U.S. Geothermal Inc.
TSX : GTH
NYSE MKT : HTM

U.S. Geothermal Inc.

November 09, 2015 16:01 ET

U.S. Geothermal Inc. Reports First Nine Months 2015 Results, Updates 2015 Guidance, and Provides Project Updates

BOISE, IDAHO--(Marketwired - Nov. 9, 2015) - U.S. Geothermal Inc. (TSX:GTH)(NYSE MKT:HTM) -

Third Quarter Highlights

  • Twelfth straight quarter of positive EBITDA and Cash Flow From Operations
  • Net Income Attributable to US Geothermal, As Adjusted is up 363% over 2014
  • 2015 Guidance is reaffirmed and tightened
  • Signed agreement to acquire 3 new power plant units at 5% of original cost
  • El Ceibillo drilling discovers commercial resource and concession modification signed
  • Drilled five deep temperature gradient wells at San Emidio outlining new high temperature anomaly
Summary of First Nine Months 2015 Financial Results: Nine Months Ended September 30
(in millions, except per share amounts)
2015 2014
Operating Revenue $ 21.26 $ 21.08
Adjusted EBITDA $ 10.91 $ 10.86
EBITDA $ 9.86 $ 9.69
Net Income, As Adjusted* $ 2.28 $ 1.93
Net Income $ 1.81 $ 1.93
Net Income Attributable to US Geothermal $ 0.78 $ 0.27
Per Share $ 0.01 $ 0.00
Net Income Attributable to US Geothermal, As Adjusted* $ 1.25 $ 0.27
Per Share, As Adjusted* $ 0.01 $ 0.00

* Refer to Table 1 and 2 for further detail of Net Income, As Adjusted. Refer to Appendix for further detail on Adjusted EBITDA and EBITDA.

Full Year Guidance (Consolidated):
(in millions)
2015
Operating Revenue $ 30 - 33
Adjusted EBITDA $ 16 - 18
EBITDA $ 15 - 17
Net Income $ 4 - 6

U.S. Geothermal Inc. (the "Company") (TSX:GTH)(NYSE MKT:HTM), a leading and profitable renewable energy company focused on the development, production, and sale of electricity from geothermal energy, announced today its financial and operating results for the First Nine Months ending September 30, 2015 (the "First Nine Months"), updated guidance for 2015, and highlighted notable achievements for the First Nine Months. This earnings release should be read in conjunction with U.S. Geothermal's financial statements, and management's discussion and analysis ("MD&A") and Quarterly Report on Form 10-Q, which are available on the Company's website at www.usgeothermal.com and have been posted at the U.S. Securities and Exchange Commission website at www.sec.gov and on SEDAR at www.sedar.com.

Operating Revenue for the First Nine Months was $21.26 million, compared to $21.08 million for the prior year period. Adjusted EBITDA for the First Nine Months was $10.91 million, compared to $10.86 million for the prior year period, while EBITDA was $9.86 million for the First Nine Months compared to $9.69 million for the prior year. Net Income (as adjusted) for the First Nine Months was $2.28 million, compared to $1.93 million in the prior year period. Net Income for the First Nine Months was $1.81 million, compared to $1.93 million in the prior year period. Net Income attributable to U.S. Geothermal (as adjusted) for the First Nine Months was $1.25 million, or $0.01 per share, compared to $0.27 million, or $0.00 per share in the prior year period, representing a 363% increase. Net Income attributable to U.S. Geothermal for the First Nine Months was $0.78 million, or $0.01 per share, compared to $0.27 million, or $0.00 per share in the prior year period, representing a 189% increase.

"We are very pleased to have another solid quarter of performance, with corresponding financial results fully meeting our expectations. In spite of the unseasonably warm weather this year, we have delivered results which exceeded last year, and are well positioned for achieving the financial results provided as guidance. 2015 is projected to be our third consecutive year of profitability," said Dennis Gilles, U.S. Geothermal's Chief Executive Officer. "During the quarter a number of steps were also completed to advance our growth prospects and increase our MW output. At our WGP Geysers project in California our testing program confirmed a sufficient steam resource to support a 30 MW power plant. We are currently seeking a Power Purchase Agreement ("PPA") to enable start of plant construction. Our El Ceibillo project in Guatemala received formal approval of our concession modification in July, which allowed us to restart our drilling and subsequently led to discovery of a commercially viable geothermal reservoir. We are now expanding the area with further drilling prior to seeking a PPA. We have also signed an agreement to acquire three unconstructed binary power plants for a small fraction of their original cost. This provides us the flexibility to install these plants where required at existing or new projects, lowers our project capital cost, and accelerates the development timelines. We also are continuing to examine a number of synergistic acquisition opportunities."

Updated Guidance and Earning Call Information

U.S. Geothermal narrows prior 2015 full-year guidance for our Operating Revenues estimated between $30 and $33 million, Adjusted EBITDA estimate between $16 and $18 million, EBITDA estimate between $15 and $17 million, and Net Income estimate between $4 and $6 million.

U.S. Geothermal Inc. will host a telephone conference call for investors and analysts on Tuesday, November 10th, 2015 at 1:00 p.m. ET (10:00 a.m. PT) to discuss their First Nine Months results, which were filed after the Market Close on Monday November 9th, 2015.

The conference call may be accessed by dialing (877) 407-8133 in the United States and Canada, or (201) 689-8040 internationally. A simultaneous webcast of the conference call will be provided through: http://www.investorcalendar.com/IC/CEPage.asp?ID=174464

Notable Achievements for First Nine Months include:

  • Operations:
    • Achieved annual average availabilities for the first nine months for each plant (excluding planned maintenance hours) as follows: Neal Hot Springs - 97.6%, San Emidio - 99.6%, Raft River - 93.8%.
    • Completed planned annual maintenance outages at all three operating facilities including a major overhaul (once in 7 years) at Raft River.
    • Generated fleet wide total 237,244 megawatt-hours for the period, as compared to 242,255 megawatt-hours in the prior year.
    • Finalized settlement agreement with Neal Hot Springs equipment supplier Turbine Air Systems.

  • Advanced Development Projects:
    • Completed flow test of three major steam wells at WGP Geysers project and independent reservoir report confirmed the WGP drilled wells are capable of generating approximately 30 megawatts.
    • A commercial geothermal resource was discovered at the El Ceibillo Project in well EC-2A.
    • Received approval from the Guatemalan Ministry of Energy and Mines for a modified project construction schedule for the El Ceibillo project and had the modified schedule formally incorporated into the concession agreement and signed.
    • Drilled and tested the first and second water supply wells at Neal Hot Springs to support the potential hybrid cooling project.
    • Received permits for the temperature gradient wells at San Emidio for Phase II, and drilled five temperature gradient wells.
    • Signed an agreement to acquire the major and long lead equipment for three new binary power plants at a deep discount. This equipment may be used for the San Emidio II and Crescent Valley I power plants.

  • Cash Management:
    • Received combined $9.1 million cash flow from Operating Activities
    • Ended the Quarter with $228.1 million in Total Assets, Cash and Cash Equivalents of $11.2 million, and Restricted Cash of $21.0 million
    • Reduced long-term debt by $4.0 million.

The Board of Directors of the Company has approved a stock repurchase program which allows up to $2.0 million dollars' worth of the Company's outstanding common stock to be repurchased from the open market on the NYSE MKT through the end of July 2016. Additionally, a Special Committee of the Board was formed to consider other strategic alternatives to increase stockholder value. The Special Committee of the Board has selected Marathon Capital to serve as its financial advisor in this process.

OPERATIONS

Our three operating plants produced 237,244 megawatt-hours during the first nine months, which compares to 242,255 megawatt-hours during the same period of 2014. Historically warm temperatures across the west moderated during the third quarter but still had a negative impact on generation during the period. Additionally, maintenance at Raft River, and work related to the settlement under the Equipment Supply Agreement ("ESA") at Neal Hot Springs was carried out during the quarter.

Neal Hot Springs, Oregon

All three units operated smoothly, with third quarter availability for the facility at 98.5%. Generation for the First Nine Months was 124,229 megawatt-hours, compared to 128,922 megawatt-hours for the prior year period. The reduction in generation is primarily due to Neal being impacted by higher than average ambient temperatures and a 2.5 day maintenance outage that was taken on Unit 3 in August to replace a high pressure feed pump under the terms of the ESA settlement.

A settlement was reached with Turbine Air Systems and five of their key equipment suppliers under the terms of the Equipment Supply Agreement. The settlement agreement provided a cash payment to the project company, USG Oregon LLC, a commitment to finalize equipment repairs and upgrades, and an extended warranty for equipment that is repaired or replaced.

The PPA has a seasonal pricing structure that pays 120% of the average price for four months (July, August, November, and December), 100% of the average price for five months (January, February, June, September, and October) and 73.3% of the average price for three months (March, April, May). The average price paid under the PPA for 2015 is $106.79 per megawatt-hour.

San Emidio, Nevada

Plant performance was again exceptional, with third quarter availability of 98.9%. Total generation for the First Nine Months was 59,170 megawatt hours, which compares to 55,149 megawatt-hours for the prior year period.

Under the terms of our PPA, generation during 2015 is paid at the average contract price of $92.08 per megawatt-hour. There is no seasonal adjustment under this PPA.

Raft River, Idaho

Third quarter availability for the facility was 82.7%. Total generation for the First Nine Months was 53,845 megawatt-hours, which compares to 58,184 megawatt-hours for the prior year period. Raft River took an unplanned maintenance outage of 12.5 days to replace the bearings on both power plant turbines.

The PPA has a seasonal pricing structure that pays 120% of the average price for four months (July, August, November, and December), 100% of the average price for five months (January, February, June, September, and October) and 73.5% of the average price for three months (March, April, May). The average price paid under the PPA for 2015 is $62.00 per megawatt-hour. In addition to the price paid for energy, Raft River currently receives $4.75 per megawatt-hour under a separate contract for the sale of Renewable Energy Credits, with the Company preferentially receiving 70% of the REC income.

DEVELOPMENT

WGP Geysers, California (30 MW)

An extended flow test program of the three production wells with the highest flow rates was completed in June 2015, confirming that these wells are still open and ready for production. Based on data generated from the tests, GeothermEx Inc. (a Schlumberger company) reported in September that the four production wells are capable of initially delivering 458,000 pounds per hour of steam. Based on current power plant steam conversion rates from a detailed design for a 28.8 MW (net) power plant these wells should initially deliver 28.1 MW (gross) or 25.4 MW (net). Using the average steam production rate from the four wells, and an assumed interference factor of 30%, GeothermEx estimates that an additional 2-3 production wells will be needed to support the long term operation of a 28.8 MW (net) plant.

Engineering optimization of the power plant design is continuing with a focus on an innovative hybrid plant design that includes both water and air cooling. This design will dramatically increase the volume of water available for injection back into the reservoir, providing long term stable steam production, and will result in increased power generation over the life of the project. A new Conditional Use permit was submitted to Sonoma County in June, reflecting this modified cooling plan.

Our transmission interconnection application is proceeding under the Independent Study Process being conducted by the California Independent System Operator. The first phase study, the Interconnection System Impact and Facilities Study Report, was completed on October 8th. The study shows that the interconnection is feasible and the preliminary cost is estimated at $1.9 million.

Discussions with numerous potential off-takers for the power from our power plant occurred this quarter, with high interest expressed by a number of them for base load, renewable power to replace fossil fuel based power generation that is being phased out of their portfolios.

El Ceibillo, Guatemala (25+ MW)

The modified development schedule was formally approved and signed by the Minister of the Guatemalan Ministry of Energy and Mines in July. The modified schedule was officially incorporated into the concession agreement on October 13th. Drilling began on the project with well EC-2A which tested the high temperature anomaly defined by the 2014 temperature gradient drilling program. EC-2A successfully intersected a zone of high permeability at a depth of 1,300 feet (396 meters). Flow testing indicates that a commercial resource has been discovered with a flowing temperature of 398°F (198.5°C).

Based on the discovery at EC-2A, two additional wells have been sited to further extend the resource area and to test a deeper horizon in the system. The drill pad for the first well is constructed and drilling began on October 29th. Depending upon the results of the two planned wells combined with EC-2A, a decision will be made on the location for a production size well to fully test the resource to determine its size and production characteristics.

San Emidio Phase II, Nevada (11 MW)

Permits were received for a five hole temperature gradient drilling program in June and drilling commenced on July 27th. Five, 1000 feet deep temperature gradient wells were completed with all of the wells encountering high bottom hole temperatures and anomalously high temperature gradients. Bottom hole temperatures ranged from 224°F to 274°F and temperature gradients in four of the wells ranged from 12.4°F per 100 feet to 14.9°F per 100 feet. These results are considered to be indicative of a nearby, active geothermal system at depth.

A second phase program to deepen the two most prospective wells is being permitted with the Bureau of Land Management and is expected to be carried out during the fourth quarter, weather permitting. Additional temperature gradient wells to further expand the anomaly are also under consideration, but will have to be permitted separately after additional cultural surveys are conducted.

The second phase interconnection study, called the Facilities Study, was started in January 2015 and was completed in June pending a decision by NV Energy on funding upgrades to the system. NV Energy decided not to fund the upgrades and completed the Interconnection System Impact Restudy on September 28th. The Restudy determined that the interconnection is feasible, but with an increase in the estimated cost due to a change in cost allocation by NV Energy. A meeting with the NV Energy transmission group to discuss the results and anticipated costs took place in late October.

Neal Hot Springs, Oregon (3+ MW)

A second water supply well was drilled during the quarter and was flow tested for a period of six weeks, achieving steady state production at approximately 170 gallons per minute. The minimum amount of water needed for a hybrid cooling system is approximately 200-300 gallons per minute for each unit. Additional studies are being conducted to develop new fresh water drilling targets so we can continue exploring for a reliable water source. A purchase or long term lease of existing surface water or groundwater rights is also being studied. An initial engineering evaluation of various hybrid cooling methods was completed by Power Engineers Inc., which confirms the economic viability of hybrid cooling if enough water can be found.

MERGERS AND ACQUISITIONS

We entered into an agreement to acquire all of the major and long lead equipment for the construction of three binary geothermal power plants for approximately 5% of the equipment's original cost. The components for the three units being purchased are all new and unused. The three equipment packages represent approximately 70% of the components needed for the Company's proposed Crescent Valley I power plant (25 MW) and San Emidio II power plant (10 (MW).

Our focus on M&A activities remains very active. We are continuing due diligence on a number of excellent opportunities that encompass operating projects, advanced development projects and green field opportunities.

LEGISLATIVE UPDATE

The California legislature passed Senate Bill 350, which increases the Renewable Portfolio Standard in the state to require 50% renewable by the year 2030. The bill was signed and became law when it was signed by Governor Brown on October 7th.

APPENDIX

The below table summarizes revenues for 2015 and 2014, and reflects the seasonal variability by quarter of our generation and corresponding revenues, as well as the year over year comparison of revenues for the 4 quarters of each year.

Operating Revenue by Quarter: Q1 Q2 Q3 Q4
(in millions)
2015 $ 8.47 $ 5.86 $ 6.93 $ tbd
2014 $ 8.50 $ 5.85 $ 6.74 $ 9.91

Reconciliation of EBITDA:

EBITDA is calculated as net income before interest, income taxes, depreciation and amortization, and is not a measurement of financial performance or liquidity under generally accepted accounting principles in the United States. EBITDA is presented as a metric commonly used by securities analysts, investors and other interested parties in the evaluation of a company's ability to service and/or incur debt.

Adjusted EBITDA reflects EBITDA adjusted to exclude discretionary exploration costs, non-cash stock compensation as well as the value assigned to stock options granted, and write-off of discontinued exploration activities.

First Nine Months Financial Results: Nine Months Ended September 30
(in millions) 2015 2014
Net Income (Loss) $ 1.81 $ 1.93
Interest $ 2.86 $ 3.08
Income Taxes $ 0.47 $ 0.00
Depreciation & Amortization $ 4.72 $ 4.68
EBITDA $ 9.86 $ 9.69
Exploration costs, Asset impairment, Stock based comp. $ 1.05 $ 1.17
Adjusted EBITDA $ 10.91 $ 10.86
Full Year Guidance (in millions): 2015
Net Income (Loss) $ 4.0 - 6.0
Interest $ 3.7
Income Taxes $ 1.1
Depreciation & Amortization $ 6.5
EBITDA $ 15.3 - 17.3
Exploration costs and Stock based compensation $ 1.1
Adjusted EBITDA $ 16.4 - 18.4
Table 1:
Net Income, As Adjusted Nine Months Ended September 30
(in millions, except per share amounts) 2015 2014
Net Income $ 1.81 $ 1.93
Tax Expense offset by Deferred Tax Asset $ 0.47 N/A
Net Income, As Adjusted $ 2.28 $ 1.93
Table 2:
Net Income, Attributable to US Geothermal, As Adjusted Nine Months Ended September 30
(in millions, except per share amounts) 2015 2014
Net Income Attributable to US Geothermal $ 0.78 $ 0.27
Tax Expense offset by Deferred Tax Asset $ 0.47 N/A
Net Income Attributable to US Geothermal, As Adjusted $ 1.25 $ 0.27
Per Share, As Adjusted $ 0.01 $ 0.00

Net Income Attributable to US Geothermal during the First Nine Months was $0.78 million, compared to $0.27 million in the prior year period. As detailed in Table 1, Net Income Attributable to US Geothermal, As Adjusted was $1.25 million for the First Nine Months, compared to $0.27 million in the prior year period. The year-over-year change was driven largely by:

  • Recognition of $0.47 million Income Tax Expense which is offset by Deferred Tax Asset
  • Increase in earnings at San Emidio of $0.42 million, net of tax, due to increased plant revenue and decreased maintenance expense

Please visit our Website at: http://www.usgeothermal.com

About U.S. Geothermal Inc.:

U.S. Geothermal Inc. is a leading and profitable renewable energy company focused on the development, production and sale of electricity from geothermal energy. The company is currently operating geothermal power projects Neal Hot Springs, Oregon, San Emidio, Nevada and Raft River, Idaho for a total power generation of approximately 45 MWs. The company is also developing projects at: the Geysers, California; a second phase project at San Emidio, Nevada; the El Ceibillo project located near Guatemala City, Guatemala; and at Crescent Valley, Nevada. U.S. Geothermal's growth strategy is to reach 200 MWs of generation by 2020 through a combination of internal development and strategic acquisitions.

The information provided in this news release may contain forward-looking statements within the definition of the Safe Harbor provisions of the US Private Securities Litigation Reform Act of 1995. Readers are cautioned to review the risk factors identified by the company in its filings with US and Canadian securities agencies. All statements, other than statements of historical fact, included herein, without limitation, statements relating to the future operating or financial performance of U.S. Geothermal, are forward-looking statements. Forward-looking statements are frequently, but not always, identified by words such as "expects", "anticipates", "believes", "intends", "estimates", "potential", "possible", and similar expressions, or statements that events, conditions, or results "will", "may", "could", or "should" occur or be achieved. These forward-looking statements may include statements regarding anticipated financial results for 2015, perceived merit of properties; interpretation of the results of well tests; project development; resource megawatt capacity; capital expenditures; timelines; strategic plans, the availability of strategic alternatives, the level and timing of stock repurchases, if any; or other statements that are not statements of fact. Forward-looking statements 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. Important factors that could cause actual results to differ materially from U.S. Geothermal's expectations include the uncertainties involving the availability of financing in the debt and capital markets; uncertainties involved in the interpretation of results of well tests; the need for cooperation of government agencies in the development and operation of properties; the need to obtain permits and governmental approvals; risks of construction; unexpected cost increases, which could include significant increases in estimated capital and operating costs; and other risks and uncertainties disclosed in U.S. Geothermal's Annual Report on Form 10-K for the year ended December 31, 2014 filed with the United States Securities and Exchange Commission and Canadian securities regulatory authorities and in other U.S. Geothermal reports and documents filed with applicable securities regulatory authorities from time to time. Forward-looking statements are based on management's expectations, beliefs and opinions on the date the statements are made. U.S. Geothermal Inc. assumes no obligation to update forward-looking statements if management's expectations, beliefs, or opinions, or other factors, should change.

The NYSE MKT and the TSX do not accept responsibility for the adequacy of this release.

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