Ormat Technologies Inc. (NYSE: ORA) has hired John Hancock Life Insurance Company to arrange up to $330 million in construction and term loans for three geothermal projects currently under construction in California and Nevada, four months after Ormat signed a $350 million financing agreement through John Hancock, under a US Department of Energy loan guarantee program.
US government tax breaks allow the raising of government-backed capital for project, which greatly lowers their financing cost. If the company building the projects meets the government's criteria, one of which is to begin construction before the end of 2010, the company will receive a grant amounting to 30% of the total set-up cost.
Today's financing agreement is for three geothermal projects owned by Ormat Technologies subsidiary Ormat Nevada Inc. in Nevada and California, which will generate 80-90 megawatts of electricity. The projects are in various stages of construction and are due to come on line by 2013.
The set-up costs of the three projects is estimated at $412 million; the financial package amounts to 80% of the set-up costs. Ormat will finance the rest out its shareholders' equity. The government guarantees means that Ormat can get very low interest rates on the financing; it will reportedly pay 4.5% interest on the debt under current market conditions, compared with 7% interest on the private bonds it raised last summer.
When the projects are completed, Ormat can expect to receive a set-up grant, which will reduce the amount of financing by $264 million and its shareholders' equity for the projects to $65.5 million.
Ormat Technologies CEO Dita Bronicki said, "This is our second portfolio of projects that we are submitting with John Hancock under the DOE Loan Guarantee program. The first application covers three projects in advanced stages of construction: Jersey Valley, McGinness Hills and Tuscarora, all located in Nevada. These new projects are part of the implementation of our growth program which is expected to increase Ormat's generating portfolio by approximately 40% to approximately 750 MW by the end of 2013."
Ormat Technologies' share price closed in New York yesterday at $27.68, giving a market cap of $1.26 billion. Ormat Industries' share price fell 0.7% by mid-afternoon on the TASE today to NIS 28.65, giving a market cap of NIS 3.43 billion..
Published by Globes [online], Israel business news - www.globes-online.com - on December 7, 2010
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