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Alternative Earth Resources Inc. Message Board

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  • rjjones11 rjjones11 Jun 11, 2012 3:54 AM Flag

    Twinkle, twinkle, little CGC

    Part 2 of 2
    [Ormat is so big, and CGC is so little, that the only other mention is in a footnote. - RJ]
    Note 6 on page 164.
    NOTE 6 —VARIABLE INTEREST ENTITIES
    Effective January 1, 2010, the Company adopted accounting and disclosure guidance for variable interest entities (“VIEs”).
    Page 154
    AGREEMENT FOR JOINT DEVELOPMENT, CONSTRUCTION, OWNERSHIP AND OPERATION OF ONE OR MORE GEOTHERMAL POWER PLANTS IN OREGON GRADUALLY.
    [ Does this wording imply a Phase 2 down the road for even more MW? - RJ]
    -
    On October 29, 2010, the Company entered into an agreement to jointly develop, construct, finance, own and operate one or more geothermal power plants in the Crump Geothermal Area located in Lake County, Oregon (the “Crump Project”).
    Under the terms of the agreement, the other joint owner, Nevada Geothermal Power Inc., contributed all of its rights, titles and interest in the Crump Project, consisting mainly of geothermal rights, to the newly formed entity.
    The Company paid $0.1 million and will pay an additional $2.4 million over a
    three-year period to the other joint owner for its ownership interest in the Crump Project and related rights.
    [NGP is being paid $2.4 Million cash in tnstallments. -RJ]
    The Company has a 50% voting interest and will have equal representation with the other joint owner on the governing board.
    During the development stage of the Crump Project, the Company has the obligation to fund
    the first $15.0 million on behalf of the Crump Project.
    All other funding requirements will be required jointly by each owner.
    If the other joint owner is unable to obtain the necessary capital to fund its share of the Crump Project,
    the Company will provide financing directly to the joint owner in an aggregate amount of up to $15.0 million.
    In addition, the Company will be responsible for leading the development of the Crump Project and once operational, will be considered the operator of the facility.
    At any time during the development or construction of the Crump Project,
    the Company may terminate its involvement in the Crump Project,
    whereby the Company would transfer its 50% ownership interest to the other joint owner,
    at no cost to the other joint owner.
    If this occurs, the Company will have no obligation to make any additional payments to the other joint owner.
    The Company concluded that the entity is a VIE primarily because the entity does not have sufficient equity at risk.
    Through the Company’s equity ownership and other variable interest, the Company determined that it is the primary beneficiary of the Crump Project and therefore will consolidate the assets, liabilities and operations.
    In making the determination to consolidate, the Company considered the activities that most significantly impact the project’s economic performance, which party has the power to direct those activities, and whether the obligation to absorb the losses or the right to receive the benefits could potentially be significant to the Crump Project.
    The Company determined that the activities that most significantly impact the economic performance of the Crump Project currently include the development of the project. As the Company is the managing member and is primarily responsible during the development phase and further, since the Company’s obligations and benefits would be significant to the Crump Project, the Company determined that it is the primary beneficiary.
    The Company has incurred $8.0 million in development costs of the Crump Project, as of December 31,2011, which are presented in the Company’s consolidated balance sheet in “construction-in-process.”
    No amounts related to this transaction have been included in the statement of operations and comprehensive income (loss) during the years ended December 31, 2011 and 2010.
    In addition, the assets related to the Crump Project can only be used to settle the obligations related to the Crump Project.
    END QUOTE
    -
    RJ

 
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