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Polaris Geothermal Inc.

TICKER:  TSX:GEO
DESCRIPTION:  Polaris Geothermal Inc. is a renewable energy company currently developing the San Jacinto Tizate (SJT) geothermal resource in Nicaragua. Polaris is focused on the development of geothermal energy, which provides a clean, renewable, indigenous source of electrical power generation. Geothermal energy is more than just a clean source of power; it is base load, so it provides constant power generation: 24/7, 365 days a year. Online with 10 MW at the SJT plant, Polaris is on schedule to realize its Q1 2011 target of 72 MW of output. Newly tested production wells SJ9-1 and SJ6-2 have produced excellent test results with steam and pressure characteristics sufficient to produce an estimated 16.1 MW and 22.8 MW respectively. Polaris was registered with the United Nations Framework Convention on Climate Change (UNFCCC) in 2006 and has already sold and delivered 100,000 tonnes of certified emission reductions (CERs), also known as carbon credits.
WEBSITE:  http://www.polarisgeothermal.com/eng/index.php
Q2 2008 MD&A Q1 2008 MD&A

The information below is based on the most recent information we have received from analysts and the companies participating in The Energy Report. We encourage you to visit the company's web site for updates.

The Uranium Report "If you are a long-term subscriber to The Stealth Investor you may remember Polaris Geothermal, a renewable energy company operating in Nicaragua. I added it to the portfolio in July 2007 at C$1.00, and then recommended selling it at the end of November that year when the shares hit C$1.20. It turned out to be a fortuitous sale, as the shares fell in the market decline and are currently at C$0.60. It's time to buy it back.

Polaris is developing the San Jacinto Tizate (SJT) geothermal resource in Nicaragua and is looking at new geothermal acquisitions in Chile, Central America and the Caribbean. The company is now producing 10 MW of power at the SJT plant. Production tests on new wells (SJ9-1 and SJ6-2) show steam capacities sufficient to provide 16 MW and 22.8 MW, respectively. The project now has over 75% of the required total steam capacity for its full 72 MW development at SJT.

The company has assembled a world-class team of experts in geothermal power, including the firm of Sinclair Knight Merz Ltd. (SKM), one of the world's leading geothermal science and engineering companies. At San Jacinto, SKM has calculated a 90% certainty of producing in excess of 200 MW, and at their second site, Casitas, SKM has calculated 133 MW. Here is a company with a C$50-million market cap that has the probability of developing over 300 MW of power.

Only about 50% of Nicaragua has access to electricity and the government has said that rural electrification is a high priority, so demand will grow. At present over half of the power distributed is coming from oil and gas, all of which is imported. Naturally, the country has been extremely supportive of geothermal energy, particularly in the context of its own balance of payments, which would be very favorably impacted by generating power from internal sources.

Polaris has already sold and delivered 100,000 tons of carbon credits and is one of the largest carbon credit producers in the world. . .Thus, Polaris has two revenue streams, one from electricity and one from carbon credits."
- Stealth Investor (05/28/09)

The Uranium Report "Mature, cost competitive technology that provides long-term renewable power leads us to be bullish on this sector. We have a positive investment bias on the geothermal power industry given favorable characteristics such as long life assets, long-term predictable cash flow, and low levelized costs.

Although we believe the industry is relatively unknown by the investment community as compared to other renewable and fossil fuel energy sources, we expect this gap to close over time. We believe favorable regulatory support for renewable energy is growing and highlight recent events in subsequent sections. The proposed changes on the U.S. and global regulatory landscape would be favorable for geothermal developers such as US Geothermal (GTH:TSX), Nevada Geothermal (NGP:TSX.V), Western GeoPower (WGP:TSX.V), Sierra Geothermal (SRA:TSX.V), Polaris Geothermal (GEO:TSX) and Magma Energy Corp. (private company)."
-GREG REID, WELLINGTON WEST CAPITAL MARKETS (05/12/09)

The Uranium Report

"Management has 10-yr history in Nicaragua, incl. 3 yrs of power gen. 10MW plant on-stream and generating since mid-05. 90% probability of at least 340MW of steam resource in the company's development pipeline.

Shortage of supply/old fossil infrastructure = bullish on geothermal. Nicaragua in power supply deficit for several years and relies on imported oil. Policies support geothermal. Major infrastructure upgrades needed.

Long project lives and government-backed PPAs drive favorable economics. 25-year government-backed power purchase agreement but geothermal projects often can run for 40-50 years. Pricing $90/MWh, drives 30%-35% IRR.

Reiterate Spec. Buy & C$1.10 target. See C$4.70 share price by 2015. Attractive shares at 0.2x FDFF NAV; target implies 0.5x un-risked and 1x risked NAV. Pre-financed, 100% chance of success NAV ~C$3.00/share."
-GREG REID, WELLINGTON WEST CAPITAL MARKETS (05/11/09)

The Uranium Report "We believe that current stock price levels provide attractive entry points for investors with higher risk tolerances and a longer time horizon. Most of the companies in our geothermal coverage universe trade at a fraction of their estimated NAV. We believe that proposed changes on the U.S. regulatory landscape would be favorable for Canadian geothermal developers with exposure to the U.S. market. . .Companies such as Polaris Geothermal (GEO:TSX), while not having U.S. resources, should benefit from similar overall themes (i.e. regulatory, energy security, green, etc.)."
-GREG REID, WELLINGTON WEST CAPITAL MARKETS (04/28/09)

The Uranium Report "There’s been favorable government policies towards private power operators in Nicaragua and specifically for geothermal and we think they have a great resource there, which, when you put it all together, we think the economics of the projects look good. . .One of the interesting things about Polaris is the mixture of water and steam that comes out of the ground there is so hot that after it goes through the plant and gets converted to electricity and then goes back to get reinjected into the ground, I believe it’s still getting reinjected into the ground at 170° C. So that is hot enough to be able to run it through a binary plant again to create more power. We think the 340 megawatts could increase by up to 20% at a very low incremental capital cost. . .They are also involved in bidding in Chile as well, so for people that have concern about political risk in Nicaragua, they are attempting to diversify and are involved in bidding in Chile. They haven’t named the company, but I believe they’re either in partnership or in discussions with a much larger renewable energy company to help them finance and fund that opportunity there."
-GREG REID, WELLINGTON WEST CAPITAL MARKETS (04/16/09)

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