Sierra Geothermal Power Corp.

Sierra Geothermal Power Corp.

December 05, 2006 09:00 ET

Sierra Geothermal Closes the Acquisition of the Majority Interest in Cayley Geothermal Corp.

VANCOUVER, BRITISH COLUMBIA--(CCNMatthews - Dec. 5, 2006) - On November 27, 2006 Sierra Geothermal Power Corp (TSX VENTURE:SRA) announced the closing to acquire the majority interest in Cayley Geothermal Corp. By the virtue of the Cayley acquisition, Sierra has an interest in 15 geothermal projects located in Nevada and California. Concurrently, Sierra Geothermal completed a $5.06 million private placement in order to satisfy certain underlying property payments and to fund the exploration of several advanced projects once permits have been issued. The Company intends to rapidly advance the development of its portfolio of projects either through equity or joint venture partners while continuing to evaluate additional acquisitions.

Sierra Geoothermal's projects are categorized as Tier I, II and III. Tier I projects are at the pre-feasibility and production assessment drilling stage. Sierra has 4 Tier I projects having a total resource potential estimate of 90 to 180 MW. Tier II projects have had significant previous work completed but require further exploration to reach the production assessment drilling stage. Sierra has 4 Tier II projects having a total estimated potential of 30 to 65 MW. Tier III projects are located on geothermal anomalies close to transmission infrastructure but have limited exploration to date. The Tier III projects require detailed exploration and evaluation before estimates of power potential can be determined. Sierra has 7 projects in the Tier III stage of development. The net electricity of 90MW is enough power to run 72,000 homes.

The 4 most advanced (Tier I) projects are described as follows:

Reese River Project:

Reese River is a blind thermal temperature anomaly that Richards and Blackwell have rated as one of the top 10 undeveloped geothermal prospects in Nevada. Phillips Petroleum and Amax Exploration drilled a total of 52 holes during the 70's and 80's. Contoured data of the temperature gradient wells show that the 150 degreesC/km heat flow anomaly is approximately 4.8 km (3 miles) long in the northeast direction by approx. 1.6 km (1 mile) wide. The center of the anomaly reaches a temperature gradient over 500 degreesC/km. Using a Monte Carlo simulation the potential geothermal resource at Reese River was estimated to have a 90% probability of generating 13 MW and a 50% probability of exceeding 30 MW (Source: New Geothermal Site Identification and Qualification, PIER study prepared by GeothermEx, 2004). The drilling of a 1,200 m exploration slimhole is planned upon receipt of the BLM permit. The cost of the well is offset through the Department of Energy's GRED III Grant Program in the amount of US$580,000.

Pumpernickel Project:

The Great Basin Center for Geothermal Energy at the University of Nevada, Reno considers Pumpernickel to be one of the top 4 undeveloped geothermal prospects in Nevada. Sierra has the option to earn a 50% interest from the project operator Nevada Geothermal Power Inc. Nevada Geothermal has conducted geologic, geophysical and geochemical exploration on the property. Phase II permitting is in progress for three shallow gradient holes to locate the first production assessment well. Based upon the data from the hotspring area only, the potential resource is estimated at 16 MW of production for 20 years (90% probability) and a 50% probability of exceeding 40 MW for 20 years (GeothermEx June, 2006). A 16 MW power plant supplies enough electricity for 13,000 homes.

Alum Project:

In the early 1980's Amax Exploration conducted 3,000 meters of temperature gradient drilling which identified the location for the first deep production well. Located near the Nevada-California border in Esmeralda County, Nevada. A 55 kV power line runs through the 29 square km lease. Geothermometry suggests a minimum reservoir temperature of 155 degreesC with indications up to 225 degreesC. Using a Monte Carlo simulation the potential geothermal reserves at Alum are estimated to have a 90% probability of generating 41 MW, and a 50% probability of exceeding 90 MW (Source: New Geothermal Site Identification and Qualification, PIER study prepared by GeothermEx, 2004). A 41 MW power plant supplies enough electricity for 33,000 homes.

Silver Peak Project:

Located 8 km (5 miles) south of the Alum Project and features 3 km (1.9 miles) of fossilized geothermal vents and hot springs deposits. The Project has a 55 kV substation located on lease with twin transmission lines connecting the Nevada and California power grids. Geothermometry suggests a minimum reservoir temperature of 125 degreesC with good potential for a reservoir in the 150 degreesC to 180 degreesC range. A GeothermEx resource assessment using a Monte Carlo simulation estimated a 90% probability of producing 15 MW and a 50% probability of exceeding 40 MW.

The company also reported that with the acquisition of Cayley Geothermal Corp., Gary Thompson, P.Geo, and Joel Ronne, P.Eng, have been appointed to the Board of Directors of Sierra replacing Ed Muir and Judy Pullman who have now resigned. In addition, Dan McGee has been appointed Chairman of the Board, Gary Thompson has been appointed President and CEO, and Joel Ronne has been appointed VP and COO. Judy Pullman will continue as corporate secretary of Sierra Geothermal.

A study recently prepared for the Western Governors' Association, conservatively projects geothermal energy in the USA to have the near-term potential of producing 13,000 MW of capacity, which is enough electricity for 10 million homes. This amount of geothermal power could offset considerable commodity risk and pollution associated with conventional power plants. California currently produces 5% of its power from geothermal sources, which is more than double reportedly derived from wind power.

Sierra Geothermal is committed to being a leading developer of renewable power from geothermal sources. Geothermal power is clean and sustainable and produces long-term revenues. Geothermal plants provide continuous, base load power, often at or above 95% capacity thereby being the preferred source of green power for many utilities.

On behalf of the Board of Directors, Gary R. Thompson

The information provided in this news release contains forward-looking statements within the definition of the Safe Harbor provisions of the US Private Securities Litigation Reform Act of 1995, including statements regarding potential energy resources and project development possibilities. These statements are based on Sierra Geothermal's current expectations and beliefs and are subject to a number of risks and uncertainties that can cause actual results to differ materially from those described in forward looking statements, including the risks that the resource potential of any one of our projects may be uneconomic due to the lack of a high temperature water supply, or financing will not be available for construction of the power plants, and the revenues generated will not prove sufficient to fund operations and/or service debt, among others. Readers are cautioned to review the risk factors identified by the company in its filings with Canadian securities agencies. Forward-looking statements are based on management's expectations, beliefs and opinions on the date the statements are made. Sierra Geothermal Power Corp assumes no obligation to update forward-looking statements if management's expectations, beliefs, or opinions, or other factors, should change. The TSX Venture Exchange does not accept responsibility for the adequacy or accuracy of this release.

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