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U.S. Geothermal Inc. contracted with Michael B. Stewart and Empire Geothermal Power LLC to acquire a 3.6 MW geothermal plant and roughly 28,358 acres of geothermal energy leases and certain ground water rights in Nevada.
The power plant, located north of Reno, Nev., is comprised of four binary cycle units, a wet cooling tower and nine geothermal wells developed in a proven geothermal reservoir.
The total transaction purchase price is $16.62 million and includes approximately 18,000 acres of undeveloped U.S. Bureau of Land Management (BLM) geothermal leases as well as the leases, both private and BLM, associated with the power plant.
In connection with this transaction, U.S. Geothermal has also agreed to reduce an existing third party royalty from 12.5 percent to 1.75 percent of the gross power plant revenue associated with the existing production wells under a primary geothermal lease. The royalty rate reduction applies to the existing 3.6 MW power plant and any future development on the private lease. In exchange, U.S. Geothermal has agreed to issue 290,000 shares of its common stock to the lessor, subject to TSX approval.
The transaction assets are comprised of two locations: the San Emidio assets, which include the geothermal power plant project, approximately 22,944 of geothermal leases, and ground water rights used for cooling water, and the Granite Creek assets, comprised of approximately 5,414 acres of BLM geothermal leases.
The project sells electricity to Sierra Pacific Power Corp. under an existing power purchase agreement that extends through 2017. It is expected that by drilling a number of new production and injection wells, the resource area can be expanded.
U.S. Geothermal has prepared a preliminary 27 MW development plan for the San Emidio geothermal resource area. The US$75 to US$85 million plan calls for the construction of twin binary cycle plants. It is anticipated that the current well field could provide approximately 75 percent of the geothermal fluid requirement for one replacement plant and an expanded production and injection well field could be drilled to provide the balance of the geothermal fluid for the second plant to make a total 27 MW development.
Drilling is scheduled to begin in 2008, with commercial operations of the twin plants expected in late 2010 or early 2011 depending on the availability of financing, permitting timetables and transmission issues. An estimated $10 million transmission upgrade may be required to allow the full electrical output of the project to be delivered to customers.
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