Breaking new ground at Miravalles III

In July last year, construction began on Costa Rica`s first BOT project. The 27 MW geothermal plant is being touted as one of the largest private power investments in central America.

With its lush tropical rain forests, snow-capped volcanoes and thriving eco-tourist trade, Costa Rica is well known as a leader in promoting environmentally friendly energy projects among Latin American nations.

So when the government passed a Build Operate Transfer (“BOT”) law in 1995, giving foreign corporations a chance to participate in the Costa Rican energy market, Oxbow Power Corporation, along with Marubeni Corporation and Jose Altmann & Compania Ltda, decided to pursue the first geothermal project put out to bid.

Some interesting challenges surfaced, however, during the course of the development of the project. The most challenging part was to structure and close the financing just as the international financial crisis was at its peak. The other major challenge is technical: building a state-of-the-art geothermal plant on the slope of a volcano where wind gusts reach up to 140 km per hour.

The three investors formed a Costa Rican limited liability company called Geoenergia de Guanacaste, Limitada (“Geoenergy”), which is developing the 27 (net) MW Miravalles III single flash geothermal project located in Guanacaste Province in northwest Costa Rica. Electricity from the project will be sold over a 15-year period to Instituto Costarricense de Electricidad (“ICE”), an autonomous state-owned utility that controls 92 percent of the generation in the country. The plant will be transferred back to ICE at the end of the 15-year period at no cost.

As part of the project, Geoenergy will also provide to ICE a substantial amount of materials and prepaid services (“Supply List”) in order to enable them to develop and transport the required steam and construct the necessary transmission line to interconnect the power plant with ICE`s grid system.

Geothermal origins

For Costa Rica, which has an active volcanic range and a thriving economy that caters to tourists visiting its tropical rain forests, geothermal energy makes tremendous sense.

The volcanoes located in the northwest section of the country near the Nicaraguan border produce an abundant supply of hot water that can be converted into energy. Better still, geothermal plants have little impact on Costa Rica`s lush tropical vegetation because they give off little or no byproducts.

Geothermal power plants obtain their fuel from the Earth`s interior. If certain geologic conditions are right, the Earth`s internal heat collects in large underground pools of steam or hot water. This steam is tapped by drilling into the Earth`s crust and piped up to power plants where it is converted into energy.

At the Miravalles Geothermal Field, for example, production wells reach a depth of 1500 m. The superheated water, or brine, is brought to the surface and transported via surface piping to a steam separator where the geothermal fluid is flushed at a lower pressure, splitting into a component of steam and water. The single-flash technology used in the Miravalles III plant takes the geothermal brine, and converts it into high pressure steam which drives the plant`s turbines.

The brine is then injected back into the ground in a separate part of the reservoir, also at depths of 1500 to 1800 m. This injected brine not only ensures that the underground reservoir will replenish, but it also maintains the pressure needed to continue producing steam.

Financing and contracts

In February 1996, ICE issued a Request for Proposals to develop the Miravalles III Geothermal Power Plant at a site in the Miravalles Geothermal Field.

The ICE Board awarded the project to Geoenergy in March 1997. ICE has an option to enter into another PPA with Geoenergy for a second 27 MW facility.

The Oxbow, Marubeni and Altmann Consortium and two other bidders submitted proposals for the project in September 1996.

On September 22, 1998, the consortium announced that Miravalles III Geothermal Power Project had finalized $70 million in debt and equity financing. As a result, the project became one of the first geothermal BOTs in Latin America to obtain financing and start construction.

Miravalles III is being financed with $20.5 million in equity that will be contributed by the sponsors and $49.5 million in debt contributed by Inter-American Development Bank (“IDB”) under its “A-Loan/B-Loan” programme. The IDB is providing a $16.5 million “A-Loan” and a consortium of commercial banks is funding the $33 million “B-Loan.”

The Fuji Bank Ltd., Dresdner Kleinworth Benson and the Dexia Group are the three banks that comprise the “B-Loan” syndicate.

Although many international financial markets appear to be stabilizing, Geoenergy was able to obtain financing for the Miravalles III project just as the Latin American currency crisis was peaking. It was the strength of the contract, and excellent record of Oxbow Power and Marubeni, which convinced lenders to fund the project.

“Given the uncertainty in many international markets today, the successful financing of the Miravalles III project is extremely gratifying and a sign that our consortium has put together a very sound project,” said Oxbow President Bernard H. Cherry. “It is a strong vote of confidence for the Costa Rican government and the attractive investment climate that they have created.”

One of the central challenges in obtaining the financing for the project was making international lenders comfortable with the concept of the Supply List. Traditionally, financial institutions seek some type of security, often in the form of the physical plant, when funding capital projects.

As long as the project`s heat rate meets the guarantees set forth in the PPA, ICE will supply steam to the project at no net cost. ICE has the contractual obligation associated with supplying the steam and must continue to pay revenue to the project even if adequate steam is unavailable.

ICE has drilled 30 wells in the Miravalles field with 17 utilized as production wells (average production of 9.5 MW per well) and eight utilized for re-injection.

At present, ICE has enough steam to power the two separate 55 MW single flash units it operates in the Miravalles field, and sufficient excess steam to supply 50 percent of the resource requirements for Miravalles III. All required re-injection wells are in place. ICE intends to utilize the equipment and materials from the Supply List to finish producing the required amount of steam for the plant. All drilling and steam field development utilizing the materials and services from the Supply List will be at ICE`s risk.

On April 10 1998, Geoenergy entered into an EPC contract with Mitsubishi Heavy Industries Ltd., to build the plant under fixed-price turnkey contract. Mitsubishi has constructed 38 single flash geothermal plants around the world with an installed capacity of 682 MW.

Oxbow Power Services Inc., (“OPSI”) will operate and maintain the plant under an Operations and Maintenance Agree- ment. OPSI and its affiliates operate two geothermal projects in Nevada, a third in the Philippines, a gas powered facility in upstate New York and another in Nevada. A fourth 47 MW geothermal plant in the Philippines is scheduled to come on line in June 1999. The company has a lifetime availability factor at all of its plants in excess of 97 per cent.

OPSI is a subsidiary of Oxbow Power Corp. of West Palm Beach, Florida. The company was founded in 1983 and is involved in developing, acquiring, owning and operating independent power and cogeneration plants, domestically and internationally. Total installed generation is around 400 MW, with an additonal 975 MW at an advanced state of development.

The operations and maintenance workforce for the Miravalles III facility will consist of 38 full-time employees, the majority of whom will be recruited from Costa Rica. The plant and maintenance manager`s positions will initially be staffed by expatriots.

Location is a challenge

Situated 720 m above sea level, Miravalles III encompasses a 1.75 ha portion in the northwest sector of the steamfield. The mountain range is frequently subjected to hurricane force winds, which pose a challenge for production schedules, worker safety and structural reinforcement.

On February 8, 1999, Costa Rican President Miguel Angel Rodriguez laid the cornerstone of the new plant at an onsite ceremony. President Rodriguez welcomed Oxbow Power Corp. and its two partners, adding that projects like Miravalles III were essential for the economy to continue growing at seven percent.

The Miravalles III Project is a single flash geothermal power plant capable of delivering 27 MW (net) at the steam rate guaranteed to ICE. The geothermal turbine used by the project will be a single flow turbine with a top exhaust, which directs the steam into a direct contact condenser located adjacent to the turbine generator. The capacity of the turbine will be 29.55 MW (gross) and 27 MW (net).

The side-by-side configuration of the turbine generator and condenser eliminates a considerable amount of civil and structural work associated with the alternate vertical facilities layout. This configuration is becoming the standard for this size of facility because of the case of erection and maintenance.

The generator for this facility will be a totally enclosed water air cooled (“Tewac”) direct coupled synchronous unit operating at 3600 r/min. The unit is rated at 32.83 MVA at a 0.90 power factor and will be manufactured by Mitsubishi Electric Corporation of Japan. The generating voltage will be 13.8 kV, which will be stepped up to the transmission voltage of 230 kV. The nominal capacity of the generator will be 29.55 MW.

The steam from the turbine will exhaust into a direct spray condenser, which will be designed to operate at a pressure of 0.09 bar or approximately 2.7 in. Hg [abs] and will use cooled condensate from the cooling tower. The condenser will be fabricated from carbon steel and internally clad with 316L stainless steel. All piping for the plant, including circulating water system, will be corrosion resistant.

The condensed steam will be transferred to the 4-cell mechanical draft counterflow film fill cooling tower where approximately 80 per cent of the condensate will be evaporated to cool the condensate so it can be returned to the condenser. The remaining condensate will be returned to the geothermal field for injection back into the reservoir.

The small amount of non-condensible gases (“NCGs”) in the steam must be removed from the condenser to obtain the low back-pressure and resultant high efficiency. These NCGs will be removed using a hybrid vacuum system consisting of steam jet ejectors and liquid ring vacuum pump. The NCGs are primarily carbon dioxide with a small amount of nitrogen, methane, and hydrogen sulphide. The hybrid gas removal system will remove the NCGs from the condenser, repressurize the gases, and exhaust them to the atmosphere at the cooling tower stacks.

Geoenergy is responsible for the disposal and monitoring of non-resource waste. Only small amounts of wastes are anticipated, those primarily being storm water, sewage and used lubricating fluids and consumables. The EPC contract provides for the construction of storm runoff facilities and secondary sewage treatment facilities.

The design of the plant will take into consideration the site conditions for optimum arrangement of facilities and to assure minimal forced outages to maximize power output. This will be accomplished by properly selecting the equipment and materials to provide the quality necessary to minimize maintenance, and by maintaining adequate supply of spares on-site, including a spare rotor.

Construction started in July 1998. ICE needs to have transmission lines in place and be interconnected to its grid by December 8, 1999. The plant should be fully operational by February 2000. The substantial completion date is March 7 with a guaranteed date to be reached by May 19, 2000.

Pleased with the results of its activity in the Costa Rican energy market, Oxbow Power Corporation is pursuing other projects in the region.

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Figure 1. Miravalles III: touted as one of the largest private power investments in central America

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