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Ram
Power, Corp. (TSX:RPG - News) ("Ram Power"
or the "Company"), a leading renewable energy company focused on
the development, production and sale of electricity from geothermal energy,
announced today the following project and corporate financing updates.
SAN
JACINTO -- TIZATE PROJECT UPDATE -- Phase I and II Construction, Drilling and
Financing
The
Company continues to make good progress on both the Phase I and Phase II
expansions (36 MW each) of the San Jacinto-Tizate
power project (the "San Jacinto Project") to increase the
production capacity of the current operating facility from 10 to 72 MW net.
As disclosed previously, the Company has an executed power purchase agreement
for the Phase I and Phase II expansions, existing active production and
injection wells with sufficient capacity to support the Phase I production
increase, and $237 million of debt financing to support the construction of
both the Phase I and Phase II expansions. With these essential project
components in place, the Company expects that upon completion the project
will be a significant driver of future shareholder value.
As
of January 31, 2011, Phase I of the San Jacinto
Project expansion is approximately 75% completed. The Phase I expansion was
originally scheduled to be completed in 18 months with a target commission
date of April 2011. However, the project has encountered construction delays
and is now expected to be completed in 21 months with a target commission
date of July 2011. As a result of unfavorable variances in some material and
labor costs and the construction delays, the project has approximately $15 to
$20 million of additional construction costs. The Company expects to
contribute $10 to $15 million of additional equity to the project to cover
the cost overrun with the balance covered by contingent debt reserves.
Concurrent
with the Phase I expansion, the Company commenced construction on the Phase
II expansion in 2010. As of January 31, 2011, the Phase II expansion of the
San Jacinto Project is approximately 30% completed. The Phase II expansion
was originally scheduled to be commissioned in December 2011. As a result of
the construction delays in the Phase I expansion, the Company is now
projecting a revised commission date of March 2012. As a result of the
construction delays, the Phase II expansion has approximately $5 million of
additional construction costs (excluding drilling) which will be covered by
contingent debt reserves.
Over
the past 10 months, the Company's San Jacinto Phase II exploration drilling
program has drilled four wells SJ12-1, SJ9-2, SJ9-3, and SJ12-2. To complete
the Phase II drilling plan the Company must increase its current certified
resource capacity from 56 MW to 84 MW gross. To date GeothermEx,
Inc. ("GeothermEx") has certified the
production capacity of the SJ 9-3 well to be 4.2 MW based on long-term flow
tests. In their current state of completion, wells SJ 12-1, SJ 9-2 and SJ
12-2 are not capable of sustaining continued commercial operations. To
achieve production in wells SJ 12-1 and SJ 12-2, the Company has decided to
re-drill both wells. The re-drills are expected to correct the problems
encountered in the original drilling and reach the originally planned
intersection of deep production zones. The Company has retained outside
consultants to assist in the re-drilling and preliminary probability
estimates anticipate the re-drilling of SJ 12-1 and SJ 12-2 to result in 10
MW to 20 MW gross of additional resource capacity. The Company expects to
complete the re-drill of SJ 12-1 and SJ12-2 by the end of March 2011 and May
2011, respectively. Despite well SJ 9-2 having a high bottom hole temperature, the well has not demonstrated enough
permeability to sustain commercial flow rates and the Company has been using
cold water injection to stimulate the well and increase the permeability. The
Company has no future re-drill plans for SJ 9-2. Should additional production
wells be required to meet the certified resource requirements, the Company
plans to drill an additional well SJ 12-3. Under the revised Phase II
exploration drilling program, the Company is expected to incur approximately
$27 million of additional drilling expenses to complete the program.
On
November 4, 2010, the Company closed a $160 million debt facility (the
"Facility") to finance the Phase II expansion which consists of
$140 million in senior construction and term loans and $20 million in
subordinated debt which is available for contingencies and for general
corporate purposes. In addition to customary funding conditions, access to
the Facility requires that GeothermEx certify that
the steamfield for Phase II is sufficient to
achieve production of certain MW levels. The Company is unable to access the
Facility due to the current certified resource capacity of the San Jacinto
Project. The minimum production level which must be certified for the San
Jacinto Project as a whole to access the Facility is 64.8 MW gross. Upon
certification of this production level, the Company will have access to $70
million of the Facility. As noted above, the Company currently has
approximately 60 MW gross of certified resource capacity. Access of up to $98
million of the Facility will be available upon certification of the 70 MW
gross level, and the Company will have access to
approximately $7 million of additional funding under the Facility for each
additional 2.4 MW gross of certified resource capacity. In addition,
depending upon the MW levels certified, the Company is required to make
available equity funding which, together with loans made under the Facility,
are sufficient to complete construction of Phase II. The Company has been
funding Phase II construction and drilling with equity which totals
approximately $57 million to date. Additional equity funding required to meet
the minimum levels needed to access the Facility will be funded in part from
the corporate credit facility described below. As the Company achieves increased
certified resource capacity through its drilling program, the Company expects
approximately $45 million of its equity investment in Phase II to be returned
through borrowings under the Facility.
CORPORATE
FINANCING
Given
the delay in reaching the resource certification levels necessary to access
the Facility for Phase II of the San Jacinto Project, and the projected
construction cost overruns in Phase I, the Company has obtained additional
interim financing to cover these unexpected cash needs. The Company has
successfully negotiated a $50 million, two-year bridge loan commitment with Sprott Resource Lending Partnership, Exploration Capital
Partners 2008 Partnership and Newberry International Holdings Ltd.
(collectively, the "Lenders"). An interim facility of $12 million
was closed and funded by the Lenders on February 4, 2011. Interest at the
rate of 12% per annum is payable monthly on the interim facility commencing
on March 4, 2011. In addition, there is a standby fee in the amount of 1% of
the commitment under the interim facility and a drawdown fee in the amount of
1% of the amount advanced. The term of the interim facility is six months.
The interim facility is secured by the assets of the Company and its
subsidiaries other than assets which have been previously pledged or have
certain restrictions preventing them from being pledged. As of the date
hereof, $7.8 million of the interim facility has been advanced to the Company
to be used for the drilling programs at San Jacinto and at the Company's Orita project in Imperial Valley, California,
construction costs at San Jacinto, and working capital. The Company and the
Lenders are currently finalizing the documentation for the full $50 million,
two-year bridge loan which will refinance the interim facility and provide an
additional $38 million of funding for the Company. The Company expects the
$50 million facility to close in March 2011.
Hezy
Ram, CEO of Ram Power, stated, "Despite the setbacks on the San Jacinto
Project, the tremendous value of the Ram Power portfolio of project assets
enabled the company to attract the necessary financing at a critical time
that will enable us to reach our objectives and deliver long-term shareholder
value."
About
Ram Power
Ram
Power is a renewable energy company based in Reno, Nevada, engaged in the
business of acquiring, exploring, developing, and operating geothermal
properties. Ram Power has an interest in geothermal projects, primarily in
the United States, Canada, and Latin America.
Cautionary
Statements
This
press release contains "forward-looking information" within the
meaning of applicable securities laws including information regarding the
business of Ram Power. Readers are cautioned not to place undue reliance on
forward-looking information. Actual results and developments may differ
materially from those contemplated by this information. The statements in
this press release are made as of the date of this release. Ram Power
undertakes no obligation to update forward-looking information, other than as
required by law, or comment on analyses, expectations or statements made by
third parties in respect of Ram Power, or its financial or operating results
or its securities.
Contact:
Steven Scott
Director of Investor Relations
Ram Power, Corp.
Phone: 775-398-3711
Email: Email Contact
www.ram-power.com
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