States also provide incentives to geothermal energy producers. Nevada provides a property tax abatement of up to 55% for real and tangible personal property used to generate electricity from geothermal sources. TheThis abatement may extend up to twenty years if certain job creation requirements are met. In Idaho, geothermal energy producers are exempt from property tax and, in lieu, pay a 3% tax on gross energy earnings. The California Energy Commission provides favorable grants and loans to promote the development of new or existing geothermal resources and technologies within the state. Also, in California, the CPUC has required Electric Load Service Entities (LSEs) to procure 11.5 GW of new clean electricity by 2028, 1 GW of this procurement must deliver firm power with an 80% capacity factor, produce zero on-site emissions, and be weather independent. In Idaho,2023, the CPUC ordered utilities to procure 4GW of clean electricity in addition to the 11.5GW required under the original bill. With a high-capacity factor and firm and flexible generation, geothermal energy producers are exempt from property taxaddresses these requirements and in lieu, pay a tax of 3% of gross energy earnings.is the natural replacement for baseload fossil fuels and nuclear generation.

Global

We believe the global markets continue to present growth and expansion opportunities in both established and emerging markets.

Operations outside of the United States may be subject to and/or benefit from increasing efforts by governments and businesses around the world to fight climate change and move towards a low carbon, resilient and sustainable future. According to a recent report by the International Renewable Energy Agency entitled Toward 100% Renewable Energy, in 2019, a total of 61 countries had set a 100% renewable energy target in at least one end-use sector, up from 60 countries in 2018.

We believe that several global Climate Change initiatives willare likely to create business expansion opportunities for us and support the global growth of the renewable sector. Onesector, such initiative isas the historic Paris Agreement that was approved by the Twenty-first Conference of the Parties to the United NationsUN Framework Convention on Climate Change on December 12, 2015. The Paris Agreement, for(2015) and subsequent UN Climate Change Conferences which reaffirmed the first time, created a commitment by parties to this agreement to setting nationally determined efforts with the view to strengthening the global response to the threatcommitments of climate change and reporting on their progress. Following this agreement, the EIB and other multilateral institutions have committed to provide $100 billion of new financing for climate action projects over the next five years to assist countries in reaching their targets. Although former President Donald J. Trump officially withdrew the United States from the Paris Agreement in 2020, President Joe Biden signed an executive order to recommit the United States to the Paris Agreement. The Paris Agreement will enter into force for the United States on February 19, 2021.

In addition, in 2015, a group of 20 countries, including the United States, United Kingdom, France, China and India, pledged to double their respective budgets for renewable energy technology over five years as part of a separate initiative called Mission Innovation.  Mission Innovation celebrated its fifth year in 2020, and has since grown to 24 countries and the European Commission. Over the past five years members have raised the profile of clean energy innovation and increased investments by $4.9 billion annually.

Also in 2015, the Breakthrough Energy Coalition was launched by a group of 28 private investors with the objective of bringing companies with the potential to deliver affordable, reliable and carbon free power from the research lab to the market. In the same vein, in 2020, several global organizations joined the Rockefeller Foundation to form a coalition aimed at providing sustainable energy for one billion people by 2030. Joining this call to action include the African Development Bank, CDC Group plc (the UK’s development finance institution), European Investment Bank, International Energy Agency, IRENA, United Nations Development Programme (UNDP), U.S. International Development Finance Corporation and U.S. Agency for International Development (USAID). The coalition aims to unleash the full potential of distributed renewable and sustainable energy systems, including technologies such as mini-grids, grid-connected local generation and storage, renewable power solutions for industrial and commercial clusters, and stand-alone commercial appliances.

We believe that as a general matter these developments and governmental plans will create growth and expansion opportunities for us internationally.

Outside of the United States, the majority of power generating capacity has historically been owned and controlled by governments. Since the early 1990s, however, many foreign governments have privatized their power generation industries through sales to third parties encouraging new capacity development and/or refurbishment of existing assets by independent power developers. These foreign governments have taken a variety of approaches to encourage the development of competitive power markets, including awarding long-term contracts for energy and capacity to independent power generators and creating competitive wholesale markets for selling and trading energy, capacity, and related products. Some foreign regions and countries have also adopted active government programs designed to encourage clean renewable energy power generation such as the following countries in which we operate, sell products and/or are conducting business development activities:

Europe

Europe

Europe has the fourth largest geothermal power capacity, the majority of which stems from Italy and Turkey.Turkey and recently small-scale projects in Germany. A significant part of our European operations is in Turkey. We are looking for opportunities to expand in Europe.Europe, primarily in our Product segment.

Turkey

Until recently,Turkey was the fastest growing geothermal market worldwide with the theoretical potential for 31 GWA significant part of geothermal capacity and with a proven geothermal capacity of 4.5 GW, according to the Turkish Mineral Technical Exploration Agency. Due to the economic situationour European operations is in Turkey, there has been a slowdown.

Sinceand since 2004, we have established strong business relationships in the Turkish geothermal market and provided our wide range of solutions including our binary systems, to over 40 geothermal power plants with a total capacity of over 950 MW, of which one power plant is currently under construction.

The incentive plan and regulation for renewable energy generation in Turkey was renewed at900 MW. We believe the beginning of February 2021 for another 5 years. The updated FIT is lower than the previous one and the structure of the incentivized local manufactured items is not published yet, but will also change, to increase locally made parts. The structure of adjusting the exchange rate of the USD to the YTL has changed dramatically, both with applying the adjustment only once every three months, and by having an adjustment mechanism that takes into consideration changes not only on the USD / YTL rate, but also local indexes and the Euro exchange. Turkey’s external debt and economic status also create big  burden on any project financing process. Until things improve, we estimate that the slowdown in development of new sites will continue.

The potential for geothermal growth in Turkey is still high, specifically in center-south and east areas of the country. In addition, there iscountry, however, due to the ongoing economic crisis in Turkey, new projects and investments are at a standstill.

We are also experiencing growing interest and believe there are opportunities in waste heat utilization to generate electricity.Greece, Croatia and Hungary.

Latin America

Several Latin American countries have renewable energy programs and pursue thehave pursued development ofin the geothermal market. We currently operate in some countries in Latin America and are looking for opportunities in others.

Guatemala

In Guatemala, where our Zunil and Amatitlan power plants are located, the government approved and adopted the Energy Policy 2013-2027 that secure,secures, among other things, a supply of electricity at competitive prices by diversifying the energy mix with an 80% renewable energy share target for 2027.

Honduras

In Honduras, where we operate our Platanares power plant, the government set a target to reach at least 80% renewable energy production by 2034.

Caribbean

Many island nations in general and specifically the Caribbean nations, depend almost entirely on petroleum to meet their electricity needs. Caribbean nations have quite significant renewable energy potential, yet most have relatively small demand.  Other than in Guadeloupe, where the geothermal power plant that we acquired has been operating since 1985, there are no other operating geothermal projects in the Caribbean region. Although few, we believe there are geothermal opportunities for us in the Caribbean islands of St. Kitts, Nevis, St. Lucia, Dominica, and Montserrat.

New Zealand

In New Zealand, where we have been actively providing geothermal power plant solutions since 1988, the government’s policies to fight climate change include a net zero GHG emissions reduction target  by 2050 and a renewable electricity generation target of 90% of New Zealand’s total electricity generation by 2035. We continue selling power plants and products to our New Zealand customers secured two projects in the last two years and intensified our cooperationcooperate with other potential customers for adding more geothermal power generation capacity within the coming years. In 2023, we signed an EPC contract to build the Ngatamariki 58 MW following the 59MW Tehuka 3 geothermal project contract signed in 2022. In 2023, we have also announced the development of TOPP2 a 50 MW geothermal power plant. 

Asia

Indonesia

 In Indonesia

Indonesia where we hold a 12.75% equity interesthas 23 GW of geothermal potential, the largest in the Sarulla complex,world and has just utilized about 2.4 GW (10% of the potential). The Government of Indonesia (“GOI”) has made a Nationally Determined Contribution of 43.2% GHG emission reduction and achieve net zero emission by 2060. To meet this target, GOI has planned to increase renewable energy utilization, with geothermal energy planned to have a 3 GW increase by 2030. To further accelerate renewable energy development, Presidential Regulation No 112 was established in 2022, outlining renewable energy investment incentives and setting more lucrative electricity tariffs for renewables. We are currently constructing the 34 MW Ijen Power Plant (joint development with Medco Power Indonesia) and we are currently conducting exploration activitymaking intensive efforts to extend our power plant portfolio in Indonesia, adding more megawatts to the Ijen geothermal power plan in East Java, in which we own a 49% equity interest and whose first phase we plan to commission by the end of 2023. The government intends to increase the share of renewable energy sources in the energy mix, aiming to meet a target of 23% of domestic energy demand by 2025, and announced its intention to reduce the country’s carbon dioxide emissions by 26% by 2020. Under the current local regulation, the tariff policy for geothermal PPAs is mainly determined based on the location of the relevantalready operating 330 MW Sarulla power plant.

We consider Indonesia an important geothermal market, where potential for future development is significant along with an active geothermal industry that is supported by regulatory incentives and commitment fromIn the local government.

In addition to project development,product segment, we are also pursuing various supply opportunitiesseeing an increase  in Indonesia, and in other countries in Southeast Asia, including several optimization projects.

China

In China, where we supplied our equipment to one of our clients’ geothermal projects, the National Energy Administration will adopt the 14^th Renewable Energy Development Five Year Planbinary power plants for low-medium enthalpy resources, either by March 2021 that establishes targets for renewable energy deployment until 2025. Key objectives under the plan include, among others, to increase the share of non-fossil fuel energy in total primary energy consumption to 20%utilizing existing drilled wells or by 2030.utilizing unused brine from existing power plants.

Japan

The installed capacity of Japan places ninth in the world, the potential output of 23,470 MW is third in the world after the United States and Indonesia. In 2018, the Japanese government established as its goal a target of 22% to 24% renewable energy of the Japanese energy installed base by 2030. This outlook expects new geothermal plant installation in the range of 380 MW to 850 MW - 1,000 MW. State-owned resources agency JOGMEC will conduct test bores as part of the financially risky early phase of development on behalf of potential developers starting in the fiscal year from April 2020. Japan's Ministry of Economy, Trade and Industry (METI) determined 24 successful applicants for the full year 2019 Research Project for Developing Resources for Geothermal Power Generation managed by State-owned resources agency JOGMEC.

East Africa

In East Africa the geothermal potential along the Rift Valley is estimated at several thousand MW. The different countries along the Rift Valley are at different stages of development of their respective geothermal potential.

Kenya

In Kenya, there are already several geothermal power plants, including our 150 MW Olkaria III complex. The Kenyan government has identified the country's untapped geothermal potential as the most suitable indigenous source of electricity, and it aspires to reach 5 GW of geothermal power generation by 2030.electricity.

The Kenyan government is aiming to reach 10 GW of power generating capacity by 2037, underpursuant to the Least-Cost Power Development Plan 2017-37, withwhich had a target of 62% of such capacity generated from renewable energy sources (including large hydro and solar).

Other Countries

The governments of Djibouti, Eritrea, Ethiopia, Tanzania, Uganda, Rwanda and Zambia are exploring ways to develop geothermal resources in their countries, mostly through the help of international development organizations such as the World Bank.

Ethiopia electrification targets for 2025 require additional investment in generation capacities. Such growth in demand was expected to be principally met with the GERD. However, IPP’s are encouraged to participate directly in the renewable development in order to meet expected local growth. Moreover, the current government sees electricity export to neighboring countries as a strategic asset. The country recently completed an interconnection with Kenya and plans to further increase connections to Djibouti, Sudan, South Sudan, Rwanda, Burundi. These exports will improve foreign exchange reserves in Ethiopia . We hold rights for four geothermal concessions in Ethiopia, for which we have completed initial exploration studies.

In January 2014, energy ministers and delegates from 19 countries committed to the creation of the Africa Clean Energy Corridor Initiative (Corridor), at a meeting in Abu Dhabi convened by the International Renewable Energy Agency. The Corridor will boost the deployment of renewable energy and aims to help meet Africa’s rising energy demand with clean, indigenous, cost-effective power from sources including hydro, geothermal, biomass, wind and solar.

Energy Storage

Globally, there is a continued increase in the use of renewable energy. In the United States and Europe, this increase is placing strains on the electric grid as adding wind and solar PV power creates situations where a significant amount of power plant capacity must be available to ramp up and down to accommodate wind and mostly solar PV daily output cycles and variations due to atmospheric conditions. Furthermore, the output from wind and solar PV power plants can change significantly over short periods of time due to environmental conditions like cloud movement and fog burn off and cause instability on the electric grid. As a result, energy storage is becoming a key component of the future grid.

Energy storage systems utilize surplus, available electricity that enables utilities and grid operators to optimize the operation of the grid, run generators closer to full capacity for longer periods, and operate the grid more efficiently and effectively. As penetration of wind and solar resources increases, so does the need for services that energy storage systems can provide to “balance the grid”, such as local capacity, frequency regulation, ramping, reactive power, black start and movement of energy from times of excess supply to times of high demand. Common applications for energy storage systems include ancillary services, wind/solar smoothing, energy trading, peaker replacement, and transmission and distribution deferral.

We beleive that the impacts from the war in Ukraine and the instability in the Middle East continue bolstering demand for renewable energy as a way of reaching energy security. These and other factors, are currently outweighing headwinds that renewable energy is currently facing, in the form of a high interest rate environment and declining fossil fuel prices. The IEA estimates, in its 2023 World Energy Outlook 2023, that global additional Solar PV deployment between 2023 and 2030 will be 500GW. This and other renewable energy additions to the grid will place a strain on the electric grid as adding intermittent renewables such as wind and solar can create situations where a significant amount of capacity must be available to ramp up and down to accommodate these resource’s daily output cycles and variations due to weather conditions. Furthermore, the output from wind and solar PV power plants can change significantly over short periods of time due to environmental conditions like cloud movement and fog burn off and can cause instability on the electric grid. As a result, the IEA estimates that 100 GW of energy storage will be added by 2030. If a more aggressive Net Zero scenario occurs, the IEA estimates that 800 GW of solar and 180 GW of energy storage will be deployed by 2030.

In general, the energy storage market is impacted by battery prices that are linked to volatile lithium prices. In the U.S., the Energy Storage Market and our Energy Storage segment currently enjoy tail winds as a result of declining Lithium prices and the fact that the IRA provides large Investment Tax Credits to Energy Storage facilities. Also, various battery suppliers are preparing to manufacture batteries in the U.S., which is expected to result in additional tax benefits for our projects in the U.S. that will use local batteries. We also expect to see our Energy Storage segment benefit from the incentives available to other renewable energy technologies, which we believe will increase the need for energy storage.

According to Wood Mackenzie's (formerly GTM Research) Energy Storage Monitor for Q3 2020, approximately 3.3 GWh of newQ4 2023, the U.S. energy storage projectsmarket added 2,354 MW and 7,322 MWh across all segments in Q3, a new quarterly record. Most of these additions - 2,158 MW/6,848 MWh - were installed ingrid-scale storage facilities which our energy storage segment focuses on. This segment’s  installation capacity rose by 37% quarter over quarter, Wood Mackenzie is forecasting that  cumulative energy storage deployments will grow to 63GW by 2027, of which the United States in 2020 and this numberlions share is expected to grow more than seven times to approximately 24.4 GWh in 2025.

2020 saw  record growth in BESS deployment in the United States, despite the challenges presented by COVID-19, and significant growth in BESS deployment is expected to continue primarily for  grid-connected (also referred to as “in front of the meter”) applications, but also  for “behind the meter” applications, where end-users, such as small municipal utilities, electric cooperative, educational and health facilities, commercial and industrial customers, benefit from savings through demand charge reductions and create revenues through active market participation. Many power systems are also undergoing significant challenges and changes such as grid aging, grid congestion, retirement of aging generators, implementation of greenhouse gas emission reduction rules and increasing penetration of variable renewable energy resources.be grid-scale installations.

We own and operate several grid-connectedgrid-scale BESS facilities, where revenues comeare derived from selling energy, capacity and/or ancillary services in merchant markets like PJM Interconnect, ISO New England, the ERCOT and the CAISO. We are pursuing the development of additional grid-connected BESS projects in multiple regions, with expected revenues coming from providing energy, capacity and/or ancillary services on a merchant basis,or through long term bilateral contracts with load serving entities, e.g. investor owned utilities, publicly owned utilities and community choice aggregators. We are also pursuing the development and in construction of storage plus Solar PV facilities. We put in place financial instruments, where appropriate, to hedge some of the merchant risk.

C&I and Community BESS

The electricity industry continues to shift from a purely centralized topology where electricity flows only in one direction from centralized power plants to consumers, into a more distributed architecture, that includes distributed energy resources and consumers selling excess electricity generated on-site to the grid. Many C&I companies, campuses, and communities (e.g. electric cooperatives and small municipal utilities) are motivated to purchase renewable energy to meet sustainability goals and reduce costs. While the C&I industry could be a natural expansion of our customer base, our current  focus is on the much larger and rapidly growing utility-scale front-of-the-meter applications, as well as on utility-scale behind the meter applications. The opportunity is mainly with municipal utilities and electric cooperatives, such as our Hinesburg project with Vermont Electric Cooperative, where one of the revenue streams our BESS generates comes from selling peak load contribution reduction services to the local utility, which allows it to reduce the demand charges paid to the local RTO/ISO.

Solar PV

The solar PV market continues to grow, drivenand is benefited by constant decline in equipment prices and an increasingthe IRA as well as the general desire to replace conventional generation with renewable resources that are commonly supported by favorable regulatory policies.resources.  We are monitoring market drivers with the potential to develop solar PV power plants in locations where we can offer competitively priced power generation. Our current focus is in adding solar PV systems in some of our operating geothermal power plants to reduce internal consumption loads, as well as developing standalone solar PV and BESS projects in targeted regions where economics are favorable as well as developing combined solar PV and BESS projects. Infavorable. Since 2019, we successfully placed in service aone 20MW stand-alone Solar PV project and an additional 30MW of solar PV augmentation system at our Tungsten Mountainsystems adjacent to operating geothermal power plantplants in Churchill County,Nevada. In addition we recently acquired one 20MW stand alone project and 40MW of solar PV augmentation systems adjacent to operating geothermal power plants in Nevada. We are also currently constructing the 20 MW(AC) Wister solar PV project in Imperial County, California, for which a power purchase agreement with San Diego Gas & Electric is in effect and we are currently targeting commercial operation in 2021. Additional potentialdeveloping  similar projects are undergoing feasibility analysis, and some are in earlier phases of development.totaling 72MW.

Other Opportunities

Recovered Energy Generation

In addition to our geothermal power generation, activities, we are pursuing recovered energy-based power generationRecovered Energy Generation (REG) opportunities in the United States and worldwide. We believe recovered energy-based power generation will ultimately benefit from the efforts to reduce GHG emissions. WeTo date, we have built 23 power plants in North America which generate electricity utilizing “waste heat”from waste heat from gas turbine-driven compressor stations located along interstate natural gas pipelines, from midstream and gas processing facilities, and from other industrial applications.

SeveralThe passage of the IRA extended ITC for waste energy projects in the United States started before December 31, 2024. As such, twenty states and to some extent the federal government have recognizedrecognize the environmental benefits of recovered energy-based power generation. For example, 18 states currently allow electric utilities to include recovered energy-based power generation in calculating such utilities' compliance with their mandatory or voluntary RPS and/or Energy Efficient Resources Standards. In addition, California modified the Self Generation Incentive Program to allow recovered energy-based power generation to qualify for a per watt incentive. REG power.

AtThe EU aims to become the end of 2020,world’s first climate-neutral continent by 2050, and the United States Congress passed legislation including a provision that makes recovered energy generation property eligible forEuropean Commission set targets to reduce greenhouse gas emissions by 55% by 2030 when compared with 1990 IPCC levels. To meet this goal, it is imperative to decarbonize the energy investment tax credit. Recoveredsector and increase renewables in the energy property that begins construction in 2021 or 2022 is eligible for a 26 percent tax credit,portfolio. We believe this requires diversifying the energy mix and property that begins construction in 2023 is eligible for a 22 percent tax credit.localizing enhanced energy efficiency via integrated energy systems.

In Europe,We believe these policies, incentives, and specifically in Turkey, we see increasing interest in waste heat utilization to generate electricity.

In 2016, the Canadian government ratified its commitments in the Paris Agreement, which features a commitment to reduce emissions by 30% from 2005 levels by 2030. Pursuant to the Greenhouse Gas Pollution Pricing Act, Canadian provinces must have an emission reduction plan in place or be subject to a federal carbon tax in 2018. 

This comprehensive climate policy, once fully implemented,ambitious targets will encourage the development of renewable energy technologies, including waste heat recovery,REG, throughout Canada. We believe that Europethe U.S. and other markets worldwide may offer similar opportunities in recovered energy-based power generation.EU and across global markets.

In summary, the market for the recovery of waste heat converted into electricityREG sector exists either when alreadywhere available electricity is expensive or where the regulatory environment facilitates construction and marketing of power generated from recovered waste heat. However, suchthese projects tend to be smallergenerally produce less than 9 MW andso we expect any growth to be relatively slow and geographically scattered.dispersed.

Operations of our Electricity Segment

How We Own Our Power Plants

We customarily establish a separate subsidiary to own interests in each of our power plants. This ensures that the power plant, and the revenues generated by it, will be the only source for repaying indebtedness, if any, incurred to finance the construction or the acquisition (or to refinance the construction or acquisition) of the relevant power plant. If we do not own all of the interest in a power plant, we enter into a shareholders’ agreement or a partnership agreement that governs the management of the specific subsidiary and our relationship with our partner in connection with the specific power plant. Our ability to transfer or sell our interests in certain power plants may be restricted by certain purchase options or rights of first refusal in favor of our power plant partners or the power plant’s power purchasers and/or certain change of control and assignment restrictions in the underlying power plant and financing documents. AllWith certain limited exceptions most of our domestic geothermal and REG power plants are Qualifying Facilities under the PURPA and are eligible for regulatory exemptions from most provisions of the FPA and certain state laws and regulations.

How We Explore and Evaluate Geothermal Resources

Since 2006, we have expanded ourWe conduct exploration activities initially in the United States and in the last few years with an increasing focus internationally.globally. It generally takes two to threefive years from the time we start active exploration of a particular geothermal resource to the time we have an operating production well, assuming we concluderesource confirmation through drilling and testing. This timeframe assumes the resource is commercially viable and determinethere is an intention to pursue its development. Exploration activities generally involve the phases described below.

Initial Evaluation

We identify and evaluate potential geothermal resources by sampling and studying new areas combined with information available fromthrough field investigations using a robust geoscience program identified through both public and private data sources. We generally adhere to the following process, although our process can vary from site to site depending on geological circumstances and prior evaluation:

Our initial evaluation is usually conducted by our own staff,internal exploration team, although we might engage outside service providers for some tasks from time to time. The costs associated with an initial evaluation vary from site to site, based on various factors, including the acreage involved and the costs, if any, of obtaining information from private databases or other sources. On average, our expenses for an initial evaluation range from approximately $10,000 (mainly in the U.S.) to $50,000 (mainly in the international prospects) including travel, chemical analyses, and data acquisition.

If we conclude, based on the information considered in the initial evaluation, that the geothermal resource couldhas potential to support a commercially viable power plant, taking into accountconsidering various factors described below, we proceed to land rights acquisition.

Land Acquisition

We acquire land rights to any geothermal resources our initial evaluation indicates could potentially support a commercially viable power plant. For domestic power plants, we either lease or own the sites on which our power plants are located. For our foreign power plants, our lease rights for the power plant site are generally contained in the terms of a concession agreement or other contract with the host government or an agency thereof. In certain cases, we also enter into one or more geothermal resource leases (or subleases) or, a concession, or an option agreement or other agreement granting us the exclusive right to extract geothermal resources from specified areas of land, with the owners (or sublessors) of such land. In some cases, we first obtain the exploration license and once certain investment requirements are met, we can obtain the geothermal exploitation rights. This usually gives us the right to explore, develop, operate, and maintain the geothermal field, including, among other things, the right to drill wells (and if there are existing wells in the area, to alter them) and build pipelines for transmitting geothermal fluid. In certain cases, the holder of rights in the geothermal resource is a governmental entity and in other cases a private entity. Usually the duration of the lease (or sublease) and concession agreement corresponds to the duration of the relevant PPA, if any. In certain other cases, we own the land where the geothermal resource is located, in which case there are no restrictions on its utilization. The BLM and the Minerals Management Service regulate leasehold interests in federal land in the United States. These agencies have rules governing the geothermal leasing process as discussed below under “Description of Our Leases and Lands”.

For most of our current exploration sites in the United States, we acquire rights to use the geothermal resource through land leases with the BLM (which regulates leasehold interests in U.S. federal land), with various states, or through private leases. Under these leases, we typically pay an up-front non-refundable bonus payment, which is a component of the competitive lease process. In addition, we undertake to pay nominal, fixed annual rent payments for the period from the commencement of the lease through the completion of construction. Upon the commencement of power generation, we begin to pay to the lessors long-term royalty payments based on the use of the geothermal resources as defined in the respective agreements. These payments are contingent on the power plant’s revenues. A summary of our typical lease terms is provided below under “Description of our Leases and Lands”. The up-front bonus and royalty payments vary from site to site and are based on, among other things, current market conditions.

Surveys

We conduct geological, geochemical, and/or geophysical surveys on the sitesites we acquire. Following the acquisition of land rights for a potential geothermal resource, we conduct additional surface water analysis, soil surveys, and geologic mapping to determine proximity to possible heat flow anomalies and up-flow/permeable zones. We augment our digital database with the results of those analysis and create conceptual and digital geologic models to describe geothermal system controls. We then initiate a suite of geophysical surveys (e.g., gravity, magnetics, resistivity, magnetotellurics, reflection seismic, LiDAR, and spectral surveys) to assess surface and sub-surface structure (e.g., faults and fractures) and improve the geologic model of fluid-flow conduits and permeability controls. All pertinent geological and geophysical data are used to create three-dimensional geologic models to identify drill locations. These surveys are conducted incrementally considering relative impactvalue and cost, and the geologic model is updated continuously.from progressively.

We make a further determination of the commercial viability of the potential geothermal resource based on the results of this process, particularly the results of the geochemical surveys estimating temperature and the overall geologic model, including potential resource size. If the results from the geochemical surveys are poor (i.e., low derived resource temperatures or poor permeability) or the geologic model indicates small or deep resource,unlikely chance of finding a hydrothermal system, we re-evaluate the commercial viability of the geothermal resource and may not proceed to exploratory drilling. We generally only move forward with those sites that we believe have a moderate to high probability of successful development.

Exploratory Drilling & Testing

We drill one or more exploratory wells on the high priority, relatively low risk sites to confirm and/or define thea geothermal resource. If we proceed to exploratory drilling, we generally use outside contractors to create access roads to drilling sites and related activities. We have continued efforts to reduce exploration costs and therefore, after obtaining drilling permits, we generally drill temperature gradient holes and/or core holes that are lower cost than slim holes (used in the past) using either our own drilling equipment, whenever possible, or outside contractors. If the obtained data supports a conclusion that the geothermal resource can support a commercially viable power plant, it will be used as an observation well to monitor and define the geothermal resource. If the core hole indicates low temperatures or does not support the geologic model of anticipated permeability, it may be plugged, and the area reclaimed. In undrilled sites, we typically step up from shallow (500-1000 feet) to deeper (2000-4000 feet) wells as confidence improves. Following proven temperature in core wells, we typically move to slim and/or full- size wells to quantify permeability.

Each year we determine and approve an exploration budget for the entire exploration activity in such year. We prioritize budget allocation between the various geothermal sites based on commercial, business, and geologicalportfolio management factors. The costs we incur for exploratory drilling vary from site to site based on various factors, including the accessibility of the drill site, the geologyexploration strategy, and conceptual model of the site,resource. The type of exploratory drilling performed varies and can range from shallow temperature gradient wells to medium depth core drilling to full-size exploration wells. The exploration program typically focuses on the depth oflowest cost option to de-risk the resource.prospect such as temperature gradient wells to delineate a thermal anomaly and further de-risk targets with larger diameter wells. However, on average, exploration costs, prior to drilling of a full-size well, are approximately $1.0 million to $3.0$5.0 million for each site, not including land acquisition. We only reach such spending levels for sites that proved to be successfulacquisition, and depending on the success we see in the early stages of exploration. Outside the U.S. exploration costs can be higher.

Pending successful results, a full-size drilling campaign is recommended. Larger diameter wells are required to produce and inject at rates that can evaluate commercial viability of individual wells and the resource. The goal of a full-size exploration campaign is to confirm commercial production and injection zones and allow for a long-term test of the resource.

At various points during our exploration activities, we re-assess whether the geothermal resource involved will support a commercially viable power plant based on information available at that time. Among other things,For example, once we considerhave successful exploration wells, we then test the following factors:resource for up to several months to study long-term viability with temporary surface equipment. Well testing data informs the resource numerical model and supports decisions such as power plant capacity and specifications.

If we conclude that thea geothermal resource involved will support a commercially viable power plant, we proceedmove to the phase of constructing a power plant at the site. Additional wells may be drilled during the plant construction phase to meet the design point criteria.

How We Construct Our Power Plants.

The principal phases involved in constructing one of our geothermal power plants are as follows:

In recent years, it has taken usapproximately two to three years from the time we drill a production well until thea power plant becomes operational.

Drilling Production and Injection Wells

We consider completing the drilling of the first production well to be the beginning of our construction phase for a power plant. However, this is not always sufficient for a full release of a project for construction. The number of production wells varies from plant to plant depending on, among other things, the geothermal resource, the projected capacity of the power plant, the power generation equipment to be used and the way geothermal fluids will be re-injected through injection wells to maintain the geothermal resource and surface conditions. We generally drill the wells ourselves although in some cases we use outside contractors.

The cost for each production and injection well varies depending on, among other things, the depth and size of the well and market conditions affecting the supply and demand for drilling equipment, labor and operators. In the last five years, our typical cost for each production and injection well is approximately $3.3 million with a range of $1.0 million to $8.5 million.

Design

We usually use our own employees to design the well field and the power plant, including equipment that we manufacture and that will be needed for the power plant. In some cases, depending on complexity and location, we use third parties to help us with the design. The designs vary based on various factors, including local laws, required permits, the geothermal resource, the expected capacity of the power plant and the way geothermal fluids will be re-injected to maintain the geothermal resource and surface conditions.

Permits

We use our own employees and from time to time, depending on complexity and location, outside consultants to obtain any required permits and licenses for our power plants that are not already covered by the terms of our site leases. The permits and licenses required vary from site to site and are described below under “Environmental Permits”.

Manufacturing

Generally, we manufacture most of the power generating unit equipment we use at our power plants. Multiple sources of supply are generally available for all other equipment we do not manufacture.

Construction

We use our own employees to manage the construction work. For site grading, civil, mechanical, and electrical work we use subcontractors.

During 2020,2023, in the Electricity segment, we focused on the commencement of operations at North Valley, Dixie Valley upgrade and Steamboat Hills Repower2-3 Repowering in Nevada, as well as Heber-1 Repowering and Mammoth G2 upgrade in California. In addition, we commenced operations at Brady Solar and Steamboat 2-3 Solar in Nevada. We also beganfocused on construction of CD4, Dixie Meadows and Tungsten Mountain enhancementthe Beowawe repower as well as with enhancement work in some other of our operating power plants worldwide. We also commenced construction of the Guadeloupe enhancement, Beowawe and the North Valley Solar PV projects to supply power to the auxiliary loads of our power plants.

When deciding whether to continue holding lease rights and/or to pursue exploration activity, we diligently prioritize our prospective investments, taking into account resource and probability assessments in order to make informed decisions about whether a particular project will support commercial operation. As a result, during fiscal year 2020 we decided to discontinue our holding in one site in Nevada.

After conducting exploratory studies at those sites, we concluded

We may conclude that the respectivea prospective geothermal resources wouldresource will not support commercial operations. CostsIn such case, costs associated with exploration activities at these sites werewill be expensed accordingly (see “Write-offunder the Write-off of Unsuccessful Exploration Activities” under Item 7 — “Management’s Discussion and AnalysisActivities line item in the consolidated statements of Financial Condition and Results of Operations”).

We added tooperations in our exploration inventory two prospective sites in 2020.financial statements.

How We Operate and Maintain Our Power Plants

Our operations and maintenance practices are designed to minimize operating costs without compromising safety or environmental standards while maximizing plant flexibility and maintaining high reliability. Our operations and maintenance practices for geothermal power plants seek to preserve the sustainable characteristics of the geothermal resources we use to produce electricity and maintain steady-state operations within the constraints of those resources reflected in our relevant geologic and hydrologic studies. Our approach to plant management emphasizes the operational autonomy of our individual plant or complex managers and staff to identify and resolve operations and maintenance issues at their respective power plants; however, each power plant or complex draws upon our available collective resources and experience, and that of our subsidiaries. We have organized our operations such that inventories, maintenance, backup, and other operational functions are pooled within each power plant complex and provided by one operation and maintenance provider. This approach enables us to realize cost savings and enhances our ability to meet our power plant availability goals.

Safety is a key area of concern to us. We believe that the most efficient and profitable performance of our power plants can only be accomplished within a safe working environment for our employees. Our compensation and incentive program includeincludes safety as a factor in evaluating our employees, and we have a well-developed reporting system to track safety and environmental incidents, if any, at our power plants.

How We Sell Electricity

In the United States, theour purchasers of power from our power plants are typically investor-owned electric utility companies or electric cooperatives including public owned utilities, and more recently, we signed a PPA with CCAs. Outside of the United States, our purchasers are either state-owned utilities or privately-owned-entities and weprivately-owned-entities. We typically operate our facilities under rights granted to us by a governmental agency pursuant to a concession agreement. In each case, we enter into long-term contracts (typically, PPAs) for the sale of electricity or the conversion of geothermal resources into electricity. Although previously our power plants’ revenues under a PPA generally consisted of two payments, energy payments and capacity payments, our recent PPAs provide for energy payments only. Energy payments are normally based on a power plant’s electrical output actually delivered to the purchaser measured in kWh, with payment rates either fixed or indexed to the power purchaser’s “avoided” power costs (i.e., the costs the power purchaser would have incurred itself had it produced the power it is purchasing from third parties) or rates that escalate at a predetermined percentage each year. Capacity payments are normally calculated based on the generating capacity or the declared capacity of a power plant available for delivery to the purchaser, regardless of the amount of electrical output actually produced or delivered. In addition, we have sixone domestic power plants located in California, Nevada and Hawaii that areis eligible for capacity bonus payments under the respective PPAs upon reaching certain levels of generation, or subject to a capacity payment reduction if certain levels of generation are not reached.

How We Finance Our Power Plants

Historically weWe have funded our power plants with different sources of liquidity such as a non-recourse or limited recourse debt, lease financing, tax monetization transactions, internally generated cash, which includes funds from operation,operations, as well as proceeds from loans under corporate credit facilities, green convertibles corporate bonds public debt and equity offerings, senior unsecured corporate bonds, project financing and the sale of equity interests and other securities. Such leveragedOur debt financing permits the development of power plants with a limited amount of equity contributions, but also increases the risk that a reduction in revenuescashflow could adversely affect a particular power plant’s ability to meet its debt obligations. Leveraged financing also means that distributions of dividends or other distributions by our power plant subsidiaries to us are contingent on compliance with financial and other covenants contained in the applicable financingfinance documents.

Non-recourse debt or lease financing refers to debt or lease arrangements involving debt repayments or lease payments that are made solely from the power plant’s revenues (rather thanIn 2023, we raised several corporate and project finance loans, we raised equity, commercial papers and expanded and renewed our revenues or revenues of any other power plant) and generally are secured by the power plant’s physical assets, major contracts and agreements, cash accounts and, in many cases, our ownership interest in our affiliate that owns that power plant. These forms of financing are referred to as “project financing”.

In the event of a foreclosure after a default, our affiliate that owns the power plant would only retain an interest in the power plant assets, if any, remaining after all debts and obligations have been paid in full. In addition, incurrence of debt by a power plant may reduce the liquidity of our equity interest in that power plant because the equity interest is typically subject both to a pledge in favor of the power plant’s lenders securing the power plant’s debt and to transfer and change of control restrictions set forth in the relevant financing agreements.

Limited recourse debt refers to project financing as described above with the addition of our agreement to undertake limited financial support for our affiliate that owns the power plant in the form of certain limited obligations and contingent liabilities. These obligations and contingent liabilities may take the form of guarantees of certain specified obligations, indemnities, capital infusions and agreements to pay certain debt service deficiencies. Creditors of a project financing of a particular power plant may have direct recourse to us to the extent of these limited recourse obligations.

In 2020, we completed an equity offering, issued senior unsecured corporate bonds and raised corporaterevolving credit facilities to support our geothermal and storage growth.

We In addition, we have used financing structures to monetize PTCs and tax depreciation such as our tax equity partnership transaction involving McGinness Hills phase 3, Tungsten,for the North Valley power plant and an operating lease arrangement relating to our Puna complex power plantswe sold ITCs and PTCs that was recently retired in 2019.can be transferred for the first time.

We have also used a sale

How We Mitigate International Political Risk.

We generally, but not always, purchase insurance policies to cover our portion of our book equity exposure to certain political risks involved in operating in developing countries, as described below under “Insurance”. However, insurance may not cover all political risks or coverage amounts may not be sufficient.

Description of Our Leases and Lands

We have domestic leases on approximately 338,123377,780 acres of federal, state, and private land in California, Hawaii, Nevada, New Mexico, Utah, Idaho and Oregon. The approximate breakdown between federal, state and private leases and owned land is as follows:

Each of the leases within each of the categories abovelease has standard terms and requirements, as summarized below. Internationally, our land position includes approximately 60,90359,154 acres.

BLM Geothermal Leases

Certain of our domestic project subsidiaries have entered into geothermal resourcesresource leases with the U.S. government, pursuant to which they have obtained the right to conduct their geothermal development and operations on federally-owned land. These leases are made pursuant to the Geothermal Steam Act and theAct. The lessor under such leases is the U.S. government, acting through the BLM.

BLM geothermal leases grant the geothermal lessee the right and privilege to drill for, extract, produce, remove, utilize, sell, and dispose of geothermal resources on certain lands, together with the right to build and maintain necessary improvements thereon. The actual ownership of the geothermal resources and other minerals beneath the land is retained in the federal mineral estate. The geothermal lease does not grant to the geothermal lessee the exclusive right to develop the lands, although the geothermal lessee does hold the exclusive right to develop geothermal resources within the lands. Since BLM leases do not grant to the geothermal lessee the exclusive right to use the surface of the land, BLM may grant rights to others for activities that do not unreasonably interfere with the geothermal lessee’s uses of the same land, including use, off-road vehicles, and/or wind or solar energy developments.

Typical BLM leases issued to geothermal lessees before August 8, 2005 have a primary term of ten years and will renew so long as geothermal resources are being produced or utilized in commercial quantities but cannot exceed a period of forty years after the end of the primary term. If at the end of the forty-year period geothermal steam is still being produced or utilized in commercial quantities and the lands are not needed for other purposes, the geothermal lessee will have a preferential right to renew the lease for a second forty-year term, under terms and conditions as the BLM deems appropriate.

BLM leases issued after August 8, 2005 have a primary term of ten years. If the geothermal lessee does not reach commercial production within the primary term, the BLM may grant two five-year extensions. If the lessee is drilling a well for the purposes of commercial production, the lease may be extended for five years and thereafter, as long as steam is being produced and used in commercial quantities, the lease may be extended for up to thirty-five years. If, at the end of the extended thirty-five-year term, geothermal steam is still being produced or utilized in commercial quantities and the lands are not needed for other purposes, the geothermal lessee will have a preferential right to renew the lease under terms and conditions as the BLM deems appropriate.

For BLM leases issued before August 8, 2005, the geothermal lessee is required to pay an annual rental fee (on a per acre basis), which escalates according to a schedule described therein, until production of geothermal steam in commercial quantities has commenced. After such production has commenced, the geothermal lessee is required to pay royalties (on a monthly basis) on the amount or value of (i) steam, (ii) by-products derived from production, and (iii) commercially de-mineralized water sold or utilized by the project (or reasonably susceptible to such sale or use).

For BLM leases issued after August 8, 2005, (i) a geothermal lessee who has obtained a lease through a non-competitive bidding process will pay an annual rental fee equal to $1.00 per acre for the first ten years and $5.00 per acre each year thereafter; and (ii) a geothermal lessee who has obtained a lease through a competitive process will pay a rental equal to $2.00 per acre for the first year, $3.00 per acre for the second through tenth year and $5.00 per acre each year thereafter. Rental fees paid before the first day of the year for which the rental is owed will be credited towards royalty payments for that year. For BLM leases issued, effective, or pending on August 5, 2005 or thereafter, royalty rates are fixed between 1.0-2.5% of the gross proceeds from the sale of electricity during the first ten years of production under the lease. The royalty rate set by the BLM for geothermal resources produced for the commercial generation of electricity but not sold in an arm’s length transaction is 1.75% for the first ten years of production and 3.5% thereafter. The royalty rate for geothermal resources sold by the geothermal lessee or an affiliate in an arm’s length transaction is 10.0% of the gross proceeds from the arm’s length sale.

In the event of a default under any BLM lease, or the failure to comply with any of the provisions of the Geothermal Steam Act or regulations issued under the Geothermal Steam Act or the terms or stipulations of the lease, the BLM may, 30 days after notice of default is provided to the relevant project, (i) suspend operations until the requested action is taken, or (ii) cancel the lease.

Private Geothermal Leases

Certain of our domestic project subsidiaries have entered into geothermal resources leases with private parties, pursuant to which they have obtained the right to conduct their geothermal development and operations on privately owned land. In many cases, the lessor under these private geothermal leases owns only the geothermal resource and not the surface of the land.

Typically, the leases grant our project subsidiaries the exclusive right and privilege to drill for, produce, extract, take and remove from the leased land water, brine, steam, steam power, minerals (other than oil), salts, chemicals, gases (other than gases associated with oil), and other products produced or extracted by such project subsidiary. The project subsidiaries are also granted certain non-exclusive rights pertaining to the construction and operation of plants, structures, and facilities on the leased land. Additionally, the project subsidiaries are granted the right to dispose geothermal fluid as well as the right to re-inject into the leased land water, brine, steam, and gases in a well or wells for the purpose of maintaining or restoring pressure in the productive zones beneath the leased land or other land in the vicinity. Because the private geothermal leases do not grant to the lessee the exclusive right to use the surface of the land, the lessor reserves the right to conduct other activities on the leased land in a manner that does not unreasonably interfere with the geothermal lessee’s uses of the same land, which other activities may include agricultural use (farming or grazing), recreational use and hunting, and/or wind or solar energy developments.

The leases provide for a term consisting of a primary term in the range of five to 30 years, depending on the lease, and so long thereafter as lease products are being produced or the project subsidiary is engaged in drilling, extraction, processing, or reworking operations on the leased land.

As consideration under most of our project subsidiaries’ private leases, the project subsidiary must pay to the lessor a certain specified percentage of the value “at the well” (which is not attributable to the enhanced value of electricity generation), gross proceeds, or gross revenues of all lease products produced, saved, and sold on a monthly basis. In certain of our project subsidiaries’ private leases, royalties payable to the lessor by the project subsidiary are based on the gross revenues received by the lessee from the sale or use of the geothermal substances, either from electricity production or the value of the geothermal resource “at the well”.

In addition, pursuant to the leases, the project subsidiary typically agrees to commence drilling, extraction or processing operations on the leased land within the primary term, and to conduct such operations with reasonable diligence until lease products have been found, extracted and processed in quantities deemed “paying quantities” by the project subsidiary, or until further operations would, in such project subsidiary’s judgment, be unprofitable or impracticable. The project subsidiary has the right at any time within the primary term to terminate the lease and surrender the relevant land. If the project subsidiary has not commenced any such operations on said land (or on the unit area, if the lease has been unitized), or terminated the lease within the primary term, the project subsidiary must pay to the lessor, in order to maintain its lease position, annually in advance, a rental fee until operations are commenced on the leased land.

If the project subsidiary fails to pay any installment of royalty or rental when due and if such default continues for a period of fifteen days specified in the lease, for example, after its receipt of written notice thereof from the lessor, then at the option of the lessor, the lease will terminate as to the portion or portions thereof as to which the project subsidiary is in default. If the project subsidiary defaults in the performance of any obligations under the lease, other than a payment default, and if, for a period of 90 days after written notice is given to it by the lessor of such default, the project subsidiary fails to commence and thereafter diligently and in good faith take remedial measures to remedy such default, the lessor may terminate the lease.

We do not regard any property that we lease as material unless and until we begin construction of a power plant on the property, that is, until we drill a production well on the property.

Description of Our Power Plants

Domestic Operating Power Plants

The following descriptions summarize certain industry metrics for our domestic operating power plants:

Power plants in the United States