About the collaboration
The modules will be installed and operated by the Heat Power operator Varmaorka. Varmaorka is a newly established Icelandic company focusing on geothermal development, harnessing low and medium enthalpy geothermal resources for the generation of clean and renewable electricity.
Climeon’s Heat Power modules generate electricity from low temperature heat, e.g. from low enthalpy geothermal wells. The system is built up by compact, flexible units of 150kW electrical power that have no consumables and generate no pollution.
The first distributed power plant, phase 1, is expected to be delivered in the first half of 2018 and will consist of seven Heat Power modules. Thereafter, provided inter alia that phase 1 is successfully completed and financing can be obtained (see also below under Financing), Climeon AB is expected to deliver an additional 93 modules under phase 2, as construction is initiated on new sites. The value of the order is 30 MEUR, in addition to that the order also includes services which adds up to a total order value of approximately 300 MSEK.
Ruben Havsed, Head of Geothermal Sales at Climeon AB, comments: “Being able to provide a competitive power solution in a market with the world’s lowest energy prices, gives us great assurance that our technology will be commercially viable in any geography. We are also happy to help the Icelandic community as this project will create jobs and provide locally produced clean electricity that meets the growing demand.”
According to Thomas Öström, CEO at Climeon AB, the order constitutes a break-through for Climeon AB. “Geothermal energy, especially when low temperatures can be utilized, has the potential to power the entire world´s energy needs many times over, and this order is a major milestone on that journey.”
The situation in Iceland is unique. The geothermal energy potential is vast and has been used for many years, primarily to heat households. Even though the energy is accessible in most parts of the country, most of the power production is centralized. The transmission of the electricity requires investments and implies transmission losses. Further, due to the easily accessible energy, mainly through hydro powered facilities and geothermal technology, Iceland has one of the world’s lowest electricity prices – creating an unforgiving competitive environment.
Even so, Climeon AB and its Icelandic partner Varmaorka, are making it possible to install a large scale distributed geothermal power solution without any subsidies or grants.
Terms and conditions
Phase 1 refers to a pilot order of seven Heat Power modules and in Phase 2, the intention to install the remaining 93 modules at various sites in Iceland. The sales order is contingent upon a number of conditions to be fulfilled and approved by the parties. The conditions that must be met includes, but are not limited to:
- the execution of a pre-study for phase 1;
- the completion of a project budget;
- that agreements with certain third parties are entered into, for example relating to construction and commissioning of the Heat Power modules in Iceland, grid connection, right of use to land and offtake of electricity;
- that a promissory note is signed by Climeon AB and CP Energy Holding; and
- that relevant governmental and local governmental permits and licenses are obtained.
To finance the seven Heat Power modules included in phase 1, Climeon AB will assist CP Energy Holding with complete funding, comprising of a suppliers credit and a promissory note. The suppliers credit is secured by way of retention of title to seven Heat Power modules. The promissory note is secured by way of charge over assets in CP Energy Holding and individual guarantee commitments. The guarantee commitments amounts to 50 percent of the value of the promissory note. Furthermore, Climeon AB has retention to title to seven Heat Power modules if CP Energy Holding does not fulfill their payment obligation. Payment for the seven modules included in phase 1 follows a repayment plan of 15 years from the date when Climeon AB provided the funding to CP Energy Holding. It is the parties intention that CP Energy Holding shall re-finance the loan within 24 months.
Phase 2 is expected to comprise a total of 93 Heat Power modules which are delivered at call offs from CP Energy Holding. Delivery and payment for the Heat Power modules shall take place no later than 30 months after the agreement was entered into, i.e. in February 2020. Payment for the 93 modules included in phase 2 to is divided into three parts: 20 percent of the agreed price when a call of note is submitted, 50 percent when Climeon AB initiates the production and the remaining 30 percent at delivery. Thus, Climeon AB receives 70 percent of the payment before delivery of the Heat Power modules.
CP Energy Holding has not yet established a financing plan relating to phase 2 and CP Energy Holding intends to seek financing from private investors as well as banks. The parties rely partly on receiving government financing from, e.g., the Swedish Export Credits Guarantee Board and Svensk Exportkredit.
In conclusion, Climeon and its Icelandic partner CP Energy, are aiming to make it possible to install a large scale distributed geothermal power solution without any subsidies or grants.