Nevada Geothermal Power Completes 49.5-Megawatt Power Station

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Researched by Industrial Info Resources (Sugar Land, Texas)--Renewable energy developer Nevada Geothermal Power Incorporated (OTC:NGLPF) (NGP) (Vancouver, British Columbia) recently completed construction of the 49.5-megawatt (MW) Blue Mountain Faulkner 1 geothermal power station in Humboldt County, Nevada. The firm has completed the installation of electrical, mechanical and metering systems for three energy converters. The cooling tower, control building, and fire protection and safety systems are ready to be put into operation.

Commissioning of the geothermal power plant has begun and is scheduled for completion by the end of next month. While the plant has a nameplate capacity of 49.5 MW, the facility will not initially run at full capacity. The plant is expected to begin operations in early October with a net output capacity of 28 to 30 MW. Following start-up of operations, NGP plans to replace two existing shallow injectors at the site with widely spaced make-up wells to augment the net output capacity to 40 MW. The firm plans to investigate the potential for additional expansion at the site starting 2010.

The geothermal resource at Blue Mountain was discovered during gold exploration activities conducted in the 1980s and 1990s. In July 2003, NGP acquired a 100% interest in Blue Mountain Power Company Incorporated (Vancouver, Canada) and the Blue Mountain geothermal power project. At the time, NGP announced plans to focus on the development of a 30-MW geothermal power plant at the Blue Mountain site. The region has resource temperatures of 150 degrees Celsius (302 degrees Fahrenheit) to depths of up to 500 meters, which is suitable for power generation. GeothermEx Incorporated (Richmond, California) estimated that the site was useful for generation of 17 to 63 MW of geothermal power.

NGP commenced drilling operations at the site in April 2004. The firm's subsidiary, Noramex Corporation (Vancouver), received a grant of $659,000 from the U.S. Department of Energy for the project. In a report released in January 2005, GeothermEx estimated the cost of setting up a 30-MW power plant at $73 million.

In August 2006, NGP entered into a 20-year power purchase agreement with Nevada Power Company (Las Vegas, Nevada) to supply net power of 18.75 to 31.25 MW from the Blue Mountain project. Plans for the project included development of a water-cooled, zero-emission power plant and seven production wells to supply high-temperature geothermal water, which would be re-injected to maintain reservoir pressure and productivity. The agreement was approved by the Nevada Public Utilities Commission in February 2007. The project also included the development of a 21-mile transmission line from the geothermal plant to a 120-kilovolt transmission line operated by Sierra Pacific Power Company (SPPC) (Reno, Nevada). In November 2007, NGP entered into a large generator interconnection agreement with SPPC to supply up to 75 MW of power from the Blue Mountain site in two phases, with the first phase pertaining to the proposed 35-MW geothermal power plant. Nevada Power Company merged with SPPC and its holding company Sierra Pacific Resources in 1999, and the joint entity has been operating as NV Energy Incorporated (NYSE:NVE) (Reno) since 2008.

In April 2008, NGP awarded an engineering, procurement and construction (EPC) contract to Ormat Technologies Incorporated (NYSE:ORA) (Reno) for setting up a power plant with a gross generation capacity of 49.5 MW at Blue Mountain. The power plant would be equipped with three Ormat Energy Converters (OECs) based on the firm's proprietary technology for power generation from heat with water-cooling for maximum efficiency. The OEC is capable of converting low-, medium- and high-temperature heat into electrical energy with power generation capacities ranging from 250 kilowatts to 20 MW. The total value of the contract was $76 million, $20 million of which NGP had already released under a Limited Notice to Proceed issued to Ormat in February 2008. The OECs were selected to augment the power output of each unit to 16.5 MW from the earlier planned 12.5 MW.

In September, NGP awarded an EPC contract to Wilson Construction Company (Canby, Oregon) to build a transmission line connecting the geothermal plant to NV Energy's transmission grid in Mill City. The same month, NGP signed an amendment to its power purchase agreement with Nevada Power Company to supply all power generated from the Blue Mountain facility to NV Energy. The total value of sales is estimated to be $530 million for the entire 20-year duration of the contract.

In April 2009, Desert Valley Golden Company, a subsidiary of NGP, acquired the mineral rights to an area of 17 square miles in Blue Mountain from Nevada Eagle Resources, a subsidiary of Gryphon Gold Corporation (OTC:GYPH) (Vancouver), at a cost of $50,000 for 31 claims with future production royalties, including 2% net smelter return (NSR) royalty from core claims and 0.5% NSR royalty on future production of precious metals. The Faulkner 1 facility covers an area of only 1 square mile, leaving scope for future expansion.

In May 2009, NGP awarded a procurement and construction contract to Industrial Builders Incorporated (West Fargo, North Dakota) for the development of a fluid gathering system and re-injection pipeline to the power plant, and production and injection wells. To date, NGP has completed development of six production wells with a total net power generation capacity of 42 MW.

NGP has also completed construction of the 21-mile long power transmission line connecting the geothermal power plant to NV Energy's power grid. The transmission line was energized on August 3, 2009. Power from NV Energy's grid can now be back-fed to the geothermal power plant and used to test electrical components in the facility, production well pumps, and cooling tower fan motors.

In July 2007, NGP secured a construction loan of $100 million from Morgan Stanley (NYSE:MS) (New York, New York). This was followed by a bridge loan facility of $20 million, sanctioned in August 2007 by Glitnir Banki HF (Reykjavik, Iceland), now known as Íslandsbanki HF. The loan facility was increased to $180 million in September 2008, with Morgan Stanley and Glitnir acting as the lead co-arrangers.

In addition to the Blue Mountain property, NGP holds a 100% leasehold interest in three locations: Black Warrior in central Nevada, Pumpernickel in northern Nevada, and Crump Geyser in Oregon. Exploration and development activities are under way at these three sites. The four locations are estimated to have a combined power generating capacity potential of more than 200 MW.

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