Raser Technologies, Inc. (NYSE: RZ) announced that it has entered into a term sheet with the Southern California Public Power Authority (SCPPA) to sell 110 megawatts (MW) of geothermal power to certain SCPPA member municipalities in a pre-paid arrangement.
The power plants would be built at Raser’s Thermo, Utah site, over a three year period.
The term sheet establishes the basic terms of a Power Purchase Agreement, or “PPA,” under which Raser would develop 110 MW of geothermal power for sale to SCPPA in a pre-paid arrangement. Under a pre-paid PPA, the purchaser of the power pays for a portion of the expected power generation up front and then pays a reduced monthly amount for the remaining power and environmental attributes. The term sheet is non-binding, and either party can end discussions at any time, for any reason, without liability to the other party.
Pre-paid PPAs are structured to take advantage of the municipalities’ ability to borrow at favorable rates to purchase power up front at a reduced rate. This allows the municipalities to improve the economics of the transaction and provide greater price stability over the life of the agreement, as well as provide greater access to renewable energy projects.
In turn, a pre-paid structure allows developers like Raser to secure funding for their projects from an alternative source in challenging economic times. The pre-paid PPAs would provide Raser with greater flexibility for planning and developing its commercial geothermal power projects.
Richard Clayton, Executive Vice President for Raser, said, “We are excited to have signed this term sheet and be nearing completion of negotiations for this significant power purchase agreement with SCPPA. We have had productive discussions with SCPPA to date and hope to finalize the PPA in the near future.”
The Southern California Public Power Authority (SCPPA) is a joint powers authority consisting of 11 municipal utilities and one irrigation district. SCPPA members deliver electricity to approximately 2 million customers over an area of 7,000 square miles, with a total population of 6 million. The Members include the municipal utilities of the cities of Anaheim, Azusa, Banning, Burbank, Cerritos, Colton, Glendale, Los Angeles, Pasadena, Riverside, Vernon, and the Imperial Irrigation District.
SB.com news editor Bart King interviewed Raser CEO Brent Cook about pre-paid agreements and other topics on the April 10, 2009, edition of the Green Week in Review podcast.
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