Geodynamics to buy KUTh to expand island geothermal assets

Australia’s leading geothermal energy company, Geodynamics, has launched a bid for a smaller rival KUth Energy in what seems to be a bid to expand its international geothermal projects while the Australian market comes to a halt.

Geodynamics and KUTh have agreed to a scrip offer that values KUTh at around $3 million. Its shareholders will be offered one share in Geodynamics for every 5.5 shares in their company. The bid represents a premium of around 31 per cent for KUTh shareholders.

KUTh had hoped to develop projects in Tasmania and Victoria, but its most promising asset is the Takara geothermal project in Vanuatu. Geodynamics sees synergies in that project with its Savo Island geothermal project in the Solomon Islands.

KUTh has also submitted applications for licenses in Papua New Guinea and Fiji. The companies say that in all these locations there is growing electricity demand and the potential to replace current high cost diesel power supply with cheaper, cleaner and more reliable power through geothermal generation.

That is the opposite of the case in Australia, where geothermal is high cost and sourced though “hot rocks” rather than shallow, volcanic resources. In Australia, there is also too much capacity, forcing wholesale prices down to their lowest levels in a decade (net of the carbon price which is soon to be repealed).

Geodynamics recently announced a write-down of its Cooper Basin assets, although it is hopeful that the successful deployment of a 1MW pilot plant at Innamincka will lead to a 5MW to 10MW commercial demonstration plant, if it can convince one of the shale gas and shale oil producers in the region to sign on.

CEO Geoff Ward said the purchase will provide the company with access to an enlarged, more diverse portfolio of high quality geothermal projects in the Pacific Islands.

“KUTh’s portfolio contains attractive geothermal opportunities that are a strong strategic and commercial fit with Geodynamics’ activities in the Solomon Islands,” he said in a statement.

“The combination of Geodynamics’ and KUTh’s portfolio provides shareholders access to a well-balanced portfolio of opportunities offering near term revenue and potential for longer term growth within an overall stronger company that is well-financed to achieve the development of these projects.

“The combination of the two groups will allow equipment, knowledge and capability to be shared effectively across the portfolio providing significant benefits through combined drilling campaigns, shared technical resources and cost efficiencies.”