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US Geothermal Inc. (NYSEMKT: HTM ) Q3 2015 Results Earnings Conference Call November 10, 2015, 01:00 PM ET Executives Dennis Gilles – CEO Kerry Hawkley – CFO Doug Glaspey – President and COO Analysts Jim McIlree – Chardan Capital Markets Peter Rabover – Artko Capital Bryan Lee – Private Management Group Operator Greetings, and welcome to the U.S. Geothermal’s 2015 Third Quarter Earnings Results Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. With no further ado I would like to turn the conference over to our CEO, Dennis Gilles. Thank you Mr. Gilles, you may begin. Dennis Gilles Thank you, Tim and thank you everybody for joining. Today we want to thank you for joining the call and for your continuing interest in U.S. Geothermal. My name as Tim said is Dennis Gilles, and I am the Chief Executive Officer of U.S. Geothermal. And joining me on today’s call is Kerry Hawkley, our Chief Financial Officer and Doug Glaspey, our President and Chief Operating Officer. We’re pleased with our performance as we reached the end of this third quarter of 2015. Our plans continue to outperform industry standards for operational availability and we continue to focus on our next phase of growth. I would now like Kerry Hawkley our CFO to provide you with the summary of our financial results for this first nine months of the year. Kerry? Kerry Hawkley Thank you, Dennis and good morning to our listeners on this call. Before beginning, we would like to remind you that the information provided during this call may contain forward-looking statements relating to current expectation, estimates, forecasts 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. During the call, we will present non-GAAP financial measures such as EBITDA, adjusted EBITDA, and adjusted net income. Reconciliation to the most directly comparable GAAP measures and management’s reason 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. I will now discuss the financial statements of US Geothermal for the nine months ended September 30, 2015. You will note that the company is now filing our financial statements and MD&A in a condensed format, which should be read in conjunction with our audited financial statements and 10K filings for the year ended December 31, 2014. On our balance sheet as of September 30, 2015, we have total assets of $228.1 million. Our cash and cash equivalents are $11.2 million with our restricted cash and bond reserves up $21.0 million for total cash assets of $32.2 million. Our total liabilities are $97.8 million, our non-controlling interest has been reduced to $44.0 million and our net stockholders equity has increased $86.3 million. On our statement of operations we’re very pleased with our results for the past nine months. Revenues for the first nine months were $21.3 million, up $180,000 from 2014. Our planned production expenses were $12.0 million, up $238,000 over the same period in 2014. Salaries and wages and stock-based compensation cost were down $268,000 from 2014 levels due primarily to cost applicable to our development projects. US Geothermal no longer has a tax valuation allowance as existed in 2014 due to recording a deferred tax asset in December 2014. In 2015 we recognized an income tax expense of $473,000 for GAAP purposes and reduced the deferred tax asset by the same amount. Please note that US Geothermal has no tax liability until the deferred tax asset is fully depleted. Income tax amount represent cash on US Geothermal’s share of net income only. Our net income for the first nine months of 2015 was $1.8 million. If we eliminate the income tax to just a comparable number to the 2014, our adjusted net income would be $2.3 million in 2015 as compared to $1.9 million for the same period last year. Our net income attributable to non-controlling interests is down $637,000 in due to lower revenues at increased payroll and maintenance costs at our Raft River project. Net income attributable to US Geothermal was $781,000 in 2015 compared to $268,000 in 2014. Earnings at our San Emidio plant increased $547,000 net of tax 2015 compared to 2014 due to increased plant revenues and decreased maintenance costs. San Emidio has owned 100% by US Geothermal. For comparison purposes, if we had not recorded the deferred tax asset in December 2014, net income attributable to US Geothermal as adjusted would have been $1.25 million in 2015 compared to $268,000 in 2014. On our statement of cash flow, we began the year with cash and cash equivalents of $13.0 million. Nine months cash generated by operations was $9.1 million. No payments reduced our total debt by $4.0 million. Payments to our non-controlling interests were $3.5 million. Capitalized development cost at the Geysers, San Emidio 2, El Ceibillo and Crescent Valley totaled $4.5 million. Funds released from restrictions and funds raised via option exercises were $1.1 million for the nine months. We ended the quarter with cash and cash equivalents of $11.2 million. On our statement of changes in stockholders equity, we added net income attributable to US Geothermal of $781,000 during the first nine months. Our accumulated deficit net of tax is now $18.5 million. Shares of common stock issued upon exercise of stock options were 155,000 for the first six months another 428,000 shares were issued with a one year restriction. Cash of $3.5 million was distributed to our non-controlling interest and net income of $1.0 million were allocated to the non-controlling interest. Our shares of common stock issued and outstanding at September 30, 2015, totaled 107.6 million shares. We’re very sensitive to the complexity of our disclosure caused by our partnership agreements. The company continues to evaluate opportunities to simply this process. Please see the disclosure on Page 42 of the MD&A regarding the net income attributable to the non-controlling interest and the net income attributable to US Geothermal and its shareholders. For the first six months, you will see that Neal Hot Springs contributed $2.1 million. San Emidio contributed $752,000 and Raft River contributed $125,000 for a total net income attributable to US Geothermal and its shareholders of $3.0 million. From that, exploration activities and corporate overhead cost $2.2 million. All of these figures are net of tax. Costs in this last category includes the company’s cost of existence including being listed on two stock exchanges, legal accounting professional fees, filings with government agencies, stock-based compensation and the cost of evaluating and developing new projects. These costs represent an investment in the future growth of our company, but are 100% US Geothermal cost and reduce the net income attributable to US Geothermal. As we continue to grow the company by adding new income generating projects in the future, this last category should not increase significantly from current levels allowing the net income from any new projects to increase the bottom line almost dollar for dollar. Thank you for your continued interest in US Geothermal. I’ll turn the call back over to Dennis. Dennis Gilles Thanks Gary. Doug Glaspey, our President and Chief Operating Officer is now going to provide you highlights of our operation performance and our development activities for the last nine months. Doug? Doug Glaspey Thank you, Dennis and good day to everybody. We’ll start with operations. Generation during the third quarter from all three plants was 68,371 megawatt hours, compared to 68,987 megawatt hours in the third quarter of 2014. Generation for the first nine months of the year totaled 237,244 megawatt hours, compared to 242,255 megawatt hours during the same period in 2014. Warmer than average temperatures have been experienced through the first three quarters of the year, but they have moderated now in the third quarter and we’re hoping for more normal temperatures in the fourth. For the year, we’re 4 degrees above the 10-year average temperature at all three facilities. At Neal Hot Springs, our generation for the third quarter was 33,498 megawatt hours and for the first nine months of the year was 124,229 megawatt hours. This compares to 128,922 megawatt hours for the first nine months of 2014. The facility averaged 15.4 net megawatts per hour of operation and achieved 98.5% availability for the third quarter. As we previously announced a settlement was reached with Turbine Air Systems under the terms of our equipment supply agreement in five of their key equipment suppliers. The settlement provided a cash payment of the company, which is project company USG Oregon LLC and a commitment from the five suppliers to repair a specific equipment deficiencies and to provide extended warranty for equipment that is repaired or replaced. We did take a 2.5 day maintenance outage during the quarter on Unit 3 and that was to replace the higher pressure feed pump or the new pump and that part of this EFA settlement. At San Emidio generation was 18,924 megawatt hours for the quarter and for the first nine months of the year, it was 59,170 megawatt hours. This compares to 55,149 megawatt hours for the first nine months from 2014. San Emidio averaged 8.7 net megawatt per hour of operation and achieved a 98.9% availability for the quarter. They’re doing a really great job down there. At Raft River generation was 15,950 megawatt hours for the third quarter and for the first nine months of the year generation was 53,845 megawatt hours. This compares to 58,184 megawatt hours for the nine months in 2014/ Raft River averaged 8.7 net megawatt per hour of operation for the quarter and operated at 82.7% availability. During the third quarter, we did take a 12.5 day maintenance outage that was taken in August to replace variance that we’re failing on both servers. That we restarted, it’s operated smoothly and there is no indication of any further issues. Overall we’re pleased with the continued high performance of all three plants so far this year and we expect to finish out 2015 with a strong fourth quarter. On the development front, at our at our WGP Geysers project, we did run an extended flow test program on the three largest production wells in June and that confirmed that the wells on the project are still open and ready for production. The wells have been maintained successfully with the pressurized nitrogen charge in the well bore for over six years now. So we feel very solid that this is a good way to keep these wells up and make sure they stay open and ready for production. Data from the flow test was used by GeothermEx to determine the capacity of the existing wells and the reservoir. The four existing wells are capable of initially delivering 458,000 pounds of steam per hour, which has delivered 28.1 megawatts growth or 25.4 megawatts net. These estimates are based on the steam conversion rates from a detailed plant design for a 28.8 megawatts net power plant with hybrid cooling. GeothermEx further estimates that the for the long term operation of the plant we will need an additional two to three production wells over time. Our plan is to reopen historic wells located on the site to provide additional steam at a much lower cost compared to drilling new wells. And generating non conversion of the power plant design is continuing and the hybrid plant design it incorporates both water and air cooling and on capital reduction. This design saves and recycles the maximum amount of water possible for reinjection back into the reservoir. Experience in the Geysers steel that’s shows that if you have 60% or greater water injection that the steam production can be stabilized over the long term, which is extremely important for power generation and it’s one of the key reasons past ever has developed this project were not successful. On the permitting front, our interconnection study, which will allow us to connect to the transmission grid completed the first phase report or the interconnection system impact and facilities study on October 8. The outcome of the study concluded that it is feasible for the project to interconnect into the transmission grid and that the estimated cost is about $1.9 million for the upgrades required at our delivery substation. While this amount won’t be our full cost of interconnection, we expect that the savings of $1 million to $2 million will be achieved compared to past cost estimates. The Sonoma County conditional use permit process is proceeding in parallel and till date has not identified any significant issues. We’re continuing to focus now on securing a power purchase agreement, building a new power plant and selling electricity. The State of California plan to launch this fall and requires 50% of their power to come from renewable energy by 2030. That’s an increase from their current 33%. We believe that this action combined with other new regulations aimed at significant reduction in carbon emissions will spur renewed interest in our project. At El Ceibillo in Guatemala, the modified development schedule was formally approved and signed by the Minster of Energy and Mines in July and that modified schedule was officially incorporated into our profession agreement and signed on October 13. Drilling began on the project with well EC-2, which was halted due to drilling difficulties and was followed up by well EC-2A. The target was the high temperature anomaly defined by the 2014 temperature grading drilling program. EC-2A successfully intersected the zone of high permeability at a depth of 1300 feet or 396 meters. Low counting indicates that the commercial resource has been discovered with the flowing temperature of 398 degrees Fahrenheit or 198.5C. Based on the discovery at EC-2A, two additional wells have been cited to further extend the resource area and to test the deeper horizon in the system. Drilling began on well EC-3 on October 29. So depending upon the results of the two additional wells, combined with EC-2A we will then select the location for our production size well to fully test the resource and determine its size and production characteristics. Now that the modified schedule has been included in our concession agreement and we’ve signed a commercial resource, we will begin the process of identifying and meeting with potential purchasers for our project. That includes of course going back to the group that we previously had an agreement with. The Country of Guatemala has been considering the issuance of a 200 megawatt geothermal RFP sometime during 2016, which of course we fully support. At San Emidio Phase 2, we received our permits for five temperature gradient locations in June and we started drilling in July. Five 1,000 foot temperature gradient wells were completed and all of the wells encountered high bottom hole temperatures and anomalously high temperature gradients. These wells were guided by both seismic data that showed a false control offset at depth and 1970 is vintage shallow temperature gradient holes. The temperature is measured at the bottom of the wells range from 224 degrees Fahrenheit to 274 degrees Fahrenheit. So the temperature gradients in four of the well range from 12.4 degrees Fahrenheit for 108 14.9 degrees Fahrenheit per hundred feet/ In the geothermal world these are very good results and they indicate that an active geothermal system could be in close proximity to these wells. Our second phase of this drilling program that we hope to get done yet this year is to deepen the two most prospective wells. That activity only is currently being permitted with the U.S. Bureau of Land Management. Drilling in this area is weather dependent however. So once we get approval, we’ll have to see when we can mobilize the drill. We have not yet defined the extent of this new anomaly, so we will also be permitting additional temperature gradient wells in the future. Again as San Emidio the second phase interconnection study called the Facility Study was completed in June pending a decision by MD Energy on funding certain upgrades of their transmission system. MD Energy ultimately decided not to fund the upgrades and completed the interconnection system impact restudy on September 28. The restudy determined that the interconnection is feasible, but included an increasing estimated cost due to a change in cost allocation by MD Energy. A median with MD Energy transmission group to discuss these results and anticipated cost took place in late October and a reduction in those costs has already been indicted. The interconnection process will continue with the next phase study to be started within the next month. At our Neal Hot Springs Water cooling project, we did drill a second water supply well during the quarter and flow tested it for a period of six weeks and that achieved a steady state production of about 170 gallons per minute. Recall that the first well we drilled also at found water, but unfortunately that well could not be used under State of Oregon laws as it’s communicated directly with surface water. The minimum amount of water needed for our hybrid cooling system is approximately 200 to 300 gallons per minute for each unit. So that’s our target. Several new drilling targets have been selected and we will continue exploring for our water source that will support the hybrid cooling system. It’s also possible that we could purchase water or get a long term lease of existing surface water or ground water. So we’re looking into that as well. Power Engineers Incorporated completed an initial engineering evaluation of various hybrid cooling methods, which confirm the positive economic impact of hybrid cooling for the project. Our goal is to increase the annual average generation of the plant from the design rate of 22 megawatts up to the PPA contract limit of 25 annual average megawatts and the results of the study support this plan. Last but not least, we recently announced I guess yesterday morning that we’ve completed or we are in the process of completing a purchase of some equipment. We announced yesterday that we signed a purchase agreement for major long lead equipment required to build three binary cycle power plant modules. This equipment represents approximately 70% of the equipment needed for a full power plant and is essentially identical to the equivalent used in our Neal Hot Springs facility. Often how quickly you can build a power plant is determined by how fast specific large pieces of equipment can be built by the manufacture. These are the long lead items that control a construction schedule. By owning this equipment, we will not only reduce our capital cost significantly but we can cut months of the constructions schedule, which is also very important to control cost. Fortunately for us, binary cycle equipment is flexible within a range of resource temperatures and flows. So these equipment packages give us a significant pricing and delivery advantage on our new projects going forward. And that’s my report for operations and development, Dennis? Dennis Gilles Thank you, Doug. Summarizing the notable highlights for the first nine months of 2015, on the financial performance side though all of our facilities experienced warmer than normal seasonal temperatures the entire first nine months of the year, which negatively impacted our generation and with our first major overhaul in over six years at our Raft River project and then having to remove the plant again from service following that overhaul to replace damage bearings we still finished the first nine months with excellent results. Looking at our financial performance, on a consolidated basis our revenues for the first nine months of $21.26 million were slightly up compared to $21.08 the prior year. Adjusted EBITDA for the first nine months of $10.91 million was slightly up compared to $10.86 million the prior year. Our net income as adjusted for the first nine months was $2.28 million and that was slightly up compared to $1.93 million in the prior year or an 18% increase over the prior year. Our cash flow from operations for the first nine months were $9.14 million compared to $7.8 million in the prior year or a 17% increase. We reduced total liabilities since the end of last year by $4.2 million and we ended the first nine months as Kerry had said with cash and cash equivalents of $11.2 million. Looking at the financial performance attributable to US Geothermal only after eliminating our minority interest, which represent our partner’s share of the project at Neal Hot Springs and at Raft River, our net income as adjusted attributable to US Geothermal for the first nine months was $1.25 million compared to $270,000 during the prior year which reflected a 363% increase. The primary source of that increase was roughly $600,000 of increase in net income at San Emidio both due to increased generation and reduced cost and San Emidio is 100% owned by US Geothermal. Looking at taking that same comparison that we got on a net income as adjusted basis for US Geothermal and looking at it on a consolidated basis, the gain in net income from San Emidio was offset by a loss at Raft River of roughly $640,000, but I want to point out that the way our partnership is structured 99% of Raft River profits and losses are attributable to our partner on that project. So that 99% of that $640,000 impact was lost — was represented in the consolidation, but was not represented in US Geothermal’s net income. And I also want to point out that the major overhaul that we had at Raft River is one that occurs once in seven years. On the growth side, at our El Ceibillo project in Guatemala we received a signed modified concession agreement from the Guatemala Ministry of Energy and Mines. We are very pleased to have this resolved this longstanding issue finally resolved. We completed drilling of EC-2A confirming the discovery of the commercial Geothermal resource as Doug said and are currently drilling well EC-3. Our San Emidio 2 project we drilled five 1000 temperature radiant wells are waiting permits from the BLM and two of those wells will be deepened into the identified hit anomaly to confirm the underlying resource in that Southwest Zone. Our WGP Geysers project we received the independent engineers report summarizing the results of the well flow testing which indicated the resource could support the proposed 30 megawatt power plant for up to 54 years. At our Neal Hot Springs project we drilled and tested the first and second water supply wells to support the potential hybrid cooling, it appears we currently have sufficient water to support one of the three units so far. And yesterday we announced that we signed an agreement to acquire three refinery power plant modules at roughly 5% of what that equipment would have cost us to buy it new. The equipment purchase is nearly identical to that installed at our Neal Hot Springs project except newer, this equipment is projected to meet approximately 70% of the major and long lead equipment requirements for the construction of our San Emidio and our Crescent Valley power plants development projects. This purchase will also allow us to lower our cost and shorten our construction time. We continue our evaluation of a number of other potential acquisitions that could contribute to our growth both in the near and long term. Our guidance for 2015, we updated and narrowed and it doesn’t include the projection of revenue that maybe provided by any acquisitions we’re considering. The guidance for 2015 is as follows, for revenue we’re projecting between $30 million and $33 million. For adjusted EBITDA between $15 million and $18 million. Our EBITDA between $15 million and $17 million and our net income between $4 million and $6 million and I do wish to point out all of those are on a consolidated basis. In summary, our cash position continues to be solid with strong cash flows from operations. We continue to have adequate cash on hand to support both our ongoing operations and our early stage development efforts and we continue to add cash to our balance sheet in preparation for our next construction project for acquisition. In acquisition of our three new binary power plant modules, which we announced yesterday will decrease our project cost, improve our project competitiveness and shorten the construction duration for both our San Emidio and present projects. Earlier this quarter, we announced that our Board of Directors had authorized a share buyback over the next year of up to $2 million. We have not had any purchases to date of our stock under that repurchase program. Possessing inside non-publicly disclosed information of a material nature restricts us from making such purchases. Also this quarter we had announced that our Board of Directors had engaged Marathon Capital to act its financial advisor to evaluate opportunities to potentially unlock value of the company for the shareholders. That process has been initiated. In closing the current low energy, excuse me, the current low oil and gas prices that we’re seeing have no impact on our current power plant revenues since those all three plants are fully contracted. We have now had 12 consecutive quarters of positive EBITDA and cash flow from operations. Our fleet of power plants continues to perform well. We’re pleased with the performance of our resources and we’re excited and optimistic about the growth opportunities we’re currently evaluating. Thank you for your continuing support and operator I would like to now open the call for questions. Question-and-Answer Session Operator At this time, we will be conducting a question-and-answer session/ [Operator Instructions] Our first question comes from the line of Jim McIlree of Chardan Capital. Please proceed with your question. Jim McIlree Thank you. I guess good morning, to you. Dennis Gilles Yes it is. Jim McIlree And are the cost — is the cost of flooring the equipment that you purchased is that significant or meaningful? Dennis Gilles No Jim, the cost that we will incur is relocation of equipment from where it’s currently stored to our San Emidio facility. At the San Emidio facility we have both internal and external storage to adequately house that equipment. So on an ongoing basis after the equipment is relocated, we won’t have any storage cost per se. Jim McIlree And are relocation cost, is that a significant amount? Dennis Gilles Relative to the price that we paid for the equipment it is. If it’s $7 million it will be somewhere between probably $0.5 million and three quarters of a million to relocate all the equipment. Jim McIlree And so is that something that will be expensed or do you get the capital right there? Dennis Gilles I am looking at our CFO. Kerry Hawkley I’ll get back with you on that one. Jim McIlree Okay. Great. And then as far as Q4 goes, are there any special outages, maintenance, any issues that we should — that you can remind me of just in case I don’t want to be too aggressive or pessimistic on that? Dennis Gilles Q4 is our high money quarter and we keep all the units running and generate the maximum generation that we can. There are no outages planned during the quarter. Jim McIlree Great. Great. And then similar question for next year, do you have any planned major or semi-major maintenance for any plant? Dennis Gilles No major outages planned at any of the plants. We do have our screen outage that we take all the facilities down and do kind of our… Doug Glaspey Five to six days usually Jim on our spring outage reach unit. Jim McIlree But that’s the normal spring outage that you guys have. Dennis Gilles Yeah it’s not like what we experienced on Raft River, those occur one in every seven years and Raft was seven years old. The other two plants started in late 2012 so they’re a long way away from their major outages. Jim McIlree Okay, great. And as far as the stock buyback goes, are you just waiting to get out of a higher period to implement funding or does the Marathon process has to be complete before you can do anything. Dennis Gilles We don’t believe the marathon process currently impacts our ability to purchase the stock. We do have as noted material none publicly disclosed information regarding another transaction that were looking at and that limits our ability to do the stock repurchase once we’re outside of that and that’s behind us then it’s our intent to proceed forward with our stock repurchases. Doug Glaspey But Jim it would be subject to our normal blackout period that we’re restricted I believe three 30-day periods during the year that we can actually purchase. Jim McIlree Right of course, okay and then last one is there an estimated time when you think the Marathon process would be complete? Dennis Gilles I don’t have a projection for you on that. The process has been initiated and as we noted in our press release, we do not intend to comment further regarding the evaluation of the strategic alternatives unless the Board decides to proceed forward with any specific transaction. Jim McIlree Al right. That’s it for me. Thanks a lot. Dennis Gilles Great, thanks Jim. Appreciate your support. Operator Our next question comes from the line of Peter Rabover of Artko Capital. Please proceed with your question. Peter Rabover Hi, guys, can you hear me? Dennis Gilles Yes we can. Peter Rabover Hey, congratulations on the DLA, I really like that, just a couple of questions on that. So would that make your PPA bids more competitive given the low cost I guess low capital investment, is that how you’re looking at it? Dennis Gilles Yes it allows us two things. It either allows us if you we had a PPA to increase the margin on that project, but since we don’t have a PPA it give us the flexibility to dramatically lower our price allowing us to be more competitive in obtaining a PPA. Peter Rabover Okay, that’s great. And maybe you can give an update, given how many projects you have in I guess like ready to be fired up on your financing strategy since what’s happening with conservation with banks what kind of financing partners are you looking at. You do have some cash but it sounds like you’re going to more money than this. So I would love to hear some color on that? Dennis Gilles Well our intent depending on each product is specific, our intent is to project finance each project three of the four projects that we have in our development pipeline qualify for the investment tax credit so our intent would be to bring in a tax equity partner so that we can monetize that tax credit that is 30% investment tax credit. So between the 30% investment tax credit funds being monetized and between the construction fine or the construction to firm financing not recourse financing for the project which were roughly to be 70% to 75% of the project cost between the two of those that will cover the majority of the capital requirements for the project. Peter Rabover Okay, but you’re talking about acquisitions and do you have financing partners lined up for things like that? Dennis Gilles We do not have financing partners lined up, no we don’t. We have some third parties that we have talked to but we do not have partners lined up no. Peter Rabover You have I guess the whole project that does not have credit I assume that the Guatemala project, do you have any thoughts on that the financing there? Dennis Gilles Yes for Guatemala as we previously announced it’s our intent to bring in a in-country partner as our equity partner on the project and we have not pursued that yet because the primary thing was we were waiting resolution of our concession agreements which that was very long process well over two years and then we need to secure our power purchase agreements with those two in hand and with the recent confirmation of the commercial resource then we could then pursue and lock in a equity partner for that project. Peter Rabover Okay. Then just on the deal that you guys made for the equipment purchases that is very interesting are there more things like that out there like or that is just a very unique project or unique purchase? Dennis Gilles In the binary field that’s the only one that we’re aware of that is out there. Peter Rabover Okay. Dennis Gilles New equipment again this is equipment we are extremely familiar with as we noted in our press release the developer had bought equipment for six plants the three that were installed is essentially a replication of our Neal Hot Springs plant, these are Atlas Copco turbines. Atlas Copco is a $10 billion plus company. Very solid company. It’s the turbines that we have, the turbines, the generators and all the other associated equipment’s that we have at our Neal and our San Emidio projects already will familiar with that will familiar with the turbine with the equipment manufacturers so that one for us is a home run. So we are looking at other opportunities out there in order to try to improve our competitiveness and advance our securing power purchase. Peter Rabover Okay, great. Just a couple of more so on the Geysers it sounds like based what the report you guys got it sounds like you are proceeding with the [indiscernible] option? Dennis Gilles That is correct. We’re proceeding with the option of building a new plant. Peter Rabover Okay, great and then just on the Marathon Capital thing, how do you anticipate that putting that out to shareholders is that going to be a report at some point like it is just curious on that? Dennis Gilles That is actually an item I can’t speak to Peter, the our board of directors is the one working with Marathon in this process to with the intent to determine whether or not there is unrealized value for our shareholders that is not the unrealized the way the markets responding to our current share price. So until they complete their process it I am not in a position to say it. Peter Rabover Okay, great. Well hey you guys are doing great, keep up the good work with the deals and I will just get off the line and let somebody ask more questions. Dennis Gilles Thanks Peter. Operator Our next question comes from the line of Bryan Lee of Private Management Group. Mr. Lee Please proceed with your question. Bryan Lee Hey thanks for taking my question. You know couple of months back the State of Ohio put out a ruling that they are going to start taking into account the reliability of the power source when determining purchase price agreements basically putting a premium on that base loads stable production. Do you see that trend stretching on or do you heard any other states echoing those comments would be my first question and then maybe if you can take a little deeper and talk about California and how they are kind of taking into account where your PPA negotiation talks? Doug Glaspey Sure this is Doug Glaspey. It’s a very good question because as you know our chief I guess rivals in the renewable business are wind and solar which are intermittent resources. What we’re seeing certainly is that California is coming to that same conclusion. They have bought tremendous amount of wind. They have a lot of solar and more solar coming and it is giving them some good reliability problems because most of the power plants that are coming off line that need to be replaced are base load power plants. Whether they are nuclear plants, coal plants or once through cooling plants along the coast. So we think there is going to be a little bit of a change especially in the California market. I think because of them going a little too far maybe with wind and solar purchases all the other states are looking to see what happened and they want to make sure that doesn’t happen to them. So we view that very positively, glad to see that Ohio is making that move, it is certainly in talks about it and it has been referenced in the legislation in California not directly specified but certainly referenced that grid stability and base load is an important aspect of the renewable program. Bryan Lee Great, great. And then I don’t know if you can put numbers around this, but on the Geysers project can you just maybe give us directionally where you think that PPA is going to come out maybe compared to one of your existing PPAs? Doug Glaspey Not in a position to give you that Bryan. Bryan Lee Okay. Doug Glaspey I’m sorry. Bryan Lee That is fine. Doug Glaspey Until we have the PPA negotiated I am not in a position to speculate on what the price is going to be. Bryan Lee Okay, great. All right, great quarter. Thank you. Doug Glaspey Thank you. Operator There are no further questions in audio portion of this conference. With no further ado I would like to turn the conference back over to management for closing remarks. Dennis Gilles Well, thank you operator and thank you to everybody on the call. We appreciate your continuing support. We’re excited about the some of the current announcements we are excited about the things that we had in the works that we hope to be able to announce to you in the not too distant future and we’re continuing to work diligently in order to try to increase the value of — the value of your investment and the value of the shares that you hold and the value of our company as a whole. Thank you for your continuing support and we wish you all the best of the upcoming holidays and as we wind out this year. Thank you operator and with that I conclude my comments. Operator This concludes today’s conference. Thank you for your participation. You may disconnect your lines at this time and we ask that you have wonderful rest of your day. Dennis Gilles Thank you.