Dr. Mike Allen, Executive Director Geothermal New Zealand. Iceland Geothermal Conference 2013 March 5-8, 2013, Harpa, Reykjavík

1. Geothermal Developments
New Zealand & International
Dr Mike Allen
Executive Director
Geothermal New Zealand
Iceland Geothermal Conference
6th March 2013

2. NZ Power System
79% Renewable
Generation in 2010

3. NZ Power Companies
Company GWh to 30 June
2010
Operating Revenue
$B 2009/10
Ownership
Contact Energy 10,183 2.16 Listed
Genesis Power 3,535 1.48 SOE
Meridian Energy 13,000 2.06 SOE
Mighty River Power 5,812 1.06 SOE
Trust Power 4,033 0.77 Listed

4. Market Dynamics – Demand
• Electricity demand growth of 670GWh per annum from 1976 – 2007 (CAGR of 2.5%), 2011 demand back at
2008 levels due to weak economic conditions
• Seasonal electricity demand profile with winter peaking system – temperate climate
• Residential segment drives daily evening demand peaks
• Total market electricity consumption of 38,091GWh. Peak system demand of 6,654MW (2011)
• Major demand in north, significant supply in south; Transmission investment removing bottlenecks

5. New Zealand Geothermal
Ngatamariki (82MW) and Te Mihi (166MW)
under construction
750 MW
installed;
25% of
annual
electricity
production

6. NZ Geothermal Industry
• Domestic geothermal plant operations for 55 years
• Extensive background R&D
• Specialist participation in almost every geothermal
field in the world
• Developed first plants in Indonesia, Philippines, Kenya
• Recently completed Kawerau, Nga Awa Purua and Te
Huka examples of world best practices – cost, time and
plant output in New Zealand. Some $1 billion invested.
• Active international market participation

7. Mighty River Power
Nga Awa Purua - 140 MW
Commissioned 2010 – world’s largest single geothermal turbine/generator

8. Mighty River Power
Ngatamariki - 82MW Binary

9. Contact Energy
Te Mihi - 168MW

10. Kawerau – largest geothermal
industrial site in the world
more than 50 years of operations

11. International
• New Zealand has participated in some way in
most international geothermal projects
• Early support through NZ government agencies
• Extensive recent and current engagement across
the NZ geothermal industry
• SOE investments in Chile, USA and Germany and
through associated companies (Origin) in
Indonesia
• Industry very active in Indonesia, Kenya, Chile
and Philippines

12. Geothermal New Zealand
• A collaboration amongst leading consultants, service
providers, contractors and construction companies
• Seeking international opportunities over and above our
traditional consulting support
• Clearly Indonesia, Chile, Philippines and Kenya are key
target markets
• Strong partnerships with international companies –
manufacturers and EPC contractors
• Vision is to have “New Zealand” projects in
international markets

13. International Opportunities &
Challenges
• The project cycle
• Project risks
• Historical approach
• What’s needed now
• Summary

14. The Project Cycle – Risk & Reward
(ex World bank Presentation)

15. The toughest part..
The Valley of
Death!

16. Project Risks
• Risks are not just those that are “geothermal”
– Resource risk
– Reinjection performance
but equally important
• Those we can influence:
– Construction Risks – an EPC approach
– Financial risks – appropriate financial structuring
– Market risks – security of off take agreement
– Management risk – choose the very best
• Those we may have less control over
– Country and political risk – some insurance possible

17. Historical Funding
• Funding has been predominantly public:
• In NZ DSIR and Ministry of Works explored and drilled test wells;
essentially a “brownfields” environment for developments post
Wairakei; only now looking at “greenfield” sites
• In US considerable grant and taxation incentives drove
developments in Geysers in 1980s; attracted speculators by offering
(perhaps) inflated returns;
• Mexico utilised state power company funds
• Philippines attracted some commercial interests (UNOCAL) ex US
market; heavy donor support
• Indonesia provided early exploratory support and first plant
through NZ AID
• Kenya supported by UNDP then World Bank for plant; Ethiopia a
similar story

18. What’s Needed Now?
• Equity for the early phases
– Need a strong corporate balance sheet or
– Need investors who will take appropriate risks
– Need project returns that meet these investors needs
– Risks are economic, financial and political
– This balance is never easy
• Debt for those stages once risk is reduced
– Resource capacity and performance defined
– PPA in place
– EPC committed
– Likely that a syndication of banks may still be required

19. Summary
• There is a key challenge in all markets to finance the exploration /
exploratory drilling phase
• Donor / grant funding has played a key role in opening
opportunities in the past
• Emerging market support is attempting to address this financing
• Debt is available but banks still see geothermal as high risk
influencing the cost / tenor of debt and a need for syndication
• Private sector interests exist but few specialised facilities have been
established; corporates with strong balance sheet entering market
• To attract investment the risk reward profile must be appropriate;
we compete with all other investment opportunities in the energy
markets, many of which are much better understood and seen as
less risky.

20. Thank you
mike.allen@geothermalnewzealand.com
www.geothermalnewzealand.com