Vulcan Power Company

Company Overview

Vulcan Power Company ("Vulcan") is a privately owned developer of clean, renewable power projects headquartered in Bend, Oregon. Founded in 1991, the primary focus of Vulcan is the development and operation of clean, renewable, "24x7" baseload geothermal power plants. Vulcan projects comprise over 130,000 acres, which is one of the largest geothermal property portfolios in the United States. The company believes it also owns the largest new renewable power contract portfolio in the nation.

By November 2007, Vulcan projects had executed firm contracts to supply 340 megawatts (MW) of environmentally benign, "green" power to major electric utilities in California and Nevada. An additional 300 MW of additional power contracts were in process, for a total of 640 MW of new renewable power for the American West. These new projects will increase geothermal power output by nearly 25% in the United States.

Vulcan: God of Fire and Volcanoes

In Roman mythology, Vulcan was the god of fire and volcano's.

Vulcan was said to forge weapons and armor for the gods under Mount Etna, a volcano in Italy. According to myth, Mt Etna's steam and lava came from Vulcan's hammering out thunder-bolts at his volcanic forge for Jupiter and creating armor for the other Roman gods.

The word "volcano" originated from Vulcano, an island in the Aeolian Islands near Italy that erupted for thousands of years. Some have claimed that Vulcano is the site of Vulcan's forge. Special thanks to Tom Pfeiffer for his spectacular images of Mt Etna eruptions, which appear in this website.

A 2007 third-party report estimated that Vulcan properties can supply steam to generate from 770 MW to 1,700 MW of electricity from subsurface natural steam reservoirs in the Earth. That is sufficient power to supply electricity for up to 2 million Americans. It is also up to three times the amount of powerful, natural steam needed to fuel the massive Vulcan power project development portfolio.

An estimated $27 million has been spent on geothermal exploration and development work on Vulcan project properties. By March 2007, Vulcan had invested $20 million in additional development work on its project areas including international bank development financing.

In April 2007, Vulcan closed a $35 million corporate financing with a Merrill Lynch subsidiary, the cornerstone investment of its proposed $150 million institutional private placement.

Vulcan has utility Power Purchase Agreements in hand, one of the most experienced science and drilling management teams in the industry, advanced geothermal resource sites, its own drill rigs, and its "can do" attitude. Vulcan intends to meet its contract goals through an aggressive, phased development plan of resource exploration, drilling and power plant construction over the next five years. Its drilling team is now drilling in Nevada. At Vulcan, its "Full Steam Ahead!"

Company Highlights

Vulcan Power Company has worked diligently to position itself as a major new supplier of geothermal power, the "Premium Power Source." Vulcan has created:

One of the largest geothermal property portfolios in the nation, over 130,000 acres.
The largest new renewable power contract portfolio in nation, over 600 MW.
Revenue potential of $7 billion from fixed price utility contracts, plus contract drilling.
An experienced development team, over 700 MW prior geothermal projects.
Vertically integrated operations with a drill rig fleet joint venture.
Ownership of GD Manager advanced exploration and development software.

Strong Market for New Geothermal Power

In the American West, electric utilities are scrambling to meet a substantial share of their future power load demand with renewable energy. Why? Because new Renewable Portfolio Standard (RPS) laws require utilities to serve their customers with large amounts of new "green" electricity generated from renewable sources. Another reason lies in the ever-higher prices for natural gas, the primary fossil fuel used by power plants in our region. Gas fuel is now over $8.00 per mcf delivered where Vulcan conducts business.

With increasing public concern about the environment and RPS laws that have created a new market for renewable energy, new geothermal projects are cost competitive and new renewables are required by law. Geothermal power prices are economic below the California Energy Commission Market Price Referent (MPR) of over $0.09 per kilowatt-hour, the estimated price of power from a new gas-fired power plant coming online in 2009. In these market conditions, baseload "24x7" geothermal power is a preferred, clean, reliable bargain for utilities and their millions of customers across the West.

The Vulcan Power Team is proud to have led the passage of RPS laws in Nevada and California for geothermal and other renewable power industries. Wisely crafted through bipartisan cooperation by our elected representatives, these new laws have created a new "renewables platform" of market opportunity that will phase-in an estimated 10,000 MW of new renewable power in the six states of CA, NV, AZ, NM, OR and WA.

Vulcan projects have gained a substantial share of new RPS long-term, fixed-price power contracts. This is a direct result of a tightly focused and well executed Vulcan five year plan to create markets and gain market share, after acquiring high quality, advanced stage strategically located steam fuel properties for development.

Renewable Transmission Upgrades

In addition, the Vulcan Power Team is proactively working with electric utilities, regulatory agencies, and state and federal leaders to advance the major task of rebuilding the Western transmission grid upon a sustainable, renewable power base.

To handle projected loads, the western transmission grid requires major infrastructure upgrades. Those programs are underway in California, where Vulcan geothermal projects have been identified by regulatory agencies and utilities as desirable "low hanging fruit" for adding new renewable power to the grid. For example, Southern California Edison proposes building an upgrade of its North of Lugo transmission line at a cost of over $250 million, largely to facilitate new geothermal power.

In support of such projects, the California Public Utility Commission issued a ruling that allows electric utilities a rate of return on transmission projects even if renewable developers do not produce power. That ruling was considered a major step forward to meet the California State Renewable Transmission Plan. For the electric utility industry, it eliminates risk from transmission upgrade projects designed to service new renewable energy projects.

Vulcan Geothermal Properties

In the 1990s, while major U.S. geothermal companies focused on offshore properties for growth, the Vulcan team planned and implemented a cost-effective, "counter cyclical sweep" of the best available, major advanced stage geothermal properties in the western United States. Vulcan has successfully assembled a portfolio of geothermal leases and exclusive lease applications that exceed 130,000 acres.

Vulcan owns one of the largest geothermal property positions in North America. A 2007 comprehensive report on the Company geothermal resource properties by Dr. Jim Combs, Ph.D. (MIT), estimates that Vulcan projects have a power capacity potential of 770 MW to 1,709 MW.

Vulcan obtained its premier resources portfolio by evaluating more than 100 geothermal resource areas, selecting 10 advanced stage properties, then successfully acquiring 8 of those prime sites. These large properties are strategically located near existing power transmission lines that serve California, the second largest and greenest power market in the nation, and other markets in the rapidly growing American West.

The Vulcan Power Team believes its property strategy, including bearing the initial risks of acquisition, holding costs, and exploration, provides the company with a significant competitive advantage. This is especially true considering successful company companion efforts to create renewable energy markets for itself and its competitors, through active pursuit of RPS laws and other progressive energy policies in the United States.

Vulcan geothermal properties have benefited from an estimated $27 million in expenditures by prior leaseholders for important geological, geophysical, drilling exploration, and development work. Replication of these efforts today would cost an estimated $70 million. Vulcan has performed an additional $20 million in follow up work since the acquisitions, bringing the total value of exploration and development on Company properties to $90 million in current dollars. The recent $35 million placement is primarily targeted to project development next stage steam exploration drilling on advanced stage properties.

Vulcan Power Purchase Agreements

Vulcan signed its first Power Purchase Agreement (PPA) in March, 2005 with Southern California Edison, to supply up to 120 MW of geothermal power to the utility. By November 2007, Vulcan projects had executed long term, fixed price PPAs with Pacific Gas & Electric and Nevada Power Company for a total of 300 MW of geothermal power from its properties in Nevada and California. An additional 300 MW of geothermal power supply contracts are in progress with utilities.

The Vulcan Power Team plans to startup new geothermal power plants in Nevada about 1.5 to 2.5 years after completion of the $150 million private placement.

Vulcan is also developing biomass power projects in connection with the Federal Healthy Forest Initiative. Supported by federal funds, the Initiative seeks thinning of small trees to reduce forest fire risks and to improve forest health. Wood chips generated from thinning will provide fuel for biomass power plants. A Vulcan subsidiary has signed a contract for 40 MW of biomass power in Oregon. The following is a summary of Vulcan power contracts for its power projects:

Contract Status	Resource Type	Location	Contact MW	PPA (Years)	Net %
Executed Executed Executed Executed	Geothermal Geothermal Geothermal Biomass	Nevada California Nevada Oregon	120 MW 120 MW 60 MW 40 MW 340 MW	20 20 20 10	100 100 100 100
In Process	Geothermal	CA/NV	300 MW	20	100
Total			640 MW

The Vulcan Power Team

The Vulcan Power Team has a high level of experience in all aspects of geothermal resource exploration, power development and production. Founder and Chief Executive Officer Steve Munson has worked in all stages of geothermal energy projects for more than 20 years. He has assembled a team of professionals proficient in all facets of geothermal power development and finance, serving the company as directors, employees and advisors.

Taken together, Vulcan Power Team members have previously developed and/or operated over 700 MW of geothermal power in the United States and have financed independent power projects worth more than $5 billion. The Vulcan Power Team has particular expertise in all of the scientific, engineering, financial, and legal disciplines needed to successfully develop geothermal power. Their collective technical talents include geology, geophysics, power engineering, power plant construction, transmission, and steam well drilling.

Rocket Drillco Joint Venture

Rocket DrillCo Rig 2

Vulcan formed a joint venture with an experienced Oklahoma drilling contractor, which provides Vulcan with a 50% ownership interest in up to 12 large drilling rigs. With very high demand for quality drilling equipment and crews, the Rocket DrillCo joint venture provides Vulcan with a significant competitive advantage to move forward with its geothermal development projects. Vulcan gains drilling expertise and benefits from day-rate cost caps. The Rocket DrillCo joint venture ensures Vulcan rig availability critical to development of its steamfields and potential revenue from contract drilling. The Company also has reduced its well costs through bulk purchase strategic alliances with well equipment suppliers.

Vulcan Advanced Technology

Vulcan has proprietary ownership of advanced geothermal software programs in GD Manager, which accumulate, manage and analyze steamfield exploration, development and production data. The systems are considered some of the best in the industry. In addition, the company recently upgraded its geothermal exploration software by integrating state-of-the-art GPS equipment to enhance field exploration by efficiently logging in altered rock and high silica scinter deposits formed by hot water and steam altering native rock on Vulcan properties.

In the hands of our experienced team, this advanced software provides Vulcan with cost effective high-quality steamfield resource exploration and development capability. The company manages this core competency under a rigorous phased exploration methodology, designed to minimize the costs and risks of steam exploration and development.

Renewable Energy Incentives Programs

The explosive growth of renewable energy for power generation will be a defining feature of infrastructure growth in the U.S. economy for the foreseeable future. As noted above, RPS laws in several states have spawned the requirement for over 10,000 MW of new renewable power projects in the American West.

To offset risks of natural gas price fluctuations and supply reductions, and to meet concerns about climate change, new "green" power laws and other incentives are being considered where Vulcan is developing its geothermal and biomass power projects and markets. For example, progressive lawmakers in California have banned new coal-fired power from entering the state unless it is proven to be non-polluting, an unlikely event. California is also considering increasing its RPS law requirement from 20% by 2011 to 33% by 2020.