U.S. Geothermal Management Discusses Q3 2013 Results - Earnings Call Transcript

Nov.15.13 | About: US Geothermal (HTM)

U.S. Geothermal (NYSEMKT:HTM)

Q3 2013 Earnings Call

November 15, 2013 11:00 am ET

Executives

Dennis J. Gilles - Chief Executive Officer, Director and Member of Audit Committee

Kerry D. Hawkley - Chief Financial Officer, Chief Accounting Officer, Controller and Secretary

Douglas J. Glaspey - Co-Founder, President, Chief Operating Officer and Non Independent Director

Analysts

Matthew Farwell - Imperial Capital, LLC, Research Division

James Patrick McIlree - Chardan Capital Markets, LLC, Research Division

Jared Alexander - Canaccord Genuity, Research Division

Aram Fuchs - Fertilemind Capital

Operator

Greetings, and welcome to the U.S. Geothermal's Third Quarter 2013 Results Conference Call. [Operator Instructions] As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Mr. Dennis Gilles, Chief Executive Officer. Mr. Gilles, you may begin.

Dennis J. Gilles

Thank you, Jen, and thank you to everybody for joining today's call. I want to welcome you to U.S. Geothermal's Third Quarter 2013 Results Conference Call. Today, joining me is Doug Glaspey, our President and Chief Operating Officer; along with Kerry Hawkley, our Chief Financial Officer.

Our third quarter performance has been solid and was in line with our plan and guidance, as was our prior quarter. As such, we believe we are right on target to meeting our 2013 year-end guidance. So at this point, there is no adjustment to our 2013 anticipated year-end results.

Kerry Hawkley, our Chief Financial Officer, will now provide you with the summary of our third quarter 2013 financials, highlighting the items of particular interest. Kerry?

Kerry D. Hawkley

Thank you, Dennis. Before beginning, we would like to remind you that the information provided during this call may contain forward-looking statements relating to current expectations, estimates, forecast and projections about future events that are forward-looking as defined in the Private Securities Litigation Reform Act of 1995. These forward-looking statements generally relate to the company's plans, objectives and expectations for future operations and are based on management's current estimates and projections of future results or trends. Actual future results may differ materially from those projected as a result of certain risks and uncertainties.

In addition, during the call, we will present non-GAAP financial measures, such as EBITDA and adjusted EBITDA. Reconciliations to the most directly comparable GAAP measures and management's reasons for presenting such information is set forth in the press release that was issued last night. Because these measures are not calculated in accordance with U.S. GAAP, it should not be considered in isolation from our financial statements prepared in accordance with GAAP.

Our balance sheet as of September 30, 2013, reflects total assets of $228.1 million. Items of note in assets is that we have fully funded long-term cash and bond reserves related to our projects. Cash of $24.1 million and grant proceeds of $7.6 million. We want to highlight the fact that a portion will be subject to allocation to partners. Total liabilities are $104.2 million. That includes the new Prudential loan at San Emidio that was finalized during the quarter. We have noncontrolling interests of $56.5 million for a net stockholders' equity of $67.4 million.

On our income statement, as of September 30, we have 3-month net income of $186,000, which is part of a 9-month net income of $455,000. Our Q3 revenues are up 16% from Q2 due to improved pricing during the third quarter. Our salaries and wages have increased due to a reduction in salaries and wages that we are able to allocate due to projects since the projects have been completed. Our 2013 drilling costs at El Ceibillo were capitalized as we are now considering the SA development project.

On our cash flow statement, as of September 30, our cash and cash equivalents decreased to $24.1 million in the third quarter. Our third quarter cash generated by operations was $1.7 million, $6.7 million year-to-date. We have funded reserves, cash reserves and bonds at Neal Hot Springs and San Emidio for $12.7 million, we've had note and construction-related payments of $11.5 million during the quarter. And we've had additional plant expenditures of $1.6 million, primarily at Guatemala and San Emidio Phase 1. On our statement of stockholders' equity, as of September 30, we have reflected stock issuance of 578,000 shares during the quarter in satisfaction of an employment agreement.

Dennis, back to you.

Dennis J. Gilles

Thank you, Kerry. Now I'd like to turn the call over to Doug Glaspey, our President and Chief Operating Officer. Doug is going to provide highlights of our operations performance for the third quarter, as well as a summary of our development activities. Doug?

Douglas J. Glaspey

Thank you, Dennis, and good morning, everybody. Fleet-wide, there's 3 operating projects now. We had a total generation for the quarter of 62,842 megawatt hours. As you're all aware now, through the third quarter, in the summertime, with high-ambient conditions, that high temperature affects our operating power plants. We're coming out of that now into the fall, and we did have 1 major unplanned outage at Neal Hot Springs for 1 unit and a short unplanned outage at San Emidio during the period.

At Neal Hot Springs, we had generation of 25,836 megawatt hours for the quarter, and we operated at 87.2% availability compared to the second quarter availability of 72.2%. Our average hourly generation for the period was 11.7 net megawatts per hour. And as I've said, that's primarily due to the seasonally high ambient temperatures that we experienced out here in the West. And we did have 1 unplanned outage.

The biggest impact to that availability was the unplanned outage. One of our units at Neal Hot Springs was shut down for almost 26 days to repair the high-pressure refrigerant pump, that is the primary motive pump in the system. And it was determined that, that failure was due to the reset of clearances and the pump not being set properly by the manufacturer. The work that's been done was not under warranty, and we have rechecked our other pumps and reset those clearances to make sure we don't have this failure again. We estimate we lost 4,700 megawatt hours just on that 1 issue alone.

Our October availability, thus far, has been 88.2%, and our average hourly net generation is 20.7 megawatts. So you can see the difference that's made just on temperature with these air cooled condensers. And further, in November, thus far, we're at 25 megawatts. So in the fourth quarter, this should be -- the fourth quarter of this year and the first quarter of next year will typically be our highest period of generation.

At San Emidio, generation was 18,318 megawatt hours for the quarter. That plant operated at 94.7% availability versus 91.5% for the second quarter. And our average hourly generation through the third quarter was 8.9 net megawatts. We did have an unplanned outage at San Emidio. We had to replace a pump seal, and since we were down for that pump seal, which is typically 1 day to 1.5 days type outage, we extended that to 3.7 days, got all of our work done, and thus eliminated a 4-day planned outage that was scheduled for October.

October, thus far, at San Emidio, we're at 97.5% availability, with an average net generation of 9.5 megawatts per hour. That's a good example of difference between water-cooled and air-cooled units. 8.9 megawatts for the third quarter versus, now, 9.5 megawatts, so the swing is not as great when you have an air-cooled unit -- or water cooled, excuse me.

Our generation at Raft River for the quarter was 18,688 megawatt hours. The average hourly generation at Raft was 8.5 net megawatts per hour. And it operated at 99.9% availability for the quarter compared to 89.3% in the second quarter. October, thus far, were at 97.7% but an average net generation of 9.1 megawatts. So you can see all these plants now are moving into higher generation areas with the cooler temperatures. And in fact, the air cooled condensers operate better in cold weather versus water cooled, so you'll see Neal Hot Springs continue to increase that generation.

I wanted to bring you up our expectation -- well, first of all, our expectation for the fourth quarter. We expect all these plants now, with the outages behind us and the warm weather behind us, to operate in the mid- to high-90s as far as availability is concerned. And as we demonstrated that overall generation is increasing with the cooler temperatures and this should really be our best quarter of the year. Our power prices on the Idaho Power contracts have returned now to the higher seasonal levels for the full quarter at Neal and Raft River, and that should favorably impact our revenue.

As far as our development work is concerned, at San Emidio Phase 2, as you know, we started drilling on the Phase 2 project, and we've done some work both in the north and south zones of the San Emidio resource. In the north zone, we began drilling the well OW-12 on September 2. We completed the well on October 23. And that well was drilled to a depth of 3,643 feet. The result from the well is being evaluated. It's also been incorporated into our reservoir model.

We moved down to the south zone after that and worked on well OW-10. Currently, it is now considered to be a production well 61-21. It was reworked. We removed the small-diameter slotted liner that was in the well. We drilled out the wellbore to a larger diameter and then installed a larger slotted liner, a 6 7/8-inch liner to improve the productivity of that well, and we're planning on that well now providing up to 750 GPM, gallons per minute, of geothermal brine at 300 degree fluid when we put it online in the future.

Permitting is underway for additional drill sites in the south zone. We have identified a large anomaly in the south, working through the DOE grant that we've been doing over the last couple of years, and we still have 5 well sites currently permitted in the north zone. So we're preparing to launch, I guess, into the next phase of development of Phase 2 over the next quarter or 2.

In Guatemala, well EC-1 was drilled in the first phase to 4,829 feet deep and had a bottom hole temperature of 491 degrees Fahrenheit or 255 degrees centigrade. It's very hot and much hotter than we expected. After a short flow test and temperature surveys, the decision was made to deepen the well because of the high bottom hole gradient of 7 degrees per 100 feet. So in a temperature-gradient situation, we measure how fast temperature is increasing in the wellbore, and that tells us whether there may be an active system in the well or deeper.

We decided to deepen that well. We started on August 21. We've completed the deepening on September 15 to 5,650 feet, and we have a bottom hole temperature now of 526 degrees Fahrenheit. Once again, we conducted a short-term flow test with temperature surveys, and the well data was provided to a third-party reservoir engineering consultant group that specializes in volcanic resources for analysis. Due to the complex interaction with the small wellbore, you might recall that we drilled a small borehole on this resource, and a very high-temperature volcanic-type resource, which is a little new to us, we needed some specific expertise to really figure out what was going on.

Planning is underway for another round of drilling, and so we expect to continue drilling at El Ceibillo to further delineate that resource and really see what we have down there. Also, I would mention that during this quarter, the third quarter, the Guatemalan Ministry of Environmental and Natural Resources issued an environmental license to the project, which allows us to construct and operate a 25-megawatt power plant on the site.

Dennis, back to you?

Dennis J. Gilles

Great. Thank you, Doug. I wanted to point out some of the notable highlights from this quarter. We had previously noted that we had a number of loose ends that we had to clean up. Over the last 6 months, we've been successful with that, and I just wanted to kind of point some of those out to you.

We had a $25 million construction loan with SAIC on our San Emidio project. That note was due and payable mid-November of this year. We successfully obtained long-term financing for the project, $30.7 million, from Prudential and have paid off the $25 million SAIC note in full, eliminating our exposure on that project. That Prudential loan additionally funded project reserves, and we ended up with $2.6 million coming back to us for our working capital needs.

On our Neal project, we had received an investment tax credit from the U.S. Department of Treasury, back during the second quarter, and we had previously noted that. But those grant funds were being held up by our lender, the DOE. In August, our Neal project achieved final completion, as defined under the project loan agreement, and as a result, the $32.7 million in cash grant funds that had been held were released by the DOE. $11.9 million of those funds went to prepay the project loan as required by the lender, $11.1 million was used to fund project reserves and $9.7 million was made available for distribution to the project owners.

Additionally, at the end of the second quarter, we had a construction loan whose total loan amount and interest had not yet been finalized. We have since taken the final draw on that loan, and we and the lender have closed out the construction phase and are now in the operation phase of that loan agreement.

We previously noted, also, that we had a Business Energy Tax Credit from the State of Oregon, with a value of $7.4 million that we needed to sell. We have identified a buyer, and we expect to announce the close of that transaction in the very near future. We still have outstanding, though, the finalization of our partner interest on the Neal project with Enbridge. Our agreement with Enbridge requires that a calculation be performed after construction is completed, after all loan draws are final and after all distributable funds have been determined. We expect to resolve the calculation of ownership once the final amount and distribution of the BETC funds has been determined and after additional funds held by the DOE are released.

Summarizing our operating performance. This third quarter was a solid performance by all 3 of our plants, as Doug had noted. Our unit availabilities across the fleet were substantially up from last quarter, with the average availability for the third quarter of the fleet 94%. That compares to a second quarter average of 84%. We anticipate similar or higher availabilities for the fourth quarter, which is also expected to be our highest revenue quarter.

There's 2 primary factors that I wanted to stress that caused the fourth quarter to have the highest contribution. The first is the higher outputs expected from our plants as a result of the colder ambient weather conditions. The greatest impact is at our Neal project, as Doug had mentioned, it's our largest plant, but it has air cooled condensers and the other 2 plants have water cooled -- water-cooling towers that only are minimally impacted. As an example, at Neal Hot Springs, our generation in July was 11 megawatts with all 3 units running as compared to 25-plus megawatts currently. That reflects the impact of ambient conditions on those air cooled condensers. I do need to stress, though, we have that built -- that fluctuation in generation built into our forecast, and that's why we're able to say we're right on plan and right on schedule.

The second factor is higher energy prices paid for the power that we generate during those 4 quarter -- that fourth quarter months. Within our Idaho Power contract, which applies to our Neal and our Raft River power plants, we have 4 months during the year that are paid at a premium price, a premium price of 120% of the average price paid, and that applies to those 4 premium months. 2 of those 4 premium months occur during the fourth quarter, during the months of November and December.

Now moving on to the development side. On our El Ceibillo project in Guatemala, as Doug mentioned, we hit temperatures as high as 526 degrees. We received the environmental license to allow us to construct and operate the first phase of that project, and we're preparing to move forward with additional drilling to define that resource better.

Again, summarizing our San Emidio project. During the quarter, we drilled a new well in the north, we reworked the well in the south. And the results of those 2 wells have confirmed that the up-flow zone in that area is in the south zone, closer to our OW-10 well, and OW-12 defining the northern extent of the outflow zones. So our focus -- as we move forward, we'll move towards expanding that south resource. We're now planning to drill deep temperature-gradient wells, and we have a program that involves a number of those to further map out the heat flow in that area. We're also working on a detailed project milestone scheduled for submittal to NV Energy, who has the power purchase agreement for that additional generation.

On the M&A front. We're also currently evaluating a number of strategic growth opportunities, but nothing to report specifically at this time, other than to say that our strategy is to grow both organically and through strategic acquisitions. As far as guidance for the company. We're providing guidance for the balance of 2013 and for 2014. These figures are forecast only and considered forward-looking statements. We have provided the guidance for 2014 to assist you in making your own projections. 2013 is a transition year, as we had noted previously. 2014 will be really the first full year with all 3 plants fully commissioned and performing at expected levels. 2014 should be more indicative of future year results for these projects.

As noted earlier, our third quarter results were right in line with our plan and our previous guidance. Therefore, we're not adjusting our year-end 2013 guidance at this time. We have, however, refined our 2014 guidance. Our guidance for 2013 and '14 is as follows. Our revenues for 2013, we expect to end the year between $25.9 million and $27 million in revenues. That compares to 2014, our expectation is revenues between $27 million and $31 million. On EBITDA, 2013, we expect to end the year between $12.5 million and $13.7 million, and that compares to our expectation for 2014 of $12 million to $16 million. On the net income, we expect to end the year between $1.8 million and $3 million for 2013. For 2014, we have a projection of $1 million to $5 million.

In summary, the third quarter of 2013 yielded results that have us right in line with our expectations. We continue on track to achieve the results that we previously provided in our guidance. And based on the final plant operating performance demonstrated today and loan amounts and interest rates being finalized, we've updated our guidance for 2014. We have sufficient cash on our balance sheet, and we have cash flows from operations to support our ongoing operations and our early day -- early-stage development efforts.

And Jen, with that, I'd like to turn it back over to you for questions.

Question-and-Answer Session

Operator

[Operator Instructions] Our first question today comes from the line of Robert Huffman [ph], a private investor.

Unknown Attendee

I was wondering if you're going to do any additional work at Neal Hot Springs, I mean, like put in another plant.

Dennis J. Gilles

Neal, at this point in time, we have no immediate plans to expand that project. Under our loan agreement with the Department of Energy, what's required first is that we verify and prove up that the current resource is able to support the projections that we've included in that project financing. And we have to make sure that, that is certain and solid before we move on with any type of expansion there.

Operator

Our next question comes from the line of Matt Farwell with Imperial.

Matthew Farwell - Imperial Capital, LLC, Research Division

I'm just thinking of looking at some outstanding questions. First is on the Enbridge equity allocation, could you elaborate on the fact what percent will go into the determination? And should we be looking for an update on that in the coming weeks? Or will you record it when you report the fourth quarter?

Dennis J. Gilles

Thank you, Matt. That's a great question. The Enbridge situation continues to be outstanding. We have previously said that we anticipated resolution of it relatively quickly. What we failed to factor in is our lender, the Department of Energy, has essentially "first say" in the funds that are available to us under the loan agreement, as to how those funds will be utilized. And so where we assumed that things like the investment tax credit and some of the BETC, the Business Energy Tax Credit, some of those others would flow directly to us, as we saw with the investment tax credit, that was not the case. And it took 4 to 5 months in order to get a resolution as to how those funds would be distributed and utilized. So really, until we finish up all those remaining funding sources and the DOE has assisted us in determining how those funds would be utilized, we're not able to finalize that figure. As soon as we are able to finalize it, though, my feeling is that, that would warrant a press release announcing what the final ownership percentage at Neal is. So I would not wait until the end of the quarter to provide that information.

Matthew Farwell - Imperial Capital, LLC, Research Division

Okay. And do you have any color on Enbridge's expect -- intentions to hold on to its equity stake? Or would you -- is there some possibility of U.S. Geothermal acquiring the minority stake?

Dennis J. Gilles

Well, that's an excellent question, too. I can't speak on behalf of Enbridge. I do know, however, that Enbridge is very interested in renewable energy. They're very interested in expanding their position in renewable energy. They have multiple sources of renewable energy that they have invested in. And I don't anticipate that they would be letting go of their position on this project. My guess is they would be looking for other opportunities like this project to get invested in. But again, I'm speculating, pure speculation. I cannot speak for them. That would be an Enbridge question.

Matthew Farwell - Imperial Capital, LLC, Research Division

Right, right. So also on San Emidio 2, you -- I believe you're considering sort of how to -- the accounting treatment for the development expenses, whether or not to capitalize those expenses versus letting them flow to the income statement. When will you announce -- when will you make that decision? When will you announce it? And then also, how might it affect the P&L? Would there be a reversal in expenses in the fourth quarter?

Dennis J. Gilles

Another excellent question. As we had done on our El Ceibillo, the initial drilling work that was done down there was expensed. And at such point in time, where we determined that the project moves from exploration to development, then we're able to transfer those expenses and reverse them from expense to capital. On the El Ceibillo project, our conclusion was with the results that we've obtained to date, that, that project had met that hurdle. We have not made that determination yet on San Emidio. We're still evaluating the results that we have. We're formulating them into our model. And once that determination is completed, we will make that determination as to whether or not they are expensed or whether that converts it to a development project and we capitalize it. As far as the impact to the quarter, if that occurs before year-end, those expenses would become capitalized and...

Kerry D. Hawkley

It's about $0.5 million.

Dennis J. Gilles

It's about $0.5 million of impact, potential.

Matthew Farwell - Imperial Capital, LLC, Research Division

I see, okay. And then in -- on the subject of El Ceibillo, what is the CapEx or development expense that you've incurred year-to-date? And what do you plan to spend in 2014?

Kerry D. Hawkley

Year-to-date is $1.3 million.

Dennis J. Gilles

And as far as anticipated expenditure for 2014, we do not have that number yet.

Matthew Farwell - Imperial Capital, LLC, Research Division

Got it. And is there any -- in your CapEx number, is there maintenance CapEx that you could further refine?

Dennis J. Gilles

Neal or collectively on the fleet? I think that's what you're asking. Collectively across the fleet?

Matthew Farwell - Imperial Capital, LLC, Research Division

Yes, correct.

Dennis J. Gilles

For 2014 or for 2013?

Matthew Farwell - Imperial Capital, LLC, Research Division

So far in 2013 and 2014?

Dennis J. Gilles

We don’t have that at our fingertips, Matt. We could get that to you. We just went through and approved budgets. We'd have to pull it out of our budget.

Operator

Our next question comes from the line of Jim McIlree with Chardan Capital.

James Patrick McIlree - Chardan Capital Markets, LLC, Research Division

It's James McIlree with Chardan. You talked about 2 months having premium pricing, November and December. What are the other 2 months that get premium pricing?

Douglas J. Glaspey

July and August.

Dennis J. Gilles

July and August.

James Patrick McIlree - Chardan Capital Markets, LLC, Research Division

Great. And when is it reasonable to expect the El Ceibillo to start production?

Dennis J. Gilles

Our current concession and our current MOU have that project online by year-end 2015.

James Patrick McIlree - Chardan Capital Markets, LLC, Research Division

Okay. And that's still -- it sounds like that's on track. Is that correct?

Dennis J. Gilles

Year-end 2015 is doable, yes.

James Patrick McIlree - Chardan Capital Markets, LLC, Research Division

Okay. The Phase 2 expansion, similar question. When would that be reasonable to expect production to begin?

Dennis J. Gilles

Similar answer. It would be the latter part of 2015. Our power purchase agreement requires the unit to be installed the end of second quarter of 2015, but not COD.

James Patrick McIlree - Chardan Capital Markets, LLC, Research Division

Right, right. Okay. And then finally, you talked about air cooling versus water cooling. And I'm wondering if it makes sense to put air cooled units at the other sites?

Dennis J. Gilles

Well, actually the other way, Jim, our preference would be water-cooled sites. The water-cooled sites have less variability of output. The air cooled is installed basically out of necessity. If you don't have a water source or if the state or the geographical area requires that water is a critical supply and doesn't want it released to the atmosphere, which is what happens during water cooling, the water is lost through evaporation and goes up into the atmosphere. So in the case of our Neal project, it was done out of necessity. We didn't have a water source readily available.

James Patrick McIlree - Chardan Capital Markets, LLC, Research Division

Okay. I get it. Well, thank you for correcting me on that. [indiscernible]

Dennis J. Gilles

No, that's fine. And Jim, I did want to point out, in our MD&A, we did provide additional color as to which months -- this quarter's MD&A, we provided additional color as to which months had those power prices and which months had the leaner power prices, so you could extract that from there.

Operator

Our next question comes from the line of Jared Alexander with Canaccord Genuity.

Jared Alexander - Canaccord Genuity, Research Division

I wanted to start with San Emidio. And I found that the realized price was a little lower than I expected this quarter. I think the $83.60 in the MD&A. I was just wondering why that happened and whether we can expect that return to the kind $90 range going forward.

Douglas J. Glaspey

Jared, thank you for the question. It's a little complex in our PPA at San Emidio. There are provisions in the PPA that if we over-generate in off-peak periods or we over-generate our supply amount that the -- and the power company pays us the full price for that during the summer period, then at the end of that summer period, they are able to recover those costs. So in round numbers, if they pay us $90 a megawatt hour under the contract, and we generated hours in excess of our supply amount, they're only worth $50 a megawatt hour under the contract. So they recover that at the end of the summer period, which also happens to be the end of the third quarter. So that reduction in price is a reflection of the fact that we over-generated according to our original supply amount. Now we are also allowed, under the PPA, to adjust our supply amount, which we have done for 2014. So we don't expect to have that kind of impact at San Emidio in 2014.

Dennis J. Gilles

Another way -- adding some color to that. Our units performed better than planned during the summer. But unfortunately, we didn't realize our full payment for that better than generation, and we had to reimburse them during the fall.

Jared Alexander - Canaccord Genuity, Research Division

I see, okay. And you don't expect the same situation in 2014, so we would be looking at $90-ish for Q3 '14?

Dennis J. Gilles

Yes, that's correct.

Dennis J. Gilles

Yes if our forecast that we've provided to NV Energy are correct, which we believe they are, based on our experience now. That was our first summer with that plant. So it was our best projection at the time, when we provided it to NV Energy, to ensure that we didn't put ourselves into penalties for underperformance. Unfortunately, it works against you, too.

Douglas J. Glaspey

Yes. You might recall that when we signed the PPA, we had a supply that -- or gave to NV Energy that supply amount when we signed the PPA before we built the power plant, you might recall that the original plant size was 8.6 net megawatts. But after testing, once the plant was built, we operated that to 9 megawatts. So we ended up with a better plant than we expected when we signed the contract. Fortunately, we're allowed to adjust that contract going forward. So as Dennis said, we think we've adjusted that properly, so we won't have these negative impacts to the price. And we'll see, 2014 should be much better. We don't want to have to give money back to Nevada Energy. I could tell you that. And the plant is performing better than its original design.

Jared Alexander - Canaccord Genuity, Research Division

Okay, that's great. That's very helpful. Now moving to Neal. I was wondering, because it just looked like you changed your reporting just slightly. Can you tell me what the plant operating expenses were there for the quarter?

Dennis J. Gilles

You don't have it in there by quarter, do you?

Kerry D. Hawkley

I do back in the MD&A. I'll just look real quick.

Dennis J. Gilles

Kerry is noting he has that in the MD&A, and he's pulling it out.

Kerry D. Hawkley

We've got it for the 9 months. I don't have it for the 3 months.

Jared Alexander - Canaccord Genuity, Research Division

9 months is fine, I guess.

Kerry D. Hawkley

As an example, for the 9 months -- I see the San Emidio. Where is Neal?

Dennis J. Gilles

Jared, we -- how about we follow up with that to you for both the 3 and 9 months?

Jared Alexander - Canaccord Genuity, Research Division

Yes. Absolutely, it's no problem. Now I wonder if we could just circle back to Matt's question about the Enbridge ownership interest. And I know these things are really hard to predict. But kind of what is just your best guess? Are we going to settle this up in Q4? Or is this a 2014 event?

Dennis J. Gilles

Well, I can tell you what my hope is. Again, I don't have a whole lot of control over the Department of Energy. My hope is that we'll settle it up in Q4, and my hope is that we'll settle it up really soon. But as I noted, we're very close to finalizing our BETC sale and the determination of how those funds will be distributed. And then the Department of Energy has some additional funds that they're currently holding as a result of remaining punch-list items on our Neal project, very minimal punch-list items, but they're still retaining funds. And whether those funds will be released to us in entirety or be reallocated to loan paydown or to project reserves is unknown to us at this time. So we -- I'd like to be able to tell you very soon. But again, it's -- that's when it's outside of my court.

Jared Alexander - Canaccord Genuity, Research Division

Okay, great. Now I'm wondering at San Emidio 2, you're talking about you have to have it installed, I think you said, by the end of Q2 '15. So when does that mean that you kind of have to make a go, no-go decision on this plant to meet that timeline?

Dennis J. Gilles

I would say we have to be -- Q1?

Douglas J. Glaspey

5 months, 6 months at the most.

Dennis J. Gilles

Yes. Within Q1, 2Q -- Q1, Q2.

Jared Alexander - Canaccord Genuity, Research Division

Okay. So first half of 2014, anyhow. Okay.

Dennis J. Gilles

Yes.

Jared Alexander - Canaccord Genuity, Research Division

And then maybe I can kind of ask the similar situation with respect to Guatemala. In order to make that timeline, when do you have to, I guess, in that case, execute the PPA?

Dennis J. Gilles

Q1, 2Q -- Q1, Q2, probably more like Q2.

Operator

Our next question comes from the line of Aram Fuchs from Fertilemind Capital.

Aram Fuchs - Fertilemind Capital

On Neal Hot Springs, do you think that outage had anything to do with the new refrigerant possibly doing -- causing havoc? Or is there any connection to the refrigerant?

Dennis J. Gilles

No, Aram. That was just a pure mechanical glitch. The clearances set in the pump were incorrectly set by the vendor's representative during the commissioning phase. And as a result, the impalers contacted the ball and caused a catastrophic failure of the pump internals. As Doug had noted, we've since corrected that on our other 2 pumps, making sure that the clearances were all set to manufacturer's rep. It really has nothing to do with the product that was being pumped.

Aram Fuchs - Fertilemind Capital

Okay. And could you give us sort of a qualitative analysis of the refrigerant? Is it performing as expected? That was sort of the 1 risk or one of the major risks. Maybe just talk about that.

Douglas J. Glaspey

Sure, Aram. This is Doug. It is performing as expected. I think we're seeing the kind of generation that was proposed when the plant was built. It's good to remember that this was kind of a first-generation type power plant using this equipment and this particular motive fluid, the refrigerant. So thus far, at least, I think it's performing as well or better than expected.

Aram Fuchs - Fertilemind Capital

Okay. With the observation that there seems to be a healthy appetite for project equity, as long as there's a long-term PPA, and there's not a healthy appetite for penny stocks, I was wondering, when you think you will bring in an equity partner. And I guess the question is loaded. On El Ceibillo, how long will you use the balance sheet of HTM to do the exploration work? Is there an optimal time to bring a partner?

Dennis J. Gilles

Well, yes, there is. The optimal time to bring in a partner is once you've de-risked the project. And if we could de-risk the project for a relatively minimal cost and prove up and confirm the relative size of the resource and its viability for 25, 50 megawatts, then the level of interest is dramatically increased and the partner that comes in is not going to have as high of a return threshold that they're looking for. To bring that equity partner in during this very early stage, they're going to have a higher return that they're anticipating, and we'll bear that cost over the life of the project. So if we can do it for a minimal cost on the front end, that saves us on the overall life of the project.

Aram Fuchs - Fertilemind Capital

And so that is just -- the goal there will be to get a certain amount of wells, Doug, where you can get it, so it's an accurate estimate of roughly 25 [ph] to 29 [ph] wells

Douglas J. Glaspey

Yes. And that's...

Aram Fuchs - Fertilemind Capital

And what about the...

Douglas J. Glaspey

Then, at that point, we would bring in equity. We have a considerable amount of interest expressed in coming onboard even as early as now. But we're holding them at bay.

Aram Fuchs - Fertilemind Capital

Okay. And the interest is from both risk-taking equity and possibly the world development banks or the multilateral banks, is that fair to assume?

Douglas J. Glaspey

I don't want to get into where that interest is. We have in-country interest and out-of-country interest, both.

Operator

Our next question comes from the line of Jim Sobieski [ph], a private investor.

Unknown Attendee

On your net income guidance, first of all, I didn't see it in the press release, and I'm happy that you give it because I think it's extremely important for the company to have that income and to have that as a goal. Is the net income guidance -- the guidance for net income attributable to U.S. Geothermal? Or is it the line above that?

Dennis J. Gilles

Jim, 2 things. In the press release, the very last table in the press release under the, what do we call it, the reconciliation of EBITDA is where we give the net income guidance. So just to point you to that.

Unknown Attendee

You're correct. I think I see that.

Dennis J. Gilles

And then the second part of that is -- second part your question is that guidance is consolidated. It's not broken down into U.S. Geothermal's share.

Unknown Attendee

So what would the effect be to put it into the amount attributable to U.S. Geothermal?

Dennis J. Gilles

All we could do is a guesstimate at this time because, as some of the earlier questions asked regarding the Enbridge interest, that's not yet been finalized. For the purpose of our financials, we're using an estimated 35% for the actual net income attributable to U.S. Geothermal. But that, again, is an estimate. It's based on an assumption that all we've done is taken the 30% to 40% range that we're estimating for the final Enbridge ownership, and we're using the midpoint.

Kerry D. Hawkley

35% for Enbridge.

Dennis J. Gilles

That's 35% of ownership for Enbridge in the project.

Unknown Attendee

Okay. So you would have 65% for U.S. Geothermal?

Dennis J. Gilles

In that scenario, in that estimate, yes.

Unknown Attendee

In that estimate that's what it was, yes. And in...

Dennis J. Gilles

So that's why we haven't gone the next step and broke down our guidance because, really, again, it's just a rough estimate.

Unknown Attendee

Okay. But anyway, it's helpful to know that, that's what it is. And I understand -- and I see it at the bottom of the press release, I see that. So in the press release, you go from $186,000 of net income and then when you get what's attributable to U.S. Geothermal, it actually goes into a loss of $28,000. How does that happen? If you've got -- I mean, it sounds like there's something different in just the percentage of it?

Kerry D. Hawkley

Well, we have 13 different entities that are all tied up into this consolidated statement. You have differing percentages of noncontrolling interest at 3 of the different companies. So if you back out 35% of the one with your major profits and then you -- it's just a -- it's a mathematical nightmare that you can't explain very easily. You'd have to look at each of the individual companies. Some of the companies have a loss. Some of the companies have a gain with a differing percentage. Ownership that we have in each of those 13 entities just calculates out that way. There's not, really, a good, fast and easy way of explaining it.

Unknown Attendee

But for the year of 2013, you don't anticipate that the amount attributable to U.S. Geothermal wouldn't be a profit -- net income, I mean?

Kerry D. Hawkley

That is correct. I think we anticipate -- right now, going through the 9 months, we have just, place it, $180-some-thousand loss. We're going into our best quarter, which should be the fourth quarter. 65% of Neal Hot Springs is going to be a very significant number, so we would expect to be positive for the net income attributable to U.S. Geothermal.

Unknown Attendee

Okay. I noticed in the 10-Q that in the last 6 months, you've paid the prior CEO's consulting firm $194,684. I wondered why that was. And do you expect that to continue? In other words, does the present management not have the capabilities that the prior CEO had?

Dennis J. Gilles

We had -- I'm not familiar with the 194. We had a [indiscernible] ...

Unknown Attendee

I'm sorry, yes, it's in the 10-Q. In the consulting -- it's in the management discussion and analysis of consulting payments made.

Kerry D. Hawkley

;

Well, what we had is we had a -- we pay him like $12,400 per month, and then there was a signing bonus that we basically have retained him for a 12-month period, from April 19 of 2013 to April 19 of 2014. So we had a signing bonus of, I believe, $125 [ph] plus $12,400 per month is what you're seeing?

Unknown Attendee

What does he do for the $12,400?

Kerry D. Hawkley

Well, in -- we consult with him. We assign him projects. Plus, it has him restricted to work for us in the geothermal sector. So he is restricted from going out and doing work for others within the geothermal sector, for working for one of our competitors. So it's kind of a -- not only does he do work for us, but it's a restriction on what work he can do for our competitors over that 12-month period.

Dennis J. Gilles

It's a non-compete provision.

Unknown Attendee

It's a non-compete, sure, sure. And on the Raft River, on the $50, where you overproduced what you had indicated you were going to do, you still got the $50 -- you're still better than if you haven't overproduced, right? You got incremental dollars for it. It wasn't $90, but it was at least something. Isn't that correct?

Kerry D. Hawkley

In San Emidio, that's correct.

Douglas J. Glaspey

Yes, we did get some. I mean, you're basically almost getting half of the payment that you otherwise...

Unknown Attendee

Right, right, right. But it's not like you just threw the production away. It's better than if you -- it's better to have had the production and gotten the $50, than not have it and not gotten anything.

Kerry D. Hawkley

Yes, just when you look at the average price...

Unknown Attendee

Right. It brings the average down, of course, I understand.

Kerry D. Hawkley

Average price is down, but it does increase the revenues.

Unknown Attendee

Right. And now it's going to increase it more because you're now going to get the $90?

Dennis J. Gilles

That's correct. But unfortunately, what it does is, then, in effect, overstate the revenues for the summer and understate the revenues for the fall.

Unknown Attendee

In this year?

Dennis J. Gilles

In this particular year because of that particular circumstances.

Unknown Attendee

Right, right, right. I understand, understand. But it's still a net plus to you because it's still incremental dollars?

Dennis J. Gilles

Yes.

Unknown Attendee

Just not as good as it could have been if -- but there's no way to know going in. You did the best you could.

Dennis J. Gilles

No, it's a good problem to have. To have a unit that's performing higher than expected is a good problem to have.

Unknown Attendee

We would hope that would happen to all the units.

Dennis J. Gilles

And yes, we would hope that would happen to all the units.

Operator

Our next question comes from the line of Merrick Dodge [ph], a private investor.

Unknown Attendee

I just wanted to let you guys know you're doing a real good job on these projects and everything. Just an observation though, in looking at how many shares we have out in float, about 97 million, I think. Is there going to be any buyback program, where you're going to buy those -- any of those shares back? Are you going to have any splits in the stock itself? And I'm just asking this from the shareholders' equity point of view.

Dennis J. Gilles

Our total is 102 million.

Kerry D. Hawkley

Our total shares outstanding is 102 million.

Unknown Attendee

Right. But i think you had -- in the float, though, you have 97 million.

Kerry D. Hawkley

That's correct. We do not anticipate using our cash to do a buyback. We're going to use the cash basically to go out and continue to develop new projects.

Dennis J. Gilles

And the second, Merrick, with regards to the split, it's not our intent to do a reverse split. We -- unless there was some major combination with another company or something, that's not something that we would entertain or that we're anticipating entertaining. As far any other type of split, if our stock happens to run up substantially to the point where a split makes sense, then we would gladly entertain that. But definitely not something here while we're trading in the cents.

Operator

There are no further questions at this time. I would like to turn the floor back over to Mr. Gilles for closing comments.

Dennis J. Gilles

Well, thank you, Jen. I appreciate that. And I appreciate all of you calling in today. I appreciate your interest in U.S. Geothermal. And for those of you who are shareholders, I particularly appreciate your interest in the company.

I'm very interested in the company. I think we have a lot -- we definitely have a lot on our plate, and I think, over the next many months, you will be able to hear, hopefully, about some of those things that are on our plate that we're aggressively looking at. We just think the company is very solid. Our units are performing well. Our availabilities are continually rising, and we're coming into an excellent revenue time for the company, given the way the units perform and given how energy prices, here, in this part of the country, work during the winter months. Unlike other parts of the West, where winter months tend to be low priced, in the Pacific Northwest, winter months tend to be high priced. And so a lot of good things going for us and aligning and looking forward to what lies ahead.

Again, I thank you, all, for your attention today, and appreciate you calling in. And look forward to a great quarter ahead. Thank you much.

Operator

This will conclude today's teleconference. You may disconnect your lines at this time. We thank you for your participation. Have a great day.

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