Polaris Geothermal Announces Approval of New Tariff and Amendments to Power Purchase Agreement

Polaris Geothermal Inc. announce that its Nicaraguan subsidiary, Polaris Energy Nicaragua S.A., has signed an addendum to the existing Power Purchase Agreement entered into between PENSA and the energy distributor in Nicaragua. The Addendum has also been approved by Nicaraguan utility regulator Instituto Nicaraguense de Energia (“INE”).

The key terms of the Addendum are:

a) all power generated beyond the present 10MW level will be sold at a tariff of US$0.092/kWh, representing an increase of over 50% from the current tariff. Current power generation up to 10 MW will continue to be sold at the existing tariff of US$0.061 /kWh, until 2013, after which time all power will be sold at the new tariff as per the approved Addendum. The combined equivalent tariff for all power generated going forward is approximately US$0.087/kWh;

b) the term of the PPA has been extended from 20 to 25 years;
c) the amount of electricity to be purchased under the PPA has been increased from 66 MW to 72 WM; and
d) the Addendum contains provisions providing for increases in the US$0.092/kWh tariff in the event that construction financing costs increase above certain defined levels.

In order to facilitate the implementation of the Addendum, the Ministry of Energy and Mines has agreed to extend the term of PENSA’s generation license from 20 to 30 years and has also extended the existing San Jacinto-Tizate geothermal concession from 20 to 25 years, subject to further extension at the election of PENSA for an additional 10 year period.

Tom Ogryzlo, President and CEO of Polaris, said “We are very pleased with the accomplishment of this important milestone for the country of Nicaragua and our Company. We believe that the Addendum provides a major improvement to the economics of the project, as well as an important degree of protection from interest rate increases. The Addendum will help facilitate project financing for the San Jacinto-Tizate project. When completed, the San Jacinto-Tizate project will displace significant importation of petroleum products currently being used for the generation of power with important resulting benefits for Nicaragua. This tariff increase demonstrates powerful support for private investment in the country and together with other changes to the PPA and project documents is evidence that the government recognizes the strategic role that renewal energy must play in reducing the country’s reliance on imported oil.”

The approval of the Addendum triggers the final steps for completing the loan syndication and drawdown process being led by the Central American Bank for Economic Integration (CABEI) for our Phase I MCT 24 MW expansion.

Polaris is a Canadian company, focused on the generation of renewable energy projects in Latin America and other parts of the world. For more information about Polaris visit www.polarisgeothermal.com.