UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2015
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________to ___________
Commission File Number: 001-34023
U.S. GEOTHERMAL INC.
(Exact Name of Registrant as Specified in Its Charter)
Delaware |
84-1472231 |
(State or Other Jurisdiction of |
(I.R.S. Employer |
Incorporation or Organization) |
Identification No.) |
390 E. Parkcenter Blvd., Suite 250 |
|
Boise, Idaho |
83706 |
(Address of Principal Executive Offices) |
(Zip Code) |
208-424-1027
(Registrants Telephone Number,
Including Area Code)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [X] No [ ]
Indicate by check mark whether the registrant has submitted
electronically and posted on its corporate Web site, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files). Yes [X] No [ ]
-1-
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated filer or a smaller
reporting company. See the definitions of large accelerated filer,
accelerated filer, and smaller reporting company in Rule 12b-2 of the
Exchange Act. (Check one):
Large accelerated filer [ ] |
Accelerated filer [ ] |
Non-accelerated filer [ ]
(Do not check if a smaller reporting company) |
Smaller reporting company [X] |
Indicate by check mark whether the registrant is a shell
company (as defined in Rule 12b-2 of the Exchange Act).
Yes [ ] No [X]
Indicate the number of shares outstanding of each of the
issuers classes of common stock, as of the latest practicable date.
Class |
Shares Outstanding as of May 8, 2015
|
Common stock, par value |
107,063,029 |
$ 0.001 per share |
|
-2-
U.S. Geothermal Inc. |
Form 10-Q |
For the First Quarter Ended March 31, 2015 |
|
INDEX |
-3-
U.S. GEOTHERMAL INC. |
CONSOLIDATED BALANCE SHEETS
|
|
|
(Unaudited) |
|
|
|
|
|
|
March 31, 2015 |
|
|
December 31, 2014 |
|
|
|
|
|
|
|
|
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
Current: |
|
|
|
|
|
|
Cash and cash equivalents |
$ |
13,290,389 |
|
$ |
12,994,975 |
|
Restricted cash and
bonds |
|
4,070,611 |
|
|
3,320,781 |
|
Trade accounts receivable |
|
2,559,801 |
|
|
3,774,133 |
|
Deferred income tax
asset |
|
1,803,000 |
|
|
1,803,000 |
|
Other current assets |
|
1,431,153 |
|
|
1,550,359 |
|
Total current assets |
|
23,154,954 |
|
|
23,443,248 |
|
|
|
|
|
|
|
|
Restricted cash and bond reserves
|
|
17,165,788 |
|
|
18,690,096 |
|
Property, plant and equipment, net of depreciation
|
|
166,689,585 |
|
|
166,859,446 |
|
Intangible assets, net of
amortization |
|
15,402,092 |
|
|
15,417,514 |
|
Net deferred income tax asset |
|
8,060,000 |
|
|
8,504,000 |
|
Total assets |
$ |
230,472,419 |
|
$ |
232,914,304 |
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Liabilities: |
|
|
|
|
|
|
Accounts payable and accrued
liabilities |
$ |
1,261,889 |
|
$ |
1,886,947 |
|
Related party accounts
payable |
|
- |
|
|
5,195 |
|
Current portion of capital lease
obligations |
|
8,426 |
|
|
20,919 |
|
Current portion of
notes payable |
|
4,355,902 |
|
|
4,336,271 |
|
Total current liabilities |
|
5,626,217 |
|
|
6,249,332 |
|
|
|
|
|
|
|
|
Long-term Liabilities: |
|
|
|
|
|
|
Asset retirement
obligations |
|
1,400,000 |
|
|
1,400,000 |
|
Notes payable, less current portion |
|
92,541,453 |
|
|
94,376,351 |
|
Total
long-term liabilities |
|
93,941,453 |
|
|
95,776,351 |
|
|
|
|
|
|
|
|
Total liabilities |
|
99,567,670 |
|
|
102,025,683 |
|
|
|
|
|
|
|
|
Commitments and Contingencies (note
9) |
|
|
|
|
|
|
STOCKHOLDERS EQUITY |
|
|
|
|
|
|
Capital stock (authorized: 250,000,000
common shares with a $0.001 par value; issued
and outstanding shares at March 31, 2015 and December
31, 2014 were: 107,063,029 and 107,018,029;
respectively) |
|
107,063 |
|
|
107,018 |
|
Additional paid-in capital |
|
104,048,731 |
|
|
103,669,371 |
|
Accumulated deficit |
|
(18,550,725 |
) |
|
(19,284,860 |
) |
|
|
85,605,069 |
|
|
84,491,529 |
|
|
|
|
|
|
|
|
Non-controlling interests |
|
45,299,680 |
|
|
46,397,092 |
|
Total stockholders equity |
|
130,904,749 |
|
|
130,888,621 |
|
|
|
|
|
|
|
|
Total liabilities and
stockholders equity |
$ |
230,472,419 |
|
$ |
232,914,304 |
|
The accompanying notes are an integral part of these interim
consolidated financial statements.
-4-
U.S. GEOTHERMAL INC. |
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
|
|
|
(Unaudited) |
|
|
|
For the Three Months Ended March 31, |
|
|
|
2015 |
|
|
2014 |
|
|
|
|
|
|
|
|
Plant Revenues: |
|
|
|
|
|
|
Energy sales |
$ |
8,375,746 |
|
$ |
8,401,097 |
|
Energy credit
sales |
|
98,115 |
|
|
100,868 |
|
Total plant
operating revenues |
|
8,473,861 |
|
|
8,501,965 |
|
|
|
|
|
|
|
|
Plant Expenses: |
|
|
|
|
|
|
Plant production
expenses |
|
2,290,212 |
|
|
2,159,706 |
|
Depreciation and amortization
|
|
1,568,012 |
|
|
1,558,318 |
|
Total plant operating expenses |
|
3,858,224 |
|
|
3,718,024 |
|
|
|
|
|
|
|
|
Gross Profit |
|
4,615,637 |
|
|
4,783,941 |
|
Operating Expenses (Income): |
|
|
|
|
|
|
Corporate
administration |
|
295,380 |
|
|
292,306 |
|
Professional and management fees
|
|
383,123 |
|
|
369,983 |
|
Salaries and
wages |
|
381,988 |
|
|
394,713 |
|
Stock based compensation |
|
365,455 |
|
|
147,312 |
|
Travel and
promotion |
|
30,428 |
|
|
34,723 |
|
Exploration costs |
|
43,041 |
|
|
24,086 |
|
Operating Income |
|
3,116,222 |
|
|
3,520,818 |
|
|
|
|
|
|
|
|
Interest
Expense |
|
949,351 |
|
|
980,992 |
|
Other (income) expense |
|
(40,510 |
) |
|
(7,265 |
) |
|
|
|
|
|
|
|
Income Before Income Tax Expense |
|
2,207,381 |
|
|
2,547,091 |
|
Income Tax
Expense |
|
(444,000 |
) |
|
- |
|
|
|
|
|
|
|
|
Net Income |
|
1,763,381 |
|
|
2,547,091 |
|
Net income attributable
to the non-controlling interests |
|
(1,029,246 |
) |
|
(1,207,671 |
) |
|
|
|
|
|
|
|
Net Income Attributable to U.S. Geothermal Inc. |
|
734,135 |
|
|
1,339,420 |
|
Other Comprehensive Income: |
|
|
|
|
|
|
Unrealized income on
investment in equity securities |
|
- |
|
|
27,321 |
|
|
|
|
|
|
|
|
Comprehensive
Income Attributable to U.S. Geothermal Inc. |
$ |
734,135 |
|
$ |
1,366,741 |
|
|
|
|
|
|
|
|
Basic Net Earnings Per Share Attributable to U.S.
Geothermal Inc. |
$ |
0.01 |
|
$ |
0.01 |
|
Diluted Net Earnings Per Share Attributable to
U.S. Geothermal Inc. |
$ |
0.01 |
|
$ |
0.01 |
|
|
|
|
|
|
|
|
Shares used in the calculation of income
per share: |
|
|
|
|
|
|
Basic |
|
107,039,029 |
|
|
102,300,440 |
|
Diluted |
|
108,417,352 |
|
|
105,202,422 |
|
The accompanying notes are an integral part of these interim
consolidated financial statements.
-5-
U.S. GEOTHERMAL INC. |
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
|
(Unaudited) |
|
|
|
For the Three Months Ended March 31, |
|
|
|
2015 |
|
|
2014 |
|
|
|
|
|
|
|
|
Operating Activities: |
|
|
|
|
|
|
Net Income |
$ |
1,763,381 |
|
$ |
2,547,091 |
|
Adjustments to reconcile net income to
total cash provided by operating activities: |
|
|
|
|
|
|
Depreciation and
amortization |
|
1,595,421 |
|
|
1,590,029 |
|
Stock based compensation |
|
365,455 |
|
|
147,312 |
|
Loss on sale of
securities |
|
- |
|
|
27,967 |
|
Change in deferred income taxes |
|
444,000 |
|
|
- |
|
Net changes in: |
|
|
|
|
|
|
Trade accounts receivable |
|
1,214,332 |
|
|
1,191,915 |
|
Accounts payable
and accrued liabilities |
|
(567,674 |
) |
|
(391,438 |
) |
Prepaid expenses and other |
|
119,206 |
|
|
(83,811 |
) |
Total cash provided by operating activities |
|
4,934,121 |
|
|
5,029,065 |
|
|
|
|
|
|
|
|
Investing Activities: |
|
|
|
|
|
|
Purchases of property,
plant and equipment |
|
(1,496,717 |
) |
|
(595,230 |
) |
Company acquisitions |
|
- |
|
|
(324,436 |
) |
Net funding of
restricted cash reserves and bonds |
|
774,478 |
|
|
824,990 |
|
Total cash used by
investing activities |
|
(722,239 |
) |
|
(94,676 |
) |
|
|
|
|
|
|
|
Financing Activities: |
|
|
|
|
|
|
Issuance of common
stock |
|
13,951 |
|
|
295,913 |
|
Distributions to non-controlling
interest |
|
(2,102,658 |
) |
|
(13,304,947 |
) |
Principal payments on
notes payable and other obligations |
|
(1,815,267 |
) |
|
(2,285,574 |
) |
Principal payments on capital leases
|
|
(12,494 |
) |
|
(11,768 |
) |
Total cash used by financing activities |
|
(3,916,468 |
) |
|
(15,306,376 |
) |
|
|
|
|
|
|
|
Increase (Decrease) in Cash and Cash
Equivalents |
|
295,414 |
|
|
(10,371,987 |
) |
|
|
|
|
|
|
|
Cash and Cash Equivalents, Beginning of
Period |
|
12,994,975 |
|
|
28,736,934 |
|
|
|
|
|
|
|
|
Cash and Cash Equivalents, End of Period |
$ |
13,290,389 |
|
$ |
18,364,947 |
|
|
|
|
|
|
|
|
Supplemental Disclosures: |
|
|
|
|
|
|
Non-cash investing and financing activities: |
|
|
|
|
|
|
Accrual for purchases
of property and equipment |
$ |
86,579 |
|
$ |
53,096 |
|
Receivable from sale of equity
securities |
|
- |
|
|
41,528 |
|
|
|
|
|
|
|
|
Other Items: |
|
|
|
|
|
|
Interest paid |
|
1,399,457 |
|
|
1,438,977 |
|
The accompanying notes are an integral part of these interim
consolidated financial statements.
-6-
U.S. GEOTHERMAL INC. |
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS
EQUITY - Unaudited |
For the Three Months Ended March 31, 2015 and Year
Ended December 31, 2014 |
|
|
|
|
|
|
|
|
Additional |
|
|
|
|
|
Accumulated |
|
|
Non- |
|
|
|
|
|
|
Number of |
|
|
Common |
|
|
Paid-In |
|
|
Accumulated |
|
|
Comprehensive |
|
|
controlling |
|
|
|
|
|
|
Shares |
|
|
Shares |
|
|
Capital |
|
|
Deficit |
|
|
Income (Loss) |
|
|
Interest |
|
|
Totals |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2013 |
|
102,094,542 |
|
$ |
102,094 |
|
$ |
100,381,207
|
|
$ |
(30,898,571 |
)
|
$ |
(27,321 |
)
|
$ |
58,155,480
|
|
$ |
127,712,889
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distributions to non-controlling interest
entities |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
(15,048,334 |
)
|
|
(15,048,334 |
)
|
Non-controlling equity contribution from Gerlach Green
Energy, LLC |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
7,360 |
|
|
7,360 |
|
Stock issued to shareholders of acquired
company |
|
692,769 |
|
|
693 |
|
|
317,981 |
|
|
- |
|
|
- |
|
|
- |
|
|
318,674 |
|
Stock issued by the exercise of employee stock options |
|
1,077,000 |
|
|
1,077 |
|
|
336,544 |
|
|
- |
|
|
- |
|
|
- |
|
|
337,621 |
|
Stock issued by the exercise of stock
purchase warrants |
|
2,594,596 |
|
|
2,595 |
|
|
1,294,703 |
|
|
- |
|
|
- |
|
|
- |
|
|
1,297,298 |
|
Stock compensation |
|
559,122 |
|
|
559 |
|
|
1,338,936 |
|
|
- |
|
|
- |
|
|
- |
|
|
1,339,495 |
|
Unrealized loss and reclassification to net
income |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
27,321 |
|
|
- |
|
|
27,321 |
|
Net income |
|
- |
|
|
- |
|
|
- |
|
|
11,613,711 |
|
|
- |
|
|
3,282,586 |
|
|
14,896,297 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2014 |
|
107,018,029 |
|
|
107,018 |
|
|
103,669,371 |
|
|
(19,284,860 |
) |
|
- |
|
|
46,397,092 |
|
|
130,888,621 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distributions to non-controlling interest entities |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
(2,126,658 |
) |
|
(2,126,658 |
) |
Stock issued by the exercise of employee
stock options |
|
45,000 |
|
|
45 |
|
|
13,905 |
|
|
- |
|
|
- |
|
|
- |
|
|
13,950 |
|
Stock compensation |
|
- |
|
|
- |
|
|
365,455 |
|
|
- |
|
|
- |
|
|
- |
|
|
365,455 |
|
Net income |
|
- |
|
|
- |
|
|
- |
|
|
734,135 |
|
|
- |
|
|
1,029,246 |
|
|
1,763,381 |
|
Balance at March 31, 2015 |
|
107,063,029 |
|
$ |
107,063 |
|
$ |
104,048,731 |
|
$ |
(18,550,725 |
) |
$ |
- |
|
$ |
45,299,680 |
|
$ |
130,904,749 |
|
The accompanying notes are an integral part of these interim
consolidated financial statements.
-7-
U.S. GEOTHERMAL INC. |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -
Unaudited |
March 31, 2015 |
NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS
U.S. Geothermal Inc. (the Company) was incorporated on March
10, 2000 in the State of Delaware. U.S. Geothermal Inc. Idaho was formed in
February 2002, and is the primary subsidiary through which the Company conducts
its operations. The Company constructs, manages and operates power plants that
utilize geothermal resources to produce energy. The Companys operations have
been, primarily, focused in the Western United States of America.
Basis of Presentation
These unaudited interim consolidated financial statements of
the Company and its subsidiaries have been prepared in accordance with the rules
and regulations of the Securities and Exchange Commission (SEC) for interim
financial reporting. Certain information and footnote disclosures normally
included in the annual consolidated financial statements prepared in accordance
with U.S. generally accepted accounting principles (GAAP) have been condensed
or omitted pursuant to such rules and regulations. In our opinion, the unaudited
consolidated financial statements include all material adjustments, all of which
are of a normal and recurring nature, necessary to present fairly our financial
position as of March 31, 2015 and our operating results and cash flows for the
three months ended March 31, 2015 and 2014. The accompanying financial
information as of December 31, 2014 is derived from audited financial
statements. Interim results are not necessarily indicative of results for a full
year. The information included in this Quarterly Report on Form 10-Q should be
read in conjunction with our Annual Report on Form 10-K for the year ended
December 31, 2014.
The Company consolidates subsidiaries that it controls
(more-than-50% owned) and entities over which control is achieved through means
other than voting rights. These consolidated financial statements include the
accounts of the Company and its wholly owned subsidiaries, as well as three
controlling interests. The accounts of the following companies are consolidated
in these financial statements:
|
i) |
U.S. Geothermal Inc. (incorporated in the State of
Delaware); |
|
ii) |
U.S. Geothermal Inc. (incorporated in the State of
Idaho); |
|
iii) |
U.S. Geothermal Services, LLC (organized in the State of
Delaware); |
|
iv) |
Nevada USG Holdings, LLC (organized in the State of
Delaware); |
|
v) |
USG Nevada LLC (organized in the State of
Delaware); |
|
vi) |
Nevada North USG Holdings, LLC (organized in the State of
Delaware); |
|
vii) |
USG Nevada North, LLC (organized in the State of
Delaware); |
|
viii) |
Oregon USG Holdings, LLC (organized in the State of
Delaware); |
|
ix) |
USG Oregon LLC (organized in the State of
Delaware); |
|
x) |
Raft River Energy I LLC (organized in the State of
Delaware); |
|
xi) |
Gerlach Geothermal LLC (organized in the State of
Delaware); |
|
xii) |
USG Gerlach LLC (organized in the State of
Delaware); |
|
xiii) |
U.S. Geothermal Guatemala, S.A. (organized in
Guatemala); |
|
xiv) |
Geysers USG Holdings Inc. (incorporated in the State of
Delaware); |
|
xv) |
Western GeoPower, Inc. (incorporated in the State of
California); |
|
xvi) |
Etoile Holdings Inc. (incorporated in the
Bahamas); |
|
xvii) |
Mayacamas Energy LLC (organized in the State of
California); |
|
xviii) |
Skyline Geothermal LLC (organized in the State of
Delaware); |
|
xix) |
Skyline Geothermal Holding, Inc. (incorporated in the
State of Delaware); and |
-8-
|
xx) |
Earth Power Resources Inc. (incorporated in
Delaware). |
All intercompany transactions are eliminated upon
consolidation.
In cases where the Company owns a majority interest in an
entity but does not own 100% of the interest in the entity, it recognizes a
non-controlling interest attributed to the interest controlled by outside third
parties. The Company will recognize 100% of the assets and liabilities of the
entity, and disclose the non-controlling interest. The statements of
comprehensive income will consolidate the subsidiarys full operations, and will
separately disclose the elimination of the non-controlling interests allocation
of profits and losses.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cash and Cash Equivalents
The Company considers all unrestricted cash, short-term
deposits, and other investments with original maturities of no more than ninety
days when acquired to be cash and cash equivalents.
Trade Accounts Receivable Allowance for Doubtful
Accounts
Management estimates the amount of trade accounts receivable
that may not be collectible and records an allowance for doubtful accounts. The
allowance is an estimate based upon aging of receivable balances, historical
collection experience, and the periodic credit evaluations of our customers
financial condition. Receivable balances are written off when we determine that
the balance is uncollectible. As of March 31, 2015 and December 31, 2014, there
were no balances that were over 90 days past due and no balance in allowance for
doubtful accounts was recognized.
Concentration of Credit Risk
The Companys cash and cash equivalents, including restricted
cash, consisted of commercial bank deposits, money market accounts, and petty
cash. Cash deposits are held in commercial banks in Boise, Idaho and Portland,
Oregon. Deposits are guaranteed by the Federal Deposit Insurance Corporation
(FDIC) up to $250,000 per legal entity. At March 31, 2015, the Companys total
cash balance, excluding money market funds, was $3,869,559, and bank deposits
amounted to $3,967,574. The primary difference was due to outstanding checks and
deposits. Of the bank deposits, $2,480,347 was not covered by or was in excess
of FDIC insurance guaranteed limits. At March 31, 2015, the Companys money
market funds invested, primarily, in government backed securities totaled
$30,653,529 and were not subject to deposit insurance.
Property, Plant and Equipment
Property, plant and equipment, including assets under capital
lease, are recorded at historical cost. Costs of acquisition of geothermal
properties are capitalized in the period of acquisition. Major improvements that
significantly increase the useful lives and/or capabilities of the assets are
capitalized. A primary factor in determining whether to capitalize construction
type costs is the stage of the potential projects development. Once a project
is determined to be commercially viable, all costs directly associated with the
development and construction of the project are capitalized. Until that time,
all development costs are expensed. A commercially viable project will have,
among other factors, a reservoir discovery well or other significant geothermal
surface anomaly, a power transmission path that is identified and available, and
an electricity off-taker identified. A valid reservoir discovery is generally
defined when a test well has been substantially completed that indicates the
presence of a geothermal reservoir that has a high probability of possessing the
necessary temperatures, permeability, and flow rates. After a valid discovery
has been made, the project enters the development stage. Generally, all costs
incurred during the development stage are capitalized and tracked on an
individual project basis. If a geothermal project is abandoned, the associated
costs that have been capitalized are charged to expense in the year of
abandonment. Expenditures for repairs and maintenance are charged to expense as
incurred. Interest costs incurred during the construction period of defined
major projects from debt that is specifically incurred for those projects are
capitalized. Funds received from grants associated with capital projects reduce
the cost of the asset directly associated with the individual grants. The offset
of the cost of the asset associated with grant proceeds is recorded in the
period when the requirements of the grant are substantially complete and the
amount can be reasonably estimated.
-9-
Direct labor costs, incurred for specific major projects
expected to have long-term benefits will be capitalized. Direct labor costs
subject to capitalization include employee salaries, as well as, related payroll
taxes and benefits. With respect to the allocation of salaries to projects,
salaries are allocated based on the percentage of hours that our key managers,
engineers and scientists work on each project and are invoiced to the project
each month. These individuals track their time worked at each project. Major
projects are, generally, defined as projects expected to exceed $500,000. Direct
labor includes all of the time incurred by employees directly involved with
construction and development activities. General and/or indirect management time
and time spent evaluating the feasibility of potential projects is expensed when
incurred. Employee training time is expensed when incurred.
Depreciation is calculated on a straight-line basis over the
estimated useful life of the asset. Where appropriate, terms of property rights
and revenue contracts can influence the determination of estimated useful lives.
Estimated useful lives in years by major asset categories are summarized as
follows:
|
Estimated Useful |
Asset Categories |
Lives in Years |
|
|
Furniture, vehicle and other equipment |
3 to 5 |
Power plant, buildings and improvements |
3 to 30 |
Wells |
30 |
Well pumps and components |
5 to 15 |
Pipelines |
30 |
Transmission lines |
30 |
Stock Compensation
The Company accounts for stock based compensation by recording
the estimated fair value of stock-based awards granted as compensation expense
over the vesting period, net of estimated forfeitures. The fair value of
restricted stock awards is determined based on the number of shares granted and
the quoted price of the Companys common stock on the date of grant. The fair
value of stock option awards is estimated at the grant date as calculated by the
Black-Scholes-Merton option pricing model. Stock-based compensation expense is
attributed to earnings for stock options and restricted stock on the
straight-line method. The Company estimates forfeitures of stock-based awards
based on historical experience and expected future activity.
Earnings Per Share
Basic income or loss per share is computed using the weighted
average number of common shares outstanding during the period, and excludes any
dilutive effects of common stock equivalent shares, such as options and
restricted stock awards. Restricted stock awards (RSAs) are considered
outstanding and included in the computation of basic income or loss per share
when underlying restrictions expire and the awards are no longer forfeitable.
Diluted income per share is computed using the weighted average number of common
shares outstanding and common stock equivalent shares outstanding during the
period using the treasury stock method. Common stock equivalent shares are
excluded from the computation if their effect is anti-dilutive. In a period where
we are in a net loss position, the diluted loss per share is computed using the
basic share count.
-10-
Foreign Currency Translation
The Companys functional currency is the U.S. dollar. Monetary
items are converted into U.S. dollars at the rate prevailing at the balance
sheet date. Resulting gains and losses are generally included in determining net
income for the period in which exchange rates change.
Revenue
Revenue Recognition
Energy Sales
The energy sales revenue is recognized when the electrical
power generated by the Companys power plants is delivered to the customer who
is reasonably assured to be able to pay under the terms defined by the Power
Purchase Agreements (PPAs).
Renewable Energy Credits (RECs)
Currently, the Company operates three plants that produce
renewable energy that creates a right to a REC. The Company earns one REC for
each megawatt hour produced from the geothermal power plant. The Company
considers the RECs to be an inventory item held for sale, and outputs that are
an economic benefit obtained directly through the operation of the plants. The
Company does not currently hold any RECs for our own use. Revenues from RECs
sales are recognized when the Company has met the terms and conditions of
certain energy sales agreements with a financially capable buyer. At Raft River
Energy I LLC, each REC is certified by the Western Electric Coordinating Council
and sold under a REC Purchase and Sales Agreement to Holy Cross Energy. At San
Emidio and Neal Hot Springs, the RECs are owned by our customer and are bundled
with energy sales. At all three plants, title for the RECs pass during the same
month as energy sales. As a result, costs associated with the sale of RECs are
not segregated on the statement of operations.
Revenue Source
All of the Companys operating revenues (energy sales and
energy credit sales) originate from energy production from its interests in
geothermal power plants located in the states of Idaho, Oregon and Nevada.
Recent Accounting Pronouncements
Management has considered all recent accounting pronouncements.
The following pronouncements were deemed applicable to our financial statements:
Consolidation
In February 2015, FASB issued Accounting Standards Update No.
2015-02 (Update 2015-02), Amendments to the Consolidation Analysis,
Consolidation (Topic 810). Update 2015-02 provides modifications to the
evaluation of variable interest entities that may impact consolidation of
reporting entities. Update 2015-02 is effective for public business entities for
fiscal years, and for interim periods within those fiscal years, beginning after
December 15, 2015. The Company currently consolidates variable interest entities
and may create or acquire variable interest entities for future endeavors.
Management is still evaluating the possible impact this Update may have on the
financial presentation of the Companys consolidated financial statements.
-11-
Presentation of Debt Issuance Costs
In April 2015, FASB issued Accounting Standards Update No.
2015-03 (Update 2015-03), Simplifying the Presentation of Debt Issuance
Costs, Interest-Imputation of Interest (Subtopic 835-30). Update 2015-03
requires that debt issuance costs related to a recognized debt liability be
presented in the balance sheet as a direct deduction from the carrying amount of
that debt liability. For public business entities, Update 2015-03 is effective
for financial statements issued for fiscal years beginning after December 15,
2015, and interim periods within those fiscal years. Early adoption is permitted
for financial statements that have not been previously issued. Management is
still evaluating the impact and the timing of adoption of this Update.
NOTE 3 RESTRICTED CASH AND BOND RESERVES
Under the terms of the loan agreements with the Department of
Energy and Prudential Capital Group, various bond and cash reserves are required
to provide assurances that the power plants will have the necessary funds to
maintain expected operations and meet loan payment obligations. Restricted cash
balances and bond reserves are summarized as follows:
Current restricted cash and bond reserves:
|
|
March 31, |
|
|
December 31, |
|
Restricting
Entities/Purpose |
|
2015 |
|
|
2014 |
|
Idaho Department of Water Resources,
Geothermal Well Bond |
$ |
260,000 |
|
$ |
260,000 |
|
Bureau of Land Management, Geothermal Lease Bond- Gerlach
|
|
10,000 |
|
|
10,000 |
|
State of Nevada Division of Minerals,
Statewide Drilling Bond |
|
50,000 |
|
|
50,000 |
|
Bureau of Land Management, Geothermal Lease Bonds- USG
Nevada |
|
150,000 |
|
|
150,000 |
|
Oregon Department of Geology and Mineral
Industries, Mineral Land and Reclamation Program |
|
400,000 |
|
|
400,000 |
|
Prudential Capital Group, Cash Reserves |
|
645,719 |
|
|
188,930 |
|
Prudential Capital Group, Debt Service
Reserves |
|
1,594,754 |
|
|
- |
|
Bureau of Land Management , Geothermal Rights Lease Bond
|
|
10,000 |
|
|
10,000 |
|
U.S. Department of Energy, Debt Service
Reserve |
|
850,138 |
|
|
2,151,851 |
|
State of California Division of Oil, Gas and Geothermal
Resources, Well Cash Bond |
|
100,000 |
|
|
100,000 |
|
|
|
|
|
|
|
|
|
$ |
4,070,611 |
|
$ |
3,320,781 |
|
-12-
Long-term restricted cash and bond reserves:
|
|
March 31, |
|
|
December 31, |
|
Restricting
Entities/Purpose |
|
2015 |
|
|
2014 |
|
Nevada Energy, PPA Security Bond |
$ |
1,468,898 |
|
$ |
1,468,898 |
|
Prudential Capital Group, Debt Service Reserves |
|
- |
|
|
1,594,605 |
|
Prudential Capital Group, Maintenance
Reserves |
|
608,689 |
|
|
604,529 |
|
Prudential Capital Group, Well Reserves |
|
77,692 |
|
|
212,298 |
|
U.S. Department of Energy, Operations
Reserves |
|
270,000 |
|
|
270,000 |
|
U.S. Department of Energy, Debt Service Reserves |
|
2,550,522 |
|
|
2,582,606 |
|
U.S. Department of Energy, Short Term Well
Field Reserves |
|
4,505,705 |
|
|
4,505,150 |
|
U.S. Department of Energy, Long-Term Well Field Reserves
|
|
4,862,517 |
|
|
4,761,927 |
|
U.S. Department of Energy, Capital
Expenditure Reserves |
|
2,821,765 |
|
|
2,690,083 |
|
|
|
|
|
|
|
|
|
$ |
17,165,788 |
|
$ |
18,690,096 |
|
The well bonding requirements ensure that the Company has
sufficient financial resources to construct, operate and maintain geothermal
wells while safeguarding subsurface, surface and atmospheric resources from
unreasonable degradation, and to protect ground water aquifers and surface water
sources from contamination. Other future costs of environmental remediation
cannot be reasonably estimated and have not been recorded. The debt service
reserves are required to provide assurance that the Company will have sufficient
funds to meet its debt payment obligations for the terms specified by the loan
agreements. The maintenance and capital expenditure reserves are required by the
lending entities to ensure that funds are available to acquire and maintain
critical components of power plants and related supporting structures to enable
the plants to operate according to expectations. Except for the PPA Security
Bond, all of the restricted funds consisted of cash deposits or money market
accounts held in commercial banks. Portions of the cash deposits are subject to
FDIC insurance. See note 2 for details. The PPA Security Bond is held by the
power purchaser. All of the reserve accounts were considered to be fully funded
at March 31, 2015 and December 31, 2014.
-13-
NOTE 4 - PROPERTY, PLANT AND EQUIPMENT
During the first quarter ended March 31, 2015, the Company
focused development activities the Crescent Valley and WGP Geysers projects.
Drilling costs of approximately $662,000 were incurred on a production well at
Crescent Valley. Costs were incurred at WGP Geysers for site preparation, an
interconnection study and a well field study that totaled approximately
$428,000. A down payment of $104,960 was made on a variable pump control module
for a pump at Raft River Energy I, LLC.
Property, plant and equipment, at cost, are summarized as
follows:
|
|
|
|
|
December 31, |
|
|
|
March 31, 2015 |
|
|
2014 |
|
Land |
$ |
3,210,496 |
|
$ |
3,211,010 |
|
Power production plant |
|
162,076,367 |
|
|
162,076,367 |
|
Grant proceeds for power plants |
|
(52,965,236 |
) |
|
(52,965,236 |
) |
Wells |
|
67,621,167 |
|
|
67,621,167 |
|
Grant proceeds for wells |
|
(3,464,555 |
) |
|
(3,464,555 |
) |
Furniture and equipment |
|
1,835,931 |
|
|
1,796,807 |
|
|
|
178,314,170 |
|
|
178,275,560 |
|
|
|
|
|
|
|
|
Less: accumulated depreciation |
|
(28,618,835 |
) |
|
(27,068,836 |
) |
|
|
149,695,335 |
|
|
151,206,724 |
|
Construction in progress |
|
16,994,250 |
|
|
15,652,722 |
|
|
|
|
|
|
|
|
|
$ |
166,689,585 |
|
$ |
166,859,446 |
|
Depreciation expense charged to plant operations and
administrative costs for the three months ended March 31, 2015 and 2014, was
$1,595,999 and $1,448,867; respectively.
Changes in construction in progress are summarized as follows:
|
|
For the Three |
|
|
|
|
|
|
Months Ended |
|
|
For the Year |
|
|
|
March 31, |
|
|
Ended December |
|
|
|
2015 |
|
|
31,
2014 |
|
Beginning balances |
$ |
15,652,722 |
|
$ |
6,354,503 |
|
Development/construction |
|
1,341,528 |
|
|
3,730,371 |
|
Grant reimbursements
and rebates |
|
- |
|
|
(632,210 |
) |
Acquisitions |
|
- |
|
|
6,200,058 |
|
Transfers into
production |
|
- |
|
|
- |
|
Ending balances |
$ |
16,994,250 |
|
$ |
15,652,722 |
|
-14-
Construction in Progress, at cost, consisting of the following
projects/assets by location are as follows:
|
|
March 31, |
|
|
December 31, |
|
|
|
2015 |
|
|
2014 |
|
Raft River, Idaho: |
|
|
|
|
|
|
Unit I, well improvements |
$ |
104,960 |
|
$ |
- |
|
Unit II, power
plant, substation and transmission lines |
|
750,493 |
|
|
750,493 |
|
Unit II, well
construction |
|
2,130,287 |
|
|
2,127,547 |
|
|
|
2,985,740 |
|
|
2,878,040 |
|
San Emidio, Nevada: |
|
|
|
|
|
|
Unit II,
power plant, substation and transmission lines |
|
423,536 |
|
|
383,536 |
|
Unit II, well
construction * |
|
3,170,235 |
|
|
3,133,873 |
|
|
|
3,593,771 |
|
|
3,517,409 |
|
Neal Hot Springs, Oregon: |
|
|
|
|
|
|
Power plant and facilities |
|
8,778 |
|
|
6,477 |
|
|
|
|
|
|
|
|
WGP Geysers, California: |
|
|
|
|
|
|
Power plant and facilities |
|
319,989 |
|
|
319,988 |
|
Well
construction |
|
6,567,146 |
|
|
6,139,421 |
|
|
|
6,887,135 |
|
|
6,459,409 |
|
Crescent Valley, Nevada: |
|
|
|
|
|
|
Well construction
|
|
795,261 |
|
|
133,058 |
|
El Ceibillo, Republic of Guatemala: |
|
|
|
|
|
|
Well Construction |
|
2,715,065 |
|
|
2,649,829 |
|
Plant and
facilities |
|
8,500 |
|
|
8,500 |
|
|
|
2,723,565 |
|
|
2,658,329 |
|
|
|
|
|
|
|
|
|
$ |
16,994,250 |
|
$ |
15,652,722 |
|
|
* |
- Consists of four wells at March 31, 2015. The wells
represent efforts to develop a well field to be utilized for Phase II. As
of the date of these financial statements, the results of the wells are
not sufficient to confirm a well field that would support another power
plant. Two wells are being utilized to target a potential resource area.
One well is currently being utilized/flow tested by the Phase I power
plant. Management is still actively pursuing the Phase II project. If the
project is abandoned, the cost of the wells that have no future economic
value will be removed. |
-15-
NOTE 5 INCOME TAXES
The Companys estimated effective income tax rate is as
follows:
|
|
For the Three Months Ended |
|
|
|
March 31, |
|
|
|
2015 |
|
|
2014 |
|
U.S. Federal statutory rate |
|
34.0% |
|
|
34.0% |
|
Average State and foreign income tax, net of federal tax
effect |
|
3.7 |
|
|
3.7 |
|
Production tax credits |
|
- |
|
|
- |
|
Valuation allowance |
|
- |
|
|
(37.7 |
) |
Consolidated tax rate before non-controlling interest |
|
37.7 |
|
|
- |
|
Tax effect of non-controlling interests |
|
(17.6 |
) |
|
- |
|
Net
effective tax rate |
|
20.1% |
|
|
-% |
|
The provision for income taxes reflects an estimated effective
income tax rate attributable to U.S. Geothermal Inc.s share of income. Our
provision for income taxes for the three months ended March 31, 2015, reflects a
reported effective tax rate of 20.1% which differs from the statutory federal
income tax rate of 35% primarily due to the impact of the non-controlling
interest and state income taxes.
NOTE 6 NOTES PAYABLE
U.S. Department of Energy
On August
31, 2011, USG Oregon LLC (USG Oregon), a subsidiary of the Company, completed
the first funding drawdown associated with the U.S. Department of Energy (DOE)
$96.8 million loan guarantee (Loan Guarantee) to construct its power plant at
Neal Hot Springs in Eastern Oregon (the Project). All loan advances covered by
the Loan Guarantee have been made under the Future Advance Promissory Note (the
Note) dated February 23, 2011. Upon the occurrence and continuation of an
event of default under the transaction documents, all amounts payable under the
Note may be accelerated. In connection with the Loan Guarantee, the DOE has been
granted a security interest in all of the equity interests of USG Oregon, as
well as in the assets of USG Oregon, including a mortgage on real property
interests relating to the Project site. No additional advances are allowed under
the terms of the loan. A total of 13 draws were taken and each individual draw
or tranche is considered to be a separate loan. The loan principal is scheduled
to be paid over 21.5 years with semi-annual installments including interest
calculated at an aggregate fixed interest rate of 2.598%. The principal payment
amounts are calculated on a straight-line basis according to the life of the
loans and the original loan principal amounts. The principal portion of the
aggregate loan payment is adjusted as individual tranches are extinguished. The
principal payments started at $1,709,963 on February 10, 2014 and are scheduled
to be reduced to $1,626,251 on February 10, 2017 and continue through February
12, 2035. The loan balance at March 31, 2015 totaled $65,256,686 (current
portion $3,419,927).
-16-
Loan advances/tranches and effective annual interest rates are
details as follows:
|
|
|
|
|
Annual Interest |
|
Description |
|
Amount |
|
|
Rate
% |
|
Advances by date: |
|
|
|
|
|
|
August 31, 2011* |
$ |
2,328,422 |
|
|
2.997 |
|
September 28, 2011 |
|
10,043,467 |
|
|
2.755 |
|
October 27, 2011 |
|
3,600,026 |
|
|
2.918 |
|
December 2, 2011 |
|
4,377,079 |
|
|
2.795 |
|
December 21, 2011 |
|
2,313,322 |
|
|
2.608 |
|
January 25, 2012 |
|
8,968,019 |
|
|
2.772 |
|
April 26, 2012 |
|
13,029,325 |
|
|
2.695 |
|
May 30, 2012 |
|
19,497,204 |
|
|
2.408 |
|
August 27, 2012 |
|
7,709,454 |
|
|
2.360 |
|
December 28, 2012 |
|
2,567,121 |
|
|
2.396 |
|
June 10, 2013 |
|
2,355,316 |
|
|
2.830 |
|
July 3, 2013* |
|
2,242,628 |
|
|
3.073 |
|
July 31, 2013* |
|
4,026,582 |
|
|
3.214 |
|
|
|
83,057,965 |
|
|
|
|
Principal paid through March 31, 2015 |
|
(17,801,279 |
) |
|
|
|
|
|
|
|
|
|
|
Loan balance at March 31, 2015 |
$ |
65,256,686 |
|
|
|
|
* - Individual tranches have been
fully extinguished.
SAIC Constructors LLC
Effective August 27,
2010, the Companys wholly owned subsidiary (USG Nevada LLC) signed a
construction loan agreement with SAIC Constructors LLC (SAIC). The new 10.0
net megawatt power plant was considered complete and operational for financial
reporting purposes on September 1, 2012. On February 15, 2013, USG Nevada LLC
signed a settlement agreement with SAIC that defined the terms of three separate
debt components to settle the obligations incurred under the construction loan
agreement. As of December 31, 2013, two components of the settlement agreement
were paid in full. On April 30, 2013, SAIC signed a loan agreement with Nevada
USG Holdings LLC (parent company of USG Nevada LLC and wholly owned subsidiary
of the Company), that further defined the terms of the remaining debt component
of $2 million. This remaining obligation will be repaid in quarterly
installments of $119,382, including interest at 7.0% per annum that began on
July 31, 2013 and is scheduled to be repaid by September 2018. The loan balance
at March 31, 2015 totaled $1,392,347 (current portion $395,673).
Prudential Capital Group
On September 26,
2013, the Companys wholly owned subsidiary (USG Nevada LLC) entered into a note
purchase agreement with the Prudential Capital Groups related entities
(Prudential) to finance the Phase I San Emidio geothermal project located in
northwest Nevada. The term of the note is approximately 24 years, and bears
interest at fixed rate of 6.75% per annum. Interest payments are due quarterly.
Principal payments are due quarterly based upon minimum debt service coverage
ratios established according to projected operating results made at the loan
origination date and available cash balances. All amounts owing under the notes
and the note purchase agreement or any related financing document are secured by
USG Nevada LLCs right, title and interest in and to its real and personal
property, including the San Emidio project and the equity interests in USG
Nevada LLC. At March 31, 2015, the balance of the loan was $30,182,333 (current
portion $530,200).
Auto Loans
On August 21, 2014, the Companys
wholly owned subsidiaries (U.S. Geothermal Services, LLC, USG Nevada LLC and
Raft River Energy I, Inc.) purchased three trucks with down payments that
totaled $47,000 and three separate loan agreements with Chrysler
Capital. The loans require total monthly payments of $1,257, including interest
at an average rate of 7.9% per annum until September 2020. The notes are secured
by the vehicles. At March 31, 2015, the loan balances totaled $65,989 (current
portion $10,102).
-17-
Based upon the terms of the notes payable and expected
conditions that may impact some of those terms, the total estimated annual
principal payments were calculated as follows:
For the Year Ended |
|
Principal |
|
March 31, |
|
Payments |
|
2016 |
$ |
4,355,902
|
|
2017 |
|
4,335,588 |
|
2018 |
|
4,349,847 |
|
2019 |
|
3,978,007 |
|
2020 |
|
4,026,338 |
|
Thereafter |
|
75,851,673 |
|
|
|
|
|
|
$ |
96,897,355 |
|
NOTE 7 - STOCK BASED COMPENSATION
The Company has a stock incentive plan (the Stock Incentive
Plan) for the purpose of attracting and motivating directors, officers,
employees and consultants of the Company and advancing the interests of the
Company. The Stock Incentive Plan is a 15% rolling plan approved by shareholders
in September 2013, whereby the Company can grant options to the extent of 15% of
the current outstanding common shares. Under the plan, all forfeited and
exercised options can be replaced with new offerings. As of March 31, 2015, the
Company can issue stock option grants totaling up to 16,059,454 shares. Options
are typically granted for a term of up to five years from the date of grant.
Stock options granted generally vest over a period of eighteen months, with 25%
vesting on the date of grant and 25% vesting every six months thereafter. The
Company recognizes compensation expense using the straight-line method of
amortization. Historically, the Company has issued new shares to satisfy
exercises of stock options and the Company expects to issue new shares to
satisfy any future exercises of stock options.
The following table reflects the summary of stock options
outstanding at December 31, 2014 and changes for the three months ended March
31, 2014:
|
|
|
|
|
Weighted |
|
|
|
|
|
|
|
|
|
|
|
|
Average |
|
|
Weighted |
|
|
|
|
|
|
Number of |
|
|
Exercise |
|
|
Average |
|
|
Aggregate |
|
|
|
shares under |
|
|
Price Per |
|
|
Fair |
|
|
Intrinsic |
|
|
|
options |
|
|
Share |
|
|
Value |
|
|
Value |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance outstanding, December 31, 2014 |
|
11,808,500 |
|
$ |
0.62 |
|
$ |
0.36 |
|
$ |
4,264,270 |
|
Forfeited/Expired |
|
(450,000 |
) |
|
0.84 |
|
|
0.53 |
|
|
(240,180 |
) |
Exercised |
|
(45,000 |
) |
|
0.31 |
|
|
0.17 |
|
|
(7,533 |
) |
Granted |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance outstanding, March 31, 2015 |
|
11,313,500 |
|
$ |
0.61 |
|
$ |
0.36 |
|
$ |
4,016,557 |
|
The fair value of each option award is estimated on the date of
grant using the Black-Scholes option-pricing model using the assumptions noted
in the following table. Expected volatilities are based on historical volatility of the Companys stock. The Company uses historical
data to estimate option volatility within the Black-Scholes model. The expected
term of options granted represents the period of time that options granted are
expected to be outstanding, based upon past experience and future estimates and
includes data from the Plan. The risk-free rate for periods within the expected
term of the option is based upon the U.S. Treasury yield curve in effect at the
time of grant. The Company currently does not foresee the payment of dividends
in the near term.
-18-
Changes in the subjective input assumptions can materially
affect the fair value estimate and, therefore, the existing models do not
necessarily provide a reliable measure of the fair value of the Companys stock
options.
As of March 31, 2015, there was $288,721 of total unrecognized
compensation cost related to nonvested share-based compensation arrangements
granted under the Plan. That cost is expected to be recognized over a
weighted-average period of 1.5 years.
Stock Compensation Plan (Restricted Shares)
On April 19, 2013, the Company granted an officer and director
300,000 common shares valued at $0.35 per share, which were distributed at the
end of a one-year vesting period. The recipient meets the vesting requirements
by maintaining employment and good standing with the Company through the vesting
period. After vesting, there are no restrictions on the shares. These shares
were issued in July 2013 to the recipient and held by the Company until vested.
The total fair value of options at the grant date was $105,000.
On April 2, 2014, the Company issued 559,122 shares of Company
stock at a price of $0.74 that fully vest on April 2, 2015 to its employees and
directors. The total fair value is $413,750 and the recognized cost through
March 31, 2015.
Stock Purchase Warrants
At March 31, 2015, the outstanding broker warrants and share
purchase warrants consisted of the following:
|
|
|
|
|
Broker |
|
|
|
|
|
|
|
|
|
|
|
|
Warrant |
|
|
Share |
|
|
Warrant |
|
|
|
Broker |
|
|
Exercise |
|
|
Purchase |
|
|
Exercise |
|
Expiration Date |
|
Warrants |
|
|
Price |
|
|
Warrants |
|
|
Price |
|
September 16, 2015 |
|
246,285 |
|
$ |
1.25 |
|
|
4,104,757 |
|
$ |
1.25 |
|
May 23, 2017 |
|
255,721 |
|
|
0.44 |
|
|
- |
|
|
- |
|
December 21, 2017 |
|
- |
|
|
- |
|
|
3,310,812 |
|
|
0.50 |
|
NOTE 8 FAIR VALUE MEASUREMENT
Current U.S. generally accepted accounting principles
establishes a fair value hierarchy that prioritizes the inputs used to measure
fair value. The hierarchy gives the highest priority to unadjusted quoted prices
in active markets for identical assets or liabilities (Level 1 measurement) and
the lowest priority to unobservable inputs (Level 3 measurement).
The three levels of the fair value hierarchy are as
follows:
Level 1 Quoted prices are available
in active markets for identical assets or liabilities.
Level 2 Directly or
indirectly market based inputs or observable inputs used in models or other
valuation methodologies.
Level 3 Unobservable inputs that are no
corroborated by market data. The inputs require significant management judgement
or estimation.
-19-
The following table discloses by level within the fair value
hierarchy the Companys assets and liabilities measured and reported on its
Consolidated Balance Sheet as at fair value on a recurring basis:
At March 31, 2015:
|
|
Total |
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
Money market accounts * |
$ |
30,653,529 |
|
$ |
30,653,529 |
|
$ |
- |
|
$ |
- |
|
At December 31, 2014:
|
|
Total |
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
Money market accounts * |
$ |
30,515,067 |
|
$ |
30,515,067 |
|
$ |
- |
|
$ |
- |
|
* - Money market accounts include
both restricted and unrestricted funds.
NOTE 9 - COMMITMENTS AND CONTINGENCIES
Operating Lease Agreements
The Company has entered into several lease agreements with
terms expiring up to December 1, 2034 for geothermal properties in Neal Hot
Springs, Oregon; Washoe County, Nevada; Eureka County, Nevada; The Geysers,
California; Raft River, Idaho and the Republic of Guatemala. The Company
incurred total lease expenses for the three months ended March 31, 2015 and
2014, of $109,653 and $117,904; respectively.
The following is the total contracted lease operating
obligations (operating leases, BLM lease agreements and office leases) for the
next five years:
Years Ending |
|
|
|
December 31, |
|
Amount |
|
|
|
|
|
2015 |
$ |
674,684
|
|
2016 |
|
930,463 |
|
2017 |
|
900,124 |
|
2018 |
|
865,753 |
|
2019 |
|
742,547 |
|
Thereafter |
|
13,273,471 |
|
-20-
NOTE 10 JOINT VENTURES/NON-CONTROLLING INTERESTS
Non-controlling interests included on the consolidated balance
sheets of the Company are detailed as follows:
|
|
March 31, |
|
|
December 31, |
|
|
|
2015 |
|
|
2014 |
|
|
|
|
|
|
|
|
Gerlach Geothermal LLC interest held by
Gerlach Green Energy, LLC |
$ |
219,340 |
|
$ |
230,539 |
|
Oregon USG Holdings LLC interest held by Enbridge Inc. |
|
23,919,891 |
|
|
24,818,443 |
|
Raft River Energy I LLC interest held by
Raft River I Holdings, LLC |
|
21,160,449 |
|
|
21,348,110 |
|
|
$ |
45,299,680 |
|
$ |
46,397,092 |
|
Gerlach Geothermal LLC
On April 28,
2008, the Company formed Gerlach Geothermal, LLC (Gerlach) with our
partner, Gerlach Green Energy, LLC (GGE). The purpose of the joint
venture is the exploration of the Gerlach geothermal system, which is located in
northwestern Nevada, near the town of Gerlach. Based upon the terms of the
members agreement, the Company owns a 60% interest and GGE owns a 40% interest
in Gerlach Geothermal, LLC. The agreement gives GGE an option to maintain its
40% ownership interest as additional capital contributions are required. If GGE
dilutes to below a 10% interest, their ownership position in the joint venture
would be converted to a 10% net profits interest. The Company has contributed
$757,190 in cash and $300,000 for a geothermal lease and mineral rights; and the
GGE has contributed $704,460 of geothermal lease, mineral rights and exploration
data. During the first three quarters of the current year, contributions were
made to Gerlach by the Company and GGE that totaled $11,040 and $7,360;
respectively. These contributions maintained the existing ownership interests of
the two partners in Gerlach. During the fourth quarter of the year ended
December 31, 2014, the Company contributed $400,000 for the projects drilling
costs that were not proportionally matched by GGE. These contributions
effectively reduced GGEs ownership interest to 32.65%, and increased the
Companys interest to 67.35% as of December 31, 2014.
The consolidated financial statements reflect 100% of the
assets and liabilities of Gerlach, and report the current non-controlling
interest of GGE. The full results of Gerlachs operations are reflected in the
statement of operations with the elimination of the non-controlling interest
identified.
Oregon USG Holdings LLC
In September
2010, the Companys subsidiary, Oregon USG Holdings LLC (Oregon Holdings),
signed an Operating Agreement with Enbridge Inc. (Enbridge) for the right to
participate in the Companys Neal Hot Springs project located in Malheur County,
Oregon. On February 20, 2014, a new determination under the existing agreement
was reached with Enbridge that established their ownership interest percentage
at 40% and the Companys at 60%, effective January 1, 2013. Oregon Holdings has
a 100% ownership interest in USG Oregon LLC. Enbridge has contributed a total of
$32,801,000, including the debt conversion, to Oregon Holdings in exchange for a
direct ownership interest. During the three months ended March 31, 2015,
distributions were made to the Company and Enbridge that totaled $3,153,986 and
$2,102,657; respectively.
The consolidated financial statements reflect 100% of the
assets and liabilities of Oregon Holdings and USG Oregon LLC, and report the
current non-controlling interest of Enbridge. The full results of Oregon
Holdings and USG Oregon LLCs operations are reflected in the statement of
operations with the elimination of the non-controlling interest identified.
-21-
Raft River Energy I LLC (RREI)
Raft River
Energy I is a joint venture between the Company and Raft River I Holdings, LLC a
subsidiary of the Goldman Sachs Group, Inc. An Operating Agreement governs the
rights and responsibilities of both parties. At fiscal year end, the Company had
contributed approximately $17.9 million in cash and property, and RREI has
contributed approximately $34.1 million in cash. Profits and losses are
allocated to the members based upon contractual terms. For income tax purposes,
Raft River I Holdings, LLC receives a greater proportion of the share of losses
and other income tax benefits. This includes the allocation of production tax
credits, which will be distributed 99% to Raft River I Holdings, LLC and 1% to
the Company during the first 10 years of production. During the initial years of
operations, Raft River I Holdings, LLC will receive a larger allocation of cash
distributions.
The consolidated financial statements reflect 100% of the
assets and liabilities of RREI, and report the current non-controlling interest
of Raft River I Holdings LLC. The full results of Raft River Energy I LLCs
operations are reflected in the statement of operations with the elimination of
the non-controlling interest identified.
Effective May 17, 2011, a repair services agreement (RSA) was
executed between RREI and U.S. Geothermal Services, LLC for the purpose of
funding repairs of two underperforming wells. The agreement defined terms of the
RSA repair costs and RSA repair management fees that would be funded by the
loan. The outstanding loan balance will accrue interest at 12.0% per annum. The
RSA payments will be made preferentially from project cash flow at a rate of 90%
of increased cash created by the repairs and cash availability on a quarterly
basis. The repairs were completed in January 2012. During the three months ended
March 31, 2015 and the year ended December 31, 2014, RREI made principal
payments on the loan of $0 and $1,012,613; respectively. The balance of the loan
at March 31, 2015 and December 31, 2014 was $368,249. The loan balance and
related interest effects are fully eliminated during the consolidation process.
-22-
Item 2 - Managements Discussion and Analysis of
Financial Condition and Results of Operations
INFORMATION REGARDING FORWARD LOOKING STATEMENTS
This document contains forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995. These
forward-looking statements involve a number of risks and uncertainties. We
caution readers that any forward-looking statement is not a guarantee of future
performance and that actual results could differ materially from those contained
in the forward-looking statement. These statements are based on current
expectations of future events. You can find many of these statements by looking
for words like believes, expects, anticipates, intend, estimates,
may, should, will, could, plan, predict, potential, or similar
expressions in this document or in documents incorporated by reference in this
document. Examples of these forward-looking statements include, but are not
limited to:
-
our business and growth strategies;
-
our future results of operations;
-
anticipated trends in our business;
-
the capacity and utilization of our geothermal resources;
-
our ability to successfully and economically explore for and develop
geothermal resources;
-
our exploration and development prospects, projects and programs, including
timing and cost of construction of new projects and expansion of existing
projects;
-
availability and costs of drilling rigs and field services;
-
our liquidity and ability to finance our exploration and development
activities;
-
our working capital requirements and availability;
-
our illustrative plant economics;
-
market conditions in the geothermal energy industry; and
-
the impact of environmental and other governmental regulation.
These forward-looking statements are based on the current
beliefs and expectations of our management and are subject to significant risks
and uncertainties. If underlying assumptions prove inaccurate or unknown risks
or uncertainties materialize, actual results may differ materially from current
expectations and projections. The following factors, among others, could cause
actual results to differ from those set forth in the forward-looking
statements:
-
the failure to obtain sufficient capital resources to fund our operations;
-
unsuccessful construction and expansion activities, including delays or
cancellations;
-
incorrect estimates of required capital expenditures;
-
increases in the cost of drilling and completion, or other costs of
production and operations;
-
the enforceability of the power purchase agreements for our projects;
-
impact of environmental and other governmental regulation, including delays
in obtaining permits or ongoing impacts of the sequester;
-
hazardous and risky operations relating to the development of geothermal
energy;
-
our ability to successfully identify and integrate acquisitions;
-23-
-
the failure of the geothermal resource to support the anticipated power
capacity;
-
our dependence on key personnel;
-
the potential for claims arising from geothermal plant operations;
-
general competitive conditions within the geothermal energy industry; and
-
financial market conditions.
All subsequent written or oral forward-looking statements
attributable to us or any person acting on our behalf are expressly qualified in
their entirety by the cautionary statements contained or referred to in this
section. We do not undertake any obligation to release publicly any revisions to
these forward-looking statements to reflect events or circumstances after the
date of this document or to reflect the occurrence of unanticipated events,
except as may be required under applicable U.S. securities law. If we do update
one or more forward-looking statements, no inference should be drawn that we
will make additional updates with respect to those or other forward-looking
statements.
The U.S. dollar is the Companys functional currency. All
references to dollars or $ are to United States dollars.
General Background and Discussion
The following discussion should be read in conjunction with our
unaudited consolidated financial statements for the quarter ended March 31, 2015
and notes thereto included in this report.
U.S. Geothermal Inc. (the Company) is a Delaware corporation.
The Companys common stock trades on the NYSE MKT LLC under the trade symbol
HTM and on the Toronto Stock Exchange under the symbol GTH.
For the quarter ended March 31, 2015, the Company was focused
on:
-
operating and optimizing the Neal Hot Springs, San Emidio and Raft River
power plants;
-
pursuing PPA and steam sale opportunities, preparing for flow testing and
optimizing power plant design at the WGP Geysers project;
-
drilling a well at the Crescent Valley project;
-
finalizing permits and approvals for drilling a water supply well at Neal
Hot Springs;
-
working with the Guatemalan Ministry of Energy and Mines to adopt a
modified construction schedule;
-
permitting temperature gradient wells at San Emidio; and
-
evaluating potential new geothermal projects and acquisition opportunities.
Project Overview
The following is a list of projects that are in operation,
under development or under exploration. Projects in operation currently have
producing geothermal power plants. Projects under development have a geothermal
resource discovery or may have wells in place, but require the drilling of new
or additional production and injection wells in order to supply enough
geothermal fluid sufficient to operate a commercial power plant. Projects under
exploration do not have a geothermal resource discovery occurrence yet, but have
significant thermal and other physical evidence that warrants the expenditure of
capital in search of the discovery of a geothermal resource. Due to inflation
and marketplace increases in the costs of labor and construction materials,
estimates of property development costs may be low.
-24-
Projects in Operation |
|
|
|
Generating |
|
Contract |
Project |
Location |
Ownership |
Capacity (megawatts) |
Power Purchaser |
Expiration |
Neal Hot Springs |
Oregon |
JV(1) |
22.0 |
Idaho Power |
2036 |
San Emidio (Unit I) |
Nevada |
100% |
10.0 |
Sierra Pacific |
2038 |
Raft River (Unit I) |
Idaho |
JV(2) |
13.0(3) |
Idaho Power |
2032 |
|
(1) |
In September 2010, the Companys wholly owned subsidiary
(Oregon USG Holdings LLC) entered into agreements that formulated a
strategic partnership with Enbridge (U.S.) Inc. (Enbridge). Enbridge
contributed approximately $32.8 million to the Neal Hot Springs geothermal
project. The Companys equity interest in the project is 60% and
Enbridges equity interest is 40%. |
|
(2) |
As part of the financing package for Unit I of the Raft
River project, the Company contributed $16.5 million in cash and
approximately $1.4 million in property to Raft River Energy I LLC, the
Unit I project joint venture company. Raft River I Holdings, LLC, a
subsidiary of The Goldman Sachs Group, contributed $34 million to finance
the construction of the project. |
|
(3) |
Based on the designed annual average net output. The
output of the Raft River Unit I plant currently is approximately 9.4
megawatts annual average. |
Projects Under Development |
|
|
|
|
|
Estimated |
|
|
|
|
Target |
Projected |
Capital |
|
|
|
|
Development |
Commercial |
Required |
Power |
Project |
Location |
Ownership |
(Megawatts) |
Operation Date |
($million) |
Purchaser |
El Ceibillo Phase I |
Guatemala |
100% |
25 |
2nd Quarter 2018
|
138 |
TBD |
San Emidio Phase II |
Nevada |
100% |
11 |
3rd Quarter 2017 |
65 |
TBD |
WGP Geysers |
California |
100% |
30 |
2nd Quarter 2017
|
160 |
TBD |
Crescent Valley Phase I |
Nevada |
100% |
25 |
1st Quarter 2018 |
141 |
TBD |
Properties Under Exploration |
|
|
|
Target Development |
Project |
Location |
Ownership |
*(Megawatts) |
Gerlach |
Nevada |
60% |
10 |
Vale |
Oregon |
100% |
15 |
El Ceibillo Phase II |
Guatemala |
100% |
25 |
Neal Hot Springs II |
Oregon |
100% |
10 |
Raft River Unit II |
Idaho |
100% |
13 |
Crescent Valley Phase II |
Nevada |
100% |
25 |
Crescent Valley Phase III |
Nevada |
100% |
25 |
Lee Hot Springs |
Nevada |
100% |
20 |
Ruby Hot Springs Phase I |
Nevada |
100% |
20 |
Granite Creek During the year ended
December 31, 2014, the Company elected to not continue exploration and
development activities due to more attractive projects in its portfolio. The
Company is in the process of releasing its interests in the area.
Neal Hot
Springs Phase III, Raft River Phase III, and San Emidio Phase III These
projects were removed from the list of properties under exploration during the
prior year ended December 31, 2014.
Unfavorable market conditions and
development time frames did not warrant the allocation of exploration or
development resources.
* Target development sizes are predevelopment
estimates of resource potential of unproven resources.
-25-
Property Details |
|
Property Size |
|
|
|
|
(square |
|
|
|
Property |
miles) |
Temperature (ºF) |
Depth (Ft) |
Technology |
Neal Hot Springs |
9.6 |
286-311 |
2,500-3,000 |
Binary |
San Emidio |
27.9 |
289-316 |
1,500-3,000 |
Binary |
Raft River |
10.8 |
275-302 |
4,500-6,000 |
Binary |
Gerlach |
4.7 |
338-352 |
2,000-3,000 |
Binary |
El Ceibillo |
38.6 |
410-526 |
1,800-TBD |
Steam |
WGP Geysers |
6.0 |
380-598 |
6,000-10,000 |
Steam |
Crescent Valley |
33.3 |
326-351 |
2,000-3,000 |
Binary |
Lee Hot Springs |
4.0 |
280-320 |
1,250-5,000 |
Binary |
Ruby Hot Springs |
3.3 |
315-340 |
1,670-4,500 |
Binary |
Vale |
0.6
|
290-300 |
2,450-5,000 |
Binary |
Neal Hot Springs, Oregon
Neal Hot Springs is located
in Eastern Oregon near the town of Vale, the county seat of Malheur County, and
achieved commercial operation on November 16, 2012. The Neal Hot Springs
facility is designed as a 22 megawatt net annual average power plant, consisting
of three separate 12.2 megawatt (gross) modules, with each module having a
design output of 7.33 megawatts (net) annual average based on a specific flow
and temperature of geothermal brine.
Generation from the facility during the first quarter of 2015
totaled 53,500 megawatt-hours with an average of 25.56 net megawatts per hour of
operation. Plant availability was 96.9% during the quarter.
The PPA for the project was signed on December 11, 2009 with
the Idaho Power Company. It has a 25 year term, and a variable percentage annual
price escalation. The PPA has a seasonal pricing structure that pays 120% of the
average price for four months (July, August, November, December), 100% of the
average price for five months (January, February, June, September, October) and
73.3% of the average price for three months (March, April, May). The average
price paid under the PPA for 2015 is $106.79 per megawatt-hour.
San Emidio Unit I, Nevada
The Unit I power plant at
San Emidio is located approximately 100 miles north-east of Reno, Nevada near
the town of Gerlach, and achieved commercial operation on May 25, 2012. The San
Emidio facility is a single 14.7 megawatt (gross) module, with a design output
of 9 megawatts (net) annual average based on a specific flow and temperature of
geothermal brine.
Generation from the facility during the first quarter 2015
totaled 21,754 megawatt-hours, with an average of 10.1 net megawatts per hour of
operation. Plant availability was 99.9% during the quarter.
On June 1, 2011, an amended and restated PPA was signed with
Sierra Pacific Power Company d/b/a NV Energy for the sale of up to 19.9
megawatts of electricity on an annual average basis. The PPA has a 25 year term
with a base price of $89.75 per megawatt-hour, and an annual escalation rate of
1 percent. The average price paid under the PPA for 2015 is $92.08 per
megawatt-hour.
Raft River, Idaho
Raft River Unit I is located in
Southern Idaho, near the town of Malta, and achieved commercial operation on
January 3, 2008. The Raft River facility is a single 18 megawatt (gross) module,
with a design output of 13 megawatts (net) annual average based on a specific
flow and temperature of geothermal brine.
-26-
Generation from the facility during the first quarter 2015
totaled 20,672 megawatt-hours, with an average of 9.60 net megawatts per hour of
operation. Plant availability was 99.7% during the quarter.
The PPA for the project was signed on September 24, 2007 with
the Idaho Power Company. The PPA has a 25 year term with a starting average
price for the year 2007 of $52.50 that escalates at 2.1% per year through 2020
and then at 0.6% per year until the end of the contract in 2034. The Idaho Power
PPA has a seasonal pricing structure that pays 120% of the average price for
four months (July, August, November, December), 100% of the average price for
five months (January, February, June, September, October) and 73.5% of the
average price for three months (March, April, May). The average price paid under
the PPA for 2015 is $62.00 per megawatt-hour.
In addition to the price paid for energy by Idaho Power, Raft
River Unit I currently receives $4.75 per megawatt-hour under a separate
contract for the sale of Renewable Energy Credits (RECs) to Holy Cross Energy,
a Colorado electric cooperative. Starting in calendar year 2018, 51% of the RECs
produced by the project will be owned by the Idaho Power Company and 49% by the
project. For the 49% of RECs owned by the Raft River project, a new, 10 year REC
contract with the Public Utility District No. 1 of Clallam County, Washington
will replace the current contract. The Company currently receives 70% of the REC
income during the term of the Holy Cross contract and will receive 50% of the
REC income due to Raft River during the term of the Clallam County contract.
Projects Under Development/Exploration
San Emidio, Nevada
The Phase II expansion is
dependent on successful development of additional production and injection well
capacity. We expect that approximately 75% of the Phase II development may be
funded by project loans, with the remainder funded through equity financing. We
anticipate the project qualifying for the 30% Federal investment tax credit. As
a result of the delays experienced in permitting wells on BLM administered
leases, it was determined that it is not possible to complete the development of
the Phase II project within the development time frame required in the existing
19.9 megawatt NV Energy PPA.
A Small Generator Interconnection Agreement for 16 megawatts of
transmission capacity was executed with Sierra Pacific Power Company on December
28, 2010. An application to increase the interconnection agreement to the full
19.9 megawatts allowed under the PPA was submitted to NV Energy on January 9,
2014. A System Impact Study (SIS) agreement, which is the next step in the
interconnection process mandated by the Federal Energy Regulatory Commission,
was signed on August 28, 2014. Results from the SIS were received on December
24, 2014. A second phase interconnection study, called the Facilities Study, was
started in January of 2015.
On October 30, 2009, the Company was awarded $3.77 million in
Recovery Act funding from the Department of Energy (DOE) for the exploration
and development of its San Emidio geothermal power project using advanced
geophysical exploration techniques. This award was categorized under the
Innovative Exploration and Drilling Projects section of the American Recovery
and Reinvestment Act. The first stage of the DOE project applied innovative,
seismic and satellite imagery techniques along with state-of-the-art structural
modeling, to locate large aperture fractures that represent high-productivity
geothermal drilling targets and was completed in 2011. Two zones along the 4.5
mile long San Emidio fault structure were identified as high quality targets for
drilling during the first phase of the DOE program, a South Zone and a North
Zone.
The second stage of the DOE program was a 50-50 cost shared
drilling plan that was intended to follow up on targets identified in the first
stage. Drilling started in the South Zone, and two wells were completed by the
Company. After approval of the drilling program by the DOE in November 2011, one
of the first two wells was deepened and three additional wells
were completed in the South Zone with the costs being shared on a 50-50 basis.
-27-
As part of the continuing DOE program, permitting was initiated
early in the 2013 with the Bureau of Land Management (BLM) for four new
observation wells to be drilled in the South Zone to follow up on the high
temperatures found in wells 61-21 (302°F) and 45-21 (316°F). As part of the
permitting process, cultural and biological surveys were performed, and the well
design and drilling program were submitted during the first quarter. Permits for
three wells were issued by the BLM on April 29th and a drill rig was
mobilized to the site on June 26th. Two additional wells were
completed on the BLM administered land during the third quarter. Well OW-14 was
drilled to a depth of 3,501 feet and had a bottomhole temperature of 265°F. Well
OW-15 was drilled to a depth of 3,716 feet and had a maximum downhole
temperature of 300°F. While the wells extended the high temperature outline of
the South Zone, neither well encountered the commercial permeability seen in
well 61-21 (formerly OW-10).
Well 61-21 (formerly OW-10) in the South Zone, was reworked
beginning on October 25, 2013 and was completed on November 2, 2013. Flow
testing of 61-21 was completed during the second quarter of 2014. To allow for
early, long term testing of the South Zone resource area, a cross tie pipeline
was constructed between the Phase I and Phase II project areas and a production
pump was installed in well 61-21 during the third quarter. Well 61-21 is
currently producing 600 gallons per minute of 296°F fluid to the San Emidio
Phase I power plant. San Emidio Phase I plant generation has increased
approximately a half of megawatt. Hooking up and flow testing well 61-21 was the
last work under the DOE Innovative Exploration and Drilling Project grant. The
grant program was completed at the end of September 2014, with the DOE
Geothermal Technologies Program having expended $3,772,560 and the Company
$4,156,741.
Permitting for an expanded temperature gradient drilling
program is underway for an area south west of the current resource. Results from
the recent OW drilling program combined with 1970s era, shallow temperature
gradient data, indicate a high temperature trend into this south-west zone.
Geophysical surveys have also identified structural trends in this area. Several
1,000 foot deep temperature gradient wells are being permitted to investigate
this portion of the resource.
NV Energy issued a Request for Proposal (RFP) for 100
megawatts of renewable energy on October 1st. We submitted a bid for an air
cooled power plant to be developed on the Phase II project site. In early
December, NV Energy submitted a request to the Nevada Public Utilities
Commission (NPUC) to combine the 2014 solicitation with the 2015 solicitation
for a total of 200 megawatts to be procured in 2014. An alternative option for
Phase II that incorporated a water cooled plant was submitted to NV Energy on
February 16, 2015 and on March 3, 2015 we were notified that our bid was
advanced to the initial short list of projects. On May 12, 2015, our bid was not
included on the final short list.
In parallel, we are continuing to investigate a power purchase
agreement with California off-takers, where power prices are typically
higher.
Raft River, Idaho
The Raft River project was awarded
an $11.4 million cost-shared, thermal fracturing program grant from the
Department of Energy. The goal of the project is to create an Enhanced
Geothermal System (EGS) by creating thermal fractures and developing a
corresponding increase in permeability in the low permeability rock. Well RRG-9
was made available, and after installing four, 300 foot deep monitoring wells
with seismic geophones to allow for seismic monitoring, the first stage of
injection into the well began in June 2013. Initially the well was only capable
of receiving 20 gallons per minute (gpm) of water due to the low permeability
of the rock. Injection of power plant injectate has continued through the
quarter, with flow into the well seeing a continuing, increase to now over 550
gpm, indicating that significant additional permeability has developed. The
encouraging EGS stimulation is expected to continue through 2015.
-28-
If the fracturing program success continues, and permeability
is improved to a commercial level, well RRG-9 may be utilized as a production or
injection well for the existing Raft River power plant. The Companys
contributions for the thermal fracturing program are made in-kind by the use of
the RRG-9 well, well field data, and monitoring support.
Gerlach, Nevada
The Gerlach Joint Venture, located
adjacent to the town of Gerlach in Washoe County, Nevada is made up of both
private and BLM geothermal leases. Ownership of the joint venture was initially
set by contributions at 60% for the Company, and 40% for GGE Development
Company, LLC. The Peregrine well, a historic exploration slim hole that
encountered a lost circulation zone at a depth of 975 feet, was redrilled in
2010 and the hole was opened from a 6.5 inch diameter well to a 12.5 inch
diameter well. Lost circulation was confirmed within three zones through the 900
to 1,024 foot interval. The well was stopped at 1,070 feet total depth.
Temperature surveys and a short clean out flow test were conducted on the well.
The well flowed at an estimated 300-400 gallons per minute and the flowing
temperature was 208°F. Geochemistry indicates an average potential source
temperature of 374°F for the Gerlach site.
Drilling commenced on observation well 18-10a on October 30,
2014. 18-10a is a twin well to a well originally drilled in 1994 (the 18-10
well). The upper section of 18-10a well was drilled to 826 feet deep and an 8
inch liner was cemented in place. Temperature measurements in the well have
provided the highest measured temperature in the field to date at 268°F within
160 feet of surface and a temperature gradient of 6.4°F per 100 in the bottom
section of the hole. There are two previously identified lost circulation
targets from the original well at 1,600 and 2,800 feet deep that will be
targeted when drilling is resumed.
Drilling resumed on well 18-10a on April 14, 2012 and was
stopped on April 18, 2012 at 1,943 feet deep. Circulation was lost in minor
zones at 1,530 and 1,595 feet deep. Drilling resumed again on well 18-10a on
August 14, 2014, and was completed in late November. The well was drilled to a
total depth of 2,889 feet and encountered a maximum temperature of 275°F. The
last round of drilling on well 10-10a was funded by the Company, resulting in a
change of ownership for the joint venture to 67.4% for the Company and 32.6% for
GGE. Further work is dependent upon additional funding from the partners.
El Ceibillo, Republic of Guatemala
A geothermal
energy rights concession, located 14 kilometers southwest of Guatemala City, was
awarded to U.S. Geothermal Guatemala S.A., a wholly owned subsidiary of the
Company in April 2010. The concession has a 5 year term for the development and
construction of a power plant. There are 24,710 acres (100 square kilometers) in
the concession which is at the center of the Aqua and Pacaya twin volcano
complex.
An office and staff are located in Guatemala City and a 17 acre
plant site is under lease on land adjacent to the existing wells. A second
surface lease for use of an additional 80 acre parcel was signed on October 15,
bringing the total surface leasehold interest to 97 acres. Construction of a
drill pad, pond and cellar for well EC-2, the new planned well, was completed
during the fourth quarter of 2014. EC-2 is located on the new surface leasehold.
The modified development schedule has received approval from
the legal, technical, environmental, and mining departments of the Guatemalan
Ministry of Energy and Mines (MEM), and the Vice-Minister of MEM has approved
the new schedule as well. Final paperwork is being prepared for the Ministers
signature and his approval is expected in the near term. Once the modified
development schedule has received final approval, we intend to commence drilling
well EC-2, which is targeted at the high temperature anomaly defined by the 2014
temperature gradient drilling program.
El Ceibillo, the first development target on the concession, is
located near the town of Amatitlan, in an industrial zone immediately adjacent
to the highway that connects Guatemala City to the Port of San Jose on the
Pacific coast. An initial development of a 25 megawatt (Phase I) power plant is
planned in the El Ceibillo area of the concession, but the final size of the
facility will be determined after drilling and resource delineation has
advanced. Initial transmission studies have been completed, and identified the
grid interconnection point approximately 1.2 miles (2 kilometers) from the site.
-29-
A temperature gradient (TG) drilling program was initiated
during the first quarter of 2014 with a series of 656 foot (200 meter) deep
wells planned. Nine TG wells have been completed with depths ranging from 656 to
1,312 feet (200 to 400 meters). Bottom-hole temperatures found in this shallow
drilling program range from 176 to 413°F (80 to 211°C) with two of the wells
encountering permeability and flowing brine. The data from these wells provided
a more accurate temperature gradient map of the underlying geothermal resource
which has assisted in identifying future drilling targets.
A first phase of drilling took place during the third quarter
of 2013 when well EC-1 was drilled to a depth of 4,829 feet (1,472 meters) and
encountered a bottom hole temperature of 491°F (255°C), with the temperature
gradient at the bottom of the hole rising at a rate of 7.1°F/100 Feet
(129.1°C/km). High temperatures in excess of 392°F (>200°C) were encountered
in the well beginning at a depth of 2,625 feet (800 meters), which represents a
potential high temperature reservoir interval in excess of 2,204 feet (672
meters) thick. Due to the high temperature gradient found in the lower section
of the well, the decision was made to deepen the well. The final depth of the
well is 5,650 feet (1,722 meters) with a measured bottom-hole temperature of
526°F (274°C). Clean out and short term flow tests were conducted along with
temperature surveys and have been incorporated in the geologic model of the
reservoir. Well EC-1 did not encounter commercial permeability.
In early September 2013, the Guatemalan Ministry of the
Environment and Natural Resources (MARN) issued the Environmental License for
the construction and operation of the planned, first phase, 25 megawatt power
plant at the El Ceibillo site. The license is based on the Environmental Impact
Assessment Study that was submitted in December 2012, describing the initial
design of the 25 megawatt facility, and requires the submittal of final design
specifications for review by MARN prior to starting physical construction of the
plant. Additionally, the license requires compliance with all legal and
regulatory requirements under Guatemalan law, submittal of an air quality
monitoring plan, and that final design comply with the strict guidelines for
noise, dust and hydrogen sulfide emissions. Prior to issuance of the license, an
environmental bond was posted with the Ministry of Environment and Natural
Resources.
A binding Memorandum of Understanding (MOU) was signed on
October 18, 2012 with one of the largest power brokers in Central America. The
MOU established the framework for a PPA that included a 15-year term for an
initial, estimated 25 megawatts of power generation up to a maximum of 50
megawatts of power generation to be developed in two phases. As a result of the
delays in approval of the modified development schedule from MEM, we requested
an extension of our MOU, which was allowed under the terms of the agreement, but
our request was declined and the MOU is now terminated. We are continuing
discussions with the broker to re-instate or renegotiate the agreement, and are
approaching other power consumers in Guatemala and Central America.
WGP Geysers, California
The WGP Geysers project is
located in the broader Geysers geothermal field located approximately 75 miles
north of San Francisco, California. The broader Geysers geothermal field is the
largest producing geothermal field in the world generating more than 850
megawatts of power for more than 30 years. Acquisition of the WGP Geysers
Project from Ram Power was completed on April 22, 2014 for $6.4 million.
WGP Geysers is an advanced stage project that encompasses the
former Pacific Gas and Electric Unit 15, which once had a 62 megawatt (gross)
capacity geothermal power plant that was shut down in l989. The project includes
3,809 acres (6 square miles) of geothermal leases and property, development
design plans, and permits for an up to 38.5(gross) megawatt power plant. There
are four existing wells drilled in 2008-2009 which are immediately available for
production or injection, with a fifth, historic well that has temporary plugs installed but can be reworked. The four new
wells have been tested with an initial steam flow totaling 462,000 pounds per
hour. A report prepared in 2012 by a third party reservoir engineering firm,
states that the total initial power capacity from these four wells is estimated
at about 30 megawatts (gross).
-30-
Engineering optimization of the power plant design is
continuing with a focus on the new hybrid plant design that includes both water
and air cooling. This design will dramatically increase the volume of water
available for injection back into the reservoir. Traditional water cooled steam
plants re-inject approximately 20% of the water that is removed during power
generation, while a hybrid design may re-inject up to 65% of the water. This
higher injection rate will provide longer term, stable steam production, and
will result in increased power generation over the life of the project.
An updated steam reserve estimate, which incorporated the past
five years of wellfield pressure data and the increased injection rate from the
hybrid plant design, was completed in March by an independent geothermal
reservoir consulting firm. The report supports past analysis that the project
has 30 megawatts gross steam capacity already behind pipe and that a 28.8 net
megawatt plant can be supported for its full 20-30 year project life. A full,
bankable reservoir analysis will be prepared upon completion of the flow test
planned for this spring. Upon completion of the reservoir analysis and power
plant optimization, the size of the new plant will be finalized.
The flow test program was designed by the same independent
consulting firm, and preparations are underway to run the test during the second
quarter. The three wells with the best steam production will be tested at three
different flow rates to determine the reservoir pressure and deliverability
characteristics. Steam samples will be taken to determine the various components
of the steam for plant design purposes.
Our new transmission interconnection application was accepted
by the California Independent System Operator and has now entered the evaluation
process. The new conditional use permit application is being prepared for
submittal to local regulatory agencies to replace the current conditional use
permit that expires in July.
In addition to pursuing a PPA, with associated construction of
a power plant, we continue to pursue a steam sale agreement.
Crescent Valley, Nevada
The Crescent Valley prospect
consists of approximately 21,300 acres (33.3 square miles) of private and
Federal geothermal leases. It is located in Eureka County, Nevada, approximately
15 miles south of the Beowawe geothermal power plant and about 33 miles
southeast of Battle Mountain. The project was acquired as part of the Earth
Power Resources merger which was completed in November 2014.
Multiple geothermal and mineral exploration drilling programs
performed over the years in this area have identified high temperatures and high
temperature gradients in the shallow subsurface over an area greater than 30
square miles. Historic drill holes defining this area have anomalous temperature
gradients of up to 40°F/100 feet of depth, and a recorded high temperature of
285°F at 395 feet below the surface. These drill holes define large areas of
hydrothermal alteration that correspond to positive gravity anomalies that
extend into undrilled areas of the valley.
A mineral exploration hole drilled in the mid-l990s near the
Crescent Valley fault encountered geothermal fluid under pressure. The driller
was not able to control the flow of geothermal fluid from the well and a geyser
erupted. An oil field service company had to be brought in to stop the
uncontrolled flow and to abandon the well. This well demonstrates that
prospective permeability and commercial temperature are known from past minerals
exploration.
Hot springs located on the property have surface discharge
temperatures of up to 198°F. Broad areas of hydrothermal alteration occur at
both Hot Springs Point and along the Crescent Valley fault 8 miles to the southeast. Chemistry of the hot springs and the occurrence of
silica deposits at surface, and in the shallow subsurface, suggest reservoir
temperatures at depth of 350°F to 400°F.
-31-
Temperature gradients based on wide spaced drilling, that are
above normal background values, extend up to 7 miles northwest from the Crescent
Valley fault into Crescent Valley proper. Additional fracture controlled
permeability may be present under the valley floor as potential fault systems
that bound buried, down-dropped blocks have been identified from historic
seismic studies.
An independent geothermal consulting firm evaluated all of the
available data for the Crescent Valley Prospect in late 2009. After evaluating
the data, a recoverable, heat-in-place Monte Carlo method was used to estimate
the generation potential of the prospect. The resulting estimate for the field
was 71 megawatt with 90% probability and 186 megawatt with 50% probability over
a 20 year period. The actual, producible power generation may be significantly
different than the recoverable heat-in-place calculations, and will depend upon
the discovery of commercial temperatures and permeability.
In light of federal legislation that extended the qualification
for the 30% Investment Tax Credit to projects that began construction prior to
December 31, 2014, drilling of the first production/injection well CVP-001
(67-3) was initiated in December of 2014, following completion of gravity
surveys, and analysis of prior temperature gradient drilling data. Well CVP-001
was completed on March 27th to a depth of 2,746 feet. The well exhibited modest
permeability with a flowing temperature of 213°F, which makes the well suited
for duty as an injection well. The next phase of development work is in the
planning stages.
Lee Hot Springs, Nevada
Lee Hot Springs is in
Churchill County, 18 miles south of Fallon. The area was originally explored by
Occidental Geothermal Company, a subsidiary of the oil company Occidental
Petroleum Corporation. The project is comprised of 2,560 acres (four square
miles) of BLM leases. ENEL Green Energy, a subsidiary of ENEL Group, the Italian
based, multi-national power company, has completed a 15 megawatt binary plant at
Salt Wells, 6 miles to the east of Lee. The project was acquired as part of the
Earth Power Resources merger which was completed in November 2014.
Dating back to 1930, the area has had numerous water wells,
temperature gradient holes, and small diameter test holes. From 1977-1982
Occidental Geothermal, Inc. drilled four temperature gradient holes to depths of
500 feet, two stratigraphic test wells to 2,000-3,000 feet, and one
large-diameter production test to 3,000 feet (well 72-33). The 3,000 foot test
well flowed 280°F hot water from a zone at 1,200 ft. The A33-4 well, 1,000 feet
southwest of well 72-33, was drilled to 2,400 feet and reportedly had
temperatures in excess of 300°F and a steadily increasing temperature gradient.
The Great Basin Research Institute has had the leasehold mapped
in detail, showing several large silica deposits. The reservoir temperature has
been estimated using geochemistry as ranging from 320°F to 340°F by the US
Geological Survey and other sources in the 1970s. No exploration work is
scheduled for Lee Hot Springs in 2015.
Ruby Hot Springs, Nevada
The property is located 30
miles southwest of Elko. EPR filed a BLM lease application for 2,140 acres in
February 2001 and the lease application was rejected by the BLM in December 2005
due to cultural issues. The decision was appealed to the Interior Board of Land
Appeals (IBLA) and the IBLA remanded the application back to the BLM for
further action. No further action has been taken by BLM on issuance of the lease
pending the completion of cultural and ethnographic studies that are required
for further review. The project was acquired as part of the Earth Power
Resources merger which was completed in November 2014.
The area around Ruby was first leased by Union Oil Company (now
Chevron) in the late 1970s. A 3,149 foot test well was drilled and reportedly
flowed at over 300°F. A second well in the area, Ruby Valley 65-10, was drilled
to 1,075 feet deep and encountered lost circulation zones, but no temperature
data is available. In the early 1980s, Aminoil drilled twelve 500 foot
deep temperature gradient wells and two 1,000 foot stratigraphic test wells.
Data from these wells have been incorporated into generalized heat-flow contour
maps of the area.
-32-
Vale, Oregon
The property consists of 368 acres of
geothermal energy and surface rights in Malheur County, located approximately
one-half mile east of the town of Vale, Oregon. The property is within the Vale
Butte geothermal resource area and provides the opportunity to evaluate
development of a known resource. A prolific, shallow reservoir located along the
north edge of the leasehold area has been used for many years in an agricultural
drying facility and a mushroom growing operation.
An extensive database of geophysical and geological information
from previous geothermal exploration in the Vale Butte area was used in the
evaluation of the prospect. Geochemical analysis of samples taken from shallow
hot wells results in a calculated geothermometer that indicates a potential
reservoir temperature of 311°F to 320°F. Past exploration drilling near the site
by Trans Pacific Geothermal and Sandia National Laboratory encountered
temperatures in excess of 300°F in the basement rocks. The leases for this
project were acquired in January and February 2014. A gravity survey, 2-3
temperature gradient wells, and a small diameter exploration well may be
initiated in 2015.
Operating Results
For the three months ended March 31, 2015, the Company reported
net income attributable to the Company of $734,135 ($0.01 income per share)
which represented a $605,285 (45.2% decrease) decrease from net income of
$1,339,420 reported in the same period ended 2014 ($0.01 income per share). Both
favorable and unfavorable variances were reported related to the operations of
the Companys three power plants. Notable unfavorable variances were reported in
stock compensation, income taxes and net income attributable to the
non-controlling interests.
Plant Operations
A summary of energy sales by plant
location for the two reporting periods are as follows:
|
|
For the Three Months Ended March 31, |
|
|
|
2015 |
|
|
2014 |
|
|
|
$ |
|
|
% |
|
|
$ |
|
|
% |
|
Energy sales by plant: |
|
|
|
|
|
|
|
|
|
|
|
|
Neal Hot Springs, Oregon |
|
5,207,350 |
|
|
62.2 |
|
|
5,266,455 |
|
|
62.7 |
|
San Emidio,
Nevada |
|
2,003,346 |
|
|
23.9 |
|
|
1,935,091 |
|
|
23.0 |
|
Raft River, Idaho |
|
1,165,050 |
|
|
13.9
|
|
|
1,199,551 |
|
|
14.3
|
|
|
|
8,375,746 |
|
|
100.0 |
|
|
8,401,097 |
|
|
100.0 |
|
% - represents the percentage of
total Company energy sales.
A quarterly summary of megawatt hours generated by plant are as
follows:
|
|
For the Quarter Ended, |
|
|
|
March 31, |
|
|
June 30, |
|
|
September 30, |
|
|
December 31, |
|
|
March 31, |
|
|
|
2014 |
|
|
2014 |
|
|
2014 |
|
|
2014 |
|
|
2015 |
|
Neal Hot Spring, Oregon |
|
56,047 |
|
|
40,629 |
|
|
32,246 |
|
|
54,472 |
|
|
53,500 |
|
San Emidio, Nevada |
|
21,223 |
|
|
15,686 |
|
|
18,240 |
|
|
21,745 |
|
|
21,754 |
|
Raft River, Idaho |
|
21,614 |
|
|
18,069 |
|
|
18,501 |
|
|
20,614 |
|
|
20,672 |
|
|
|
98,884
|
|
|
74,384
|
|
|
68,987
|
|
|
96,831
|
|
|
95,926
|
|
-33-
Neal Hot Springs, Oregon (USG Oregon LLC) Plant
Operations
For the three months ended March 31, 2015, subsidiary net
income was $3,010,263 which was a slight decrease of $60,086 (2.0% decrease)
from subsidiary net income from the same period ended 2014. For the three months
ended March 31, 2015, plant energy revenues were consistent (1.1% decrease) with
the same three month period ended 2014. Energy production decreased 4.5% (2,547
megawatt hours) from the prior quarter ended March 31, 2014. In current quarter,
the plants three units experienced a total of 192 hours of lost production. The
two primary causes for the outages were plugged vaporizers and an exciter
re-alignment needed at Unit 3. Plant operating costs were consistent (1.6%
increase) with the three months ended March 31, 2014. Increases in salaries and
related costs were partially offset by decreases in chemical costs. On March 31,
2015, the plant employees were awarded a bonus that totaled $60,900 for the
favorable performance of the plant reported in the prior calendar year.
Additional operating and maintenance costs were incurred in the current quarter
that were partially covered under the warranty agreement in the quarter ended
2014. The additional time and increases in workers compensation costs resulted
in increases of approximately $47,000. In March of 2014, the plant made a large
refrigerant purchase of $95,200 to take advantage of a volume price
discount.
Summarized statements of operations for the Neal Hot Springs,
Oregon plant are as follows:
|
|
Three Months Ended March 31, |
|
|
|
2015 |
|
|
2014 |
|
|
Variance |
|
|
|
$ |
|
|
% |
|
|
$ |
|
|
% |
|
|
$ |
|
|
%* |
|
Plant revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Energy sales |
|
5,207,350 |
|
|
100.0
|
|
|
5,266,454 |
|
|
100.0
|
|
|
(59,104 |
) |
|
(1.1 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plant expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General
operations |
|
965,105 |
|
|
18.6 |
|
|
939,995 |
|
|
17.9 |
|
|
(25,110 |
) |
|
(2.7 |
) |
Depreciation and amortization |
|
819,708 |
|
|
15.7
|
|
|
817,503 |
|
|
15.5
|
|
|
(2,205 |
) |
|
(0.3 |
) |
|
|
1,784,813 |
|
|
34.3 |
|
|
1,757,498 |
|
|
33.4 |
|
|
(27,315 |
) |
|
(1.6 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Profit |
|
3,422,537 |
|
|
65.7 |
|
|
3,508,956 |
|
|
66.6 |
|
|
(86,419 |
) |
|
(2.5 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
(414,274 |
) |
|
(8.0 |
) |
|
(445,332 |
) |
|
(8.5 |
) |
|
30,499 |
|
|
6.8 |
|
Other and
interest income |
|
2,559 |
|
|
0.1 |
|
|
6,725 |
|
|
0.2 |
|
|
(4,166 |
) |
|
(61.9 |
) |
|
|
(412,274 |
) |
|
(7.9 |
) |
|
(438,607 |
) |
|
(8.3 |
) |
|
26,333
|
|
|
6.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subsidiary Net Income |
|
3,010,263 |
|
|
57.8
|
|
|
3,070,349 |
|
|
58.3
|
|
|
(60,086 |
) |
|
(2.0 |
) |
|
% - represents the percentage of total plant
operating revenues. |
|
%* - represents the percentage of change
from 2014 to 2015. Increases in revenues and decreases in
expenses from the prior period to the current period are considered to
be favorable and are presented as positive figures. |
|
|
|
The intercompany elimination adjustments for
interest expense, management fees and lease costs are not
incorporated into the presentation of the subsidiarys operations.
|
-34-
Key quarterly production data for the Neal Hot Springs, Oregon
plant is summarized as follows:
|
|
Mega- |
|
|
|
|
|
Ave. Rate |
|
|
|
|
|
Depreciation |
|
|
|
watt |
|
|
Energy |
|
|
per |
|
|
Subsidiary |
|
|
& |
|
|
|
Hours |
|
|
Sales |
|
|
Megawatt |
|
|
Net Income* |
|
|
Amortization |
|
Quarter Ended:
|
|
Produced |
|
|
($) |
|
|
Hour
($) |
|
|
($) |
|
|
($) |
|
March 31, 2013 |
|
46,137 |
|
|
4,197,252 |
|
|
90.6 |
|
|
2,424,648 |
|
|
779,299 |
|
June 30, 2013 |
|
30,016 |
|
|
2,435,304 |
|
|
80.2 |
|
|
518,754 |
|
|
814,434 |
|
September 30, 2013 |
|
25,832 |
|
|
2,875,686 |
|
|
110.9 |
|
|
829,374 |
|
|
810,573 |
|
December 31, 2013 |
|
53,445 |
|
|
6,058,169 |
|
|
113.3 |
|
|
3,644,359 |
|
|
812,766 |
|
March 31, 2014 |
|
56,047 |
|
|
5,266,454 |
|
|
93.8 |
|
|
3,070,349 |
|
|
817,503 |
|
June 30, 2014 |
|
40,629 |
|
|
3,403,812 |
|
|
83.7 |
|
|
1,196,404 |
|
|
820,526 |
|
September 30, 2014 |
|
32,246 |
|
|
3,717,609 |
|
|
115.0 |
|
|
1,412,124 |
|
|
805,497 |
|
December 31, 2014 |
|
54,472 |
|
|
6,378,488 |
|
|
117.1 |
|
|
4,147,356 |
|
|
819,924 |
|
March 31, 2015 |
|
53,500 |
|
|
5,207,350 |
|
|
97.3 |
|
|
3,010,263 |
|
|
819,708 |
|
|
* |
- The intercompany elimination adjustments for
management fees and corporate support are not incorporated into the
presentation of the subsidiarys net income. |
San Emidio, Nevada Plant Energy Sales and Plant Operating
Expenses (USG Nevada LLC)
For the three months ended March 31, 2015, the San Emidio plant
reported subsidiary net income of $566,301 which was an increase of $132,952
(31.4% increase) from the $423,349 in subsidiary net income reported in the same
period ended 2014. During the current three months, the plant produced 21,754
megawatt hours, which was consistent (2.5% increase) with the same quarter ended
2014.
For the three months ended March 31, 2015, total operating
costs, excluding depreciation, decreased $60,167 (8.8% decrease) from the same
three months ended 2014. Two significant cost component variances of salaries
and taxes, partially, offset each other. In March 2015, the plant employees were
awarded a bonus that totaled $40,100 for the favorable performance of the plant
reported in the prior calendar year. The minerals proceeds tax for the State of
Nevada decreased approximately $78,000 from the prior quarter ended March 31,
2014, due to changes in tax calculation methods and the higher operating costs
reported in the prior year.
-35-
Summarized statements of operations for the San Emidio, Nevada
plant are as follows:
|
|
Three Months Ended March 31, |
|
|
|
2015 |
|
|
2014 |
|
|
Variance |
|
|
|
$ |
|
|
% |
|
|
$ |
|
|
% |
|
|
$ |
|
|
%* |
|
Plant revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Energy sales |
|
2,003,346 |
|
|
100.0
|
|
|
1,935,091 |
|
|
100.0
|
|
|
68,255
|
|
|
3.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plant expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operations |
|
621,262 |
|
|
31.0 |
|
|
681,429 |
|
|
35.2 |
|
|
60,167 |
|
|
8.8 |
|
Depreciation and amortization
|
|
316,346 |
|
|
15.8
|
|
|
312,908 |
|
|
16.2
|
|
|
(3,438 |
) |
|
(1.1 |
) |
|
|
937,608 |
|
|
46.8 |
|
|
994,337 |
|
|
51.4 |
|
|
56,729 |
|
|
5.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Profit |
|
1,065,738 |
|
|
53.2 |
|
|
940,754 |
|
|
48.6 |
|
|
124,984 |
|
|
13.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
(509,718 |
) |
|
(25.4 |
) |
|
(517,406 |
) |
|
26.7 |
|
|
7,688 |
|
|
1.5 |
|
Other income |
|
281 |
|
|
0.0 |
|
|
1 |
|
|
0.0 |
|
|
280 |
|
|
# |
|
|
|
(509,437 |
) |
|
(25.4 |
) |
|
(517,405 |
) |
|
26.7
|
|
|
7,968
|
|
|
1.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subsidiary Net Income |
|
556,301 |
|
|
27.8
|
|
|
423,349 |
|
|
21.9
|
|
|
132,952 |
|
|
31.4
|
|
|
% - represents the percentage of total plant operating
revenues. |
|
%* - represents the percentage of change from 2014 to
2015. Increases in revenues and decreases in expenses from
the prior period to the current period are considered to be favorable
and are presented as positive figures. |
|
# - Variance percentage was extremely high or
undefined. |
|
The intercompany elimination adjustments for
management fees are not incorporated into the presentation of the
subsidiarys net operating income/loss. |
Key quarterly production data for the San Emidio, Nevada plant
is summarized as follows:
|
|
Mega- |
|
|
|
|
|
Ave. Rate |
|
|
Subsidiary |
|
|
Depreciation |
|
|
|
watt |
|
|
Energy |
|
|
per |
|
|
Net Income |
|
|
& |
|
|
|
Hours |
|
|
Sales |
|
|
Megawatt |
|
|
(Loss)* |
|
|
Amortization |
|
Quarter Ended: |
|
Produced |
|
|
($) |
|
|
Hour
($) |
|
|
($) |
|
|
($) |
|
March 31, 2013 |
|
19,228 |
|
|
1,726,927 |
|
|
90.3 |
|
|
834,266 |
|
|
407,060 |
|
June 30, 2013 |
|
18,039 |
|
|
1,628,382 |
|
|
90.3 |
|
|
(212,058 |
) |
|
365,314 |
|
September 30, 2013 |
|
18,317 |
|
|
1,531,260 |
|
|
83.6 |
|
|
355,498 |
|
|
307,854 |
|
December 31, 2013 |
|
21,112 |
|
|
1,905,813 |
|
|
90.3 |
|
|
180,931 |
|
|
312,273 |
|
March 31, 2014 |
|
21,223 |
|
|
1,935,091 |
|
|
91.2 |
|
|
423,350 |
|
|
312,908 |
|
June 30, 2014 |
|
15,686 |
|
|
1,450,526 |
|
|
92.5 |
|
|
(203,424 |
) |
|
316,283 |
|
September 30, 2014 |
|
18,240 |
|
|
1,663,119 |
|
|
91.2 |
|
|
109,515 |
|
|
316,638 |
|
December 31, 2014 |
|
21,745 |
|
|
1,982,709 |
|
|
91.2 |
|
|
158,352 |
|
|
315,609 |
|
March 31, 2015 |
|
21,754 |
|
|
2,003,346 |
|
|
92.1 |
|
|
556,301 |
|
|
316,346 |
|
|
* |
- The intercompany elimination adjustments for
management fees and corporate support charges are not incorporated into
the presentation of the subsidiarys net
income/loss. |
Raft River, Idaho Unit I (Raft River Energy I LLC) Plant
Operations
The net loss from Raft River Energy I LLC (RREI) operations
of $96,930 for the three months ended March 31, 2015, decreased by $158,679
(257.0% decrease) from the net profit for the same period ended in 2014. For the
current quarter, both energy revenues ($1,165,050) and hours produced (20,672
megawatt hours) were consistent with the same quarter in ended 2014. The
operating expenses, excluding depreciation, in the current period increased
$160,799 (20.7% increase) from the prior three months ended March 31, 2014. The largest increase was incurred
for salaries and wages which increased $78,924 from the same period ended 2014.
In March 2015, the plant employees were awarded a bonus that totaled $40,000 for
the favorable performance of the plant reported in the prior calendar year. For
the current three months ended March 31, 2015, the plant incurred additional
chemical costs that exceeded $43,000 (76.9% increase) from the same period ended
2014. During the current quarter, a purchase of approximately $21,000 for motive
fluid was needed to replenish the plants reserves. Also, replacement membranes
were needed for the circulation system that totaled approximately $16,000.
Additional field maintenance costs were incurred during the current quarter for
the reverse osmosis systems that exceeded $24,000. During the current quarter,
the plant implemented a safety and skills training program which resulted in an
increase in training costs of approximately $17,000 from the quarter ended March
31, 2014.
-36-
The summarized statements of operations for RREI are as
follows:
|
|
Three Months Ended March, |
|
|
|
2015 |
|
|
2014 |
|
|
Variance |
|
|
|
$ |
|
|
% |
|
|
$ |
|
|
% |
|
|
$ |
|
|
%* |
|
Plant revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Energy sales |
|
1,165,050 |
|
|
92.2 |
|
|
1,199,551 |
|
|
92.2 |
|
|
(34,501 |
) |
|
(2.9 |
) |
Energy credit
sales |
|
98,115 |
|
|
7.8 |
|
|
100,868 |
|
|
7.8 |
|
|
(2,753 |
) |
|
(2.7 |
) |
|
|
1,263,165 |
|
|
100.0
|
|
|
1,300,419 |
|
|
100.0
|
|
|
(37,254 |
) |
|
(2.9 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plant expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General
operations |
|
938,106 |
|
|
74.3 |
|
|
777,307 |
|
|
59.8 |
|
|
(160,799 |
) |
|
(20.7 |
) |
Depreciation and amortization
|
|
431,959 |
|
|
34.2
|
|
|
427,907 |
|
|
32.9
|
|
|
(4,052 |
) |
|
(0.9 |
) |
|
|
1,370,065 |
|
|
108.5 |
|
|
1,205,214 |
|
|
92.7 |
|
|
(164,851 |
) |
|
(13.7 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Profit(loss) |
|
(106,900 |
) |
|
(8.5 |
) |
|
95,205 |
|
|
7.3 |
|
|
(202,105 |
) |
|
(212.3 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
(11,602 |
) |
|
(0.9 |
) |
|
(33,719 |
) |
|
(2.6 |
) |
|
22,117 |
|
|
65.6 |
|
Other and
interest income |
|
21,572 |
|
|
1.7 |
|
|
263 |
|
|
0.0 |
|
|
21,309 |
|
|
# |
|
|
|
9,970
|
|
|
0.8
|
|
|
(33,456 |
) |
|
(2.6 |
) |
|
43,426
|
|
|
129.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subsidiary Net Loss |
|
(96,930 |
) |
|
(7.7 |
) |
|
61,749
|
|
|
4.7
|
|
|
(158,679 |
) |
|
(257.0 |
) |
|
% - represents the percentage of total plant
operating revenues. |
|
%* - represents the percentage of change
from 2014 to 2015. Increases in revenues and decreases in
expenses from the prior period to the current period are considered to be
favorable and are presented as positive figures. |
|
# - Variance percentage was extremely high
or undefined. |
|
|
|
The intercompany elimination adjustments for
interest expense, management fees and lease costs are not
incorporated into the presentation of the subsidiarys operations.
|
-37-
Key quarterly production data for RREI is summarized as
follows:
|
|
Mega- |
|
|
|
|
|
Ave. Rate |
|
|
Subsidiary |
|
|
Depreciation |
|
|
|
watt |
|
|
Energy |
|
|
per |
|
|
Net Income |
|
|
& |
|
|
|
Hours |
|
|
Sales |
|
|
Megawatt |
|
|
(Loss)* |
|
|
Amortization |
|
Quarter Ended: |
|
Produced |
|
|
($) |
|
|
Hour
($) |
|
|
($) |
|
|
($) |
|
March 31, 2013 |
|
19,675 |
|
|
1,064,481 |
|
|
56.1 |
|
|
67,620 |
|
|
472,040 |
|
June 30, 2013 |
|
17,248 |
|
|
823,154 |
|
|
49.9 |
|
|
(715,605 |
) |
|
472,094 |
|
September 30, 2013 |
|
18,687 |
|
|
1,260,124 |
|
|
69.5 |
|
|
(1,166 |
) |
|
450,222 |
|
December 31, 2013 |
|
21,951 |
|
|
1,479,499 |
|
|
69.0 |
|
|
254,302 |
|
|
450,222 |
|
March 31, 2014 |
|
21,614 |
|
|
1,199,550 |
|
|
57.9 |
|
|
61,749 |
|
|
427,907 |
|
June 30, 2014 |
|
18,069 |
|
|
907,194 |
|
|
52.6 |
|
|
(579,569 |
) |
|
428,180 |
|
September 30, 2014 |
|
18,501 |
|
|
1,273,013 |
|
|
71.2 |
|
|
117,281 |
|
|
429,164 |
|
December 31, 2014 |
|
20,614 |
|
|
1,425,811 |
|
|
71.3 |
|
|
203,414 |
|
|
431,214 |
|
March 31, 2015 |
|
20,672 |
|
|
1,165,050 |
|
|
58.5 |
|
|
(96,930 |
) |
|
431,959 |
|
|
* |
- Net income (loss) does not include intercompany
elimination adjustments for interest expense, management fees and lease
costs. |
Stock Based Compensation
For the three months ended
March 31, 2015, the Company reported $365,455 in stock based compensation, which
was an increase of $218,142 (148.1% increase) from the same period ended 2014.
The primary factor for the increase was due to the increase in the stock
compensation (restricted shares) costs with more restricted shares outstanding
and a $0.74 market price at date of grant.
The stock based compensation components are summarized as
follows:
|
|
For the Three Months Ended |
|
|
|
|
|
|
|
|
|
March 31, |
|
|
|
|
|
|
|
|
|
2015 |
|
|
2014 |
|
|
Variances |
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
% |
|
Total Stock Based Compensation: |
|
|
|
|
|
|
|
|
|
|
|
|
Stock option compensation |
|
144,602 |
|
|
121,062 |
|
|
23,540 |
|
|
19.4 |
|
Stock
compensation (restricted shares) |
|
220,853 |
|
|
26,250 |
|
|
194,603 |
|
|
741.3 |
|
|
|
365,455 |
|
|
147,312 |
|
|
218,143 |
|
|
148.1
|
|
% - represents the percentage
of change from 2014 to 2015.
Net Income Tax Expense
For the three months ended
March 31, 2015, the Company reported net income taxes of $444,000. No income tax
expense was recognized in the same period ended 2014. As of December 31, 2014,
management believed that the more likely than not standard had been met to
enable the Company to fully recognize the net deferred tax asset. In the prior
periods, including the three months ended March 31, 2014, the net deferred tax
asset was recognized to the extent of current period earnings. The current
income tax expense represents the estimated consolidated income tax expense,
less the impact of the estimated portion that belongs to the non-controlling
interest entities.
-38-
Net Income Attributable to the Non-Controlling
Interests
The net income attributable to the non-controlling interest
entities is the line item that removes the portion of the total consolidated
operations that are owned by the Companys subsidiaries. For the three months
ended March 31, 2015, the Company reported $1,029,246 in net income attributable
to non-controlling interests, which was a decrease of $178,425 (14.8% decrease)
from the $1,207,671 net income reported in the same period ended 2014. The
primary component of the decrease was the operations of Raft River Energy I LLC
(RREI) which reported a subsidiary net loss of $96,930, which was a decrease
of $158,679 from net income $61,749 reported for the three months ended March
31, 2015 from the same period ended 2014. The profits and losses are allocated
based upon this method and the terms of the partnership agreement. RREIs net
loss allocated to non-controlling interest entity was $163,660, which consisted
of $29,435 of energy credit sales and $193,095 of loss from the total company
loss after removing energy credit sales. The largest component of income from
non-controlling interests originated from USG Oregon LLC. The income of
$1,204,105 for the three months ended March 31, 2015, was consistent (1.0%
decrease) with the same period ended 2014.
The net income or (loss) attributable to the non-controlling
interest entities is detailed as follows:
|
|
For the Three Months Ended |
|
|
|
|
|
|
|
|
|
March 31, |
|
|
|
|
|
|
|
Subsidiaries and Non-Controlling |
|
2015 |
|
|
2014 |
|
|
Variance |
|
Interest
Entities |
|
$ |
|
|
$ |
|
|
$ |
|
|
% |
|
Oregon USG Holdings LLC interest held by
Enbridge Inc. |
|
1,204,105 |
|
|
1,216,146 |
|
|
(12,041 |
) |
|
(1.0 |
) |
Raft River Energy I LLC interest held by Raft River I
Holdings, LLC |
|
(163,660 |
) |
|
(8,467 |
) |
|
(155,193 |
) |
|
# |
|
Gerlach Geothermal LLC interest held by
Gerlach Green Energy, LLC |
|
(11,199 |
) |
|
(8 |
) |
|
(11,191 |
) |
|
# |
|
|
|
1,029,246 |
|
|
1,207,671 |
|
|
(178,425 |
) |
|
(14.8 |
) |
% - represents the percentage
of change from 2014 to 2015.
# - Variance percentage was
extremely high or undefined.
Non-Controlling Interests
The following is a
summarized presentation of select financial line items from the statement of
operations by project and the impact of the related non-controlling interests
for the three months ended March 31, 2015:
|
|
|
|
|
|
|
|
|
|
|
Exploration |
|
|
|
|
|
|
Neal Hot |
|
|
San |
|
|
|
|
|
Activities and |
|
|
Consolid- |
|
Statement of Operations |
|
Springs |
|
|
Emidio |
|
|
Raft River |
|
|
Corporate |
|
|
ated |
|
Element |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Profit(Loss) |
|
3,422,537 |
|
|
1,065,739 |
|
|
(106,901 |
) |
|
234,262 |
|
|
4,615,637 |
|
Expenses/Income |
|
412,274 |
|
|
509,438 |
|
|
9,971
|
|
|
(4)1,496,515 |
|
|
2,408,256 |
|
Net Income(Loss) before tax expense |
|
3,010,263 |
|
|
556,301 |
|
|
(96,930 |
) |
|
(1,262,253 |
) |
|
2,207,381 |
|
Income taxes USG Portion |
|
(681,000 |
) |
|
(210,000 |
) |
|
(25,000 |
) |
|
472,000 |
|
|
(444,000 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-controlling interests |
|
(1)(1,204,105) |
|
|
- |
|
|
(2)163,660 |
|
|
(3)11,199 |
|
|
(1,029,246 |
) |
Net income attributable to U.S. Geothermal
|
|
1,125,158 |
|
|
346,301 |
|
|
41,730 |
|
|
(779,054 |
) |
|
734,135 |
|
-39-
|
(1) |
The non-controlling interests for Neal Hot Springs
represents a 40% interest for our joint venture partner,
Enbridge. |
|
(2) |
The non-controlling interests for Raft River represents
30% of REC income and 99% of all other income/expenses for Raft River I
Holdings, a subsidiary of Goldman Sachs Group. |
|
(3) |
The non-controlling interests for our exploration
activities represents an approximately 33% interest for our joint venture
partner at Gerlach, GGE Development. |
|
(4) |
Major costs included in Exploration Activities and
Corporate for the quarter ended March 31, 2015
include: |
º |
|
Salaries and
wages |
|
$ |
381,988 |
|
º |
|
Stock based compensation |
|
|
365,455 |
|
º |
|
Corporate
administration |
|
|
295,380 |
|
º |
|
Professional fees |
|
|
383,123 |
|
These costs are the responsibility of
U.S. Geothermal Inc. (the Parent Company) and cannot be allocated to projects.
Once a project has been classified as developmental, the costs associated with a
project will be capitalized.
Off Balance Sheet Arrangements
As of March 31, 2015, the Company does not have any off balance
sheet arrangements.
Liquidity and Capital Resources
We believe our cash and liquid investments at March 31, 2015
are adequate to fund our general operating activities through December 31, 2016.
Development of our projects under development and under exploration may require
additional funding. We anticipate that additional funding may be raised through
financial and strategic partnerships, market loans, issuance of debt or equity,
and/or through the sale of ownership interest in tax credits and benefits. The
Company continues discussions with potential investors to evaluate alternatives
for funding at the corporate and project levels.
Our power is sold under long-term contracts at fixed prices to
large utilities. The status of the credit and equity markets could delay our
project development activities while we seek to obtain economic credit terms or
a favorable equity market price to further the drilling and construction
activities.
On February 4, 2014, a replacement shelf registration statement
filed on Form S-3 with the SEC became effective. The replacement shelf
registration statement was filed as routine course of business due to the
impending expiration of the Companys existing shelf registration statement
that, under SEC rules, would have expired on December 1, 2013. The Company may
use the replacement shelf registration statement to offer and sell from time to
time for a period of three years in one or more public offerings up to $50
million of common stock, warrants, or units consisting of any combination
thereof. The terms of any securities offered under the replacement shelf
registration statement, and the intended use of the resulting net proceeds, will
be established at the times of any future offerings and will be described in
prospectus supplements filed at such times with the SEC. The Company has no
immediate plans to sell any additional stock under the replacement shelf
registration statement at this time, but wishes to preserve the option in
support of its future growth and development of its projects as well as
strategic acquisition opportunities.
-40-
Potential Acquisitions and Acquisitions Completed
Subsequent to Period End
The Company intends to continue its growth through the
acquisition of ownership or leasehold interests in properties and/or property
rights that it believes will add to the value of the Companys geothermal
resources, and through possible mergers with or acquisitions of operating power
plants and geothermal or other renewable energy properties.
Critical Accounting Policies
Our consolidated financial statements are prepared in
accordance with U.S. GAAP. In connection with the preparation of our
consolidated financial statements, we are required to make assumptions and
estimates about future events and apply judgments that affect the reported
amounts of assets, liabilities, revenue, expenses and the related disclosures.
We base our assumptions, estimates and judgments on historical experience,
current trends and other factors that we believe to be relevant at the time our
consolidated financial statements are prepared. On a regular basis, we review
the accounting policies, assumptions, estimates and judgments to ensure that our
consolidated financial statements are presented fairly and in accordance with
U.S. GAAP. However, because future events and their effects cannot be determined
with certainty, actual results could differ from our assumptions and estimates,
and such differences could be material.
There have been no significant changes to our critical
accounting estimates as discussed in our Annual Report on Form 10-K for the year
ended December 31, 2014.
Item 3 Quantitative and Qualitative Disclosures about
Market Risk
Not applicable.
-41-
Item 4 - Controls and Procedures
An evaluation was performed under the supervision and with the
participation of our management, including the Chief Executive Officer (CEO)
and Chief Financial Officer (CFO), of the effectiveness of our disclosure
controls and procedures (as defined in Rule 13a-15(e) or 15d-15(e) under the
Securities Exchange Act of 1934, as amended) as of the end of the period covered
by this report. Based on that evaluation, our management, including the CEO and
CFO, concluded that our disclosure controls and procedures were effective at the
end of this period covered by this report to ensure that information we are
required to disclose in the reports that we file or submit under the Securities
Exchange Act of 1934, is recorded, processed, summarized and reported within the
time periods specified in the Securities and Exchange Commissions rules and
forms relating to us, including our consolidated subsidiaries, and was
accumulated and communicated to our management, including our CEO and CFO, as
appropriate, to allow timely decisions regarding required disclosure.
There has been no change to our internal control over financial
reporting during the three months ended March 31, 2015 that has materially
affected, or is likely to materially affect, our internal control over financial
reporting.
-42-
PART II- OTHER INFORMATION
Item 1 - Legal Proceedings
None.
Item 1A - Risk Factors
See Risk Factors in our annual report on Form 10-K for the
year ended December 31, 2014. There have been no material changes in the risk
factors during the three months ended March 31, 2015.
Item 2 - Unregistered Sales Of Equity Securities And Use
Of Proceeds
None.
Item 3 Defaults Upon Senior Securities
None.
Item 4 Mine Safety Disclosures
Not applicable.
Item 5 - Other Information
None.
Item 6 - Exhibits
See the exhibit index to this quarterly report on Form 10-Q.
-43-
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
|
U.S. GEOTHERMAL INC. |
|
(Registrant) |
|
|
Date: May 15, 2015 |
By: /s/ Dennis J. Gilles |
|
Dennis J. Gilles |
|
Chief Executive Officer |
|
|
Date: May 15, 2015 |
|
|
By: /s/ Kerry D. Hawkley |
|
Kerry D. Hawkley |
|
Chief Financial Officer and Corporate Secretary
|
-44-
EXHIBIT INDEX
-45-
Exhibit 31.1
CERTIFICATION
I, Dennis J. Gilles, certify that:
1. |
I have reviewed this report on Form 10-Q of U.S.
Geothermal Inc.; |
|
|
|
2. |
Based on my knowledge, this report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under
which such statements were made, not misleading with respect to the period
covered by this report; |
|
|
|
3. |
Based on my knowledge, the financial statements, and
other financial information included in this report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the Registrant as of, and for, the periods presented in this
report; |
|
|
|
4. |
The Registrants other certifying officer and I are
responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and
internal control over financial reporting (as defined in Exchange Act
Rules 13a-15(f) and 15d-15(f)) for the Registrant and have: |
|
|
|
|
a. |
designed such disclosure controls and procedures, or
caused such disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
Registrant, including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the period in which
this report is being prepared; |
|
|
|
|
b. |
designed such internal control over financial reporting,
or caused such internal control over financial reporting to be designed
under our supervision, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted
accounting principles; |
|
|
|
|
c. |
evaluated the effectiveness of the Registrants
disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and
procedures, as of the end of the period covered by this report based on
such evaluation; and |
|
|
|
|
d. |
disclosed in this report any change in the Registrants
internal control over financial reporting that occurred during the
Registrants most recent fiscal quarter (the registrants fourth fiscal
quarter in the case of an annual report) that has materially affected, or
is reasonably likely to materially affect, the Registrants internal
control over financial reporting; and |
|
|
|
5. |
The Registrants other certifying officer and I have
disclosed, based on our most recent evaluation of internal control over
financial reporting, to the Registrants auditors and the audit committee
of the Registrants board of directors (or persons performing the
equivalent functions): |
|
|
|
|
a. |
all significant deficiencies and material weaknesses in
the design or operation of internal control over financial reporting which
are reasonably likely to adversely affect the Registrants ability to
record, process, summarize and report financial information;
and |
|
b. |
any fraud, whether or not material, that involves
management or other employees who have a significant role in the
Registrants internal control over financial
reporting. |
Date: May 15, 2015 |
|
/s/ Dennis J. Gilles |
Dennis J. Gilles |
Chief Executive Officer |
Exhibit 31.2
CERTIFICATION
I, Kerry D. Hawkley, certify that:
1. |
I have reviewed this report on Form 10-Q of U.S.
Geothermal Inc.; |
|
|
|
2. |
Based on my knowledge, this report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under
which such statements were made, not misleading with respect to the period
covered by this report; |
|
|
|
3. |
Based on my knowledge, the financial statements, and
other financial information included in this report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the Registrant as of, and for, the periods presented in this
report; |
|
|
|
4. |
The Registrants other certifying officer and I are
responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and
internal control over financial reporting (as defined in Exchange Act
Rules 13a-15(f) and 15d-15(f)) for the Registrant and have: |
|
|
|
|
a. |
designed such disclosure controls and procedures, or
caused such disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
Registrant, including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the period in which
this report is being prepared; |
|
|
|
|
b. |
designed such internal control over financial reporting,
or caused such internal control over financial reporting to be designed
under our supervision, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted
accounting principles; |
|
|
|
|
c. |
evaluated the effectiveness of the Registrants
disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and
procedures, as of the end of the period covered by this report based on
such evaluation; and |
|
|
|
|
d. |
disclosed in this report any change in the Registrants
internal control over financial reporting that occurred during the
Registrants most recent fiscal quarter (the registrants fourth fiscal
quarter in the case of an annual report) that has materially affected, or
is reasonably likely to materially affect, the Registrants internal
control over financial reporting; and |
|
|
|
5. |
The Registrants other certifying officer and I have
disclosed, based on our most recent evaluation of internal control over
financial reporting, to the Registrants auditors and the audit committee
of the Registrants board of directors (or persons performing the
equivalent functions): |
|
|
|
|
a. |
all significant deficiencies and material weaknesses in
the design or operation of internal control over financial reporting which
are reasonably likely to adversely affect the Registrants ability to
record, process, summarize and report financial information;
and |
|
b. |
any fraud, whether or not material, that involves
management or other employees who have a significant role in the
Registrants internal control over financial
reporting. |
Date: May 15, 2015 |
|
|
/s/ Kerry D. Hawkley |
Kerry D. Hawkley |
Chief Financial Officer |
Exhibit 32.1
CERTIFICATION
In connection with the quarterly report of U.S. Geothermal Inc.
(the Registrant) on Form 10-Q for the period ended March 31, 2015, as filed
with the Securities and Exchange Commission on the date hereof (the Report),
I, Dennis J. Gilles, Chief Executive Officer of the Registrant, certify pursuant
to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, that, to my knowledge:
|
1. |
The Report fully complies with the requirements of
Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended;
and |
|
|
|
|
2. |
The information contained in the Report fairly presents,
in all material respects, the financial condition and results of
operations of the Registrant. |
Date: May 15, 2015 |
|
|
/s/ Dennis J. Gilles |
Dennis J. Gilles |
Chief Executive Officer |
Exhibit 32.2
CERTIFICATION
In connection with the quarterly report of U.S. Geothermal Inc.
(the Registrant) on Form 10-Q for the period ended March 31, 2015, as filed
with the Securities and Exchange Commission on the date hereof (the Report),
I, Kerry D. Hawkley, Chief Financial Officer of the Registrant certify pursuant
to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, that, to my knowledge:
|
1. |
The Report fully complies with the requirements of
Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended;
and |
|
|
|
|
2. |
The information contained in the Report fairly presents,
in all material respects, the financial condition and results of
operations of the Registrant. |
Date: May 15, 2015 |
|
|
/s/ Kerry D. Hawkley |
Kerry D. Hawkley |
Chief Financial Officer |
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