Note 8 - Property, Plant and Equipment and Construction-in-process

12 Months Ended

Dec. 31, 2019

Notes to Financial Statements

Property, Plant and Equipment Disclosure [Text Block]

NOTE 8 — PROPERTY, PLANT AND EQUIPMENT AND CONSTRUCTION-IN-PROCESS

Property, plant and equipment

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

	December 31,
	2019			2018
	(Dollars in thousands)
Land owned by the Company where the geothermal resource is located	$	38,049		$	38,060
Leasehold improvements		7,757			5,718
Machinery and equipment		230,465			208,646
Land, buildings and office equipment		39,099			35,708
Vehicles		8,021			22,074
Geothermal and recovered energy generation power plants, including geothermal wells and exploration and resource development costs:
United States of America, net of cash grants		2,160,910			2,065,377
Foreign countries		721,824			710,775
Asset retirement cost		19,824			11,448
		3,225,949			3,097,806
Less accumulated depreciation		(1,254,534	)		(1,138,228	)
Property, plant and equipment, net	$	1,971,415		$	1,959,578

Depreciation expense for the years ended December 31, 2019, 2018 and 2017 amounted to $126.7 million, $114.4 million and $98.8 million, respectively. Depreciation expense for the years ended December 31, 2019, 2018, and 2017 is net of the impact of the cash grant in the amount of $7.3 million, $6.4 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 United States was approximately $1,841.4 million and $1,696.4 million as of December 31, 2019 and 2018, respectively. These amounts as of December 31, 2019 and 2018 are net of cash grants in the amount of $162.3 million and $179.7 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 $506.6 million and $524.8 million as of December 31, 2019 and 2018, respectively.

The Company, through its wholly owned subsidiary, OrPower 4, Inc. (“OrPower 4”), owns and operates geothermal power plants in Kenya. The net book value of assets associated with the power plants was $284.5 million and $302.0 million as of December 31, 2019 and 2018, respectively. The Company sells the electricity produced by the power plants to Kenya Power and Lighting Co. Ltd. (“KPLC”) under a 20-year PPA ending between 2033 and 2036 .

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 to 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 3% equity interest. The net book value of the assets related to the power plant was $10.3 million and $14.6 million at December 31, 2019 and 2018, 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 $42.8 million and $43.5 million at December 31, 2019 and 2018, 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 15 years from the commercial operation date, which expires in 2047. Platanares sells the electricity produced by the power plants to ENEE, the national utility of Honduras under a 30-year PPA. The net book value of the assets related to the power plant was $96.1 million and $105.7 million at December 31, 2019 and 2018, 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 $24.5 million and $23.9 million at December 31, 2019 and 2018, respectively. GB sells the electricity produced by the power plants to EDF, the French electric utility, under a 15-year PPA.

Construction-in-process

Construction-in-process consists of the following:

	December 31,
	2019		2018
	(Dollars in thousands)
Projects under exploration and development:
Up-front bonus costs	$	17,018	$	17,018
Exploration and development costs		66,916		53,237
Interest capitalized		703		703
		84,637		70,958
Projects under construction:
Up-front bonus costs		27,473		27,473
Drilling and construction costs		258,484		160,398
Interest capitalized		5,961		2,861
		291,918		190,732
Total	$	376,555	$	261,690

	Projects under exploration and development
	Up-front Bonus Costs			Exploration and Development Costs			Interest Capitalized		Total
	(Dollars in thousands)
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
Cost incurred during the year		—			17,215			—		17,215
Transfer of projects under exploration and development to projects under construction		—			(3,536	)		—		(3,536	)
Balance at December 31, 2019	$	17,018		$	66,916		$	703	$	84,637

	Projects under construction
	Up-front Bonus Costs			Drilling and Construction Costs			Interest Capitalized			Total
	(Dollars in thousands)
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
Cost incurred during the year		—			264,137			3,100			267,237
Transfer of projects under exploration and development to projects under construction		—			3,536			—			3,536
Insurance recoveries		—			(35,435	)		—			(35,435	)
Transfer of completed projects to property, plant and equipment		—			(134,152	)		—			(134,152	)
Balance at December 31, 2019	$	27,473		$	258,484		$	5,961		$	291,918