January 22, 08
Raser Technologies to Build 100MW Geothermal Plant

Raser Technologies and Merrill Lynch entered into an agreement for the structuring and non-resource financing of up to 155 MW of Raser's geothermal power plants, along with a commitment letter from Merrill Lynch to provide funding for the construction of Raser's first geothermal power plant.

The agreement provides for the funding of up to 100 MW of power plant construction and a right of first refusal to build up to an additional 55 MW of power plants. The partnership agreement also provides Merrill Lynch with the ability to receive warrants to purchase up to 3.7 million shares of Raser's common stock for funding the initial 100 MW of capacity.

Graham Goldsmith, managing director and head of Corporate Principal Investments at Merrill Lynch, said, "We believe that renewable energy represents a significant market opportunity for investors due to structural shifts in demand for green power. Raser has a business model that is environmentally beneficial. We look forward to being a part of an energy solution that will benefit future generations."

The first geothermal power plant, which will utilize PureCycle geothermal technology from UTC Power, a United Technologies Corp. company, is designed to produce 10.5 MW of electrical power with zero emissions. The plant is expected to begin operations no later than the third quarter of 2008.

The financing commitment for the first 10.5 MW project is up to US$44 million in the form of 15-year fully amortizing fixed rate notes, to fund approximately US$33 million of total construction costs, in addition to a letter of credit, reserve accounts, accrued interest, transaction fee and other costs.

The agreement also provides Raser with 95 percent of the fees and distributions of the partnership, subject to certain priority distribution.

Raser expects to receive approximately US$4 million per year in cash fees and distributions, along with other tax benefits, during the first three years of operations from the 10.5 MW power plant after maintenance, operating expenses and debt service, and approximately US$2.5 million per year in cash fees and distributions during the 10 years of operations.

Raser CEO Brent Cook stated, "This is the first of what we expect to be many agreements to accelerate the development of clean, renewable energy production utilizing our geothermal technology and resources.

"This unique agreement provides the required up-front capital to complete our initial projects and keep up on pace to fulfill our goal to initiate the development of 100 MW per year for the first three years of our geothermal power production effort, and 150 MW each year thereafter."

Merrill Lynch's commitment is subject to market conditions, due diligence, receipt of all necessary internal approvals by both Raser and Merrill Lynch, acquisition of the 5 percent equity interest in the plant by a third party other than Merrill Lynch unless Merrill purchases such interest, and the satisfaction of certain other conditions.

The power plant will be formed as a special purpose entity. The expected useful life of Raser's geothermal power plants is approximately 35 years. The entity will be responsible for the debt service, all maintenance and operations expenses and various fees and distributions to Raser.