May 3 (Bloomberg) -- Geodynamics Ltd., an explorer seeking to produce power from hot underground rocks, is starting a search for new partners to develop its project in central Australia after Origin Energy Ltd. decided to pull out.
“We’re interested in bringing in other partners,” Geoff Ward, chief executive officer of Brisbane-based Geodynamics, said by phone yesterday, declining to elaborate. “It’s something that’s commencing and one of my key focus areas.”
Geodynamics, trying to become the first company in Australia to start a commercial geothermal plant, expects to start with a 5-megawatt to 10-megawatt project in the Cooper Basin. Origin Energy told Geodynamics in March that it would withdraw from the Innamincka joint venture after earlier saying the development hadn’t met expectations.
“A partner would be very significant, that validation from a technology or finance partner with credibility in the energy space,” Paul Jensz, a Melbourne-based analyst at PhillipCapital Ltd., said today by phone.
The shares rose 12 percent today to 14 cents in Sydney trading to the highest in almost six months after earlier surging as much as 60 percent to 20 cents. Australia’s benchmark S&P/ASX 200 Index was little changed.
The company rose 56 percent yesterday after announcing that its 1-megawatt Habanero pilot plant started producing power and will carry out tests expected to run until August. The data is expected to help Geodynamics develop a plan for the small-scale project and sign a supply agreement, Ward said.
Possible customers are shale gas explorers Santos Ltd. or Beach Energy Ltd., which attracted Chevron Corp. as a partner in February, he said. The effort to get a customer would occur over the next 12 months if the trial is successful, he said.
While Geodynamics moves forward with its plans in the Cooper Basin outback region, it’s considering expansion outside its home country, according to Ward, whose company has lost more than 90 percent of its market value since late 2007. In Australia, geothermal must compete with low-cost power sources and contend with falling electricity demand, he said.
Papua New Guinea and the Pacific islands are areas Geodynamics is evaluating, he said. The company in November agreed to acquire as much as 70 percent of the Savo Island geothermal power project in the Solomon Islands.
“Australia will remain a difficult market for the electricity sector as a whole, but particularly for a new technology,” he said. “You have strongly embedded incumbents that have a very low cost base and we have declining demand.”
Geothermal power developers in Australia are using technology that circulates water through cracks as deep as 5 kilometers (3.1 miles) underground, turning it to steam to run a turbine. Unlike wind and solar, geothermal can provide a constant level of power, the Australian Geothermal Energy Association says.
Still, geothermal power is unlikely to play a significant role in Australia’s energy mix this decade as companies in the industry such as Geodynamics struggle to overcome technical challenges, Bloomberg New Energy Finance said last year.
Origin, Australia’s largest electricity retailer, will pull out of the Innamincka venture at the end of June, Geodynamics said March 28. That followed Origin’s announcement in August that it didn’t plan to invest more in the project as the “activities have not met expectations for a timely and commercial development of the geothermal resources.”
Geodynamics, which had A$17.6 million ($18.1 million) in cash at the end of March and received a A$22.2 million refund under the government’s research and development tax incentive program, can take the geothermal trial into the next phase without the need for additional funding, Ward said.
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