Greenearth Energy secures potential $25m Victorian Government backing to advance geothermal project

Greenearth Energy (ASX: GER) has secured a A$25 million funding agreement with the Victorian Government to progress its flagship conventional geothermal project and is now looking to the Australian Government for further financial support.

The funding was awarded to assist two stages of the Geelong Geothermal Power Project development.

The first $5 million will go towards establishing Stage 1 – Proof of Resource, which will involve the drilling of an initial well into the hot sedimentary geothermal aquifer to a depth of approximately 4,000 metres in an attempt to bring hot water to the surface.

Managing director Mark Miller told Proactive Investors today that if that first well is successful, Greenearth will then drill a sand well which would establish proof of concept, which would pave the way for development of the second stage. 

“If all of our predictions are correct and the Victorian Government is happy with the results then they have provided us with an allocation of $20 million for what we call the demonstration stage of the project, which would be another two wells and a 12 megawatt geothermal energy plant,” he said.

Miller said the Victorian Government funding agreement gave Greenearth a head start but the company needs to raise more capital for the first well, which it will do via an application to the Emerging Renewables program, as well as through a capital raising.

Importantly, Greenearth has previously had the support of the Australian Government for the project.

“We have had success at the Commonwealth level with applications for the Geelong Geothermal Power Project, and now we have a supportive State Government we feel that we’re in a very good position to be able to apply for funding via Emerging Renewables from the Commonwealth Government for the project,” Miller said.

“We feel confident that the Victorian Government’s agreement to fund both the exploration stage and the demonstration stage will see a commitment from the Federal Government.”

Miller said he anticipates the funding process to continue through 2012 and hopefully the company will be in a position to potentially drill the first well sometime after that.

The separate tranches of the funding are paid on the achievement of set milestones and are subject to a number of conditions precedent including securing the necessary project funds to complete each stage.


Geelong Geothermal Power Project concept

The end goal for the project is the development of a 140-megawatt geothermal power plant providing clean, renewable power for 100,000 homes.

The staged approach to the project will initially confirm the productive properties of the target hot sedimentary geothermal aquifer and – if a geothermal resource is proven – then develop a commercial geothermal plant that could produce up to 140 megawatts of baseload energy.

Minister for Energy and Resources Michael O’Brien said realisation of this geothermal resource is still some time away, but the Victorian Government grant will support Greenearth to prove the geothermal resource and pilot a 12 megawatt power station using hot water from about 4 kilometres beneath the surface.

While a site for the project is yet to be finalised, Greenearth holds an exploration licence that covers an area around the Geelong-area townships of Gherang, Wensleydale and Anglesea.

The company is undertaking community consultation in relation to the selection of a suitable site for Stage 1 and Stage 2.

Greenearth is also continuing discussions with Alcoa of Australia (ASX: AAI) in relation to areas of potential collaboration.