MRP takes on US geothermal project
MRP takes on US geothermal project, ups global fund to US$250m
By Pattrick Smellie
May 18 (BusinessWire) - MightyRiverPower is to sink up to US$107 million into a 49.9 megawatt geothermal power station in southern California, in a project led by GeoGlobal Energy, the US-based geothermal developer in which MRP has a 25% holding.
The Hudson Ranch Power 1 plant will use the same technology as the state-owned electricity generator and retailer has installed successfully at its Kawerau and brand-new Nga Awa Purua plant.
MRP has simultaneously announced it is increasing its commitment to the GGE capital fund, in which it is the sole capital investor, from US$100m to US$250m. That will allow the company to continue pursuing similar geothermal opportunities in Chile with US-based GGE.
The announcement is the second major offshore investment in a fortnight by an electricity State-Owned Enterprise. Meridian Energy announced last week it was paying A$191 million for the 70MW Mt Millar windfarm in South Australia.
MRP chief executive Doug Heffernan told BusinessWire the investment was one of the largest renewable developments occurring in the US in 2010, and that MRP's experience with high temperature geothermal resources and infrastructure was a key to winning involvement in the Hudson Ranch project, which will be sited in the Salton Sea desert area of Imperial Valley, southern California.
Production wells have already been drilled and the resource proven by the developer, EnergySource LLC, the project is fully financed with an eight bank consortium, and output from the plant is fully contracted.
"Part of the reason GGE was selected was that this is a very high temperature resource, and very similar to New Zealand," said Heffernan. "The EnergySource partners liked GGE's geothermal experience and the MRP funding made a compelling case.
"MRP is one of the world's 10 largest geothermal operators and has relatively rare and highly sought after competencies in a nice sector of the global power industry."
Asked whether rating agency concerns about the impact of offshore development exposures to SOE balance sheets could lead to a re-evaluation of MRP's credit rating, Heffernan said the main concerns related to the unknown costs associated with domestic electricity sector reform.
"We are confident that MRP has the capability to fund through GGE into the investment without causing undue strain on our financial ratios."
That included factoring in the construction for a winter 2013 start of the 110MW Nga Tamariki geothermal plant, in the central North Island, resource consents for which were granted last week.