DOE remains confident in Nevada geothermal plant

WASHINGTON — Although its parent company is facing a financial struggle, the Department of Energy maintains the future is sound for a Northern Nevada geothermal power plant that it backed with a loan guarantee, officials said Monday.

The Blue Mountain plant in Humboldt County is expected to generate enough revenue over the next 20 years to cover a $93 million loan from John Hancock Life Insurance Co., of which $79 million was guaranteed by the government, a DOE spokesman said.

"While the plant didn’t initially generate as much power as the operators had hoped, it is generating more than enough clean, renewable power to repay its loan," said Damien LaVera, a DOE spokesman.

Less certain is the fate of Blue Mountain’s parent company, Vancouver-based Nevada Geothermal Power, which is looking to restructure another loan, $91.3 million borrowed from EIG Global Energy Partners, for the Humboldt County plant.

The company recently released its 2011 fiscal year report in which its accountants warned that the company would not be able to service the loan, casting "significant doubt" on its future.

The company’s troubles were detailed in a New York Times story on Sunday.

Paul Mitchell, a spokesman for the company, said Monday that it is in negotiations with EIG to restructure the loan. He said he was hopeful a deal can be reached so that Nevada Geothermal continues to operate the facility about 22 miles west of Winnemucca.

"EIG is an investment company. I don’t think they have any interest in running a power plant," he said.

Mitchell said that there are also efforts to improve Blue Mountain so that it will generate more power — and revenues.

It now produces enough energy to power about 35,000 homes. Executives would like to get that figure closer to 40,000.

Blue Mountain generated $24.8 million in gross revenues in the 2011 fiscal year for an operating profit of $6.9 million. Debt interest, however, cost $20.3 million, according to the company report.

LaVera said that DOE is monitoring the project closely but was confident that taxpayer dollars are well-protected.

"The power plant cannot be used as collateral for any other debt. What matters is that the power generated by the Blue Mountain plant — and the revenue generated under its long-term guaranteed sales contract — will be enough to repay the loan," LaVera said.

The Department of Energy has come under fire for the loan guarantee program, which included a $528 million guarantee to now shuttered and bankrupt Solyndra.

Nevada leads the nation in geothermal energy production with 21 operating geothermal power plants and 65 in development.

The state effort to build geothermal power has enjoyed widespread support among Democrats and Republicans.

Then-Gov. Jim Gibbons, Sen. Harry Reid, then-Sen. John Ensign and then-Rep. Dean Heller each issued congratulatory notes when the Blue Mountain plant opened.

Contact Stephens Washington Bureau reporter Peter Urban at purban@stephensmedia.com or 202-783-1760.