarter financial results, along with 2014 and 2015 guidance, on Nov. 13, 2014, with the earnings call on Nov. 14, 2014, at 11 a.m. Eastern Time.

We seek Safe Harbor.

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