Geothermal handbook: PlanninG and Financing power Generation t e c h n I c a L r e p o r t 2 / 2

early Stage | test drilling and initial Production drilling
. In the early stage, the greatest obstacle 
to closing a deal with commercial financiers is the exploration risk, which is considered to be high 
and difficult to price. Commercial debt will typically not be available at this stage. Major geothermal 
development companies may consider the early development costs acceptable and may choose to 
finance test drilling and initial production drilling from their balance sheets. Similarly, major publicly-
listed companies with established access to capital markets may be able to issue public equity to 
finance early stage development, but this is rarely done in practice. Private equity investors may be 
willing to contribute their capital, but will require a very high risk premium in return. Public sector 
contribution, through direct funding, loan guarantees, or other incentive mechanisms, has been used 
in many countries with geothermal developments. Donor, development agency and IFI sources may 
also be available.