Global energy

Ormat moves into Honduras

This is an Ormat geothermal power plant in Amatitlan, Guatemala.

This is an Ormat geothermal power plant in Amatitlan, Guatemala.

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“It’s not exactly an acquisition,” president and chief operating officer of Ormat Technologies, Inc. Yoram Bronicki said about their recent agreement with ELCOSA, an energy company in Honduras. “The agreement is a BOT [Build, Operate and Transfer] agreement where Ormat will take the next step in developing the project. … We’ll build it, operate it for a certain number of years and then transfer it back to that company.”

The project he’s referring to is the Geotérmcia Platanares geothermal project that was owned by ELCOSA up until this deal was made. Ormat will first build a geothermal power plant at the site and then operate it, gaining revenue from it for the duration of the contract.

Ormat will hold ownership of the plant for 15 years after commercial operation at the plant begins. And it typically takes about five years to get a project to commercial operation when it begins from scratch, according to Bronicki, but he believes it will take less in this case because ELCOSA has begun the work for Ormat.

Bronicki cautioned that since they haven’t begun physical work at the property in Hounduras, Ormat can’t know for certain that the project will be successful, but they expect it to be. The Honduran company has done a good amount of work on getting the project started, but the physical building of the power plant will be Ormat’s responsibility.

“We need to develop the resource, drill wells, test the wells and provided that the wells are successful—and we believe that they are—we can then move into building the power plant and operating that power plant for a long period of time, selling green power to the greater Honduras,” Bronicki said.

Bronicki explained that Ormat decided to strike this agreement because the company is always looking for geothermal resources to develop across the globe where the “people could appreciate or benefit from the positive attributes of geothermal energy.” He also said that this deal is good for everyone involved.

“What’s nice about BOT structures is that it allows each party to excel and benefit from what they know how to do, and I think this is how we can bring a lot of value to them and, of course, we will benefit from the good work they have done early on in that project,” Bronicki said.

Ormat will also gain profits made from the project in the time that they own it. ELCOSA will benefit from the revenue stream created by the power plant after the contract ends, and “the market in Honduras will benefit from the reliable power that is also renewable and does not involve burning fuels and generating emissions,” according to Bronicki.

“It will truly benefit all parties,” Bronicki said.

When complete, it is expected that the plant will create 35 megawatts of geothermal energy. Ormat currently has about 600 megawatts at this time and expects to be just under 640 megawatts in the first half of 2014. In terms of size, this could be a 5 percent increase to Ormat’s portfolio. This will also be the first geothermal plant in Honduras if successful.