Mighty River Power takes direct control of geothermal interests in Chile and US-based EnergySource
15 February 2013
Mighty River Power Limited today announced that it had reached an agreement to take direct control of geothermal investments in the United States (EnergySource) and Chile.
The agreement with the Managing Partners of GeoGlobal Energy (GGE) LLC, the manager of the GGE Fund in which Mighty River Power is the cornerstone investor, provides for Mighty River Power to take full ownership and direct control of:
· The GGE Fund’s minority interests in EnergySource, a geothermal development and operating company based in the United States, including its related entities.
· All of the Fund’s geothermal interests in Chile, including the Fund’s development projects at Tolhuaca in Southern Chile and Puchuldiza in Northern Chile and the operating business based in Santiago and all its employees based in Chile.
GeoGlobal Energy LLC will take direct ownership and control of the Fund’s interests in Germany, and assets in the US not related to EnergySource. Mighty River Power will retain an option for an economic interest in the assets in Germany but will have no ongoing management involvement.
Mighty River Power will transfer its ownership interest in GeoGlobal Energy to the Managing Partners and pay them US$24.8 million on final close expected over the next few months. Under the terms of the agreement, both parties will now be free from geographic restriction or exclusivity in pursuing future geothermal opportunities. By terminating the existing agreements half-way through the 10-year term of the GGE Fund, Mighty River Power also avoids, among other things, future obligations for management fee payments to GGE.
Mighty River Power Chief Executive, Doug Heffernan, said that during the five-year relationship the GGE partnership had developed one of the largest global portfolios of geothermal opportunities. The structure of the new agreement reflected the respective strategic interests and capabilities of Mighty River Power and GGE and the best way to mobilise further capital to build out the opportunities in each country where the Fund's assets are located.
Dr Heffernan said, “We see this agreement as a natural evolution and transition from the GGE relationship which successfully provided an entry point for us into international geothermal in 2008 through the GeoGlobal Energy Fund.
“Mighty River Power remains committed to a strategy of applying our geothermal experience and expertise gained through our domestic geothermal exploration, development, construction and operations. Following completion of our Ngatamariki project near Taupo (New Zealand) in mid-2013, we do not expect development opportunities in New Zealand within the next three to five years due to market conditions – and international markets offer better opportunities for geothermal growth.”
“Mighty River Power’s strong New Zealand geothermal operating business and long term strategic horizons can better leverage our capabilities for developments in Chile and we see a lot of potential synergies between our business and EnergySource as an operator and developer of a large brownfield geothermal reservoir in the US.”
Dr Heffernan said an immediate priority was to integrate the Chilean business, which includes approximately 50 people headquartered in Santiago, as a subsidiary of Mighty River Power reporting to GM Development, Mark Trigg.
“The Company sees Chile as an exciting geothermal development prospect with sound fundamentals of high-quality resources, a stable political and legal environment, along with strong economic and electricity demand growth. The Company will develop a strategic plan for the business in Chile, utilising the knowledge of the staff in Chile and experience we have gained through the GGE relationship, and from experience gained over the past decade developing a significant geothermal business in New Zealand.”
In the US, Dr Heffernan said Mighty River Power would appoint Mr Trigg to the EnergySource-related governance entities. EnergySource operates the 49.9MW John L. Featherstone power station commissioned in 2012 and is advancing the Hudson Ranch Power II project – a second station of the same capacity.
Mighty River Power would maintain a measured and prudent approach to international development opportunities, and any related capital commitments. This restructuring of arrangements with GGE creates an opportunity to re-evaluate and focus the Company’s international geothermal programme, Dr Heffernan said.
An update on Mighty River Power’s international geothermal investments will be provided in association with the release of the Company’s HY2013 accounts on February 21.