Geothermal company set to open first plants

PROVO, Utah Thu Aug 28, 2008 5:20pm EDT

1 of 4. Richard Speights, superintendent of drilling at Raser Technologies' Thermo geothermal power plant, looks at steam escaping from a well in Minersville, Utah, August 27, 2008.

Credit: Reuters/Nichola Groom

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PROVO, Utah (Reuters) - Five years after going public, geothermal company Raser Technologies Inc is on the verge of a major milestone: earning real revenue.

Later this year, the renewable energy producer will open its first power plant in the Utah desert near the tiny town of Minersville. The plant will use hot water from deep underground to produce power for about 9,000 homes in Anaheim, California, the hometown of Disneyland.

Seven more plants will come online next year, and Raser expects to see positive cash flow at the beginning of 2009.

"After these first couple of plants come online I believe we will be cash flow positive," Cook said in an interview at Raser's Provo, Utah, headquarters on Wednesday. He would not say when the company expects to turn a profit.

Heat from below the earth's surface is seen by many to have the potential to be a massive contributor to the nation's electricity supplies because it is available around the clock.

Geothermal energy, however, has received less investment and attention than wind and solar power, which are less consistent producers but faster to deploy.

It hasn't been an easy road for Raser, which began as a developer of electric motor technology for the transportation industry earlier this decade. When Chief Executive Brent Cook joined Raser in 2005, the former CEO of synthetic fuels company Headwaters Inc said the company should continue its electric motor business but meanwhile added a new pursuit -- geothermal energy. The two have no common thread.

"In the case of geothermal... the execution of that plan is all in our hands," Cook said. "The licensing side of our business requires convincing some other company to take the technology and deploy it into their marketplace, and that's a lot harder to predict."

To get into the geothermal business, Raser tried to acquire geothermal company Amp Resources, his former employer, though that deal ultimately fell through. Amp is now owned by Italian power company Enel SpA

FROM THE GROUND UP

Not to be dissuaded, Cook resolved to build Raser's geothermal business from the ground up, and the company has spent nearly two years acquiring land leases throughout the Western U.S. and lining up financing for its geothermal projects.

Merrill Lynch earlier this year agreed to finance up to 155 megawatts of Raser power plants, including a commitment of up to $44 million for the first plant.

Raser also tapped United Technologies Corp to supply the geothermal generating units for its plants.

To speed its growth, Cook said Raser is focusing on small power plants that can be built in just a few months, about the same time it takes to build a wind farm.

"Geothermal usually takes much longer to be built. We've tried to go with an off-the-shelf type of plant design," Cook said, adding that plants could be expanded later if there are enough geothermal resources to do so.

"It's like Legos that come together," he said.

Raser says its technology is unique because it can build a plant where underground water temperatures are relatively low, or below the 212 degrees Fahrenheit needed to boil water. That's because the company uses the hot water from the ground to turn a second liquid with a lower steam point into the steam used to power the turbines.

"That allows us to exploit sites that frankly were passed over or thought to not be useful 25 or 30 years ago," Cook said. "We are going back through and tying up a lot of those opportunities."

Raser has more than 200,000 acres of geothermal interests in six Western U.S. states.

Cook said utilities are becoming more concerned about rising prices of natural gas, used to generate much of utilities' so-called baseload power.

"We're seeing a lot of utilities recognize that geothermal is much more competitive than natural gas and has zero fuel risk exposure," Cook said.

Raser shares were down 3 cents at $7.85 in afternoon trade on the NYSE Arca exchange.

(Editing by Phil Berlowitz)

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