Please Note: Blog posts are not selected, edited or screened by Seeking Alpha editors.

Earth Heat Resources moves closer to funding Copahue geothermal power project

Earth Heat Resources (ASX: EHR) has received a number of letters of support and expressions of interest from a variety of potential investors in the company's Copahue geothermal power project in Argentina.

Groups have individually expressed interest in not only providing up to 25% of the total Project costs directly, but also being mandated for the debt syndication of the balance of the Copahue's complete financing requirements.

Earth Heat is looking to fund the Copahue Project's Stage 1 and 2 developments and among the possible investors are investment banks and commercial, multi lateral and private investor groups.

The company is positioned to be the first ASX listed geothermal company to complete a Bankable Feasibility Study (NYSE:BFS) and order long lead items for a commercial geothermal power project.

Also, an innovative 'insurance' product is being developed with a large international insurer which, if successful, has ramifications for extension of lending facilities for the project in excess of 75% of the total capex.

Torey Marshall, Earth Heat's managing director, said “the receipt of these letters of interest from various lenders, investment banks and private investor groups is a very strong vote of confidence in the process and direction being taken by the company, within its projects in Argentina.

"Earth Heat has cultivated a relationship with target groups over the last two years, to ensure the most efficient funding of projects in Latin America and these include some of the largest funding agencies in the region."

Earth Heat is focused on the identification of off-take partners who meet the criteria needed to pass through the due diligence process in project financing negotiations. The company has not disclosed the names of the groups it is in discussions with at this stage.

Earth Heat is moving its projects towards meeting criteria set by various project lenders who generally account for 50%-75% of total development capex.

The company is well positioned to establish independent funding sources which significantly reduce the need for equity raisings through the project development cycle, and mean the company can avoid significant shareholder wealth dilution.

The funding interest follows Earth Heat's announcement on October 18 that it has signed an agreement for a power purchase offtake from its Copahue project with Electrometalurgica Andina SAIC, with an initial allotment of 30MWe per annum that has significant potential for further expansion.

The co-investment demonstrates the strong demand for power in Argentina and the company is looking to finalise the ultimate offtake power purchase agreements as part of the BFS process for the project.