Bulletin E-Edition:
Investors warm up to geothermal power
Merrill Lynch puts $35M into Bend firm
By Chuck Chiang / The Bulletin
Published: May 03. 2007 4:00AM PST
advertisement:
Bend-based Vulcan Power Co. received a $35 million financial boost from a major investor last week, officials from the geothermal power firm said Wednesday.
The company expects up to $115 million more from other investors in the coming months.
It's unclear whether any of that money will end up at Newberry Crater south of Bend, where Vulcan is planning to install a geothermal plant, said Steve Munson, the company's founder, chairman and CEO.
Vulcan agreed to a $35 million principal investment from the energy investment branch of New York-based Merrill Lynch, Munson said. The deal with Merrill Lynch Commodity Partners is part of an estimated $150 million in financing Vulcan expects to receive by the end of June to fund development of the company's geothermal properties, which comprise approximately 136,000 acres spanning five states.
None of the sites is currently producing power, but Vulcan estimates they could produce enough power for up to 2 million people.
"I think it's just a great first step to have an organization as experienced and respected as Merrill Lynch become one of our cornerstone investors," Munson said, adding that the $35 million will likely go toward Vulcan's geothermal projects in western Nevada.
The company also has sites in Oregon, Washington state, California and Arizona.
Vulcan has plans to build a $300 million geothermal plant at Newberry, but those plans are on hold after the company's partner in the project, Greenwich, Conn.-based Davenport Power LLC, sued Vulcan in December over the right to negotiate power-sale deals.
"Depending on the outcome of the arbitration, there could possibly be money (from the $150 million) that goes towards Newberry," Munson said. "But we can use those funds to develop another site in Northern California (if Newberry falls through)."
Geothermal power production involves drilling into underground reservoirs that have been superheated by lava. When extracted, the water becomes steam, which turns surface-based turbines that produce power.
Vulcan, established in 1991, has been exploring the idea of tapping Newberry's geothermal potential since the mid-1990s. But investor interest in geothermal projects didn't materialize until fossil fuels' recent price hikes and growing concerns about global warming.
Merrill Lynch officials were unavailable for comment Wednesday, but the company issued a written statement saying Vulcan's portfolio of geothermal sites is especially attractive, given the current popularity of renewable energy production in the United States.
"Vulcan is an emerging leader in the expanding industry of renewable energy," David Owens, managing director and principal of Merrill Lynch's energy investment division, said in the statement. "The Vulcan portfolio of long-term, fixed-price power contracts and geothermal leases puts them in a strong competitive position."
Vulcan has power purchase agreements with Nevada Power Co. and Southern California Edison Co., among others, according to the Bend-based firm.
Munson said that with many Western states establishing renewable energy quotas for a certain percentage of future power sold in a state to be generated from green sources, he is optimistic that interest from other investors will continue to grow.
"I would say the new, rapid growth of the geothermal industry is just getting under way," he said.
Oregon currently has its own bill for renewable energy quotas going through the Legislature.
Brian Urban, managing partner of Dallas-based Silveron Capital Partners LP and Vulcan's financial adviser, said the rest of the $150 million in investments should be finalized and announced by late June, adding that other investors interested in Vulcan are similar in scale to Merrill Lynch.
"(Investor interest) has been very strong," he said. "Interest in renewable energy is very high right now, and it is important to have a large institution like Merrill Lynch demand the value created by Vulcan. We anticipate other parties will see similar value in the company."
Chuck Chiang can be reached at 617-7859 or at cchiang@bendbulletin.com.
ARTICLE ACCESS: This article is among those available to all readers. Many more articles are available only to E-Edition members. Sign up today!
comments powered by Disqus
