Ormat Industries Ltd. (TASE: ORMT) unit Ormat Nevada Inc. has received an offer of a conditional commitment from the US Department of Energy for a partial guarantee of up to a $350 million loan to support a geothermal power project expected to generate up to 121 megawatts of electricity by three geothermal power stations. Ormat Industries owns Ormat Nevada through Ormat Technologies Inc. (NYSE: ORA).
The three power stations - McGinness Hills, Jersey Valley and Tuscarora - will provide clean power under a 20-year power purchase agreements with NV Energy Inc. (NYSE: NVE) subsidiary Nevada Power Company. The 15-megawatt Jersey Valley power plant is already on line, and the entire project is in various stages of construction and expansion.
The Department of Energy loan guarantees should reduce Ormat Technologies' financing costs and increase the return on the Nevada projects. For example, in February 2011, Ormat Technologies raised $88 million in a private placement which expanded its private bond series, at an interest rate of 7%. The return on the Department of Energy guarantees is slightly higher than on 10-year T-bills, which currently bear 2.97% interest.
Ormat Technologies' share price fell 2.4% in New York on Friday to $22.01, giving a market cap of $1 billion. Ormat Industries' share price fell 2.2% by mid-afternoon on the TASE today to NIS 21.91, giving a market cap of NIS 2.66 billion.
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