Request for Bank Guarantee to Build Geothermal Plant in Dominica
Dominica’s finance minister requested parliamentary approval to secure a bank guarantee from the National Bank of Dominica to construct a geothermal energy plant.
The government intends to get a guarantee of EC$13.5 million (One ECC dollar=US$0.37 cents) to ensure the execution of the commitments outlined in the project finance agreement inked with the Geothermal Power Company of Dominica, owned by Ormat Technologies Inc of Nevada, for the development of the geothermal power plant.
This bank guarantee acts as a form of financial security for the project’s stakeholders. If, for any reason, the government is unable to fulfill its financial obligations for the construction of the geothermal energy plant, the bank, as per the terms of the guarantee, may step in to cover the specified amount or fulfill the commitment outlined in the guarantee. Essentially, it provides confidence to contractors, investors, and other involved parties that the necessary funds will be available, reducing the perceived risk associated with the project.
The deal was finalized during the United Nations Climate Change Conference (COP 28) held in Dubai recently. Its objectives include stabilizing electricity costs, decreasing reliance on fossil fuels, and responsibly utilizing Dominica’s abundant geothermal sources.
Ormat is set to manage and upkeep the power plant for a duration of 25 years. Subsequently, the ownership of the power plant and any assets obtained within the agreement’s duration will transition to the Government of Dominica. Anticipated for commissioning in 2025, the power plant has future prospects for additional capacity expansion.
The Dominica Geothermal Development Company Ltd. anticipates finishing the geothermal plant within 18 months, benefiting around 23,000 households with renewable energy.
Speaking to reporters, Henderson highlighted the pending decision on the plant’s location, emphasizing infrastructure resilience. Estimated costs hover between US$70 to US$80 million.
He emphasized the plant’s substantial investment, already secured through World Bank funds.
The geothermal plant’s funding is also sourced from Dominica’s Citizenship by Investment (CBI) program, recognized as one of the world’s oldest and most trusted.
The CBI program has been instrumental in reconstructing Dominica post-Typhoon Erika and Hurricane Maria. It facilitated the creation of climate-resilient homes and essential infrastructure. Partnering with the government, MMC Development Ltd., a dedicated private company, has been pivotal in this effort for several years.