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.
|Financial Considerations||Financing Stage|
|Exploration and Drilling||Construction and Operation|
|Balance-Sheet Financing||Mezzanine-Debt Financing||Construction Loan
or Term Loan
Exchange-traded corporate equity
|Funded as part of larger corporate operations||Limited provider (e.g. select banks)||Insurance companies
|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
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.