Resource risk and its mitigation for the financing of geothermal projects

Abstract

resource risk in connection with the financing of geothermal projects can he subdivided into questions resource size, deliverability, cost of development and operation, environmental management and operational and degradation. for the question of existence, these risks can change in perception, in reality, over timc. If risk cannot be managed or mitigated, it will result in increased loss revenue, or hoth. at times economic failure and shutdown of the project. Casts accrue to the developer and the equity investors. In certain cases they be passed an to lcnders (default and rescheduling payments), or the public (increased power or increased taxes). This in turn may investors or lenders shun future geothermal projects. increase the requirement for protective guarantees. with the that future projects become costly finance, and thus likely to succeed economically. Several approaches have been tried by the financial institutions mitigate risks; these can he summarized as the exercise greater care by in project selection and in of money, along with more careful monitoring of performance, and a willingness take control of poorly performing projects. In order to mitigate the risks associated with geothermal project financing, lenders in the United States require of the geothermal resource. development plans, budgets and timetables, project and management. and environmental and issues. This verification is made periodically throughout the period when a substantial amount of capital is at risk.