NOTE 11 – CONSTRUCTION NOTES PAYABLE

U.S. Department of Energy
On August 31, 2011, USG Oregon LLC (“USG Oregon”), a subsidiary of the Company, completed the first funding drawdown associated with the U.S. Department of Energy (“DOE”) $96.8 million loan guarantee (the “Loan Guarantee”) to construct its planned power plant at Neal Hot Springs in Eastern Oregon (the “Project”). The U.S. Treasury’s Federal Financing Bank, as lender for the Project, issues payments direct to vendors. Future advances covered by the Loan Guarantee will carry interest at a rate of 0.375% per annum over the U.S. Treasury bill rate of comparable maturities as of the date of each advance. All advances will be made under the Future Advance Promissory Note (“the Note”) dated February 23, 2011. The maximum principal amount of the Note is approximately $93.8 million. No advances may be made under the Note after July 31, 2013. Upon the occurrence and continuation of an event of default under the transaction documents, all amounts payable under the Note may be accelerated. In connection with the Loan Guarantee, the DOE has been granted a security interest in all of the equity interests of USG Oregon, as well as in the assets of USG Oregon, including a mortgage on real property interests relating to the Project site. The estimated current portion of the loan balance at March 31, 2013 was $866,342.

Loan advances and effective annual interest rates are details as follows:

Based upon the terms of applicable agreements and expected conditions that may impact some of those terms, the estimated annual principal payments were calculated as follows:

SAIC Constructors LLC
Effective August 27, 2010, the Company’s wholly owned subsidiary (USG Nevada LLC) signed a construction loan agreement with SAIC Constructors LLC (“SAIC”). The new 9.0 net megawatt power plant was considered complete and operational for financial reporting purposes on September 1, 2012. Interest accrued on the outstanding balance at 9.5% per annum. On February 15, 2013, USG Nevada LLC signed a settlement agreement with SAIC. The settlement agreement reduced the construction cost and accrued interest liability incurred under the construction loan agreement from approximately $31.1 million to $29,525,000. The agreement defines the remaining liability as consisting of three components. The first component is a $1.0 million non-interest bearing note to be repaid in three monthly payments of $333,333 beginning February 28, 2013. The second component is a $2 million obligation that is to be repaid in quarterly installments of $119,382, including interest at 7.0% per annum to begin July 31, 2013. The third component is a balloon payment of $26,525,000 due upon obtaining long-term permanent financing. At March 31, 2013, the loan balances totaled $28,858,334 ($27,815,000 long-term, $710,000 calculated short term portion and $333,334 short-term note). Since the long-term financing agreement for the major component of the obligation has not been finalized, a 5 year maturities schedule was not presented. The long-term replacement loan is expected be repaid over up to a 25 year term, plus interest incurred at approximate annual interest rate between 7.0% and 7.5%.