Ormat Technologies has recently announced it has signed an investment agreement and shareholders agreement with Sageos holding (Sageos), a fully owned subsidiary of Bureau de Recherches Géologiques et Minières (BRGM), to acquire a 85% stake of Geothermie Bouillante SA (GB).
GB owns and operates the Bouillante geothermal power plant. This plant currently generates approximately 10 MW, and owns two exploration licenses with a total additional potential capacity of up to 30 MW, all located in Guadeloupe Island, a French territory in the Caribbean.
At closing, expected in the second quarter, Ormat will pay approximately €22 million (US$25 million), to Sageos for 79.6% equity interest in GB. In addition, Ormat is committed to further invest €10 million (US$11 million) during the first two years, which will increase its equity interest to 85%. The cash will be used mainly for the enhancement of the power plant.
Ormat is confident that with its technology and expertise it can optimize the use of the resource at the existing facilities and recover its current production to its design capacity of 14.75 MW by mid-2017. Additionally, Ormat plans modifications to the existing equipment as well as to further develop the asset, with a potential of reaching a total of 45 MW in phased development, by 2021. Under the investment agreement, Ormat will pay Sageos an additional amount of up to €16 million subject to the achievement of agreed production thresholds and capacity expansion within a defined time period.
The Bouillante geothermal plant sells its electricity under a new 15-year Power Purchase Agreement (PPA) that was entered into force in January 2016, with Électricité de France SA (EDF). As a major renewable plant in Guadeloupe Island, the power plant is entitled to certain benefits from the French government that were set in order to promote renewable energy, mainly through feed-in tariff and tax benefits.
Isaac Angel, Ormat Chief Executive Officer, said:
“Strategic M&A is a key pillar of our growth strategy, enabling us to leverage our expertise and our balanced model to improve existing projects, expand our geographic reach and grow our portfolio. This acquisition is an evidence to the progress we made in our business development efforts to achieve these important goals. We are happy to have the opportunity to share our accumulated knowledge and experience in the geothermal development in Guadeloupe Island. I’m certain that, together with the local skilled employees and our partner BRGM, we can achieve great accomplishments and add value to the assets we acquire as well as to Ormat shareholders.”