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Financing Options for Geothermal Power Projects

Different financing options are used at each stage in geothermal power project development, which include the exploration and drilling stage and construction and operation stage. The financing option in each stage earns a return proportionate with the risk accepted at that stage in the project's development. For each financing option, both financial and non-financial elements should be considered.

Financing options and considerations for a typical geothermal power project are shown in the table below. Your project financing options and considerations may be different.

Financing Options and Considerations for a Typical Geothermal Power Project*
Financial Considerations Financing Stage
Exploration and Drilling Construction and Operation
Financing
Options
Equity
Financing
Balance-Sheet Financing Mezzanine-Debt Financing Construction Loan
or Term Loan
Financing
Source
Private equity

Exchange-traded corporate equity
Funded as part of larger corporate operations Limited provider (e.g. select banks) Insurance companies
Pension funds
Select banks
Financing
Cost
Very high Variable - returns commensurate with corporate level investment return requirements High to moderate Moderate to low
Non-Financial Metrics Quality management team: ability to raise capital and to execute their business plan

Risk mitigation strategies, planned and implemented
Drilling contract in place

At least one production well drilled, possibly more
Engineers' report affirming resource availability to support 20-year financing

PPA with credit worthy counterparty in place (exceptions in California)

Typically 50%-80% of production wells drilled for construction loan

Project operational for term loan

*Information found in table based on a series of interviews conducted in the spring and summer of 2010 with geothermal industry developers, financiers, and other industry experts.

Get market-specific details on investment requirements and market changes that have affected the exploration and drilling stage and construction and operation stage of geothermal power projects in the Guidebook to Geothermal Power Finance.