US geothermal company Ormat Technologies Inc (NYSE:ORA) said Tuesday it has signed a new 25-year power purchase agreement (PPA) for its Ormesa geothermal complex in Imperial Valley, California, eliminating its exposure to natural gas prices.
The deal is with Southern California Public Power Authority (SCPPA), which will buy energy from the complex at USD 77.25 (EUR 72.6) per MWh with no annual escalation. The contract capacity is 35 MW, with a maximum generation equivalent to a net capacity of about 43 MW, Ormat said.
The new PPA will start on November 30, 2017 and replace Ormesa's current 30-year contract with Southern California Edison that will expire at that time and has a variable energy rate linked mainly to "volatile" natural gas prices.
Ormat chief executive Isaac Angel said the new contract will reduce the company's exposure to natural gas to about 50 MW, or less than 10% of its portfolio. Ormesa's operating profit and EBITDA (earnings before interest, taxes, depreciation and amortisation), meanwhile, are expected to improve by USD 8.5 million in 2018 compared to estimated levels in 2016.
SCPPA will resell about 86% of complex's output to the Los Angeles Department of Water and Power (LADWP) and the remaining 14% to the Imperial Irrigation District (IID).
"Geothermal power will greatly assist LADWP in reaching our goal of 33% renewable energy by 2020 while transitioning away from coal power," said Michael Webster from LADWP.