NOTE

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

Property, plant and equipment

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

	December 31,
	2018			2017
	(Dollars in thousands)
Land owned by the Company where the geothermal resource is located	$	38,060		$	32,178
Leasehold improvements		5,718			3,984
Machinery and equipment		208,646			182,121
Land, buildings and office equipment		35,708			31,128
Automobiles		22,074			12,596
Geothermal and recovered energy generation power plants, including geothermal wells and exploration and resource development costs:
United States of America, net of cash grants		2,065,377			1,744,728
Foreign countries		710,775			700,498
Asset retirement cost		11,448			10,563
		3,097,806			2,717,797
Less accumulated depreciation		(1,138,228	)		(983,106	)

Property, plant and equipment, net	$	1,959,578		$	1,734,691

Depreciation expense for the years ended

December 31, 2018,

2017,

and

2016

amounted to

$114.4

million,

$98.8

million and

$94.8

million, respectively. Depreciation expense for the years ended

December 31, 2018,

2017

and

2016

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

$6.4

million,

$5.5

million and

$5.5

million, respectively.

U.S. Operations

The net book value of the property, plant and equipment, including construction-in-process, located in the U.S. was approximately

$1,696.4

million and

$1,447.4

million as of

December 31, 2018

and

2017,

respectively. These amounts as of

December 31, 2018

and

2017

are net of cash grants in the amount of

$179.7

million and

$133.2

million, respectively.

Foreign Operations

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

$524.8

million and

$580.8

million as of

December 31, 2018

and

2017,

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

$302.0

million and

$326.1

million as of

December 31, 2018

and

2017,

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 INDE, a Guatemalan power company, 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 a

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

$14.6

million and

$9.9

million at

December 31, 2018

and

2017,

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

$43.5

million and

$40.7

million at

December 31, 2018

and

2017,

respectively.

The Company, through its wholly owned subsidiary, GeoPlatanares, signed a BOT contract for the Platanares geothermal project in Honduras with ELCOSA, a privately owned Honduran energy company, for

years from the commercial operation date. Platanares sells the electricity produced by the power plants to ENEE, the national utility of Honduras under a

-year PPA. The net book value of the assets related to the power plant was

$105.7

million and

$140.3

million at

December 31, 2018

and

2017,

respectively.

The Company, through its subsidiary, GB, owns a power plant in Guadeloupe. The net book value of the assets related to the power plant was

$23.9

million and

$24.9

million at

December 31, 2018

and

2017,

respectively. GB sells the electricity produced by the power plants to EDF, the French electric utility, under a

-year PPA.

Construction-in-process

Construction-in-process consists of the following:

	December 31,
	2018		2017
	(Dollars in thousands)
Projects under exploration and development:
Up-front bonus lease costs	$	17,018	$	17,018
Exploration and development costs		53,237		46,154
Interest capitalized		703		703
		70,958		63,875
Projects under construction:
Up-front bonus lease costs		27,473		27,473
Drilling and construction costs		160,398		198,943
Interest capitalized		2,861		3,251
		190,732		229,667
Total	$	261,690	$	293,542

	Projects under Exploration and Development
	Up-front Bonus Lease Costs			Exploration and Development Costs			Interest Capitalized		Total
	(Dollars in thousands)
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
Cost incurred during the year		—			11,224			—		11,224
Write off of unsuccessful exploration costs		(367	)		(1,429	)		—		(1,796	)
Balance at December 31, 2017		17,018			46,154			703		63,875
Cost incurred during the year		—			7,209			—		7,209
Write off of unsuccessful exploration costs		—			(126	)		—		(126	)
Balance at December 31, 2018	$	17,018		$	53,237		$	703	$	70,958

	Projects under Construction
	Up-front Bonus Lease Costs			Drilling and Construction Costs			Interest Capitalized			Total
	(Dollars in thousands)
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 projects under exploration and development to projects under construction		10,240			21,895			—			32,135
Transfer 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
Cost incurred during the year		—			231,926			7,300			239,226
Transfer of completed projects to property, plant and equipment		(10,240	)		(235,194	)		(16,387	)		(261,821	)
Balance at December 31, 2017		27,473			198,943			3,251			229,667
Cost incurred during the year		—			219,610			—			219,610
Cost write off		—			(1,380	)		—			(1,380	)
Fair value of projects under construction acquired in a business combination		—			4,668			—			4,668
Transfer of completed projects to property, plant and equipment		—			(261,443	)		(390	)		(261,833	)
Balance at December 31, 2018	$	27,473		$	160,398		$	2,861		$	190,732