Polaris Geothermal update on project financing

Alexander Richter 1 Nis 2009

As announced by the company, Polaris Geothermal Inc. (TSX:GEO) provides an update the significant progress made with respect to financing of the Company’s planned 24 MW expansion at the San Jacinto geothermal power project in Nicaragua.

Progress on Project Financing

The Company has reached an agreement in principle with the Central American Bank for Economic Integration (“CABEI”) to arrange, as lead bank, a US$77 million syndicated senior project financing (the “Debt Financing”).

The Company has also entered into an engagement letter with a broker in connection with a planned concurrent US$25-30 million equity offering (the “Equity Offering” and, together with the Debt Financing, “Phase I Project Financing”). Closing of the Equity Offering will be subject to customary conditions, including satisfactory completion of due diligence and Toronto Stock Exchange (“TSX”) approval.

A global investment plan can be found in the company announcement document, see link provided below.

A portion of the proceeds of the Debt Financing will be used to repay in full the approximately US$21 million (CDN$27 million) owing to holders of debentures issued by the Company on April 11, 2008 (the “2008 Debentures”), the proceeds of which were invested in drilling programs, critical equipment purchases, civil works, construction, mobilization, planning, and related expansion activities at San Jacinto. The remaining proceeds of the Phase I Project Financing, together with the significant amount of equity committed to-date, are expected to enable the Company to successfully complete the planned 24MW expansion of the San Jacinto project and increase overall production to 34MW.

The company further announces a proposed offering of units (“Units”) consisting of one (1) voting, convertible, redeemable preferred share of a class to be created (each, a “Preferred Share”) and one (1) Class A common share purchase warrant (each, a “Unit Warrant”) at a price of CDN$0.45 per Unit for aggregate gross proceeds of US$10,000,000 (the “Unit Offering”).

Each Unit Warrant will be exercisable into one Class A common share at a price of CDN$0.45 within 24 months of closing of the Unit Offering. The number of Units issuable upon closing will be determined using the Canadian dollar equivalent of US$10,000,000 of Units, converted at the Bank of Canada noon rate on the day immediately prior to the closing date, divided by 0.45. For purposes of its filings with the TSX, the Company assumed a maximum US/Canadian dollar exchange rate of 1.35:1, provided that if the U.S. dollar goes above $1.35, the filings with the TSX will be amended to reflect the actual rate as of the date immediately prior to closing. On this basis, up to 30,000,000 Units will be issued upon closing of the Unit Offering.

Source: Company announcement via marketwire