Raser Technologies and Merrill Lynch Agree to a 155 MW Geothermal Development Financing Program

Merrill Lynch’s commitment is subject to market conditions, due diligence, receipt of all necessary internal approvals by both Raser and Merrill Lynch, acquisition of the 5% equity interest in the plant by a third party other than Merrill Lynch unless Merrill purchases such interest (at its discretion and subject to certain conditions), and the satisfaction of certain other conditions. The plant, using PureCycle® geothermal technology from UTC Power, a United Technologies Corp. (NYSE: UTX) company, is designed to produce 10.5 MW of electrical power with zero emissions.

Highlights:

• Initial commitment to provide non-recourse project financing for Raser’s first 10.5 MW geothermal power plant.
• The agreement provides Raser with 95% of the fees and distributions of the partnership, subject to certain priority distributions
• Raser expects to receive approximately $4 million per year in cash fees and distributions, along with other tax benefits, during the first three years of operations from the 10.5 MW power plant after maintenance, operating expenses and debt service, and approximately $2.5 million per year in cash fees and distributions during the first ten years of operations. After the debt is retired in year 15 of the project, Raser expects to receive net distributions of approximately $3.5 million per year for the remaining life of the project.
• Raser expects subsequent power plants developed under this agreement to have similar economics.
• The plant is expected to be placed in service no later than the third quarter of 2008.

The financing commitment for the first 10.5 MW project is up to $44 million, in the form of 15-year, fully amortizing fixed rate notes, to fund approximately $33 million of total construction costs, in addition to a letter of credit, reserve accounts, accrued interest, transaction fees and other costs.

The power plant will be formed as a special purpose entity. The expected useful life of Raser’s geothermal power plants is approximately 35 years. The entity will be responsible for the debt service, all maintenance and operations expenses and various fees and distributions to Raser. Raser will receive 95% of the fees and distributions, which together are estimated to total approximately $4 million per year during the first three years of operations. The finance structure is designed to distribute cash flow to Raser associated with project development fees based upon both the successful completion of the project and attainment of on-going operational targets and to maximize certain economic benefits to Raser. It is the intention of the parties that the power generation facilities will qualify to receive tax credits and other benefits under the provisions of the Internal Revenue Code.

The agreement provides for the funding of up to 100 MW of power plant construction and a right of first refusal to build up to an additional 55 MW of power plants. The partnership agreement also provides Merrill Lynch with the ability to receive warrants to purchase up to 3.7 million shares of Raser’s common stock for funding the initial 100 MW of capacity. The total amount of warrants that will be issued will be dependent upon meeting certain funding goals. The exercise price of the warrants will range from $14.98 to $19.71. Additional warrants may be issued to Merrill Lynch upon funding any of the additional 55 MW of power plant capacity. The exercise price of the additional warrants will be issued based upon the price of the common stock at that time.

Graham Goldsmith, managing director and head of Corporate Principal Investments at Merrill Lynch, said: "We believe that renewable energy represents a significant market opportunity for investors due to structural shifts in demand for green power. Raser has a business model that is environmentally beneficial. We look forward to being a part of an energy solution that will benefit future generations.”

Brent M. Cook, Raser’s CEO, commented, “This is the first of what we expect to be many agreements to accelerate the development of clean, renewable energy production utilizing our geothermal technology and resources. This unique agreement provides the required up-front capital to complete our initial projects and keep us on pace to fulfill our goal to initiate the development of 100 MW per year for the first three years of our geothermal power production effort, and 150 MW each year thereafter. We applaud Merrill Lynch’s vision and commitment to renewable energy and believe their financial leadership distinguishes them from the many financial players seeking to enter this market.”