U.S. Geothermal starts drilling to improve output at Raft River plant

Raft River plant - binary power plant, Idaho, (source: Ormat)

Alexander Richter 13 Haz 2016

U.S. Geothermal Inc. announced today that it has started drilling a second leg on existing production well RRG-2 at the Raft River project. This second production leg will be drilled out of the existing wellbore starting at approximately 3,500 feet below surface, to a planned final depth of approximately 5,600 feet. It is expected to intersect the primary production fracture zone between the original leg of Well RRG-2 and production well RRG-1. Once drilling is completed, the well will be tested and a new pump designed for the new production characteristics, will be manufactured and installed. The total project is anticipated to cost $3 million, and the well is expected to be placed back into production during the third quarter of this year.

The Raft River Geothermal Power Plant is located in Southeast Idaho and has a design capacity of 13 net annual average megawatts. The project is currently operating at annual average of approximately 9.4 megawatts. Power from the facility is sold under a firm price, 25 year contract with the Idaho Power Company and allows for the full 13 megawatt output. Reservoir modeling indicates that the geothermal reservoir can support the full 13 megawatt contract. Additional production from this drilling could potentially increase plant output to its full contract limit.

The Company acquired from its project partner, Goldman Sachs, the majority of their cash flow interest in and ownership of the Raft River geothermal project in December 2015. US Geothermal now receives 95% of the cash flow from the project, along with all increased cash flow from project improvements. If successful the increased production from well RRG-2 is anticipated to add between 1 and 3 MW’s of generation to the project, yielding between $500,000 and $1,500,000 of increased cash flow annually.

On May 23, 2016 the Company entered into a $20 million debt facility with a fixed interest rate of 5.8% per annum with Prudential Capital Group. Under terms of the financing agreement, the Company has the option, without obligation, to issue additional debt, up to $50 million in aggregate within the next two years. Funds from this financing are being used for the RRG-2 drilling program, to advance our development pipeline, and for any new merger or acquisition opportunities.

“Drilling of this well, which had been planned for many years, is expected to considerably improve the profitability and cash flow from our Raft River project” said Dennis Gilles, CEO of U.S. Geothermal Inc. “The acquisition from Goldman Sachs this past December unlocked the ability to consider capital upgrades like this one that should increase output from the facility and potentially reach its design capacity of 13 megawatts.”
Read more at http://www.stockhouse.com/news/press-releases/2016/06/13/u-s-geothermal-inc-begins-drilling-to-increase-raft-river-project-generation#t5yiFrZJ2H1BHOVv.99

Source: Company release