Given the tantalising statement from Torey in the quarterly...

Given the tantalising statement from Torey in the quarterly regarding the Fiale project being transformational, I decided to do some digging. Until now, I have mainly focused my interest on the Copahue project, so I thought it was about time that I increased my knowledge of the Fiale project.

It seems as though the pre-feasibility study of the project was completed by Reykjavic Energy Invest (REI) in 2010. REI have an interesting powerpoint presentation of the project at:

http://www.rei.is/media/PDF/Djibouti.pdf

Meanwhile, it would seem that Earth Heat Resources were talking with the Department of Electricity in Djibouti (EDD) and signed a Joint Venture Agreement:

http://www.earthheat.com.au/pdf/asx/22-10-10_-_Fiale_Announcement.pdf

There seems to have been some confusion at the time regarding ownership of the project, with REI claiming that EHR had not "stolen" the project (at this point in my research I was more than a little bit concerned):

http://thinkgeoenergy.com/archives/6447

It would seem that EDD were frustrated by REI and did not trust them to follow through on the project (due to financial woes suffered by REI following the global financial crisis). It turns out that their concerns were justified. REI is now bankrupt (ahh, the relief I felt when I read that). See the following links (and also verified in the link to the World Bank document):

http://www.hiiraan.com/news2/2011/jan/djibouti_desperate_for_energy_investors.aspx

http://grapevine.is/Features/ReadArticle/REYKJAVIK-ENERGY-IN-DEEP-WATER

So, with REI bankrupt, the way remains open for EHR to seal the deal on the project. The following World Bank document makes for some interesting reading. It relates to Project ID P127143 - Geothermal Exploratory Drilling Project in Djibouti. It looks as though there is a great deal of urgency for this project to get the green light soon because the alternative would be for EDD to build a diesel power plant. The Worldbank views this as a suboptimal outcome on financial (where they cite a Parsons Brinckerhoff 2009 study) and sustainability grounds. The concept review decision by the Worldbank was "to proceed with the preparation of the operation." Notably, the Worldbank intends to de-risk the "build-own-operate" project by paying for the exploratory drilling themselves (approx. US$30m). The drilling is planned to be broken into three separate contracts. The 15th of March, 2010 is a key date for us shareholders to take note of. This is the expected date of approval by the Worldbank board.

http://www-wds.worldbank.org/external/default/WDSContentServer/WDSP/IB/2011/10/27/000001843_20111101143551/Rendered/PDF/DJ0Geothermal0PID0Oct02702011.pdf

Given that EHR have positioned themselves alongside EDD in this Joint Venture Agreement and REI are out of the picture, it seems to me that EHR stands to gain from potential contracts with the Worldbank for the exploratory drilling (i.e., low risk cashflow). This should then follow with the build-own-operate project in three phases of 50MW each.

I've gotta say, I'm looking forward to Torey's update on the transformational outcomes we can expect from Fiale. This will be a very nice icing on the EHR cake.

As always, DYOR as I may have missed something here.