A VIEW FROM THE FIELD THE DEVELOPER S APPROACH

“A VIEW FROM THE FIELD” THE DEVELOPER’S APPROACH TO GEOTHERMAL PROJECTS Daniel N. Schochet, Vice President ORMAT Nevada, Inc. January 20, 2004

ORMAT - COMPANY PROFILE • RENEWABLE & SUSTAINABLE ENERGY SINCE 1965. DESIGN, ENGINEER, SUPPLY, INSTALL & OPERATE 750 MW OF POWER GENERATION IN 21 COUNTRIES, 25 O MW OF GEOTHERMAL GENERATION IN USA. FIELD PROVEN TECHNOLOGY MODULAR POWER PLANTS FROM 0. 3 TO 130 MW GEOTHERMAL, WASTE HEAT, BIOMASS & SOLAR REPOWERING / REHABILITATION OF EXISTING PLANTS à OVER US$1 B IN IPP PROJECT FINANCING

WHY GEOTHERMAL COST EFFECTIVE FROM 300 k. W TO 0 VER 100 MW Modular power plants are easily expanded as needs increase Power costs competitive with hydro, coal and diesel RELIABLE, SUSTAINABLE & ENVIRONMENTALLY SAFE Many projects operating over 10 yrs at 98%+ availability Geothermal is non-combustion - near zero emissions MINIMAL SURFACE USE- INDEPENDENT OF WEATHER FIELD PROVEN TECHNOLOGY - 8, 000 MW WORLD WIDE EASY TO INSTALL, OPERATE AND MAINTAIN Plants constructed in 6 to 12 months- O&M by local staff

ORMAT GEOTHERMAL POWER PLANTS Fang, THAILAND 1989 Upper Mahiao, The Philippines 300 k. W 1996 The Philippines Thailand Zunil, GUATEMALA 1999 1966 Olkaria, KENYA 24 MW Guatemala 125 MW 2000 8 MW Kenya

GEOTHERMAL TECHNOLOGY OVERVIEW RESOURCE TEMPERATURES FROM 250 O TO 350 O F Ø Ø Binary Technology most appropriate Most untapped resources are in this category Air cooled condensers possible – 100% injection of all fluids/gases Lowest environmental impact RESOURCE TEMPERATURES OVER 350 O F Ø Flash technology produces steam for driving turbine Ø Condensing steam cycle requires water cooled condensers Ø Combined steam & binary system allows for air cooling DRY HIGH PRESSURE STEAM PRODUCTION Ø Ø Conventional steam turbine technology most appropriate Geysers (CA), Italy, Iceland, Indonesia & New Zealand Water cooled condensers needed Higher environmental impact

Olkaria III Geothermal Power Plant, Phase 1 Kenya, 2000 CONDENSER GENERATOR TURBINE MOTIVE FLUID PUMP 12 MW binary geothermal power plant, comprising 3 aircooled ORMAT® Energy Converters (OEC) The OEC units utilize two-phase geothermal fluid consisting of steam and separated brine PRODUCTION INJECTION PUMPINJECTION WELL PRODUCTION PUMP WELL COOLED GEOTHERMAL FLUID ORMAT Air Cooled Binary Geothermal Power Plant

Geothermal Renewable Grid Connected Base Load Power PUNA (Hawaii), since 1993 CONDENSER GENERATOR TURBIN PREHE E 30 MW plant comprising 10 combined cycle OEC units Utilizes saturated steam and injects 100% of spent fluid to reservoir 1147 NON CONDENSABLE (NCG) COMPRESSOR MOTIVE FLUID PUMP STEAM PRODUCTION HOT GEOTHERMAL FLUID INJECTION PUMP WELL INJECTION COOLED GEOTHERMAL FLUID ORMAT Geothermal Combined Cycle WEL

TECHNOLOGIES Sustainable Geothermal Conventional Geothermal Steam Power Plant Combined Cycle Geothermal Power Plant Water Consuming Sustainable PROBLEMS: Consumes Water: Aquifer Depletion, Power reduction Effluents or Expensive Abatement Plume Visual Impact Water Treatment Needed: Use and Disposal of Chemicals 1584 SOLUTIONS: All Fluids Reinjected: Sustainable, No Power Reduction No Emissions (No Abatement Needed) No Plume (Air Cooled Condensers) Low Profile Not Sensitive to Quality of Brine & Steam

Current Mainland U. S. Geothermal Power Production Geysers 2070 MW Nevada Production 196 MW Mammoth 40 MW Utah Production 33 MW COSO 240 MW Imperial Valley 403 MW Total Existing Capacity = 2900 MW 25, 000 GWhs

Geothermal High Capacity Factor Resource

Average Capital and Delivered Costs 22000 Capital Cost (US$/k. W) Solar Photovoltaic 4000 Biomass - Energy Forestry Energy Crops 3000 Solar Thermal Power Geothermal 2000 Coal 1000 Wind Cost of delivered energy (US$/k. Wh) Gas 0 0 0. 02 0. 04 0. 06 0. 08 0. 10 18/03/2018 Source: 0. 12 0. 14 0. 16 0. 18 0. 20 0. 86 0. 88 International Energy Agency & Others 11

Geothermal Modular Development AZORES ISLAND (Portugal) Sao Miguel Geothermal Power Plant Phase B of a 14 MW geothermal power plant comprising 4 air cooled ORMAT® Energy Converters (OEC) The OEC units use two phase geothermal fluid, steam and separated brine Phase A (5 MW) commissioned in March 1994 -Phase B commissioned in October 1998 1497

60 MW Geothermal Power Plant MOKAI, New Zealand 1999 Combined cycle OEC power plant owned by Maori Trust 1656

IMPLEMENTING GEOTHERMAL PROJECTS Credit Support for Project Financing: 1. Proven geothermal resource with bankable report. 2. Creditworthy 3. Financible 4. Credible 5. Site purchaser for power payments. take or pay Power Purchase Agreement. developer with proven track record. control & rights to geothermal energy supply.

EXPLORATION AND RESOURCE ASSESSMENT “Greenfield Project”- High risk - Financing Difficult Probability of success in exploration is about 50% Based on experience in developing Nevada prospects Exploration, including temp. gradient wells, est. $0. 5 -1 M Federal grants or assistance may be available Resource assessment, including drilling & flow testing 2 full size wells, est. $ 3 M for 15 to 20 MW project Equity investment required, government assist may be available Result to be “bankable” report on geothermal “resource can reasonably be expected to support __ MW of electricity production for over 30 years” resource –

EXPLORATION AND RESOURCE ASSESSMENT Permitting and development expenses additional $0. 5 M, for prelim design, feasibility study, resource modeling, permit applications and PPA negotiation. These are equity investor expenses. Timetable for exploration and resource assessment activities, is typically about 6 to 12 months SUMMARY: § Exploration & Resource Assessment , approx. § Overall timetable to Bankable Report & PPA $4 -5 M 12 Mos

DRILLING AND WELL FIELD DEVELOPMENT Medium risk – Investor Financing Possible Production/injection wells $1. 0 to $3. 0 M each Production wells provide between 3 MW and 30 MW Binary wells typically 3 to 5 MW per production well One injection well serves two or more production wells Well drilling success averages over 70% 3, 000 foot average depth - Assume $ 1. 5 M per well 20 MW Binary project: 7 prod. & 3 inject. wells. Budget for 10 wells @ 2, 000 feet depth is $ 12 - 15 M Timetable including permitting would be 12 - 18 months

PROJECT RISK PROFILE PROJECT RISK MITIGATION Exploration – Lack of heat/fluid Max use of surface technologies Go-No Go exploration steps Resource Capacity Risk Drill & Test deep wells Develop resource model Regulatory Risk Use experienced permitting consultant Apply early & take no short cuts Drilling Risks (dry well) (blow out) Use all data & resource model for drill targets Use blow out protection & control of well insurance Plant Construction Risk Use credible supplier/contractor Get turn-key fixed price/date certain contract Use Field Proven technology supplier Get start-up performance guarantee Financing Risk Execute financible take or pay PPA with utility Execute binding commitment with lender

PROJECT DEVELOPMENT BUDGET 20 MW Exploration & resource assessment $ 5. 0 M Well field drilling and development 15. 0 Power plant, surface facilities, & transm. Financing “soft costs” including: o o o 30. 0 5. 0 Commitment fees Legal & Accounting fees Consultants, and Interest during construction Debt service and operating reserve $ 55 M To be provided as construction phase financing TOTAL FINANCED COST FOR 20 MW PROJECT

GOVERNMENTAL SUPPORTS 1. PRODUCTION TAX CREDIT (PTC) o o o 2. Legislation in Senate-House Conference Possible 5 or 10 year tax credit to developer/owner $0. 018/kwh tax credit for energy sold Reduces cost of production by up to $0. 018/k. Wh Depends on tax liability of developer/owner RENEWABLE PORTFOLIO STANDARD (RPS) o o o Utilities will need up to 20% renewable energy for sale Native American Projects may get double RPS credit Renewable Energy Credit (REC) is worth: Ø Renewable Energy Price – Utility Avoided Cost Ø In Nevada Typically [REC = $0. 05 - $0. 04 = $0. 01/k. Wh]

CONCLUSIONS GEOTHERMAL PROJECT DEVELOPMENT IS VERY CHALLENGING AND TIME CONSUMING. (Prepare for the unexpected) DEVELOPERS NEED INTERNAL RESOURCES TO COVER DEVELOPMENT EXPENSES. (Double all your best estimates) PRIVATE PUBLIC PARTNERSHIPS ARE POSSIBLE FINANCING SOLUTION BUT PROCESS IS LENGTHY (The process will take twice as long as your hope it will) FINANCING AND REGULATORY ACTIVITIES SHOULD START AS EARLY AS POSSIBLE. (The greatest challenge will be to your patience) 1648