Ormat turns future tax credits into cash

Ormat Technologies Inc. said last week it raised $71.8 million through a deal that essentially turns tax credits it will generate from future geothermal production into cash today.

The Reno-based developer of geothermal projects in Nevada and around the world said it plants to use the money to finance construction of additional facilities. And Ormat executives said they expect to raise another $46.6 million through a similar financing mechanism next spring.

Ormat created a new subsidiary known as OPC LLC. It transferred ownership of three geothermal plants in Nevada Desert Peak 2 in Churchill County, and Steamboat Hills and Galena 2 at the south edge of Reno to the new company.

It will continue to operate the plants, but it sold interests in the new company to the investment firms Morgan Stanley & Co. and Lehman Brothers Inc. The investment companies will get the federal production tax credits of 1.5 cents per kilowatt hour for power generated by the geothermal plants.

Ormat, in turn, will receive the cash flow from the plants and has an option to once again become sole owner of the plants once the investment firms have reached certain after-tax financial goals.

Dita Bronicki, president and chief executive officer of Ormat, said the deal allows the company to get its hands on the proceeds of the production tax credit more quickly and allows the company to put that money to work in geothermal development.