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KUTh Energy Ltd [ASX:KEN] - KUTh Signs MOU with Vanuatu Electricity Provider



KUTh Energy Limited ABN 33 125 694 920
Level 57, MLC Centre, 19-29 Martin Place Sydney NSW 2000
P +61 2 9238 6865 F +61 2 9238 7633 E W www.kuthenergy.com
Power Down Under
ASX RELEASE
16th October 2009
KUTh SIGNS MOU WITH VANUATU ELECTRICITY PROVIDER
Highlights
Signed MOU between KUTh and UNELCO establishes framework for cooperation in
pricing and base load supply
MOU activates exploration program in Vanuatu - target start November 2009
Potential to accelerate KUTh as energy generator in the Pacific by 2012/13
Stakeholder alignment between Government/KUTh/UNELCO and International
Agencies for Renewable Energy project in Vanuatu provides solid foundation
KUTh is pleased to announce that it has signed a Memorandum of Understanding (MOU)
with Vanuatu"s power provider UNELCO, to cooperate on developing Vanuatu"s geothermal
resources.

The MOU initially focuses on the base load electricity demand in Port Vila and
incorporates the framework to determine a pricing agreement acceptable to both parties.
Key Aspects of the UNELCO / KUTh Agreement
UNELCO and KUTh recognise the need to work closely together to facilitate the smooth
introduction of geothermal power to the energy grid in Vanuatu with the first main focus
area being the capital Port Vila.

The MOU focuses on the following key elements of
cooperation between the two companies.
1.

Initial geothermal energy supply feasibility will be based on 4 megawatts base load
to the Port Vila region
2.

The two companies will work on a pricing agreement that takes into consideration
the ‘avoided costs" that are realised by UNELCO which among other things include
the displacement of diesel power generation, and deferral of planned capital
expenditure resulting from future KUTh geothermal energy supply.
3.

Transmission connection from the KUTh geothermal locations to the Port Vila grid
Commenting on the agreement Managing Director David McDonald said that "the signing of
the agreement is a major milestone for the Vanuatu project.

We have been in discussions
2
with UNELCO since April with the intention of ensuring that we develop a spirit of
cooperation between the two companies.

UNELCO will be a very important stakeholder in
any energy development program in Vanuatu.

Port Vila is an important market for initial
base load electricity demand."
David McDonald further stated "KUTh sees the initial demand in Port Vila as providing the
foundation energy supply to underwrite the project.

Moving forward, new industry growth
along the north west coastal corridor of Efate Island, where the new millennium road
project has been constructed, will provide significant upside for KUTh to expand power
demand.

Energy prices in Vanuatu have been seriously impacted by spiking oil prices over
the last 3 years but despite this a growth of around 6% pa has been achieved.

Successful
implementation of the KUTh geothermal project will provide a more stable electricity tariff
environment and a platform for growth in industry, tourism and residential energy
demand".
Key Implications of the MOU
Accelerates the detailed exploration program, planned for Nov/Dec 2009.
Allows early engagement of all stakeholders who contribute to and benefit from the
successful implementation of the project (Government, Energy Regulator, UNELCO,
KUTh and potential equity and lenders to the project).
Positive confirmation of geophysical surveys will allow drill targeting and
commencement in 3rd quarter 2010 and potential for first power generation in
2012/13.
Significant long term growth via new industry development based on a stable pricing
environment fuelled by geothermal power - an indigenous resource.
Background - why geothermal energy development makes sense.
Almost all of Vanuatu"s electricity is powered by diesel generation
Vanuatu has one of the highest priced energy markets anywhere in the world; the
current published tariff rate being 44 vatu per kilowatt hour ($A0.46 per kilowatt
hour).
UNELCO Electrique du Vanuatu Ltd (UNELCO) have a government concession to
supply electricity to the capital city of Port Vila.

Replacing diesel generation with
clean geothermal energy has strong support in the country.
The Vanuatu government has established a high level committee to address climate
change initiatives and this committee is actively supporting KUTh in the
development of geothermal energy alternatives.
3
New road upgrades around the north west coastal corridor open up industry and
other development opportunities.

Affordable energy can be a trigger for growth.
Vanuatu is a signatory to the Kyoto Protocol and has drafted the regulations for the
Clean Development Mechanism (CDM).

KUTh is targeted as the first renewable
energy project to be registered in Vanuatu under these regulations which would
allow KUTh to earn Carbon Emission Reduction Certificates (CER) tradeable in
international markets
KUTh Energy (Vanuatu) Limited holds two prime geothermal prospecting licences on
the main island of Efate - the location of most commercial activity in the country.
The KUTh strategic model being to identify and develop the resource and underwrite
the start up demand through base load supply to Port Vila.

In so doing, demonstrate
capability and set the platform for larger energy users to establish operations and
fully maximise the potential of the prospective geothermal resource.
KUTh has reviewed previous feasibility plans associated with the development of
geothermal energy in Vanuatu and compared these with preliminary modelling
carried out by the company .

Full commercial feasibilities will be carried out once
the geothermal resource is quantified.
Next Steps
The signing of the MOU with UNELCO is an important milestone for KUTh, and completes an
alignment of Government, UNELCO, international development banks and donor agencies in
the success of the geothermal exploration program.
David McDonald said "The Company will now push forward with plans to conduct magneto
telluric (MT) surveys across its most prospective tenement areas and have already designed
the MT locations for this survey.

We have allocated resources to the project and our MT
survey team is ready to start.

Initial ground truthing works will be carried out in early
November and subject to weather conditions and access to existing data, KUTh would
expect to commence surveys in November/December and have results in the first quarter of
2010".
ENDS
For more information contact:
David McDonald
Managing Director
KUTh Energy Ltd
Ph: +61 2 9238 6865




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