NOTE

— PROPERTY, PLANT AND EQUIPMENT AND CONSTRUCTION-IN-PROCESS

Property, plant and equipment

Property, plant and equipment, net, consist of the following:

	December 31,
	2016			2015
	(Dollars in thousands)
Land owned by the Company where the geothermal resource is located	$	31,904		$	31,465
Leasehold improvements		3,848			3,691
Machinery and equipment		152,821			133,457
Land, buildings and office equipment		28,634			29,247
Automobiles		11,161			7,782
Geothermal and recovered energy generation power plants, including geothermal wells and exploration and resource development costs:
United States of America, net of cash grants and impairment charges		1,658,195			1,637,081
Foreign countries		541,626			494,105
Asset retirement cost		8,669			7,961
		2,436,858			2,344,789

Less accumulated depreciation		(880,480	)		(785,454	)

Property, plant and equipment, net	$	1,556,378		$	1,559,335

Depreciation expense for the years ended

December

31,

2016,

2015,

and

2014

amounted to

$94.8

million,

$95.2

million and

$87.9

million, respectively. Depreciation expense for the years ended

December

31,

2016,

2015

and

2014

is net of the impact of the cash grant in the amount of

$5.5

million,

$5.5

million and

$5.3

million, respectively.

U.S. Operations

The net book value of the property, plant and equipment, including construction-in-process, located in the United States was approximately

$1,376.1

million and

$1,335.0

million as of

December

31,

2016

and

2015,

respectively. These amounts as of

December

31,

2016

and

2015

are net of cash grants in the amount of

$138.7

million and

$144.2

million, respectively.

Foreign Operations

The net book value of property, plant and equipment, including construction-in-process, located outside of the United States was approximately

$487.0

million and

$473.1

million as of

December

31,

2016

and

2015,

respectively.

The Company, through its wholly owned subsidiary, OrPower

Inc. (“OrPower

4”)

owns and operates geothermal power plants in Kenya. The net book value of assets associated with the power plants was

$315.0

million and

$355.8

million as of

December

31,

2016

and

2015,

respectively. The Company sells the electricity produced by the power plants to Kenya Power and Lighting Co. Ltd. (“KPLC”) under a

-year PPA.

The Company, through its wholly owned subsidiary, Orzunil I de Electricidad, Limitada (“Orzunil”), owns a power plant in Guatemala. On

January

22,

2014,

Orzunil signed an amendment to the PPA with Instituto Nacional de Electrificacion (“INDE”) a Guatemalan power utility for its Zunil geothermal power plant in Guatemala. The amendment extends the term of the PPA from

2019

2034.

The PPA amendment also transfers operation and management responsibilities of the Zunil geothermal field from INDE to the Company for the term of the amended PPA in exchange for a tariff increase. Additionally, INDE exercised its right under the PPA to become a partner in the Zunil power plant with

equity interest. The net book value of the assets related to the power plant was

$12.2

million and

$19.2

million at

December

31,

2016

and

2015,

respectively.

The Company, through its wholly owned subsidiary, Ortitlan, Limitada (“Ortitlan”), owns a power plant in Guatemala. The net book value of the assets related to the power plant was

$40.3

million and

$46.0

million at

December

31,

2016

and

2015,

respectively.

Construction-in-process

Construction-in-process consists of the following:

	December 31,
	2016		2015
	(Dollars in thousands)
Projects under exploration and development:
Up-front bonus lease costs	$	17,385	$	26,491
Exploration and development costs		36,359		35,726
Interest capitalized		703		703
		54,447		62,920
Projects under construction:
Up-front bonus lease costs		37,713		27,473
Drilling and construction costs		202,211		150,467
Interest capitalized		12,338		7,975
		252,262		185,915
Total	$	306,709	$	248,835

	Projects under Exploration and Development
	Up-front Bonus Lease Costs			Exploration and Development Costs			Interest Capitalized			Total
	(Dollars in thousands)
Balance at December 31, 2013	$	30,141		$	38,220		$	1,278		$	69,639
Cost incurred during the year		—			19,231			—			19,231
Write off of unsuccessful exploration costs		(3,523	)		(11,474	)		(442	)		(15,439	)
Balance at December 31, 2014		26,618			45,977			836			73,431
Cost incurred during the year		37			10,104			869			11,010
Write off of unsuccessful exploration costs		(164	)		(1,415	)		—			(1,579	)
Transfer of projects under exploration and development to projects under construction		—			(18,940	)		(1,002	)		(19,942	)
Balance at December 31, 2015		26,491			35,726			703			62,920
Cost incurred during the year		1,514			25,165			—			26,679
Write off of unsuccessful exploration costs		(380	)		(2,637	)		—			(3,017	)
Transfer of projects under exploration and development to projects under construction		(10,240	)		(21,895	)		—			(32,135	)

Balance at December 31, 2016	$	17,385		$	36,359		$	703		$	54,447

	Projects under Construction
	Up-front Bonus Lease Costs		Drilling and Construction Costs			Interest Capitalized			Total
	(Dollars in thousands)
Balance at December 31, 2013	$	27,473	$	184,766		$	6,948		$	219,187
Cost incurred during the year		—		132,597			3,206			135,803
Transfer of completed projects to property, plant and equipment		—		(105,126	)		(970	)		(106,096	)
Sale of property, plant and equipment		—		(24,692	)		(911	)		(25,603	)

Balance at December 31, 2014		27,473		187,545			8,273			223,291

Cost incurred during the year		—		140,977			3,556			144,533
Transfer of exploration and development projects to projects under construction		—		18,940			1,002			19,942
Transfer of completed projects to property, plant and equipment		—		(196,995	)		(4,856	)		(201,851	)
Sale of property, plant and equipment		—		—			—			—
Balance at December 31, 2015		27,473		150,467			7,975			185,915
Cost incurred during the year		—		116,247			6,510			122,757
Transfer of exploration and development projects to projects under construction		10,240		21,895			—			32,135
Transafer of completed projects to property, plant and equipment		—		(86,398	)		(2,147	)		(88,545	)
Balance at December 31, 2016	$	37,713	$	202,211		$	12,338		$	252,262