Polaris Geothermal Inc.
TSX : GEO

Polaris Geothermal Inc.

December 22, 2008 09:33 ET

Polaris Geothermal Announces Approval of New Tariff and Amendments to Power Purchase Agreement

TORONTO, ONTARIO--(Marketwire - Dec. 22, 2008) - Polaris Geothermal Inc. ("Polaris" or the "Company"), (TSX:GEO) is pleased to announce that its Nicaraguan subsidiary, Polaris Energy Nicaragua S.A. ("PENSA"), has signed an addendum (the "Addendum") to the existing Power Purchase Agreement ("PPA") entered into between PENSA and the energy distributor in Nicaragua. The Addendum has also been approved by Nicaraguan utility regulator Instituto Nicaraguense de Energia ("INE").

The key terms of the Addendum are:

a) all power generated beyond the present 10MW level will be sold at a tariff of US$0.092/kWh, representing an increase of over 50% from the current tariff. Current power generation up to 10 MW will continue to be sold at the existing tariff of US$0.061 /kWh, until 2013, after which time all power will be sold at the new tariff as per the approved Addendum. The combined equivalent tariff for all power generated going forward is approximately US$0.087/kWh;

b) the term of the PPA has been extended from 20 to 25 years;

c) the amount of electricity to be purchased under the PPA has been increased from 66 MW to 72 WM; and

d) the Addendum contains provisions providing for increases in the US$0.092/kWh tariff in the event that construction financing costs increase above certain defined levels.

In order to facilitate the implementation of the Addendum, the Ministry of Energy and Mines has agreed to extend the term of PENSA's generation license from 20 to 30 years and has also extended the existing San Jacinto-Tizate geothermal concession from 20 to 25 years, subject to further extension at the election of PENSA for an additional 10 year period.

Tom Ogryzlo, President and CEO of Polaris, said "We are very pleased with the accomplishment of this important milestone for the country of Nicaragua and our Company. We believe that the Addendum provides a major improvement to the economics of the project, as well as an important degree of protection from interest rate increases. The Addendum will help facilitate project financing for the San Jacinto-Tizate project. When completed, the San Jacinto-Tizate project will displace significant importation of petroleum products currently being used for the generation of power with important resulting benefits for Nicaragua. This tariff increase demonstrates powerful support for private investment in the country and together with other changes to the PPA and project documents is evidence that the government recognizes the strategic role that renewal energy must play in reducing the country's reliance on imported oil."

The approval of the Addendum triggers the final steps for completing the loan syndication and drawdown process being led by the Central American Bank for Economic Integration (CABEI) for our Phase I MCT 24 MW expansion.

About Polaris Geothermal Inc.

Polaris is a Canadian company, focused on the generation of renewable energy projects in Latin America and other parts of the world. For more information about Polaris visit www.polarisgeothermal.com.

FORWARD-LOOKING STATEMENTS

This press release includes certain "forward-looking statements". Statements respecting the ability of the Company to successfully increase production above the 10 MW level, complete project financing and attain an anticipated production rate to 72 MW are forward looking statements that involve various risks and uncertainties. There can be no assurance that such statements will prove to be accurate and actual results and future events could differ materially from those anticipated in such statements. All statements that are not historical facts, including without limitation statements regarding future estimates, plans, objectives, assumptions or expectations of future performance, are "forward-looking statements". There is no assurance that project financing and the anticipated increase in production to 72 MW will be achieved. We caution you that such "forward looking statements" involve known and unknown risks and uncertainties that could cause actual results and future events to differ materially from those anticipated in such statements. Such risks and uncertainties include unpredictable results of exploration activities, uncertainties inherent in the estimation of geothermal resources, fluctuations in the costs of goods and services, problems associated with production operations, changes in legal, social or political conditions in the jurisdictions where the Company operates, lack of appropriate funding and other risk factors, as discussed in the Company's filings with Canadian securities regulatory agencies. The Company expressly disclaims any obligation to update any forward-looking statements.

Contact Information