US Geothermal has signed an agreement with Michael Stewart individually and Empire Geothermal Power to acquire a 3.6MW operating geothermal power plant and approximately 28,358 acres of geothermal energy leases and certain ground water rights all located north of Reno, Nevada.
The asset purchase transaction will be completed in two closings. The first closing has occurred along with the transfer of approximately 18,000 acres of undeveloped US Bureau of Land Management (BLM) geothermal leases and certain ground water rights.
The second closing will transfer the existing geothermal power plant and the balance of the geothermal leases which are the ones associated with the power plant and include private and BLM leases. The total transaction purchase price is $16.62 million.
In connection with this transaction, US Geothermal has also negotiated to reduce an existing third party royalty from 12.5% to 1.75% of the gross power plant revenue associated with the existing production wells under a primary geothermal lease. The royalty rate reduction applies to the existing 3.6MW power plant and any future development on the private lease. In exchange, US Geothermal has agreed to issue 290,000 shares of its common stock to the lessor, subject to TSX approval.
Daniel Kunz, president and CEO of US Geothermal, said: This acquisition will provide us with our second operating power plant and another proven geothermal reservoir. Based on our experience at Raft River, we believe that a new plant would utilize the existing well production more efficiently and could produce up to 10MW.