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Home My WebLink AboutMount Spurr Geothermal ApplicationForm///ii�� ALASKA Renewable Energy Fund Round 3 „1ENENGYIUnW m Grant Application Application Forms and Instructions The following forms and instructions are provided to assist you in preparing your application for a Renewable Energy Fund Grant. An electronic version of the Request for Applications (RFA) and the forms are available online at: htto://www.akenergyauthority.orq/RE Fund-Ill.html Grant Application GrantApp3.doc Application form in MS Word that includes an outline of Form information required to submit a complete application. Applicants should use the form to assure all information is provided and attach additional information as re uired. Application Cost Costworksheet3 Summary of Cost information that should be addressed by Worksheet .doc applicants in preparing their application. Grant Budget GrantBudget3.d A detailed grant budget that includes a breakdown of costs by Form oc milestone and a summary of funds available and requested to complete the work for which funds are being requested. Grant Budget GrantBudgetlnst Instructions for completing the above grant budget form. Form Instructions I ructions3. df • If you are applying for grants for more than one project, provide separate application forms for each project. • Multiple phases for the same project may be submitted as one application. • If you are applying for grant funding for more than one phase of a project, provide milestones and grant budget for completion of each phase. • If some work has already been completed on your project and you are requesting funding for an advanced phase, submit information sufficient to demonstrate that the preceding phases are satisfied and funding for an advanced phase is warranted. • If you have additional information or reports you would like the Authority to consider in reviewing your application, either provide an electronic version of the document with your submission or reference a web link where it can be downloaded or reviewed. REMINDER: • Alaska Energy Authority is subject to the Public Records Act AS 40.25, and materials submitted to the Authority may be subject to disclosure requirements under the act if no statutory exemptions apply. • All applications received will be posted on the Authority web site after final recommendations are made to the legislature. • In accordance with 3 AAC 107.630 (b) Applicants may request trade secrets or proprietary company data be kept confidential subject to review and approval by the Authority. If you want information is to be kept confidential the applicant must: o Request the information be kept confidential. o Clearly identify the information that is the trade secret or proprietary in their application. o Receive concurrence from the Authority that the information will be kept confidential. If the Authority determines it is not confidential it will be treated as a public record in accordance with AS 40.25 or returned to the applicant upon request. AEA 10-015 Application Page 1 of 27 10/7/2009 60136-0014/LEGAL17276686.1 /E ALASKA Renewable Energy Fund Grant Application Round 3 SECTION 1 — APPLICANT INFORMATION Name (Name of utility. IPP, or government entity submitting proposal) Ormat Nevada, Inc. Type of Entity-. IPP Mailing Address: 6225 Neil Road Reno NV, 89511 Physical Address: 6225 Neil Road Reno NV, 89511 Telephone Fax Email 775356-9029 1 775-8233401 bmartini®ormat.com 1.1 APPLICANT POINT OF CONTACT Name Title fidgette Martini Senior Geologist, Exploration Mailing Address 6225 Nail Road Reno NV, 89511 Telephone Fez Email 775-356.9029 775�8233401 bmartini@onnal.com ext 32271 1.2 APPLICANT MINIMUM REQUIREMENTS Please check as appropriate. If you do not to meet the minimum applicant requirements, your application will be rejected. 1.2.1 As an Applicant, we are: (put an X in the appropriate box) An electric utility holding a certificate of public convenience and necessity under AS 42.05, or X An independent power producer in accordance with 3 AAC 107.695 (a) (1), or A local government, or A governmental entity (which Includes tribal councils and housing authorities); X 1.2.2. Attached to this application is formal approval and endorsement for its project by its board of directors, executive management, or other governing authority. If the applicant is a collaborative grouping, a formal approval from each participant's governing authority is necessary. (Indicate Yes or No in the box ) X 1.2.3. As an applicant, we have administrative and financial management systems and follow procurement standards that comply with the standards set forth in the grant agreement. X 1.2.4. If awarded the grant, we can comply with all terms and conditions of the attached grant forth. (Any exceptions should be clearly noted and submitted with the application.) X 1.2.5 We intend to own and operate any project that may be constructed with grant funds for the benefit of the general public. AEA10-015 Grant Application Page 2 of 27 10/7/2009 Onnat response 10/11/2009 ALASKA Renewable Energy Fund ENEMY AUn oanv Grant Application Round 3 SECTION 2 — PROJECT SUMMARY This is intended to be no more than a 12 page overview of your project 2.1 Project Title — (Provide a 4 to 5 word title for your project) Mount Spurr Geothermal Project 2.2 Project Location — Include the physical location of your project and names) of the community or communities that will benefit from your project. Mount Spurr is stratovolcano located 80 miles west of Anchorage, Alaska on the west side of the Cook Inlet. It is 35 miles northwest of the closest community, the village of Tyonek, and 40 miles west of the gas -fired Beluga Power Plant (See Figure 1). Anchorage and the rest of the Railbelt communities, which are facing major challenges with rapidly depleting natural gas reserves for power and heating in the Cook Inlet, as well as volatile and hard to predict power prices looking forward, will benefit the most from this project. This project will play a major role in providing clean, reliable, affordable, cost -guaranteed, base -load renewable power. Communities and tribal corporations of western Cook Inlet, e.g. Tyonek Native Corporation, The Native Village of Tyonek, Cook Inlet Region Inc., and communities of the Kenai Peninsula Borough, will enjoy significant opportunities for direct and indirect local hire and local services. These opportunities will include work during the project exploration, development phases, including construction of supporting infrastructure, e.g. access roads and a transmission line, as well during decades of operation and maintenance. AEA10-015 Grant Application Page 3 of 27 10/7/2009 Ormat response 10/11/2009 A�is� Renewable Energy Fund [ucacv d�iucwlY Grant Application Round 3 2.3 PROJECT TYPE Put X in boxes as appropriate 2.3.1 Renewable Resource Type Wind Biomass or Biofuels Hydro, including run of river Transmission of Renewable Energy X Geothermal, including Heat Pumps Small Natural Gas Heat Recovery from existing sources Hydrokinetic Solar Storage of Renewable Other (Describe) 2.3.2 Proposed Grant Funded Phase(s) for this Request (Check all that apply) X Reconnaissance Design and Permitting X Feasibility Construction and Commissioning Conceptual Design 2.4 PROJECT DESCRIPTION Provide a brief one paragraph description of your proposed project. Mount Spurr represents what currently appears to be the best opportunity in Alaska to develop a utility -scale base -load geothermal energy power plant. Located 80 miles west of Anchorage on State lands leased by Ormat in October of 2008, a successful power project at Mt. Spurr would serve communities alonq the Railbelt throuqh power purchased by one or more of the Railbelt AEA10-015 Grant Application Page 5 of 27 10/7/2009 Ormat response 10/112009 ALASKA Renewable Energy Fund I MEDMM rwr„oarnr Grant Application Round 3 electric utilities. Preliminary analysis of data from held reconnaissance of the region conducted by Ormat in July -August 2009, coupled with historical exploration work from the mid-1980's, is encouraging as to the potential existence of a commercial size geothermal resource. However, further exploration is required in order to confirm it. The grant request is for a two-phase program for continued resource studies and assessment surveys with a planned timeline of roughly one year (from July 2010 to mid summer of 2011). Phase I — reconnaissance - will include mapping, further geochemical sampling, remote sensing, and aerial and ground -based geophysics. These studies will eventually culminate in gradient/slim hole drilling to be performed in the second phase, if justified. If successful, future work beyond the scope of this grant application will include further slim/production hole drilling in 2011-2012, and if the resource is confirmed, construction of a power plant and drilling of additional geothermal production and re- injection wells will follow. 2.5 PROJECT BENEFIT Briefly discuss the financial and public benefits that will result from this project, (such as reduced fuel costs, lower energy costs, etc.) Benefits should a geothermal plant be ultimately constructed and operated: • Cost competitive. Geothermal ranks better than cost -wise most forms of renewbales (Figure 4) as well as fossil -fuels e.g. natural gas. Levelized cost of a binary geothermal plant to for a Publicly Owned Utility (POU) to be $65.55/MWh, compared with CCGT at $86.84/MWh (tem 4.4.4 and Cost Workhseet). • No fuel cost risk. Power generated at Mt Spurr will be guaranteed at fixed cost for the duration of the PPA, estimated at 25 years. Furthermore, based on our decades of experience, we expect that after that time period we will be able to sign a new PPA, again guaranteeing fixed price for many years • Reliability. Ormat's geothermal technology is among the most reliable available with a guaranteed availability of 95% and actual one at 99%. • Clean. Geothermal is one of the most sustainable sources of energy, with close to zero emissions (see Figure 3); no consumption of cooling water (since Ormat plans to build an air-cooled plat at Mt Spurr); no depletion of the geothermal reservoir (since Ormat's technology does evaporate any portion of the geothermal fluid but rather re -injects 100% of the geothermal fluid to the reservoir); very low visual impact; very small surface occupancy (see Figure 6). • Baseload. Unlike practically all other forms of renewable, the geothermal power plant will offer baseload 24/7 generation with a capacity factor of >90%. It is important to note that due to this baseload attribute whenever Ormat makes reference to the plant capacity, 50-100MW, the reference is to average generation (and not peak), net to the grid. • Proven technology. Ormat has built over 1,000 MW of geothermal plants during the last 3 decades all over the western US and all over the world. Therefore the technology proposed for implementation at Mt. Spurr is proven and risk free (see Figure 5) • Provide multiple opportunities for local development, local hire and services. An average 50 MW geothermal plant would provide direct, induced, and indirect jobs for 212 full-time jobs and employ an average of 800 man -year during construction (section 5). Although the resource assessment itself will not generate renewable electric power, the activity will create jobs, establish local infrastructure, and help develop strategic partnerships and promote local skill set in geothermal exploration from which all geothermal projects in Alaska, not only Mt Spurr, will benefit. 2.6 PROJECT BUDGET OVERVIEW Briefly discuss the amount of funds needed, the anticipated sources of funds, and the nature and source of other contributions to the project. AEA10-015 Grant Application Page 6 of 27 10/7/2009 Ormat response 10/11/2009 �;ALASKA Renewable Energy Fund Grant Application Round 3 • Investment in the project so far has roughly been (further to the information depicted in section 7): o $3.5 million in leasing state lands o $100k in exploration and business support Additional investment planned between the date of this application and the grant eligibility date (7/1/10) is expected to roughly include (further to section 7): o $100k in an engineering cost study for required infrastructure o $400k in geophysical exploration to take place Spring and early Summer 2010 o $50k in permitting for activities expected during Spring and Summer of 2010 • Requested grant funds for phases I + II: $1,993,158 • Suggested matching funds for phases I + II: $2,159,647 in cash Ormat plans to fund the rest of the development and construction of the plant with its own cash, and will attempt to refinance the plant after it is in operation and generating power and revenues. Ormat may seek additional funds to help put in place some of the required infrastructure, that could also serve other future energy projects in the region. 2.7 COST AND BENEFIT SUMARY Include a summary of grant request and your projects total costs and benefits below. Grant Costs (Summary of funds requested) 2.7.1 Grant Funds Requested in this application. $1,993,158 2.7.2 Other Funds to be provided (Project match) $2,159,647 2.7.3 Total Grant Costs (sum of 2.7.1 and 2.7.2) $4,152,805 Project Costs & Benefits (Summary of total project costs Including work to date and future cost estimates to get to a fully operational project) 2.7.4 Total Project Cost (Summary from Cost Worksheet $5,000 - $6,000 / kW Including estimates through construction) 2.7.5 Estimated Direct Financial Benefit (Savings) $40m — $58m / year, for 25 years or more 2.7.6 Other Public Benefit (if you can calculate the benefit in High COz offset (please terms of dollars please provide that number here and refer to Cost Worksheet explain how you calculated that number in your application for details) (Section 5.) SECTION 3 — PROJECT MANAGEMENT PLAN Describe who will be responsible for managing the project and provide a plan for successfully completing the project within the scope, schedule and budget proposed in the application- 3.1 Project Manager Tell us who will be managing the project for the Grantee and include a resume and references for the manager(s). If the applicant does not have a project manager indicate how you intend to solicit project management support. If the applicant expects project management assistance from AEA or AEA10-015 Grant Application Page 7 of 27 10/7/2009 Ormat response 10/11/2009 e� ALASKA Renewable Energy Fund EKERWnurnoar Y Grant Application Round 3 another government entity, state that in this section. The Pmiect Manaaer will he Dr. Briaette Martini. Senior Staff Geoloaist with Ormat Nevada. Inc. Dr. Martini's resume is attached 3.2 Project Schedule Include a schedule for the proposed work that will be funded by this grant. (You may include a chart or table attachment with a summary of dates below. Ormat plans a three -phased approach to exploration at Ormat's geothermal lease at Mt. Spurr. These phases include: (1) geologic/geophysical/geochemical surveys; (2) gradient/slim hole drilling; and (3) production hole drilling. However, the third phase of exploration is beyond the scope of this grant proposal. With a goal of defining a viable geothermal resource at economic depths, Ormat will survey and model the potential resource (the focus of this grant proposal and activities slated to occur in 2010) with confirmation provided by a shallow to deep drilling program (activities slated for 2010-2012 with only gradient and slim hole drilling covered in this grant proposal). Phase I — Summer 2010: Reconnaissance — Resource exploration and definition Fundamental field, imaging and geophysical exploration is scheduled to occur during the Spring and Summer of 2010 at Mt. Spurr. Work would ideally begin in the spring to avoid the intense vegetation coverage encountered at Mt. Spun- in the summer and early fall months (late July — September). However, Ormat if fully aware of the vagaries of weather in Alaska and is prepared to move exploration activities later into fall as weather permits and the 2010 season requires. Depending on results, some geophysics and geochemistry data will also be acquired later in the season. Exploration will begin with the acquisition of high resolution aerial photography, UDAR and hyperspectral data (May -June timeframe). Air -based magnetics and ground -based gravity surveys as well as electrical surveys (CSAMT/AMT/MT) will be completed over the leases in the July timeframe. Approximately four weeks after delivery and analyses of these data, Ormat will carry out a two week field -based campaign of mapping, further geochemical sampling (including soil COZ flux surveys) and groundtruthing of the various exploration datasets. Additional geophysics may also be carried out in this timeframe if warranted (e.g. higher resolution gravity in specific locations). After analysis and synthesis of these datasets and mapping results into a resource/drilling model, which will require four to six weeks, Ormat will then site potential gradient and slim hole drilling locations. Phase II — Fall 2010(?) and 2011: Feasibility — Temperature Gradient and Slim Hole Drilling We will aim at drilling at least one temperature gradient (TG) hole (-500 ft) in the early Fall of 2010, depending on the weather and the results of the Phase I analysis. The remaining TG holes (or all if an early winter in 2010 precludes any drilling) plus Slim hole drilling (-3000 ft) are scheduled for 2011. The following is a brief description of the various activities planned for both phases: Task Timeframe & actual length) Expected Outcome Geophysical Survey — July -August (4 weeks) Define subsurface structure Gravity 2010 Geophysical Survey - July -August (1 day) Define subsurface structure Aeroma netics 1 2010 AEA10-015 Grant Application Page 8 of 27 10/7/2009 Ormat response 10/11/2009 b Renewable Energy Fund Grant Application Round 3 Geophysical Survey - July -August (4 weeks) Define subsurface structure, MT/AMT/CSAMT 2010 volcanic plumbing and possible zones of hydrothermal alteration Field Work- Geologic August - September (1 week) Continued geologic mapping Mapping - Part 2 2010 and groundtruthing of previous surveys/models Field Work- Geochemical August -September (1 week) Focused on ground -based CO2 Sampling - Part 2 2010 flux measurements along mapped fault/fracture zones Temperature Gradient Hole September -October (4-8 Provides shallow (-500 ft) Drilling (performed with weeks) Fall 2010 or late measurements of temperature small core -hole rigs) Spring 2011 gradient; lithology and water (if any) geochemistry also obtained Slim Hole Drilling May - October (10-12 weeks) Provides deeper (-3000 ft) (performed with larger 2011 measurements of temperature drilling rigs) gradient, pressure and resource productivity (flow); lithology and geochemistry also obtained 3.3 Project Milestones Define key tasks and decision points in your project and a schedule for achieving them. The Milestones must also be included on your budget worksheet to demonstrate how you propose to manage the project cash flow. (See Section 2 of the RFA or the Budget Form.) Below are the key milestones planned for the program, following instructions on the Budget Form: [ yb ...r............., r ,:. .. � r �.�:. ..� ... ., .. .� .t .7 ,.... ..n .., ..r ...��.r ..�., .. ... .�.. ....r.....�.r .iA .... � l .Y�r .[ .f .�' .� .. ..rr ..i..r .., ..... ..f ....r ......... 1 ....... ....., i ..f .f�.r .r. �..... I.rr.,',i � r!.i, .1 _•�.:,l.i�.;..lr d,�''��'( .,.;.�.. ;;r� , .� rr �,. F ,...i .�:...:{ � .t.2....r ... ..,r.....:... ..:....:. :+r.. . f .:.� .� •:'•f'r�x' .� ..:s... ':d! � .,:p P ..... .� ..c, ..i� .... ....i„ .. r..r.....,....,:::..r ......a ...r...r ,�. ..... .� ...... „/ , r. -r .. .� .... .....�..:..., .. r, R ...r � ., k ,....:, ..�. .................. ........�.,.::.r,•::: h.<. l::r-: { .. a ......... 1 ._ .� s ...t . , S .....�. .. .. 1 . r..r........... ...... .. .s ...,, ..... F.... ...:::... i.`; :}.il •.. ,1 ..r.....N. � >...,..s....ez.r~ k....r...., r.el�.., i ................�,r ,..r ...., . ... .... "�..5, tr,.n� �I • ...rrr F.K.:::t! ...i,..r, r•n�•r! .r bslaar�Task 1Y1.., a'J , r., .,,.r•., ,1P � •.IJ Phase Advanced Reconnaissance 1. Project scoping and contractor solicitation 7/1 /2010 2. Resource identification and analysis: 2.1 Geophysical Survey - Gravity 7/31/2010 2.2 Geophysical Survey - Aeroma netics 7/31/2010 2.3 Geophysical Survey - MT/AMT/CSAMT 7/31/2010 2.4 Field Work- Advanced Geologic Mapping and Geochemical Sampling 8/31/2010 3. Land use, permitting, and environmental analysis, including infrastructure and hazard assessment, models and plans 10/31/2010 4. Cost of energy and market analysis 11/31/2010 5. Simple economic analysis 11/31/2010 6. Final report and recommendations Phase II(Feasibility) 12/31/2010 1. Project scoping and contractor solicitation 31/10/2010 2. Resource identification and analysis: 2.1 Temperature gradient drilling - First 2 wells 6/30/2011 2.2 Temperature gradient drilling - 2 additional wells 8/31/2011 2.3 Slim hole drilling - 2 wells 10/31/2011 3. Land use, permitting, and environmental analysis 11/31/2011 4. Cost of energy and market analysis 11/31/2011 5. Simple economic analysis 11/31/2011 AEA10-015 Grant Application Page 9 of 27 10/7/2009 Ormat response 10/11/2009 �A� Renewable Energy Fund ENEacrnurnaanr Grant Application Round 3 6. Final report and recommendations 1 12/31/2011 3.4 Project Resources Describe the personnel, contractors, equipment, and services you will use to accomplish the project. Include any partnerships or commitments with other entities you have or anticipate will be needed to complete your project. Describe any existing contracts and the selection process you may use for major equipment purchases or contracts. Include brief resumes and references for known, key personnel, contractors, and suppliers as an attachment to your application. Ormat Nevada Inc., a wholly owned subsidiary of Ormat Technologies Inc. (NYSE: "ORA") is a vertically- integrated company primarily engaged in the geothermal and recovered energy -based power plants around the world. The Company has more than four decades of experience in the development of environmentally -sound power, primarily in geothermal and recovered -energy generation. It also supplies remote power units such as those supplied with 60 remote gate valve buildings on the Trans Alaska Pipeline in operation since 1975. Ormat products and systems are covered by more than 75 US patents. Ormat currently operates 515 MW of primarily geothermal as well as recovered energy in the following power plants: Brady (NV), Desert Peak 2 (NV), Steamboat (NV), Heber (CA), Mammoth (CA), Ormesa (CA), Puna (HI), OREG 1 (SD, ND) , OREG 2 (ND), and DREG 4 (CO); Zunil (Guatemala), Amatitlan (Guatemala); Kenya — Olkaria III (Kenya); Momotombo (Nicaragua ) and GDL (New Zealand). Ormat has supplied more than 1200 MW of power generation. Attached to this proposal is a selected list of Ormat-owned power plants as well as power plants supplied by Ormat to other owners around the world. Though we plan to rely heavily on local talent and local suppliers, we will bring to this project our in- house capabilities in areas such as geothermal exploration, drilling, reservoir engineering, power plant research and development, engineering, manufacturing, geothermal rights acquisition, environmental compliance and permitting, power sales, utility interconnection, project management, construction, project financing, operation and maintenance. The following is a partial list of the key staff, consultants, contractors, etc. that will be pivotal in this program (resumes of all names referenced below are attached to this proposal): • Exploration, drilling and reservoir engineering: We intend to rely heavily on local service providers to perform both the geophysical and geochemical surveys and the TG/slim hole drilling. However, we will have our most experienced staff, which has lead geothermal development in dozens of projects around the world, to supervise, guide and train local abd other contractors primarily on geothermal exploration and drilling. o Key staff: • Dr. Brigette A. Martini - Senior Staff Geologist and Principal Investigator / Project Manager for this program ■ Joseph Skip Matlick — Ormat's Vice President for Exploration, Development and Drilling. Mr. Matlick has decades of experience in geothermal development and drilling, including in the Aleutian Islands in Alaska. Mr. Matlick will provide guidance and supervision for the drilling program ■ Peter S. Drakos — Senior Staff Geologist ■ Benjamin M. Delwiche — Staff Geologist • Patrick Walsh — Staff Geologist • Paul Spielman - Manager of (Resource) Operations Support ■ Steven D. Fercho — Geologist and GIS Specialist o Consultants: ■ Allison L. Payne — Volcanologist from the Alaska Volcano Observatory who Ormat intends to hire as a consultant to take part in exploration ■ Dr. Jennifer L. Lewicki — A seasoned geochemist who Ormat intends to hire as a consultant to lead some of the geochemical analysis AEA10-015 Grant Application Page 10 of 27 10/7/2009 Ormat response 10/11/2009 ALA � Renewable Energy Fund �EcraurNOMW Grant Application Round 3 o Contractors: Ormat generally selects appropriate subcontractors by means of RFPs. We have already approached several leading local companies in geophysical exploration and expect to contract several companies very soon to perform work prior to the program detailed in this proposal. These companies and individuals include: • Alaska Earth Science (AES), a leading company in geophysical exploration, with recent experience in geothermal exploration with the Naknek project. Key staff who may be involved with this program include Robert M. Retherford (President/ Partner) and William T. Ellis (Vice President Exploration/Partner) ■ Zonge Engineering & Research Organization, Inc., a leading company in geophysical exploration. Key staff who may be involved with this program include Scott A. Urquhart (Geophysicist/President), Chester S. Lide (Managing Geophysicist), Dr. Scott C. Maclnnes (Senior Research Geophysicist) and David Butler (D.Sc., Sr. Geophysicist) • Spectral Geology Pty Ltd, a leading company in spectral imaging. Key staff to be probably working on this project include Michael J. Hornibrook (Technical Director) and Peter A. Cocks (spectral imaging specialist) ■ Seibert & Associates, LLC, Anchorage, a leading company in aeromagnetic survey. Key staff to be working on our project will include John E. Seibert (President, Chief Geophysicist, Principal Geodesist, Pilot) Permitting o Key staff: Though we intend to hire local companies to do our permitting activities for this project, these activities will be guided and supervised by Ormat's seasoned permitting staff, utilizing experience gained with multiple Federal, state and other jurisdictions, and while training local contractors on the unique attributes of geothermal permitting. ■ Ronald S. Leiken (Environmental/Regulatory Affairs) o Consultants: Ormat has already contracted the Anchorage office of Perkins Coie LLP to assist in regulatory affairs as well as other legal council. Key staff who are pivotal in the Mt Spurr project include: ■ Eric B. Fjelstad - a partner in the Environment, Energy & Resources group, managing partner of the Alaska office and leader of the firm's Alaska ENR practice • Amy J. MacKenzie - an associate in the Anchorage office, who focuses her practice on environment and natural resources ■ In addition, Ormat has already approached several leading engineering and permitting firms in Alaska, and intends to engage with one of more to support the Mt Spurr permitting activities. These firms include ASRC Energy Services, CH2MHill (formerly Veco), HDR, Mactec 3.5 Project Communications Discuss how you plan to monitor the project and keep the Authority informed of the status. Ormat prepares periodic written status reports of geothermal projects under development as part of the Company's basic procedures. In the case of Mount Spurr Geothermal Project, this reporting will document exploration activities, permitting activities, schedules with relation to the agreed project milestones, foreseeable issues/delays, etc. We intend to provide reports on a monthly basis, or any other frequency preferred by AEA during the phases of the project for which grant funding is requested. 3.6 Project Risk Discuss potential problems and how you would address them. Safety Risks Because of Mount Spurr's remote location, early exploration activities require all crew and their AEA10-015 Grant Application Page 11 of 27 10/7/2009 Ormat response 10/11/2009 ®ALASKA Renewable Energy Fund GMED EaERWAunuim Grant Application Round 3 equipment to be helicoptered into the site. Thus, it is critical to adhere to all safety measures and ensure all staff is fully trained to maintain the highest safety standards. Ormat's geothermal leases are located immediately adjacent to Crater Peak, the currently active vent of Mt. Spurr that erupted in 1992 covering the immediate area (including near where a geothermal plant might be located) in pyroclastic materials and debris flows or lahars. The 1992 eruption forcibly ejected large blocks up to 3.3 feet (1m) across in a concentrated zone of fallout up to 1.9 miles (3 km) southeast of Crater Peak and blocks and bombs up to 6 miles (10 km) from Crater Peak vent. Explosive phases of the Crater Peak eruption sent ash and pulverized rock in an eruptive plume to more than 14 km (46,000 ft) altitude and during at least one explosive phase, ash was blown as far away as Manley Hot Springs, 264 mi (425 km) north of the volcano. As the eruption progressed, avalanches of hot debris cascading down the south flank of Crater Peak mixed with snow to form lahars that reached the Chakachatna River. Successive pyroclastic flows formed overlapping tongues of coarse debris that coursed down the slopes of Crater Peak and funneled into preexisting drainages. The farthest -traveled pyroclastic flows moved about 1.8 mi (3 km) from the crater rim, descending more than 3280 ft (1000 m) in elevation. Ormat currently operates a 30 MW geothermal facility, operating since 1993, in a volcanically active area on the Big Island of Hawaii as well as plants near volcanoes in Momotombo, Nicaragua; Zunil and Amatitlan in Guatemala. There are several geothermal power facilities worldwide located around or near active volcanoes and geothermal exploration has been performed in many of these settings by the geothermal industry. Emergency plans will be developed for securing the facilities and evacuating personnel if necessary. Although the risk of another Mt. Spurr volcanic eruption is not considered imminent, Ormat will plan for contingencies should volcanic activity intensify; volcanic systems and particularly those of the upper Cook Inlet, can be unpredictable and highly dangerous. Exploration work at Mount Spurr will be done primarily during months when the weather is more temperate. This is generally between late May and September. Base camps will need to be established far enough away from the mountain to enable crew to ride out weather events at the exploration site, if and when they may occur. Of particular concern in siting the base camp and planning exploration activities will be potential avalanche episodes in the early spring. Though our leases rise to elevations of greater than 7,000 ft, much of our land to the south is at less than 1,500 ft. allowing for easier occupation of the site in all weather. To the extent that exploration effort goes beyond the summer months, surface exploration activities may include use of remote testing facilities that can run unmanned, including coordination with previously installed State and USGS monitoring facilities. Such facilities can provide useful data at times when our field team cannot work. Resource Risks Though Mt. Spurr has high geothermal potential, as evidenced by recent volcanism, thermal springs, abundant water, the existence of a commercially viable geothermal resource remains unconfirmed. It is not enough to simply have heat — permeability is absolutely required. Structural complexity (faults, fractures) is only partially known in this region; the potential permeability of the reservoir rocks is thus unknown. And while it is clear that geothermal fluids make it to the surface in a few restricted locations, the extent of the hydrothermal system at depth remains unknown. The young age of Mt. Spurr coupled with the extremely recent eruption (and history of high activity) may complicate our understanding of the potential hydrothermal system at depth. In addition, previous seismic and InSAR studies have indicated a deep magma chamber, which may reduce the overall heat flow extending into the shallow crust. Ormat is well -aware of these potential challenges and will tailor its exploration techniques and surveys to delineate the system as accurately as possible. Business and Financial Risks AEA10-015 Grant Application Page 12 of 27 10/7/2009 Ormat response 10/11/2009 IQLASKA Renewable Energy Fund ® tea,, ,N Grant Application Round 3 As described elsewhere in this application, Ormat is financially stable there is no risk on its ability to support its proposed share in the project phases proposed in this grant application. Moreover, as expressed in dozens on plants Ormat has successfully built during the last 3 decades, Ormat is also financially sound enough to be able to invest much larger sums as the project moves further into development and then construction. That said, since the project is still in very early stages, there are inherent business risks e.g. of signing of a Power Purchase Agreement (PPA) with a utility. Ormat is already active in mitigating these risks, e.g. by moving towards a PPA with unugacn tlectrtc Association as well as with other rcanoen uanues. SECTION: 4 — PROJECT DESCRIPTION AND TASKS • Tell us what the project is and how you will meet the -requirements outlined in Section 2 of the RFA. • The level of Information will vary according to phase(s) of the project you propose to undertake with grant funds. • If you are applying for grant funding for more than one phase of a project. provide a plan and. grant budget form for completion of each, phase. • if some work has already been completed on, your project and you are requesting funding for an advanced,,phase, submit Information sufficient to demonstrate that the preceding phases are sa#Islied and funding for an advanced phase is warranted. 4.1 Proposed Energy Resource Describe the potential extentlamount of the energy resource that is available. Discuss the pros and cons of your proposed energy resource vs. other alternatives that may be available for the market to be served by your project. We estimate net aeneration of 50-100 MW of averaae baseload Dower at Mt SDurr. Power will most likely serve Anchorage and other Railbelt communities that are currently served primarily by natural gas plant, as well some petroleum and coal plants. Other alternatives to serve the railbelt, other include primarily hydro, wind, and tidal. The pros of this proposed energy source compared to natural gas include: • No fuel cost risk. Power generated at Mt Spurr will be guaranteed at fixed cost for the duration of the PPA, estimated at 25 years. Furthermore, based on our decades of experience, we expect that after that time period we will be able to sign a new PPA, again guaranteeing fixed price for many years • Reliability. Ormat's geothermal technology is among the most reliable available with a guaranteed availability of 95% and actual one at 99%. • Clean. Geothermal is one of the most sustainable sources of energy, with close to zero emissions (see Figure 3); no consumption of cooling water (since Ormat plans to build an air-cooled plat at Mt Spurr); no depletion of the geothermal reservoir (since Ormat's technology does evaporate any portion of the geothermal fluid but rather re -injects 100% of the geothermal fluid to the reservoir); very low visual impact; very small surface occupancy (see Figure 6). AEA10-015 Grant Application Page 13 of 27 10/7/2009 Ormat response 10/11/2009 /ALASKA Renewable Energy Fund � UJERGYAUnICPITY Grant Application Round 3 Coal Petroleum Gas Geothermal Figure 3: CO2 emissions (Iles. CO21kW-hr) Source: K. Kit Bloomfield (]NEEL), Joseph N. Moore (EGI), and Robert M. Neilson, Jr. (INEEL), GRC Bulletin, Mar/Apr 2003 The pros of this proposed energy sources compared to other forms of renewable that may serve the Railbelt (hydro, wind, tidal) include: • Baseload. Unlike practically all other forms of renewable, the geothermal power plant will offer baseload 24/7 generation with a capacity factor of >90%. It is important to note that due to this baseload attribute whenever Ormat makes reference to the plant capacity, 50- 100MW, the reference is to average generation (and not peak), net to the grid. • Proven technology. Ormat has built over 1,000 MW of geothermal plants during the last 3 decades all over the western US and all over the world. Therefore the technology proposed for implementation at Mt. Spurr is proven and risk free (see Figure 5) • Clean. Geothermal compares favorably with other forms of renewables on all environmental attributes, e.g. close to zero emissions, low visual impact, small surface occupancy etc. • Levelized costs. Geothermal ranks better than most fortes of renewbales (Figure 4). Solar PV Biomass Geothermal Wind Run.•ul-n ver hydro Large hydro teal Natural Gas Conser�ion Initiatives s0 100 150 200 250 Generation Cost Range ($/Mh) Dotted vertcle lines: Range of 2006 wholesale electricity prices in Canada Source: B.C. Hydro —Challenges & Choices (2006): Jacob & Company Securities estimates AEA10-015 Grant Application Page 14 of 27 1 OR12009 Ormat response 10/112009 rI ALf1s7IV'1 Renewable Energy Fund tir>traceunaarre Grant Application Round 3 Figure 4: Levelized costs of geothermal and other forms of energy Low geothermal Onambic Digester Gas dtow-Impact Womass fp Hydro Wind ering(drect) Wind �aGass dkdac C rystalline 591con PV . Aolar:ParabulicTrcugh kshore WiM�—G s ----------------- .. MtIIIdal ftalar: Thin ` *biomass Co-Firiry( Film PV (gasilicatior• Sder: fgncentra etl PV 4kdar: Power Tower eve • Solar:NanoCells ' Low IE Market Maturity �, M'gn Source. Navigant Consulting Jacob & Company Securities Figure 5: Technology Maturity AEA10-015 Grant Application Page 15 of 27 10/7/2009 Ormal response 10/112009 WGEDALASKA Renewable Energy Fund Grant Application Round 3 Geothermal Wind* Solar PV" I Solar Thermal i Coal' 0.0 0.5 1.0 1.s 2A 2.5 3.0 3.5 4.0 Sq. M / MIN 'Includes mining " Assumes central station photoaotaic, not rooftop PV systems. "' Land actually occupied by turbines and service roads Source: Brophy, paul (1997) Renewable Energy, Vol 10:213, Geothermal Energy Association Figure 6: 40-year land use 4.2 Existing Energy System 4.2.1 Basic configuration of Existing Energy System Briefly discuss the basic configuration of the existing energy system. Include information about the number, size, age, efficiency, and type of generation. The Mt Spurr geothermal project aims at providing renewable energy to the Railbelt. The authors of this application did not find it necessary to elaborate on the existing energy system in the Railbelt, which is predominantly natural-gas based, with some petroleum, hydro, coal and other 4.2.2 Existing Energy Resources Used Briefly discuss your understanding of the existing energy resources. Include a brief discussion of any impact the project may have on existing energy infrastructure and resources. We currently estimate the resource at Mt. Spurr at 50-100 MW average, net to the grid. This number may vary significantly as we learn more about the resource, which is the primary target of this grant application. From multiple discussions held with various stakeholders in the Railbelt energy sector, and primarily with all 6 Railbelt utilities, we believe this project will have a very positive impact on the energy market thanks to the benefits detailed elsewhere in this application. From discussions Ormat has held with Chugach Electric Association (CEA) it appears that the native point of interconnection for power to arrive from Mt Spurr would be at the Beluga natural gas plant. CEA has indicated that the schedule for having power on line at Mt Spurr bodes will with CEA's plans to retire old gas turbines at Beluga, therefore freeing capacity on the transmission line connecting Beluga to Anchorage and to the rest of the CEA grid. Needless to say, a new 40-mile transmission line, probably between 96 and 230 kV will need to be put in place, and Ormat is already in discussion with CEA as well as with other potential stakeholders on ways to build this T- line. Based on over 3 decades of experience in developing geothermal projects, Onnnat will make sure the Mt Spurr geothermal protect will have a minor impact on the geothermal resource. As explained AEA10-015 Grant Application Page 16 of 27 tOR12009 Ormat response 10/11/2009 l_ASKA Renewable Energy Fund E1 ENERGY {1UT M"Y Grant Application Round 3 before, Ormat's technology does not deplete the resource but rather re -injects 100% of the geothermal fluids. Moreover, no cooling water will be consumed as the plant will be air-cooled. By nature, a geothermal resource to get cooled as a side effect of the geothermal power plant that mines heat and converts it to electricity. However, with proper design and engineering we expect the resource to get cooled by no more than 0.5-1 % annually and this cooling is typically mitigated by drilling a few make-up wells during the lifetime of the project. 4.2.3 Existing Energy Market Discuss existing energy use and its market. Discuss impacts your project may have on energy customers. The Mount Spurr geothermal resource, if developed, would serve customers in the Railbelt. Communities served by the Railbelt utilities are heavily reliant on natural gas resources produced in -state. On page 35 of the Mount Spurr Geothermal Lease Sale No. 3; Final Finding of the Director. Alaska Department of Natural Resources Division of Oil and Gas: June 16, 2008 (Attached), the Alaska Department of Natural Resources concluded that "Although current electrical demand is largely met by natural gas, gas reserves are finite and eventually Southcentral Alaska will have to find another energy source. Geothermal development resulting from this lease sale could contribute to the area's future energy supplies. Additionally, introduction of a competing energy source in Southcentral Alaska may result in downward natural gas price pressure on local utilities." Natural gas production in the Cook Inlet is depleting rapidly, causing concern over future supplies for both electricity and heating. Thus, a 50-100 MIN average, net to the grid, renewable base -load energy project will help bring stability to energy prices by offsetting the need to use these natural gas supplies for electricity production and will free considerable amounts of natural gas for heating (refer to calculations in the Cost Worksheet). As explained in sections 4.1 and 5 this project will also provide the benefits of clean air, of fighting climate change, of long term sustainability (refer to section ts) ana will provide multiple opportunities Tor local nire ana services. 4.3 Proposed System Include information necessary to describe the system you are intending to develop and address potential system design, land ownership, permits, and environmental issues. 4.3.1 System Design Provide the following information for the proposed renewable energy system: • A description of renewable energy technology specific to project location • Optimum installed capacity • Anticipated capacity factor • Anticipated annual generation • Anticipated barriers • Basic integration concept • Delivery methods Section 7 depicts the encouraging results from initial exploration so far, as well as the exploration plan planned for Spring and early Summer 2010, before the program suggested in this proposal begins. Following is a synopsis of the exploration work suggested to take place in the frame work of this grant program, in attempt to complete geophysical and geochemical surveys and start shallow and medium depth (slim hole) drilling: Phase I (Re( work): Geophysical surveys (pre-drillinal AEA10-015 Grant Application Page 17 of 27 10/7/2009 Onnat response 10/11 /2009 __ ©ALAS,KA Renewable Energy Fund Grant Application Round 3 Aeromagnetic Survey: High resolution, aeromagnetic data with a line spacing of 150 m will be acquired oblique to dominant known structural grain within the Mt. Spurr lease. Approximately 1500 line kilometers of data will be acquired (which totals --80 lines). Due to the extreme topography encountered in the lease area, the aeromagnetics may be acquired with a helicopter platform where data will be flown at 150 m off the deck. Reduced -To -Pole (RTP), horizontal gradient, first vertical derivative and depth estimation data will be delivered. Aeromagnetic data will provide control on both shallow and deeper structure that may serve as geothermal fluid conduits. Ground -based Gravity: Regional 800 m spacing gravity grids will be acquired over approximately half of the Ormat Mt. Spurr lease; much of the rest of the lease is perennially covered in snow and ice and will not be included in the survey. Regions of higher potential within these 800m grid areas (including some areas deemed too hazardous to eventually drill within) will be covered in 400 m grid spacing to provide better sub -surface resolution. Though the hazard models currently in -hand preclude development in some parts of the Spurr leases, it is still important to measure the crust in these areas for a complete picture of the potential reservoir. Gravity maps will provide control on potential structures at depth. • Ground -based MT/AMT/CSAMT: At Mt. Spurr, a CSAMT survey was conducted over the south flank of the volcano in the mid-1980's. The CSAMT data revealed a very low resistivity layer on the southeast flank of Crater Peak, overlapping with the area of the self -potential and soil Hg anomalies. Approximately 40 new line kilometers of mixed MT/AMT/CSAMT are planned for the Mt. Spurr lease area. The position of these line segments will be based on both the historical measurements (Nye et al., 1983) and the results of the earlier exploration work in 2009. The CSAMT surveys may refine both sub -surface structural models as well as indicating zones of potential subsurface hydrothermal alteration. In addition, the more broadly spaced AMT/MT lines may elucidate deeper structure of the Mt. Spurr complex. Previous seismic studies indicate a deep magma chamber; MT will continue to reveal the deeper structure of the entire Mt. Spurr region. Field -based Geologic Mapping: A two to three week field campaign performed after airborne data and ground geophysics has been acquired and analyzed. The purpose is primarily standard geologic mapping of crust within and near Ormat leases; faults, fractures, lithologic units and alteration distribution are main targets. We foresee having numerous field targets revealed by the previously described airbome data and geophysics; these targets will be field - checked or `ground-truthed' and placed more firmly into the resource model. Field -based Geochemical Sampling: Prior to fieldwork completed by Ormat in August of 2009, limited water samples were available at Mt. Spurr. Most of these samples were unlikely to be direct leaks from the reservoir but instead were provided heat from volcanic gases that leaked to the surface. This conclusion is based on the HCO3 and SO4 dominance over Cl. High -CI content would characterize a high enthalpy reservoir leakage. This does not mean that a high -CI water could not underlie the area but the chemical work conducted previous to Ormat exploration does not define such water. Warm seeps over a 1.8 km zone south of Crater Peak are encouraging, while modestly high silica and boron also provide encouragement for potential higher temperature waters nearby. The high Mg however, points to cold water input to the samples and lack of high temperature equilibration; actual reservoir waters are as yet undetected. Mercury (Hg) is a volatile element often concentrated in soils in areas of geothermal activity. Soil Hg samples were collected over a 30 square -mile area on the south flank of Mt. Spurr at elevations below 5,000 feet. Elevated soil Hg levels, some 18 times higher than background AEA10-015 Grant Application Page 18 of 27 10/7/2009 Ormat response 10/11/2009 wIMEZZ-) UMM ALMMFTY -A Renewable Energy Fund Grant Application Round 3 levels, were encountered within a 1.5 square mile area about 1.5 miles southeast of Crater Peak. The — 40 deg C zones of warm springs are located on the western edge of the Hg anomaly. The data is an indication that reservoir heat is potentially driving the mercury to the surface. The high mercury values are confined to one rock unit, the recent pyroclastic flow from the Crater Peak volcanic vent. An alternative explanation for the mercury "high" is that these are normal mercury levels for the lava flows. Additional liquid and soil geochemical sampling is planned for both thermal and non -thermal springs and soils within the Ormat lease. Future sampling will analyze for additional species including helium, hydrogen and carbon isotopes. Soil CO2-gas flux and mercury soil gas surveys are also planned, especially in faulted zones and regions where previous surveys were sparse. While the soil gas surveys will serve to indicate regions where hydrothermal upflow is more dominant, additional liquid geochemistry may further elucidate the chemistry and spatial character of the magmatic/hydrothermal plumbing beneath Mt. Spurr Ormat will site approximately sixteen well locations on the Mt. Spurr lease -hold (eight gradient wells and eight slim holes). These well sites will be located in both the western and eastern portions of our leases. Though specific locations are not yet known (pending our exploration surveys in the spring/summer of 2010), wells are sited such that they test a structural/reservoir model; a particular fault or sets of faults/fractures, likely to possess permeability and host hydrothermal fluid upflow, are targeted. Potential host reservoir lithology is also considered when determining well location, depth and direction (if any). The young nature of likely reservoir rocks will bring different drilling challenges (than compared to 'typical' lower-48 Great Basin development projects), however Ormat is prepared for these challenges due to our previous and on -going development of other active volcanic reservoirs (eg. Puna, Hawai'i, Momotombo, Nicaragua, Amatitlan, Guatamala, etc.). We will submit permits for eight to ten gradient wells and eight to ten slim holes depending on the exploration model; though we initially only plan on drilling four gradient and two slim holes in the 2010-2011 timeframe, the additional locations will insure flexibility of our drilling plans. Drilling always provides surprises and multiple sites provides us the ability test different models. Gradient Holes. Ormat first plans on drilling, logging and completing approximately four gradient holes within our areas of interest. Gradient holes will be drilled similarly to core -holes in other development locations. After a 40 x 40 foot pad is built (which contains a lined containment basin [10 x 20 x 3 foot]), rotary drilling equipment will be erected on -site. The drilling program involves drilling a 6'/ inch hole to approximately 50 ft. below ground level and cementing in 4 Y2 inch casing. A 6 inch valve will be installed on top of this casing as well as blowout prevention equipment (ROPE). After testing the BOPE, 3.85 inch diameter HO core will be drilled to 500 ft. After running 1.9 inch tubing, the well will be filled with water, allowed to equilibrate and then measured with simple, portable thermistors for temperature with depth. If the gradient hole comes in contact with groundwater and/or flows in any way, geochemical water samples will be taken for further testing. The holes will be drilled using a polymer -water drilling fluid. Core will be logged by Ormat personnel on -site. Temperature gradient data gleaned from these shallow holes will aid in siting not only remaining gradient holes but also potential deeper slim holes. It is important to note that well locations are selected to test a set of resource models. While one well is sited to test a particular structure at a specific lithologic interval, other well -sites are chosen to test and/or corroborate other structures within the geologic system. An unsuccessful well along a particular structure within a model does not preclude testing another structure in this same system model, but perhaps this structure will be orientated differently or be deeper. See Appendix for full details of the proposed drilling program. AEA10-015 Grant Application Page 19 of 27 10/7/2009 Ormat response 10/11/2009 �AI KC Renewable Energy Fund ENERMA OMW Grant Application Round 3 Slim Holes. Successful gradient holes will be followed by deeper slim hole drilling. The hole will be drilled with a core drilling rig such as those previously used at Unalaska. The rig will be equipped with diesel engines, storage tanks, mud pumps, and other typical auxiliary equipment. The top of the derrick is approximately 75 ft above ground. The drilling program involves drilling a 12-1/4-in. hole to approximately 40 ft below ground level and cementing a 10-in. conductor in place. The rig will then drill a 8-1/2-in. hole to approximately 300 ft. Casing (7-in.) will be cemented in place and blowout prevention equipment (BOPE) installed. After testing the ROPE, a 6-1/8-in. hole will be drilled to approximately 1000 ft. Then 4-1/2-in. casing will be ran and cemented. After BOPE is installed and tested, a HQ hole will be cored to 3000- 3500 ft. A 2-3/8-in. slotted liner will be hung from t940 ft to total depth (TD). At the conclusion of drilling, a test facility will be installed and a flow test conducted to define resource characteristics. Both reservoir temperature and pressure will be measured during and after this test. The holes will be drilled using a clay -water or clay - polymer -water drilling fluid to circulate the rock cuttings to the surface where they are removed. The mud will then be re -circulated. Core will be logged by Ormat personnel on -site. See attachment for full details of the proposed drilling program. Synopsis of the work to be done later on (bevond the scope of this -grant application) This resource assessment will help define the system design that would be used for a power plant in this location. However, this is not the primary objective of the resource assessment. Ormat has standard patented equipment that we have employed for roughly 1,200 MW of generation capacity mostly air-cooled in our facilities installed across the globe. Naturally, site work for resource assessment will help with assessment of the project site, including geotechnical characteristics. It will help us better define the conceptual integration design and the identification of technical barriers to developing a power plant. The proposed system design is for an eventual 50-100 MW average capacity, net to the grid, power plant that could be expanded even further, should the resource be able to support is. The plant will be based on patented power generation technology that is currently used at Ormat installed power generation facilities throughout the world. Ormat will tailor-make the power plant to best utilize the unique characteristics of the geothermal resource, so as to ensure maximum generation and availability and lowest O&M costs. There is a multitude of technologies and configurations to chose from, including a binary configuration based on Organic Rankine Cycle and Ormat's patented Geothermal Combined Cycle technology, that combines a specially designed geothermal steam turbine and an Organic Rankine Cycle (with an organic vapor turbine). Capacity factor will be higher than 95%, when calculating against the state 50-100 MW net average capacity (average and not peak, as commonly stated in wind and other generation technologies). Annual generation is therefore expected to range from 416,100,000 kWh (assuming 50 MW net to the grid) and 832,200,000 kWh (assuming 100 MW net to the grid). Since the technology we are proposing is highly mature with a vast installed base, we do anticipate special barriers beyond those detailed in section 3.6. Integration of the Mt Spurr power into the grid is expected by building a 96 - 230 kV transmission line to Beluga and from there to interconnect to the CEA grid. Power is expected to serve both CEA's customer base as well as to be shared with some/all other Railbelt utilities. CEA has already indicated that its grid, including the transmission line going from Beluga to Anchorage, will be able to accommodate power generated at Mt. Spurr AEA10-015 Grant Application Page 20 of 27 10/7/2009 Ormat response 10/11/2009 wluent'xc�vm SKA Renewable Energy Fund Grant Application Round 3 Delivery method is expected to be baseload, 24/7, based on an hourly generation profile to be agreed with the off-taker(s). Some more information on Ormat power plants, similar to the one expected at Mt. Spurr: In the binary cycle of Figure 7: Simplified Binary Cycle Process Diagram, the Geothermal Fluid is produced under pressure and passes through the tubes of a tube and shell heat exchanger (the "vaporizer"), where it transfers thermal energy to an organic working fluid (pentane or n-pentane) contained in the shell side. The organic fluid vaporizes and these vapors drive the special slow speed turbine (1,800 rpm) direct coupled to the generator. The generated power is conditioned to utility standards and fed to the grid. The geothermal fluid remains under pressure and is 100% injected without any contact with the turbine train components. The organic fluid vapors leave the turbine under positive pressure and are efficiently condensed into liquid form in an air-cooled condenser. This process under normal operation produces near zero air emissions and has the lowest environmental impact of any geothermal technology. AEA10-015 Grant Application Page 21 of 27 10/7/2009 Ormat response 10/11/2009 Renewable Energy Fund �slrnc S prn7� �nr Grant Application Round 3 Reno, NV Ormat supplied 125 MW Upper Mahiao Combined Cycle Geothermal Power Plant, Philippines. A geothermal combined cycle is most effectively applied to a steam -dominated resource. The high- pressure steam from the separator drives a back pressure turbine, which is the most efficient use of steam at this stage in the cycle. The low-pressure steam exits this turbine at a positive pressure and flows into the vaporizer of a bottoming OEC. The heat of condensation of the low-pressure stream is used to vaporize the organic motive fluid and the expansion of these vapors drives the organic turbine. The organic vapors are then condensed in a condenser, and pumped back into the pre -heater and the geothermal fluid is re -injected. Since the steam pressure in the vaporizer AEA10-015 Grant Application Page 22 of 27 10/7/2009 O"at response 10/11/2009 LASKA Renewable Energy Fund �eEac�rr Grant Application Round 3 remains positive, the non -condensable gases (NCG) can simply be vented without any loss of power. The steam condensed in the OEC heat exchangers is re -injected as condensate to the reservoir. Ormat Nevada, Inc. has acquired 35,806.9 acres of geothermal leases on Alaska State lands. Site control requirements established by Alaska Department of Natural Resources in the: Mount Spurr Geothermal Lease Sale No. 3; Final Finding of the Director. Alaska Department ojNatural Resources Division of Oil and Gas: June 16, 2008 (Attached). Ormat will comply with all lease terms and stipulations, including mitigation measures for exploration and development activities on the site. 4.3.3 Permits Provide the following information as it may relate to permitting and how you intend to address outstanding permit issues. • List of applicable permits • Anticipated permitting timeline • Identify and discussion of potential barriers _ Ormat will obtain all necessary authorizations from relevant permitting authorities for its exploration activities. To our knowledge, the description below constitutes the major permits required for the exploration activities that would be funded under the grant sought via this application. The key permit that is required for the Summer 2010 exploration program is a Geophysical AEA10-015 Grant Application Page 23 of 27 10/7/2009 Ormat response 10/11/2009 Lf" SX- A J DOW Aurrnarfrn• Renewable Energy Fund Grant Application Round 3 Exploration permit from the Alaska Division of Oil and Gas. This permit takes 50-90 days to process. This permit will be based on Ormat's Plan of Exploration, which will be submitted to the Division of Oil and Gas on November 16, 2009, Alaska Department of Natural Resources, presenting a plan essentially identical to the one depicted in this grant application. Other applicable permits that may need to be secured prior to the Summer 2010 exploration program include: Borough/Local Government (Kenai Peninsula Borough) • Development permits • Approval for pad use (if temperature gradient wells are drilled) DNR Division of Mining Land & Water (DMLM • Land use permit [11 AAC 96) — for staging areas • ROW [AS 38.05.850] — for roads, trails, ditches, or field gathering lines DNR Division of Oil and Gas (DO&G) [or potentially, the Alaska Oil and Gas Conservation Commission] • Drilling Permits (if temperature gradient wells are drilled) Office of Habitat Management & Permitting (ADFG) • Fish habitat permits [AS 16.05.841] for activities within or across a stream listed in the Atlas of Waters Important for Spawning, Rearing, or Migration of Anadromous Fishes. Office of Project Management & Permitting (OPMP) • ACMP consistency determination (if any activities will take place in or impact the coastal zone) Additional permits that may need to be secured prior to Summer 2011 exploration program include: Alaska Department of Environmental Conservation (ADEC) • Temporary storage of drilling waste • Oil discharge prevention and contingency plan • Certificate of financial responsibility • Domestic water and wastewater permits • Minor air permit Borough/Local Government (Kenai Peninsula Borough) Development permits Approval for pad use US Army Corps of Engineers (ACOE) • Any dredging or filling of wetlands - 404 Permit DNR Division of Oil and Gas (DO&G) [or potentially, the Alaska Oil and Gas Conservation Commission] • Drilling Permits Other general permits • Permits may be required for establishing man camps and for transporting equipment into the field site. AEA10-015 Grant Application Page 24 of 27 10/7/2009 Ormat response 10/11/2009 FAIEW, Renewable Energy Fund Grant Application Round 3 • Additional stipulations on required actions prior to certain exploration activities are discussed in Section R. Mitigation Measures and Lessee Advisories of the Mount Spurr Geothermal Lease Sale No. 3, Final Finding of the Director. Alaska Department of Natural Resources Division of Oil and Gas: June 16, 2008 (Attached) Regulatory; Permitting barriers • At this time, Ormat has not identified any major regulatory barriers that would effect the resource assessment. We intend to work with local partners, including Native Corporations, to assist with the permitting to ensure all permits are obtained in a timely manner. • As progress is made during resource assessment, Ormat will ascertain barriers to construction and interconnection. However, these barriers are not within the scope of this application. 4.3.4 Environmental Address whether the following environmental and land use issues apply, and if so how they will be addressed: • Threatened or Endangered species • - Habitat issues • Wetlands and other protected areas • Archaeological and historical resources • Land development constraints • Telecommunications interference • Aviation considerations • Visual, aesthetics impacts Specific environmental and land issues were identified by the Alaska Department of Natural Resources in the Mount Spurr Geothermal Lease Sale No. 3, Final Finding of the Director. Alaska Department of Natural Resources Division of Oil and Gas: June 16, 2008 (Attached). Mitigation measures are specified in this document. Ormat Nevada, Inc. will adhere to these mitigation measures in order to comply with the terms of the lease agreement. Ormat does not anticipate encountering or impacting any ESA -listed species during its exploration activities. To the extent that any habitat issues are presented, Ormat will confer with the Alaska Department of Fish and Game staff in the Habitat Division and will comply with all terms and conditions of any Title 16 permits. Prior to disturbing soils, Ormat will confer with the U.S. Army Corps of Engineers regarding the need to obtain a Clean Water Act section 404 permit. If Ormat should encounter any archaeological and historical resources, it will consult with the State Historic Preservation Office. Ormat is unaware of any land development constraints. Due to the limited disturbance and low height profile of the planned activities, Ormat does not foresee any telecommunications interference, aviation concerns, or visual/aesthetic impact. However, Ormat will utilize an experienced staff trained to handle environmental and permitting issues on a site - specific basis. For the sake of simplicity and clarify, other issues related to work beyond the scope suggested under this grant application are not presented at this time. 4A Proposed New System Costs and Projected Revenues (Total Estimated Costs and Projected Revenues) The level of cost information provided will vary according to the phase of funding requested and AEA10-015 Grant Application Page 25 of 27 10/7/2009 Ormat response 10/11/2009 AA Renewable Energy Fund Aunmrry Grant Application Round 3 any previous work the applicant may have done on the project. Applicants must reference the source of their cost data. For example: Applicants Records or Analysis, Industry Standards, Consultant or Manufacturer's estimates. 4.4.1 Project Development Cost Provide detailed project cost information based on your current knowledge and understanding of the project. Cost information should include the following: • Total anticipated project cost, and cost for this phase • Requested grant funding • Applicant matching funds — loans, capital contributions, in -kind • Identification of other funding sources • Projected capital cost of proposed renewable energy system • Projected development cost of proposed renewable energy system • Total anticipated project cost, all the way from exploration, through development and construction: Preliminary information indicates $5,000 - $6,000/ kW • Cost for phase I depicted in this application: $472,900 • Requested funding for phase I: $222,404 • Cost for phase II depicted in this application: $3,679,905 • Requested funding for phase II: $1,770,754 • All suggested matching funds are cash • We have not identified other funding sources for cost sharing the exploration. Ormat will be looking for other potential sources to fund the transmission line and access road, that are expected to also serve other projects in the region, e.g. the Chakachamna Hydro project and a potential Wind project. • Projected cost of development: In the geothermal industry, "development" typically refers to pre -drilling exploration and exploration drilling until resource can be confirmed by means of 2-3 successful full-size wells. In the case of Mt Spurr we expect this to be in the $20-$30 million range 4.4.2 Project Operating and Maintenance Costs Include anticipated O&M costs for new facilities constructed and how these would be funded by the applicant (Note: Operational costs are not eligible for grant funds however grantees are required to meet ongoing reporting requirements for the purpose of reporting impacts of projects on the communities The operation of an Ormat power plant is mainly by keeping the process stable and keeping watch on the equipment and resource status. For that most of the control is made out of the control room and routine visual inspections in the plant and wellfield. The operators are well familiarized with the OEC technology and are trained to handle any scenario. Over time, such a facility needs maintenance for keeping the plant running as much as possible, the various actions are either cleaning (equipment/ Piping/ vessels/ wells/etc.), replacing failed parts (pumps, motors, valves, instruments, etc.), general upkeep (painting equipment, road repairs, etc.), maintaining inventory levels of consumables (oils, chemicals, fuel) and calibrating instruments. During planned outages we try to complete the required equipment overhauls and major repairs and make it as fast as we can. This is done in coordination with operations while meeting the extensive safety measures and procedures and in compliance to the environmental requirements. All of the mentioned activity is handled by the plant's internal personal or by aiding with contractors. Each of our facilities is unique with the local resource, culture, and layout. In addition we are customizing the design to answer the local resources. This variety has taught us to be flexible and to best accustom the O&M approach to the need. AEA10-015 Grant Application Page 26 of 27 10/7/2009 Ormat response 10/11/2009 ALASKA Jr L�rNPAOYRarXA Renewable Energy Fund Grant Application Round 3 We currently estimate the all inclusive O&M costs (fixed +variable, including taxes, insurance, royalties, etc.) of this plant to be in the range of $0.03 - $0.06 / kWh. 4.4.3 Power Purchase/Sale The power purchase/sale information should include the following: • Identification of potential power buyer(s)/customer(s) • Potential power purchase/sales price - at a minimum indicate a price range • Proposed rate of return from grant -funded project Ormat has enqaqed in discussions with all 6 Railbelt utilities (Chugach Electric Association, Municipal Light & Power, Golden Valley Electric Association, Homer Electric Association, Matanuska Electric Association, and City of Seward). All utilities expressed high interest in this project and a desire to engage in negotiations of a Power Purchase Agreement, recognizing its key advantages: baseload, price -guarantee, high availability, technological maturity and environmental as well as economical sustainability. Chugach Electric Association has shown exceptional interest, and Ormat is currently negotiating a Memorandum of Understanding that will set the framework for negotiation of a future Power Purchase Agreement and as a basis for cooperation in developing this project. Early estimations indicate $120-$160/ MWh, for a 25 year PPA starting 2016, in 2016 $ value, depending on the actual costs to develop the resource as well as on some external factors, e.g. royalty payment and others. Ormat expects to get an internal rate of return (IRR) circa 12% in the entire life cycle of the Mt 4.4.4 Project Cost Worksheet Complete the cost worksheet form which provides summary information that will be considered in evaluating the project. The Project Cost Worksheet is attached separately. In summary, we believe that calculating the cost benefit of such a project is a complex task, since this is utility -scale long term, strategic project that should be compared with other long term alternatives, e.g. new fossil -fuel plants to be built (e.g. new natural gas CCGTs) as well as other large scale renewable projects. When making this comparison, several long term factors should be taken into account e.g. availability and projected price of natural gas in the Cook Inlet during the years 2016-2041, when the Mt. Spurr plant is planned to be in operation, the cost of environmental attributes e.g. CO2 offset, the probability of a state and/or Federal Renewable Portfolio Standard and its effect on price of fossil -fuel power, etc. An attempt to show that Mt Spurr can compete and be economically superior to natural gas is made in the cost worksheet. This conclusion does not come as a surprise and is in accord with industry research, e.g. the COMPARATIVE COSTS OF CALIFORNIA CENTRAL STATION ELECTRICITY GENERATION TECHNOLOGIES, by the California Energy Commission, CEC-200- 2007-011-SF, from December 2007, that state the Levelized cost of a binary geothermal plant to for a Publicly Owned Utility (POU) to be $65.55/MWh, compared with CCGT at $86.84/MWh encourage turtner discussion wnn ALA on this area. AEA10-015 Grant Application Page 27 of 27 10/7/2009 Oonat response 10/11/2009 Renewable Energy Fund c' wencrnurnaaix Grant Application Round 3 SECTION 5- PROJECT BENEFIT Explain the economic and public benefits of your project. Include direct cost savings, and how the people of Alaska will benefit from the project. The benefits information should include the following: • Potential annual fuel displacement (gal and $) over the lifetime of the evaluated renewable energy project • Anticipated annual revenue (based on i.e. a Proposed Power Purchase Agreement price, RCA tariff, or cost based rate) • Potential additional annual incentives (i.e. tax credits) • Potential additional annual revenue streams (i.e. green tag sales or other renewable energy subsidies or programs that might be available) Assuming 50MW of net generation to the grid, this project is expected to displace 2,925,183 MBtu of natural gas per year for 25 years or more, equivalent to $22.1 m in 2016 to $41 in in 2041. In addition, the project will offset CO2 (compared to natural gas) assumed to be worth $13.7m / year. Please refer to the Cost Worksheet for more detailed assumptions and calculations Assuming a cost -based power price of $120-$160/MWh (in 2016 currency), anticipated annual revenue for a 50 MW plant would range from circa $50m (@ $120/MWh) to $67m (@$160/MWh). We do not expect additional revenue streams, since the value renewable energy credits is probably embedded in the power price and the credits will most likely be passed to the off-taker(s). Further to the economic benefits detailed in section 4.1, and to the sustainability detailed in section 8, we believe the project will bring additional non -economic public benefits to Alaska, e.g.: • Freeing some very valuable Cook Inlet natural gas for heating instead of electricity generation • Reducing emissions of pollutants and green -house gases from otherwise fossil -fuel based plants, thereby improving public health and fighting climate change • Providing multiple short term and long term, direct and indirect opportunities for local hire and services. Even at 50 MW, the benefits to Alaska's economy can be significant. For example, according to a 2006 study by the Geothermal Energy Association in Washington D.C. (prepared for the U.S. Department of Energy): 0 An average 50 MW geothermal plant would provide direct, induced, and indirect jobs for 212 full-time jobs and employ an average of 800 man -year during construction. 0 Geothermal provides more jobs per MW than natural gas, according to the DOE. Not only does geothermal provide more jobs than a traditional power plant, it also provides quality, long-term jobs 0 Geothermal provides long-term income for people with a diversity of job skills. People employed by the sector include welders; mechanics; pipe fitters; plumbers; machinists; electricians; carpenters; construction and drilling equipment operators and excavators; surveyors; architects and designers; geologists; hydrologists; electrical, mechanical, and structural engineers; HVAC technicians; food processing specialists; aquaculture and horticulture specialists; managers; attorneys; regulatory and environmental consultants; accountants; computer techs; resort managers; spa developers; researchers; and government employees. 0 Source — Geothermal Energy Association http://www.geo- energv. org/ou bJications/reports/Socioeconomics%2OG u ide. odf AEA10-015 Grant Application Page 28 of 27 10/7/2009 Onnat response 10/11/2009 INFAUSKA Renewable Energy Fund �em��au`xomr Grant Application Round 3 Ormat is committed to maximize local hire and local services, in all phases of this project, while bring on board the best talents from Ormat's global operations and the best practices developed over 40 years to train, guide and supervise locally hired employees and local contractors and consultant. Promoting a local skill set in geothermal exploration, development, construction and operation will most likely serve to benefit not only Ormat's Mt Spurr project, but also other geothermal projects currently pursued in Alaska (e.g. Naknek, Akutan, Unalaska, Pilgrim Hot SECTION 6- SUSTAINABILITY Discuss your plan for operating the completed project so that it will be sustainable. Include at a minimum: • Proposed business structure(s) and concepts that may be considered. • How you propose to finance the maintenance and operations for the life of the project • Identification of operational issues that could arise. • A description of operational costs including on -going support for any back-up or existing systems that may be require to continue operation • Commitment to reporting the savings and benefits Ormat is a financially sound company. Since 1986 Ormat, and its affiliates, have participated in arranging over US$ 1.6 Billion in project related financing. This has included construction financing, equity investments and term debt financing. Prior to 1996, much of this financing was for the benefit of third parties who were the owners or equity investors in Ormat developed or tumkey constructed geothermal power plants or complete projects. Since 1996, the company has been investing in the ownership and operation of geothermal projects, which it has developed as well as in the acquisition, rehabilitation and operation of geothermal projects developed by others. For more information about how Ormat refinances it power plant please refer to our 2008 1 OK report (http://ccbn 10kwizard com/xml/download.oho?repo=tenk&ipaze=6173303&format=PDF page 21). Ormat's total revenues for 2008 were $344.8M with an operating income of $60.6M. For 6 months ending June 30, 2009 they were respectively $200.1 M and $35.81M Ormat will implement in the Mt Spurr geothermal project over 40 years of experience in power generation, over 30 years of specific experience in O&M of geothermal power plants, a portfolio of over 1200 MW of installed geothermal and recovered energy generation plants, and of over 515 MW of owned and operated geothermal plants. All will serve to make sure that the power plant is run using best available know-how and techniques that would maximize generation, revenue and availability and minimize O&M costs. Thanks to our vast experience in operation worldwide, including in remote, volcanic and arctic environments, we don't expect any unique operational issues. Ormat will make sure to locate the plant on a least hazardous area and to put all means in place to protect the crew, ranging from potential remote un-attended operation (if we decide that's the most appropriate solution) - a modus operandi that Ormat is successfully implementing in several plants, avalanche monitoring, seismic monitoring, rapid evacuation mechanisms etc. Description of our O&M costs and procedure appears in section 4.4.2. There are no backup system that need to operate, rather than a diesel generation that may be used for a black start. We are committed to generate detailed and credible reports on saving and benfits as will be required by all relevant agencies. AEA10-015 Grant Application Page 29 of 27 1077/2009 Onnat response 10/112009 AIMM Renewable Energy Fund Grant Application Round 3 Please refer to the attached 2008 Sustainability Report to learn more about how Ormat guarantees its operation is sustainable in multiple dimensions: sustainable technology, care of the environment, green corporate culture, caring and support for the communities we are part of, and more. AEA10-015 Grant Application Page 30 of 27 10/7/2009 Ormat response 10/11/2009 S Renewable Energy Fund /wWLJ �nu =nY Grant Application Round 3 SECTION 7 REA.DINESS: & COMPLIANCE WIT:Q H TRAN HER GT$ Discuss what you :Piave done to prepare for +this awards and: how quickly you: intend to proceed'- with. work once your grant is approved. Tell• us what you may have already accomplished on-Jhe;proJect to date and identify- other grants that ,may have been previously awarded for this project and' the degree you have been able to meet the -requirements of previous grants. Ormat has been investing substantial resources, both financial and human, in the land leasing and initial feasibility of a utility scale geothermal power plant at Mt Spurr. Ormat is determined to turn this project into a success, assuming there is indeed a commercially viable geothermal resource at Mt Spurr and assuming results of further feasibility studies, such as the subject of this proposal, are successful. Ormat will continue to explore this prospect in 2010 both before the grant eligible date of 7/1/10 and afterwards. Should the grant be awarded, in will greatly assist in sharing some of the risk and cost inherently associated with geothermal exploration, thereby enabling both Ormat and the State of Alaska to do more and better exploration and thereby expediting the time it would take to discover the existence, size and commercial potential of this prospect, so that it could be integrated into the Railbelt Integrated Resource Planning process earlier and at higher confidence level. In preparation for this award, Ormat has established a "task force" lead by Dr. Martini (PI and project manager) and Rahm Orenstein (Director of Business Development and business manager for the Mt Spurr development project) and comprising also a grant manager, a business analyst, project finance experts and a logistics project manager as well as the key staff (geologists, drilling experts, reservoir engineers, permitting experts) detailed in section 3.4. In addition, Ormat is already in advanced stages of vendor solicitation and contracting for multiple contractors and consultants as detailed in section 3.4, both in order to execute the exploration plan planned for Spring and early Summer 2010 (beyond the scope of this grant program) as well as in anticipation for a grant award, so that the above plan can be executed effectively and efficiently. Ormat has financed this initial work through internal sources and has not previously been awarded any state or federal grants. Synopsis of the work and achievements done so far: • Ormat paid $3.5 million in October 2008 to with the DNR geothermal lease sale #3 at Mt. Spurr. • Ormat has spent —$100k in initial reconnaissance. Geologists from Ormat conducted a field reconnaissance survey of Mt Spurr during the summer of 2009 with an overarching goal of future exploration plan definition. Work done included mapping, rock/soil sampling, geochemical sampling and ultimate synthesis of these data with historical data and survey information. Initial results are encouraging, with new positive indicators for the existence of a viable hydrothermal system at -depth. That said, additional extensive exploration (including geochemistry, geophysics and drilling) is required to confirm and delineate this potential geothermal resource. Please refer to the attached confidential resource report to get more insight onto the work accomplished and the results. • Ormat has released an RFP to Alaskan engineering companies in November 8,2009, looking to contract a local company to perform an engineering cost study on the infrastructure that would need to be put in place in order to support the exploration, development and construction at Mt. Spurr. This study is expected to be complete during Q1 2010 and its cost is AEA10-015 Grant Application Page 31 of 27 10/7/2009 Ormat response 10/11/2009 e>t ALASKA Renewable Energy Fund emncnaunooamr Grant Application Round 3 estimated at around $100k. Svnopsis of work that will have been completed by the time the arant is eliaible (7/1/101: The Mt. Spurr volcanic complex is extensive, with volcanic rocks covering at least 100 square kilometers. Steep topography characterizes the area with elevations from about 1,000 feet near the Chackachatna River to over 10,000 feet at the summit of Mt. Spurr. Glacial ice covers most of the complex above 5,000 feet elevation. A major feature of the area is a 4-mile wide horseshoe -shaped caldera or depression developed in the summit area, which is open to the south and southeast. Crater Peak, at about 7,500 feet elevation, is an active vent which has produced two significant explosive eruptions in the 201h century. Surface thermal features include large areas of steaming ground above 10,000 feet near the summit of Mt. Spurr, and fumaroles discharging in the Crater Peak eruptive vent. There is no question of high temperature in this area. The source water for the fumaroles appears to be local snow -melt recharge. A series of warm springs with temperatures ranging from 32-41 deg C is located 2 miles south of Crater Peak at an elevation of approximately 2,200 feet. The dissolved silica content in the waters indicate a reservoir temperature of 150 deg C. Overall, reservoir temperatures may be higher ranging up to 250 deg C (based on other similar volcanic systems). Previous studies of the volcano have not identified a high-level silicic magma chamber that could be the heat source; thus there is some question as to the presence of a high level geothermal reservoir on the south flank of Crater Peak. Attached is a generic model for a Mt. Spurr -type geothermal system. Referring to the diagram, at Mt. Spurr the vent area (Solfatara) is active and a warm spring (the area shown as HCO3/SO4increasing) is present. We do not know if a neutral chloride water (reservoir) exists, but the low resistivity survey results may define such a zone. The field work and reporting for Mt Spurr were generated in the early to mid-1980's when the survey techniques were not as sophisticated as those applied today. For example, electrical surveys would measure this area in much more detail if conducted with today's equipment. In another example, previous geochemical soil -gas surveys provide interesting data points in support of a viable geothermal resource however some types of these surveys (such as mercury) produce contentious results that newer types of surveys may rectify. With these issues yet to be resolved, the plan for exploring and defining the potential geothermal resource at Mt. Spurr is as follows. Geophy-s*cal work that will be done during Drina and early Summer of 2010 (outside the scone of is grant application) expected to total circa $400k_ 1. Aerial Photography: High resolution, 0.25 m spatial resolution, color, aerial stereo photography will be flown over the entire lease position with an additional 2 km buffer of coverage around said leases. These data will initially be used for both creation of high resolution surface lineament/structure/geologic maps as well as base maps for future field -based and digital geologic mapping. 2. UDAR: High resolution, 0.25 m spatial resolution, multiple -return UDAR will be flown over the entire lease position, mimicking survey boundaries of the aerial photography. Both surface first - return data and bare -earth elevation models will be delivered and incorporated into digital spatial databases. Primary usage of the LiDAR data will be for subtle surface structure detection, especially in areas of vegetation coverage. This elevation dataset will also be used in future infrastructure engineering. AEA10-015 Grant Application Page 32 of 27 10/7/2009 Onnat response 10/11/2009 rMC)eA$ Renewable Energy Fund ENERGY nunt M Grant Application Round 3 3. Hyperspectral Imaging: High resolution, 3 m spatial resolution, full -range hyperspectral data will be flown over the same area covered by the previous two surveys (Ormat leases and a 2 km buffer). Both raw data and preliminary surface mineralization maps will be delivered and incorporated into digital spatial databases. These data provide maps of zones of hydrothermal upflow (if any) by using surface distributions of high temperature minerals as proxy for temperature. When combined with structural maps (derived from stereo -photo and LiDAR interpretation), these mineral maps may indicate what portions of regional structure are focusing flow of hydrothermal waters. In addition, Ormat expect to spend circa $50k in preparing for permitting activities planned for Spring and Summer of 2010 SECTION 8- LOCAL SUPORT Discuss what local support or possible opposition there may be regarding your project. Include letters of support from the community that would` benefit from this project. Ormat has been working closely with Railbelt utilities that are the likely buyers of geothermal power from Mt Spurr, with the communities of western Cook Inlet where the project resides and with various environmental and other non-profit organizations who have expressed interest in this project. To date we have encountered nothing but wide support from all constituencies, who value the potential clean, affordable, reliable, price -guaranteed, renewable energy. The following is a partial list of the primary local entities we are in touch with: • Railbelt utilities: Ormat has engaged in discussions with all 6 Railbelt utilities (Chugach Electric Association, Municipal Light & Power, Golden Valley Electric Association, Homer Electric Association, Matanuska Electric Association, and City of Seward. All utilities expressed high interest in this project and a desire to engage in negotiations of a Power Purchase Agreement. Chugach Electric Association has shown exceptional interest, and Ormat is currently negotiating a Memorandum of Understanding that will set the framework for negotiation of a future Power Purchase Agreement and as a basis for cooperation in developing this project. Attached to this application is a letter of support from Chugach Electric Association. • Railbelt communities: The community that would benefit the most from the power from Mt. Spurr would be the ratepayers of Anchorage as well as other communities in the Railbelt. Attached to this proposal is a letter of support from the Mayor of Anchorage. • Communities of Western Cook Inlet: Ormat has engaged with all major constituencies in western Cook Inlet in order to seek cooperation in infrastructure development and seek local talent and services. These communities include: o Tyonek: Ormat has built a strong relationship with Tyonek Native Corporation and with the Native Village of Tyonek, laying the foundation for a long-term relationship, where Ormat would enjoy access to local talent and services and Tyonek would enjoy opportunities for local hire and services. In addition, information is exchanged bilaterally in order to make sure Tyonek is fully aware of the development plan and Ormat is aware of the special traditions and needs of the people of Tyonek. Attached to this proposal is a letter of support from Tyonek Native Corporation. o CIRI: Ormat also contacted CIRI, the biggest landowner near Ormat's leases on Mt Spurr, as well as a major representative of the communities of western Cook Inlet. Ormat briefed CIRI on its proposed plans and initiated discussions regarding potential areas for cooperation. CIRI expressed support for Ormat's plans for Mt Spurr. AEA10-015 Grant Application Page 33 of 27 10/7/2009 Ormat response 10/11/2009 clu ALASKA Renewable Energy Fund GEED ENEMYnurWArnr Grant Application Round 3 o Kenai Peninsula Borough: Ormat has engaged with the KPB to explore potential collaboration on infrastructure support, e.g. access road towards the project. The Mayor and his key staff have expressed full support for Ormat's development plans. A letter of support from the Mayor of Kenai Peninsula Borough has been forwarded to AEA directly. The renewable energy and the environmental community of the Cook Inlet. Ormat has reached towards the environmental community of the Cook Inlet, in order to share its plans for Mt Spurr and learn about potential areas of sensitivity. Various entities have been contacted, to include The Cook InletKeeper, The Renewable Energy Alaska Project (REAP), the Alaska Center for Appropriate Technologies (ACAT) and the Homer Electric Association Members Forum (HEAMF). All these entities have expressed full support of the Mt Spurr geothermal project, recognizing its great advantages to boost Alaska's renewable energy portfolio and to fight climate change while striking the right balance between development and sustainability. Attached to this proposal are letters of support from the Cook InletKeeper, ACAT and MEAMF. SECTION"9 .GRANT BUDGET Tell us: how much you want in grant funds Include anyin.vestments to date and fundingsources, how much ' is being requested In grant funds,, and addif Onal investments you will make as an applicant. Include an estimate of budget costs by milestones .us ng the forma Grant8udget3. doc - • Investment in the project so far has roughly been (further to the information depicted in section 7): o $3.5 million in leasing state lands o $100k in exploration and business support Additional investment planned between the date of this application and the grant eligibility date (7/1/10) is expected to roughly include (further to section 7): o $100k in an engineering cost study for required infrastructure o $400k in geophysical exploration to take place Spring and early Summer 2010 o $50k in permitting for activities expected during Spring and Summer of 2010 • Requested grant funds for phases I + II: $1,993,158 • Suggested matching funds for phases I + II: $2,159,647 in cash Please refer to the Grant Budget Form for detailed breakdown by milestones as per RFA instructions. Ormat is determined to make this project a success and would be highly appreciative should AEA select the proposed Mt Spurr grant application, so that the high cots of exploration could be share and a better, quicker resource assessment could be made in order to evaluate and confirm this prospect, and eventually add it to the Railbelt Integrated Resource Planning in a timely manner and with high level of confidence. AEA10-015 Grant Application Page 34 of 27 10/7/2009 Ormat response 10/11/2009 Fj�mg.-mo L 11-0 L 3 Renewable Energy Fund Grant Application Round 3 AEA10-015 Grant Application Page 35 of 27 10/7/2009 Ormat response 10/11/2009 4NEDAENERGY �3KA Renewable Energy Fund Grant Application Round 3 SECTIONS 9 ADDITIONAL DOCUMENTATION AND. CERTIFICATION SUBMIT THE FOLLOWING DOCUMEN S WITH YOUR: APPLICATION: A. Resumes of Applicant's Project Manager, key staff, partners, consultants, and suppliers per application form Section 3.1 and 3.4. B. Cost Worksheet per application form Section 4.4.4. C. Grant Budget Form per application form Section 9. D. Letters demonstrating local support per application form Section 8. E. An electronic version of the entire application on CD per RFA Section 1.6. F. Governing Body Resolution or other formal action taken by the applicant's governing body or management per RFA Section 1.4 that: - Commits the organization to provide the matching resources for project at the match amounts indicated in the application. Authorizes the individual who signs the application has the authority to commit the organization to the obligations under the grant. - Provides as point of contact to represent the applicant for purposes of this application. - Certifies the applicant is in compliance with applicable federal, state, and local, laws including existing credit and federal tax obligations. F. CERTIFICATION The undersigned certifies that this application for a renewable energy grant is truthful and correct, and that the applicant is in compliance with, and will continue to comply with, all federal and state laws including existing credit and federal tax obligations. Print Name Signature Title Date AEA10-015 Grant Application Page 36 of 27 10/7/2009 Ormat response 10/11/2009