Ormat Technologies Inc. has signed its largest-ever power purchase agreement for geothermal power with the Los Angeles Dept. of Water and Power, an estimated $94-million-a-year deal for the Reno, Nev-based firm to sell electricity from its northern Nevada geothermal portfolio project.
An Ormat subsidiary will provide around 150 MW of electricity from several geothermal plants located in the state and in California.
According to the company, the agreement is for 26 years with a fixed price of $75.50 per megawatt hour.
The deal was signed by L.A. Mayor Eric Garcetti on May 19 with the Southern California Public Power Authority.
"I promised Angelenos we would kick L.A.'s dependence on coal, and projects like this are exactly how we'll do it," he said. "Washington may be burying its head in the sand—but by embracing geothermal energy and other renewables, we're showing that cities can, and will, continue to lead the fight against climate change."
Ormat's U.S. plants received U.S. Energy Dept. grants several years ago, but they have been the subject of controversy.
The agreement comes just weeks after Japanese financial services firm ORIX Corp. bought a 22% stake in Ormat for $627 million from FIMI, an Israeli private equity firm.
The Japanese company is banking on the future growth of geothermal energy, particularly in Asia, said a May 5 Seeking Alpha report by investor Keith Williams.
"We believe the geothermal sector has the potential to become an increasingly large component in the world's overall energy mix," said Yuichi Nishigori, head of energy and eco services at ORIX.
Under the terms of the agreement, Ormat also will have exclusive rights to ORIX geothermal projects outside of Japan.
"The deal with ORIX is expected to expand Ormat's growth opportunities, especially in Asia," said Ormat Chairman and FIMI senior partner Gillon Beck, who says it will provide project financing for future projects.
The company, with roots as an Israeli-based company, will also be able to co-invest in ORIX geothermal projects in Japan. Ormat has also indicated its intention to expand in other renewable energy sectors and geographic areas.