STARTING out as a business focused on direct-use geothermal projects, Green Rock Energy has diversified its portfolio to avoid the pressures of a diminishing capital-market appetite for such projects.
Green Rock managing director Richard Beresford said market conditions had led the company, which listed on the ASX in 2003, to explore hydrocarbon projects and base load geothermal generation projects.
Two years ago, Green Rock was awarded a federal government grant under the Geothermal Drilling Program, which applied funding to emerging geothermal companies.
“At the time the market was much more buoyant, our share prices were higher, there was general optimism about the geothermal sector so we all ticked a box that said we would be able to get matching funding within two years of applying for the fund,” Mr Beresford said.
He said the market had fallen away during the past two years as share prices for geothermal companies dropped and drilling results were mixed, which led to a lack of investor attraction.
“Both the industry and the government recognised it (the program) didn’t really work properly. Four of the five companies that got the round two grant, including us, ended up not meeting the timing commitment, so we all agreed separately with government termination and handed back the money,” Mr Beresford said.
During the past year, Green Rock has been challenged by metropolitan direct-use projects due to the risk associated with drilling regulations and the economic challenges in supplying a base load power source to intermittent demand for heating and cooling.
“You really want, for the economics to be good, a base load off-take. You don’t want it to be coming and going; you want to be supplying 24/7. For heating and cooling in commercial buildings you don’t get that.”
Green Rock is now focused on a joint venture with Pacific Hydro to develop a base load project in the Mid West to connect geothermal generated electricity directly to the grid. Seven permits are held by Green Rock, which plans to commence exploration drilling toward the end of 2012 and hopes to eventually developing a 50-megawatt capacity power station with a secured off-take agreement.
“It is close to infrastructure, close to huge markets that are growing for electricity in the Mid West, and in an area where there has been lots of petroleum exploration in the last four years so it is well trodden for drilling,” Mr Beresford said, adding that this stability made attracting investors and joint venture partners easier.
That project, along with the company’s interest in a similar development in South Australia and direct geothermal projects in Hungary, is driving the business following the recent announcement that New Standard Energy had abandoned efforts to uncover shale gas deposits in the Canning Basin in the Kimberley, a project in which Green Rock had a 15 per cent stake.
Mr Beresford said this was a disappointing development, but that circumstances like this highlighted the importance of diversification for the business.