10-K/A

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K/A Amendment No. 1

x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES ACT OF 1934
For the fiscal year ended March 31, 2009

Or

oTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES ACT OF 1934
For the transition period from ______ to ______

Commission File Number 333-117287

U.S. GEOTHERMAL INC. (Exact name of Registrant as specified in its charter)

Delaware	84-1472231
(State or Other Jurisdiction of	(I.R.S. Employer
Incorporation or Organization)	Identification No.)

1505 Tyrell Lane
Boise, Idaho	83706
(Address of Principal Executive Offices)	(Zip Code)

Registrant’s Telephone Number, Including Area Code     208-424-1027    

Securities registered under Section 12(b) of the Exchange Act:

Title of Each Class	Name of Each Exchange on Which Registered
Common Stock, $0.001 par value	NYSE Amex

Securities registered pursuant to Section 12(g) of the Act: NONE

Indicate by check mark if the registrant is well-known seasoned issuer, as defined in Rule 405 of the Securities Act 

o Yes             x No

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

o Yes             x No

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for at least the past 90 days.

x Yes             o No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulations S-T (§229.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

o Yes             o No

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer o	Accelerated filer x
Non-accelerated filer o  (Do not check if a smaller reporting company)	Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).

o Yes             x No

The aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was sold, or the average bid and asked price of such common equity, as of September 30, 2009 (the last business day of the registrant’s most recently completed second fiscal quarter): $96,847,736

Number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date.

Class of Equity	Shares Outstanding as of October 23, 2009
Common stock, par value $ 0.001 per share	62,081,882

EXPLANATORY NOTE

This Amendment No. 1 to our annual report on Form 10-K (“Amendment No. 1”) of U.S. Geothermal Inc. for the fiscal year ended March 31, 2009, which was originally filed with the Securities and Exchange Commission on June 15, 2009, is being filed to amend and restate our consolidated financial statements for the years ended March 31, 2009, 2008 and 2007 contained in Item 8 captioned “Financial Statements and Supplementary Data.” In addition, this Amendment No. 1 is being filed to restate Part IV, Item 15 to include the audited financial statements of Raft River Energy I LLC, and to include exhibits 10.31, 23.1, 23.2, 23.3, 23.4 and 23.5 as listed under the “Exhibit List” heading. We are amending and restating Item 15 to provide updated certifications from our Chief Executive Officer and Chief Financial Officer in accordance with applicable SEC rules.

In the Company’s previously issued financial statements, the Company allocated the profits and losses relating to our investment in Raft River Energy I LLC (RREI) based on net capital contribution percentages. Subsequent to the issuance of our financial statements for the year ended March 31, 2009, our management determined that the calculations for estimating the value of our investment in RREI needed to be adjusted to the hypothetical liquidation at book value estimation methodology. Refer to Note 2 to the consolidated financial statements included in Item 8 for further discussion of the restatement.

The following sections in this report have been amended as a result of the restatements:

Part II:

Item 6: Selected Financial Data

Item 7: Management’s Discussion and Analysis of Financial Condition and Results of Operations

Item 8: Financial Statements and Supplementary Data

Part IV:

Item 15: Exhibits and Financial Statement Schedules

This Amendment No. 1 does not reflect events occurring after June 15, 2009, the date of the filing of our original Form 10-K, or modify or update those disclosures that may have been affected by subsequent events. In addition, we are filing an amendment to our Quarterly Report on Form 10-Q for the period ended June 30, 2009 to amend and restate financial statements for the quarter then ended.

PART II

Item 6: Selected Financial Data

		For the Fiscal Years Ended March 31,
		2009			2008			2007			2006			2005
Operating Revenues	$	2,336,202		$	190,721		$	117,809		$	0		$	0
Operating Expenses		7,660,868			4,568,871			3,035,833			1,663,069			1,751,530
Loss from Continuing Operations		(5,324,666	)		(3,314,473	)		(1,812,945	)		(1,490,593	)		(1,830,421	)
Loss per share from Continuing Operations		(0.08	)		(0.06	)		(0.04	)		(0.08	)		(0.12	)
Cash dividends declared and paid per common share		0			0			0			0			0
		As of March 31,
		2009			2008			2007			2006			2005
Total Assets	$	52,451,343		$	40,731,585		$	22,803,279		$	21,895,933		$	2,584,970
Total Long-term Obligations (1)		1,972,200			1,975,672			2,533,858			1,707,548			0

(1) Long-term obligations represent the fair value of stock options to be exercised by officers, directors, employees and consultants of the Company. These obligations were recorded as a liability since the option exercise price was stated in Canadian dollars, subjecting the Company and the employee to foreign currency exchange risk in addition to the normal market price fluctuation risk.

		Loss per share from Continuing Operations			Operating Revenues		Gross Profit		Loss from Operations			Net Loss from Continued Operations
Fiscal Year Ended March 31, 2007
1st Quarter	$	(0.01	)	$	0	$	0	$	(961,777	)	$	(372,486	)
2nd Quarter		(0.02	)		206		206		(746,292	)		(680,021	)
3rd Quarter		(0.01	)		90,000		90,000		(610,310	)		(338,278	)
4th Quarter		(0.01	)		27,603		27,603		(599,645	)		(422,160	)
Fiscal Year Ended March 31, 2008
1st Quarter		(0.01	)		0		0		(607,501	)		(323,415	)
2nd Quarter		(0.02	)		28		28		(1,348,069	)		(1,016,462	)
3rd Quarter		(0.01	)		1,103		1,103		(1,123,605	)		(826,907	)
4th Quarter		(0.02	)		189,590		189,590		(1,298,975	)		(1,147,689	)
Fiscal Year Ended March 31, 2009
1st Quarter		(0.03	)		571,862		571,862		(1,683,572	)		(1,626,115	)
2nd Quarter		(0.02	)		717,460		717,460		(1,432,677	)		(1,382,330	)
3rd Quarter		(0.01	)		545,224		545,224		(930,305	)		(904,848	)
4th Quarter		(0.02	)		501,656		501,656		(1,278,112	)		(1,274,461	)

Item 7: Management’s Discussion and Analysis of Financial Condition and Results ofOperations

U.S. Geothermal Inc. is a Delaware corporation. The Company’s shares of common stock trade on the TSX under the symbol “GTH” and on the NYSE Amex under the trade symbol “HTM”. On December 19, 2003, the Company acquired all of the outstanding securities of U.S. Geothermal Inc., an Idaho corporation (“Geo-Idaho”) incorporated in February 2002, through a transaction merging Geo-Idaho into Evergreen Power Inc., a wholly-owned Idaho subsidiary formed for purposes of the merger transaction. Following the merger, the Company changed its name from U.S. Cobalt Inc. to U.S. Geothermal Inc. Pursuant to the merger, Geo-Idaho became the surviving subsidiary of the Company, and Evergreen Power, Inc. ceased to exist. GTH is still, primarily, a development stage company and has just started receiving revenues from operating activities.

For the fiscal year ended March 31, 2009, the Company is focused on:

1)	optimizing the operation of the Unit I power plant at the Raft River, Idaho geothermal project (“Raft River Unit I”);
2)	evaluating flow test results from exploration well NHS-1, planning and permitting drilling and field development activities at Neal Hot Springs in Oregon;
3)	identifying potential buyers and negotiating a PPA for the Neal Hot Springs Project;
4)	optimizing the operation of the San Emidio (formerly Empire) power plant in Nevada, and planning for repowering the existing plant;
5)	drilling one exploration drill hole and permitting for additional exploration drill holes at the San Emidio Project; and
6)	the evaluation of potential new geothermal project acquisitions.

Raft River Unit I achieved commercial operation on January 3, 2008. During 2008, Raft River operated at 95 percent availability and averaged 9.8 megawatts for the year. A reverse osmosis filter system was added to the cooling water system for the removal of higher than anticipated levels of chloride, which would damage plant equipment.

The Company has assembled a team of seven qualified technicians for the ongoing operation and maintenance of the Unit I power plant and planned future power plant units at Raft River. The team underwent operator training from Ormat and is currently operating the plant unassisted.

With carbon regulation widely anticipated to increase the cost of power sourced from coal, and limited opportunities to purchase baseload geothermal power, the Company has found that utilities across the Western United States have been eager to discuss power purchases from the Raft River geothermal resource. As a result of the increased interest, U.S. Geothermal elected to withdraw its Raft River Unit II and Unit III Idaho Power PPAs without submitting them to the Idaho Public Utility Commission (“IPUC”) for approval in order to pursue larger capacity PPAs with other utilities. With the concurrence of Idaho Power, the Unit II and Unit III 10 megawatt contracts were voided without further obligation on either party.

On September 26 2007, Idaho Power Company and the Company announced the signing of a new, 13-megawatt, full output power purchase agreement. Idaho Power submitted the new PPA to the IPUC for their final approval, which was granted on January 16, 2008. The new PPA replaces the existing 10 megawatt, 20 year PPA and is part of Idaho Power’s 2006 formal request for geothermal electricity under which the Company was named the sole successful bidder in March 2007.

The new PPA is for electricity sales of an annual average of 13-megawatts and has a 25-year term. It is the first contract signed as part of ongoing negotiations with Idaho Power for a total of 45.5 megawatts. Idaho Power and the Company expect to be able to use this first contract as a template for advancing negotiations for the output from the planned Unit Three at Raft River and 26 megawatts of planned production from the Company’s Neal Hot Springs project located in southeast Oregon.

Eugene Water and Electric Board (“EWEB”), from Eugene, Oregon and U.S. Geothermal have signed a PPA with EWEB to purchase the full 13 megawatt annual electrical output of Raft River Unit II. With the execution of the EWEB PPA, and the increase of Unit I under the new Idaho Power PPA, the total planned output from the Unit I and Unit II Raft River power plants is expected to be 26 megawatts from two plants, instead of the originally planned 30 megawatts from three plants, resulting in substantial capital and operating cost savings through improved economy of scale. The ongoing negotiations with Idaho Power relating to Raft River Unit III and Neal Hot Springs and the signed EWEB PPA recognize that the PPAs are contingent upon extension of the federal Production Tax Credit, successful resource drilling and an economically feasible resource discovery at Raft River and Neal Hot Springs.

In addition, the strong regional interest in geothermal power has resulted in several utilities from California to Washington entering into discussions with U.S. Geothermal Inc. to purchase the electrical power output of Unit III. Subject to drilling confirmation of sufficient geothermal resource, the power plant output from three units at Raft River would be 39 megawatts, instead of the maximum 30 megawatts under the previous Idaho Power PPA provisions.

In May 2008, we acquired the geothermal assets, including a 3.6 net megawatt nameplate generating capacity power plant, from Empire Geothermal Power LLC and Michael B. Stewart, located in Washoe County, Nevada for approximately $16.6 million. The plant currently generates an approximate average net output of 3.1 megawatts, which is sold to Sierra Pacific Power Corporation. Subject to the receipt of all required permits, we intend to repower the project using the existing flow rate and build a new plant with 8 to 10 megawatts of capacity. When construction is complete, the existing 3.6 megawatt plant may be decommissioned. We believe the construction cost of the repower project will be approximately $25 to $26 million. Management is currently reviewing alternatives and believes project finance will be available for the development and construction. A new PPA for the amount of power above that is covered by the existing NV Energy PPA ( approximately 3 megawatts) will be required before financing can be completed. The method of financing the construction of the new power plant has not yet been determined.

Factors Affecting Our Results of Operations

Although other factors may impact our operations and financial condition, including many that we do not or cannot foresee, we believe that our results of operations and financial condition for the foreseeable future will be affected by the following factors.

Raft River LLC

We hold a 50% interest in Raft River LLC, which owns Raft River Energy Unit I. Construction of Raft River Energy Unit I required substantial capital, and partnering with a co-venturer allowed us to share the risks and rewards of ownership. The joint venture has also allowed us to take advantage of production tax credits which would not otherwise have been available to us. We estimate we will receive cash payments totaling approximately $1.6 million per year from the Raft River Unit I project for the first four years of its operations from a water lease ($90,000), management fees ($250,000), sales proceeds from renewable energy credits ($160,000) and projected cash distributions available from operations ($100,000).

We managed the construction of the Raft River Energy Unit I plant pursuant to our operating agreement with Raft River LLC. Raft Holdings has contributed to Raft River LLC a total of approximately $34.2 million in cash and we have contributed $16.4 million in cash and approximately $1.5 million in production and injection wells and geothermal leases through March 31, 2009.

Under the terms of the Operating Agreement, Raft River LLC is required to distribute the cash it holds that is not otherwise allocated to its liabilities or reserves to Raft Holding and us at the end of each fiscal quarter. Raft Holdings is entitled to specific quarterly cash distributions in amounts outlined in the Operating Agreement. For the first four years after Raft River Unit I was placed into service, and once Raft Holdings has received cash distributions specified in the Operating Agreement, we are entitled to receive available cash distributions up to a certain specified limit. Following this period and continuing until Raft Holdings has achieved a specified rate of return, we will receive a de minimis percentage of the available cash distributions. At such time, we will receive less than half of all available cash distributions until the later of 20 years or the date we have achieve more than 30 megawatts of total net electrical generation capacity from geothermal resources in the United States under our ownership or control or the economic equivalent thereof. However, at this time, we will be receiving a majority of the cash flow due to payments made to us as fees and royalties under separate energy and water rights agreements. Thereafter, we will receive a significant majority of the available cash distributions for the remaining life of the project.

Raft River Unit I is currently selling between 8.5 and 9.5 megawatts of power to Idaho Power Company. Raft River LLC has also entered into an agreement with Holy Cross Energy of Colorado for the sale of the RECs associated with the Raft River Unit I power plant. Holy Cross Energy has agreed to pay a price of $7.50 per megawatt hour for the first 10 megawatts of generation on an annual basis. The price for these RECs will decrease annually by $0.50 per megawatt until the contract terminates in 2017. We also receive revenue from Raft River LLC from water and energy leases.

We use the equity method of accounting to account for the operating results of Raft River LLC over which we have significant influence due to our management of the operations and our participation on the management committee. Under the equity method, we recognize our proportionate share of the net income (loss) of Raft River LLC in the line item “Loss from investment in subsidiary.” Once we begin to receive the significant majority of the available cash distributions from Raft River LLC, we expect that Raft River Unit I will be accounted for as a consolidated entity.

Pursuant to a Management Services Agreement which continues until 2028, we provide operating and management services to Raft River LLC. We will receive approximately $250,000 per year for the next four year pursuant to this agreement. Thereafter, modest adjustments to this amount will occur according to an escalator clause in the agreement.

Power Purchase Agreements

Prior to the construction of a geothermal project, we typically enter into a power purchase agreement with a utility, which fixes the price of energy produced at a project for a 20 to 25 year period. Such PPAs are typically negotiated with the utility company and approved by a state utility commission or similar regulating body.

Power purchase agreements generally provide for the payment of energy payments, capacity payments, or both. Energy payments are calculated based on the amount of electrical energy delivered to the relevant power purchaser at a designated delivery point. The rates applicable to such payments are either fixed, subject to adjustments in certain cases, or are based on the relevant power purchaser’s short-run avoided costs calculated as the incremental costs that the power purchaser avoids by not having to generate such electrical energy itself or purchase it from others. Capacity payments, on the other hand, are generally calculated based on the amount of time that our power plants are available to generate electricity. Some power purchase agreements provide for bonus payments in the event that the producer is able to exceed certain target levels and forfeiture of payments if minimum target levels are not met.

Raft River Energy I LLC currently earns revenue from a full-output PPA with Idaho Power, which is expected to be 13-megawatts annual average. The PPA expires in 2032. This PPA was signed as part of ongoing negotiations with Idaho Power for PPAs covering an expected total output of 45.5 megawatts and may be used as the template for additional PPAs. The price of energy sold under the Idaho Power PPA is split into three seasons: power produced during the peak periods of July, August, November and December will be purchased at 120% of the set price; power produced in the three month low demand season will be purchased at 73.50% of the set price; and power produced in the remaining five months of the year will be purchased at 100% of the set price. The PPA sets a first year average purchase price of $53.60 per megawatt hour. The $53.60 purchase price is escalated each year at a compound annual rate of 2.1% until year 15. From years 16 to 25 of the contract the escalation rate will drop to 0.6% per year.

Power generated by San Emidio is sold to Sierra Pacific Power Corp. (NV Energy) pursuant to a 30 year PURPA PPA that terminates in December 2017. The PPA includes energy and capacity payment components, as well as peak and off-peak rates. The average power price received in 2008 is approximately $77.00 per megawatt hour. Contract prices are adjusted annually on March 1 based upon the Handy-Whitman price index, total steam production plant category, as specified by Nevada Public Utility Commission standards for PURPA contracts.

Results of Operations

Fiscal Year Ended March 31, 2009 to March 31, 2008

For the years ended March 31, 2009 and 2008, we incurred net losses of $5,091,863 and $3,314,473 which represented ($0.08) and ($0.06) per share; respectively. The increase from 2008 to 2009 was $1,777,390 (53.6%) . These figures are indicative of several factors that are both financially favorable and unfavorable. As discussed in more detail in the following paragraphs, the figures are primarily attributable to management fee income, corporate administrative and development, professional and management fees, salaries and related costs, lease and repair costs, as well as the operations of the subsidiary and the newly acquired power plant.

Management Fee Income

For the year ended March 31, 2008, management fee income increased $187,500 compared to the same period in 2008. Management fees are earned by the Company from its subsidiary RREI at a rate of $20,833 per month ($250,000 annual). These fees began when the plant became operational in January 2008. In the fiscal year ended March 31, 2008, the Company earned 3 months of management fees. For the fiscal year ended March 31, 2009, the Company earned fees for an entire year.

Corporate Administration and Development

Administrative and development costs increased by $173,010 (28.9%) from the prior year. The primary components of the increase were the increases in exchange filing fees ($25,400), insurance ($58,000) and administration office rent ($50,500). The Company moved into a new building in January 2008. Therefore, the prior fiscal year only included three months of the higher rental costs for the new building.

Professional and Management Fees

For the year ended March 31, 2009, professional and management costs increased $151,545 (17.9%) compared to the same period in 2008. The increase was primarily due to additional audit fees, compliance with Sarbanes-Oxley Act and contractors involved in plant support. The financial statement audit fees increased approximately $25,000 due to the larger scope of the audit engagement related to the Company’s new entities. To comply with the Sarbanes-Oxley Act, additional audit fees of approximately $35,000 were incurred and additional consulting fees of $61,300 were incurred for a total of $136,000 for the fiscal year. An incremental amount of approximately $83,000 was paid to outside contractors that supported the operations of our primary subsidiary. These contractors were performing water testing and general plant operational support.

Salary and Related Costs

For the year ended March 31, 2009, our salary costs increased $563,324 (91.2%) as compared to 2007. There have not been notable changes in the number of management and development employees, pay scales or other benefits. Prior to January 3, 2008, the Company’s primary subsidiary was in a development stage, and directly involved efforts from management and development employees. Accordingly, their salaries and related costs (approximately $455,000 and $437,000 for the fiscal years ended 2008 and 2007; respectively) were allocated to the subsidiary. After the subsidiary became operational in 2008, the amount of salary costs from management and development employees were significantly reduced at the subsidiary level and now are carried at the corporate level.

Land Lease and Reservation Fees

For the year ended March 31, 2009, the lease and equipment maintenance costs increased $146,986 (211.5%) as compared to 2008. During the year, the Company began lease payments for utility line reservation fees of $101,928. Additional lease payments for geothermal water rights were incurred that amounted to over $81,000. Of that amount, $41,000 was for geothermal lease rights for the exploration activities conducted by the new joint venture company Gerlach Geothermal, LLC.

Gain/Loss on Investment in Subsidiary (Raft River Energy I, LLC)

For the fiscal year ended March 31, 2009, the Company’s portion of net gain reported by RREI was $539,815. This was an increase of $533,336 in the gain reported in the same period ended in 2008. According to contractual allocation of profits/losses (USG portion 1%) and renewable energy credits (USG portion 70%), the company can show a profit even though RREI reflects a loss for the period.

The plant became commercially operational on January 3, 2008. The quarterly financial information is presented in the table below. The operating loss experienced in the first 3 quarters of commercial operations reflects the effect of reduced power generation due to plant startup in winter conditions, completion of construction punch list activities and the resulting higher labor costs, and increased chemical treatment costs for the reduction of elevated chloride in the cooling water circuit that were higher than anticipated. In addition, the mechanical failure of the pump in production well RRG-2 caused several weeks of reduced power generation and the associated lost revenues. The quarter ended December 26, 2008, was the first quarter that RREI reported a profit. The drop in revenues and the related net loss reported in the quarter ended March 27, 2009 was related to the decline in temperature for one of the four production wells (RRG-7) and the lower contracted power rate for the month of March. The temperature reduction for well RRG-7 is an on-going condition that is still being addressed. Under the terms of the PPA, the Company was paid 100% of the contracted power rate for the months of January and February. In March, the Company is paid the lower seasonal rate of 73.5% of the contracted power rate.

Select quarterly financial information for RREI is illustrated as follows:

				Net Income (Loss)
		Total Operating					U.S. Geothermal
Quarter Ended:		Revenues		Total			Inc.’s Portion
March 28, 2008	$	1,025,459	$	(406,606	)	$	5,348
June 27, 2008		1,126,051		(119,141	)		213,226
September 26, 2008		1,408,357		(319,558	)		103,077
December 26, 2008		1,625,010		426,339			120,425
March 27, 2009		1,355,582		(14,170	)		103,086

San Emido, Nevada Plant Energy Sales and Plant Operating Expenses

During the fiscal year ended March 31, 2009, the Company reported operating revenues of $1,449,696 (energy sales $1,416,853 and production energy credit and other $32,843) and plant expenses of $2,265,277. Effective May 1, 2008, the Company purchased and began operating a geothermal power plant located in North Western Nevada. Therefore, this was the first year the Company reported revenues and expenses from this plant.

Energy sales revenues were higher in the quarter ended September 30, 2008 due to regular plant production and premium contracted rates. Based upon the terms of the PPA, premium rates are paid during the months June through September. The plant was not as productive in the quarters ended December 31, 2008 and March 31, 2009 due to the down time experienced while extensive repairs and maintenance was conducted.

Significant repair and maintenance costs were incurred during the quarters ended December 31, 2008 and March 31, 2009. Repairs and other improvements have been made that are expected to reduce operating costs, as well as increase power generation. During the last fiscal year, the Company has spent over $164,000 making various repairs to allow the facility to continue to generate power until the repower or replacement of the power plant facility is completed. Items included in the repairs and maintenance total includes repair of electrical breakers and system controls, repair pentane storage and transfer system, gear box and drive shaft alignments on all OECs and cooling tower fans, repair leaking condenser tubes, replace turbine inlet gaskets, modification of OEC oil cooler water supply pipelines, replacement of leaking brine valves on the OECs and replacement of check valve on production pump 76-16. With these repairs, the power plant facility should continue to provide operating revenues and generate positive cash flow to the Company.

Select quarterly financial information for the plant is illustrated as follows:

			Total
	MWH		Operating
Quarter Ended:	Produced		Revenues		Net Loss			Cash Flow
June 30, 2008 *	3,211	$	273,635	$	(215,769	)	$	(85,970	)
September 30, 2008 **	5,649		529,383		(63,779	)		131,267
December 31, 2008 **	4,097		337,272		(268,918	)		(71,977	)
March 31, 2009	3,808		309,406		(267,114	)		(65,402	)
	16,765	$	1,449,696	$	(815,580	)	$	(92,082	)

*	- two months of operations.
**	- Net Loss reflects a reclassification adjustment of $122,059 in expenses.

Fiscal Year Ended March 31, 2008 to March 31, 2007

For the years ended March 31, 2008 and 2007, we incurred net losses of $3,314,473 and $1,812,945 which represented ($0.06) and ($0.04) per share; respectively. The increase from 2007 to 2008 was $1,501,528 (82.8%) . These figures are indicative of high levels of activities related to our efforts to develop, study and establish financing for our geothermal interests, as detailed below.

Operating Revenues

On January 3, 2008, the Company’s first plant became commercially operational. As a result, the Company began receiving operating revenues for management fees and lease and royalty payments.

Gain/Loss on Operations of Subsidiary

The Company’s share of the operating profit/loss from the Company’s major subsidiary was a gain in 2008 ($6,479) as opposed to a loss in 2007 ($3,365), an improvement of $9,844 from the prior year. According to contractual allocation of profits/losses (USG portion 1%) and renewable energy credits (USG portion 70%), the company can show a profit even though RREI reflects a loss for the period. The subsidiary began commercial operations in January 2008 and costs are being incurred to optimize production levels. The Raft River Unit I plant is currently operating at between 9.6 to 11.7 megawatts output which is still below the design capacity. The plant has not yet been able to drop the purchases of third party power to run the production pumps as originally planned. The pump power purchases have increased the plant operating costs.

Corporate Administration and Development Activities

Administrative and development costs increased by $364,121 (168.6%) from the prior year. The primary component of the increase was the filing fee and other related costs for listing on the Toronto Stock Exchange ($269,273). Also, there were modest increases in insurance and depreciation costs.

Professional and Management Fees

Professional costs remained at a high level to support the legal and other consulting efforts to needed to comply with the Sarbanes-Oxley Act ($74,200), issue private placement offerings ($49,900), filing of a resale registration statement ($48,900), negotiate the terms of the Raft River Energy operating agreement ($45,200) and amend prior year tax returns ($21,100). Professional and management costs of $845,908 represent 17.6% of total operating expenses for the fiscal year ended March 31, 2008. These costs increased $137,384 (19.4%) and $423,218 (100.1%) from 2007.

Stock-Based Compensation Costs

Stock-based compensation represents 39.7% of the Company’s operating expenses for the fiscal year ended March 31, 2008. These costs increased $774,563 (68.6%) from the prior year. The main reason for the increase is number of options granted to directors, officers and employees in fiscal years ending March 31, 2007 and 2008. The stock options are a part of our annual executive compensation plan, and are issued to obtain, retain and motivate our directors, executives and employees. During the fiscal year ended March 31, 2008, we attained several significant milestones (moving to Toronto Stock Exchange, moving to American Stock Exchange (now NYSE Amex), completion of Raft River Unit I, etc.) which necessitated recognition of the significant work effort of our directors, executives and employees for current and prior years.

Liquidity and Capital Resources

We believe our cash and liquid investments at March 31, 2009 are adequate to fund our general operating activities through March 31, 2010. Additional funding will be needed to finance the expansion of production volumes at Raft River and the development of the San Emidio, Nevada and Neal Hot Springs, Oregon projects. We anticipate that the additional funding may be raised through the issuance of shares and/or through the sale of ownership interest in tax credits and benefits.

The current financial credit crisis is not anticipated to impact the ability of our customers, Idaho Power Company and Sierra Pacific Power, to pay for their power. This power is sold under long-term contracts at fixed prices to large utilities. Projections for 2009 indicate that both projects, Raft River and San Emidio, will generate positive cash flows to the Company. However, the current status of the credit and equity markets could delay our project development activities while the Company seeks to obtain economic credit terms or a favorable equity market price to further the drilling and construction activities. The Company continues discussions with potential investors to evaluate alternatives for funding at the corporate and project levels. We are also pursuing available DOE loan guarantees in order to reduce interest costs for any debt instruments the Company may require. At the current market price for the Company’s stock, we do not anticipate that additional funding will result from the exercise of current stock options or warrants.

In these difficult times, the Company has also implemented procedures to conserve cash, reduce costs and maximize revenue. At the corporate level, we have suspended drilling activities, cancelled non-essential consulting contracts and are reducing all non-critical expenditures. At the project level, Raft River and San Emidio are increasing efforts to reduce operating costs and will continue to find additional cost savings. The Company has instituted a wage and salary freeze for all employees effective January 1, 2009. The wage and salary freeze means that we will not be granting merit pay increases until economic conditions improve and we are able to finance the Company in the equity markets. In addition, the Company has required that employees contribute a share of the medical insurance premiums for dependent coverage. The Company will continue to pay 100% of the insurance premiums for the employees.

Potential Acquisitions

The Company intends to continue its growth through the acquisition of ownership or leasehold interests in properties and/or property rights that it believes will add to the value of the Company’s geothermal resources, and through possible mergers with or acquisitions of operating power plants and geothermal or other renewable energy properties.

Critical Accounting Policies

The discussion and analysis of our financial condition and results of operations are based upon the consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. Certain accounting policies involve judgments and uncertainties to such an extent that there is reasonable likelihood that materially different amounts could have been reported under different conditions, or if different assumptions had been made. We evaluate our estimates and assumptions on a regular basis. We base our estimates on historical experience and various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for the financial statements.

Cash and Cash Equivalents

The Company considers cash deposits and highly liquid investments to be cash and cash equivalents for financial reporting presentation on the consolidated balance sheet and statement of cash flows. The Company subscribes to the accounting standards that define cash equivalents as highly liquid, short-term instruments that are readily convertible to known amounts of cash, which are generally defined investments that have original maturity dates of less than three months. With the large value of funds invested in short-term deposits, small variations in short term interest rates may materially affect the value of cash equivalents. Investments in government obligations accumulate higher interest, but the principal balance is not insured by the FDIC.

Property, Plant and Equipment

During the development stage of operations, the Company has purchased and otherwise acquired geothermal properties for the production of power. The geothermal properties include: drilled wells, power plant components, power plant support components, land, land rights, surface water rights, and geothermal water rights. The Company’s first power plant became operational in January 2008. When the plant became operational, plant property and equipment costs were charged to operations in a systematic manner based upon the estimated useful lives of the individual assets. The factors and assumptions that comprise this allocation process will be based upon the best information available to us, and will be evaluated, at least, annually for viability. If it is determined that our cost allocations have produced results that vary significantly from the conditions surrounding the value of the Company’s geothermal properties, a gain or loss adjustment will be made in the period in which this determination is made. The cost allocation or amortization process is not intended to present the fair market value of our geothermal properties; rather to allocate the actual historical costs of those properties over their service lives.

Income Taxes

According to generally accepted accounting practices, entities must recognize assets and/or liabilities that originate with the differences in revenues and expenses presented for financial reporting purposes and those revenues and expenses that are utilized to comply with federal and state income tax law. Often deductions can be accelerated for income tax purposes, thus creating temporary timing differences. Other items (generally non-allowable expenses) do not reverse over time, and are considered to be permanent differences. These types of costs are, typically, not factored into the deferred income tax asset or liability calculation. The Company’s primary element that impacts the liability or asset calculation relates to the operating losses generated in its early stages of operation that will be allowed to offset future earnings. Stock-based compensation is another significant area that impacts that recognition of deferred income taxes. Compensation that has been provided to employees and contractors based upon the value of the issuance of stock options is reported as an operating cost. However, this compensation is not an allowable deduction for income tax purposes. At the end of the fiscal year, the Company’s significant tax differences would ultimately result in the recognition of an asset; however, due to the uncertainly surrounding future earnings, an allowance has been calculated that effectively removes the asset. The Company continues to track the financial elements that comprise the deferred income tax calculation and will remove or reduce the asset allowance if the Company is determined to be in position where it is likely to produce earnings.

Stock-Based Compensation

Effective April 1, 2007, the Company adopted a standard that states that if certain conditions are present surrounding the issuance of equity instruments as share based compensation, then circumstances may warrant the recognition of a liability for financial reporting purposes. One such condition was present when the Company originally issued stock options in a foreign currency (Canadian dollars) to employees before the beginning of the fiscal year. Authors of the standard have reasoned that when a condition is present that creates a financial risk to the recipient in addition to normal market risks (i.e., foreign currency translation risk), then the instrument takes on the characteristics of a liability, rather than an equity item. As the underlying stock options are exercised or are forfeited, then the stock based compensation liability will be reduced. The Company’s financial statements reflect these changes in the consolidated balance sheet. As the value of the options change over the vesting periods, these changes will ultimately be reflected in the amount of expense charged to operations.

The Company awards stock options for compensation to non-employees for services performed and/or services performed above and beyond expectations. After the services have been completed, the awards are made at the discretion of the Board of Directors. The fair value of the options are determined on the date the options are awarded according to several factors that include the exercise price of the option, the current price of the underlying share, the expected life of the options and the expected volatility of the stock. Generally speaking, a longer life and higher expected volatility yields a higher value of the option. In accordance with appropriate accounting guidance, the Company amortizes the value of these options as operating expense during the period in which they vest. Stock options awarded to Company employees are also valued on the date they are awarded. However, the value of these options are capitalized and expensed over the vesting period. The current vesting period for all options is eighteen months. The nature of the services provided determines whether the value will be expensed or added to the value of a Company asset. To date, no services have been provided directly related to the construction of property and equipment, thus, all services have been charged to operations.

Contractual Obligations

As of March 31, 2009, the following table denotes contractual obligation by payments due for each period:

		Total		< 1 year		1-3 years		3-5 years		> 5 years
Operating Leases	$	538,841	$	143,377	$	208,971	$	87,702	$	98,791
Capital Leases		49,943		10,998		24,573		14,372		0
Stock Compensation Payable		1,933,255		109,504		1,545,038		278,713		0

For further information regarding lease terms and conditions, please note Item 2, Description of Property, Lease/Royalty Terms beginning on page 28 of this document.

The obligations reflected for Stock Compensation Payable are reflected as due on the option expiration date. The obligation will be relieved upon exercise of the options, which may be at any time between vesting and expiration.

Off Balance Sheet Arrangements

As of March 31, 2009, the Company does not have any off balance sheet arrangements.

Item 8. Financial Statements and Supplementary Data

The information required hereunder is set forth under “Report of Independent Registered Public Accounting Firm,” “Consolidated Balance Sheets,” “Consolidated Statements of Operations,” “Consolidated Statements of Comprehensive Income (Loss) and Stockholders’ Equity (Deficit),” “Consolidated Statements of Cash Flows,” and “Notes to Consolidated Financial Statements” included in the consolidated financial statements that are a part of this Report (See Part IV, Item 15, exhibit 13.1) . Other financial information and schedules are included in the consolidated financial statements that are a part of this Report.

PART IV

Item 15. Exhibits

(a) 

The following documents are filed as a part of this report:

1. 

Consolidated Financial Statements.

See Item 8 of Part II for a list of the Financial Statements filed as part of this report.

2. 

Financial Statement Schedules.

See Exhibit 13.2 for the following Financial Statement Schedules filed as part of this report:

Financial Statements for Raft River Energy I LLC

Report of Independent Auditors

Balance Sheets at November 28, 2008 and November 30, 2007

Statements of Operations for the periods ended November 28, 2008 and November 30, 2007

Statements of Cash Flows

Statement of Members’ Equity

Notes to the Financial Statement

3. 

Exhibits. See subparagraph (b) below.

(b) 

Exhibits.

EXHIBIT LIST

EXHIBIT NUMBER	DESCRIPTION
3.1	Certificate of Incorporation of U.S. Cobalt Inc. (now known as U.S. Geothermal Inc.) (Incorporated by reference to exhibit 3.1 to the registrant’s Form SB-2 registration statement as filed on July 8, 2004)
3.2	Certificate of Domestication of Non-U.S. Corporation (Incorporated by reference to exhibit 3.2 to the registrant’s Form SB-2 registration statement as filed on July 8, 2004)
3.3	Certificate of Amendment of Certificate of Incorporation (changing name of U.S. Cobalt Inc. to U.S. Geothermal Inc.) (Incorporated by reference to exhibit 3.3 to the registrant’s Form SB-2 registration statement as filed on July 8, 2004)
3.4	Bylaws of U.S. Geothermal Inc. (formerly U.S. Cobalt Inc.) (Incorporated by reference to exhibit 3.4 to the registrant’s Form 10-Q quarterly report as filed on February 14, 2008)
3.5	Plan of Merger of U.S. Geothermal, Inc. and EverGreen Power Inc. (Incorporated by reference to exhibit 3.5 to the registrant’s Form SB-2 registration statement as filed on July 8, 2004)
3.6	Amendment to Plan of Merger (Incorporated by reference to exhibit 3.6 to the registrant’s Form SB-2 registration statement as filed on July 8, 2004)
4.1	Form of Stock Certificate (Incorporated by reference to exhibit 4.1 to the registrant’s Form SB-2 registration statement as filed on July 8, 2004)
4.2	Form of Warrant Certificate (Incorporated by reference to exhibit 4.2 to the registrant’s Form SB-2 registration statement as filed on July 8, 2004)
4.3	Provisions Regarding Rights of Stockholders (Incorporated by reference to exhibit 4.3 to the registrant’s Form SB-2 registration statement as filed on July 8, 2004)
4.4	Form of Subscription Agreement (Incorporated by reference as exhibit 10.2 to the registrant’s Form 8-K current report as filed on May 2, 2008)
4.5	Form of Warrant (Incorporated by reference as exhibit 10.3 to the registrant’s Form 8-K current report as filed on May 2, 2008)
4.6	Form of Broker Warrant (Incorporated by reference as exhibit 10.4 to the registrant’s Form 8-K current report as filed on May 2, 2008)
10.1	Agreement between U.S. Geothermal Inc. and Vulcan Power Company dated December 3, 2002 regarding the acquisition of the Vulcan interest (Incorporated by reference to exhibit 10.1 to the registrant’s Form SB-2 registration statement as filed on July 8, 2004)
10.2	Amendment No. 1 dated November 15, 2003 to Agreement between U.S. Geothermal Inc. and Vulcan Power Company (Incorporated by reference to exhibit 10.2 to the registrant’s Form SB-2 registration statement as filed on July 8, 2004)

10.3	Amendment No. 2 to “Agreement by and between U.S. Geothermal Inc. and Vulcan Power Company” dated December 30, 2003 (Incorporated by reference to exhibit 10.3 to the registrant’s Form SB-2 registration statement as filed on July 8, 2004)
10.4	Geothermal Lease and Agreement dated July 11, 2002, between Sergene Jensen, Personal Representative of the Estate of Harlan B. Jensen, and U.S. Geothermal Inc. (Incorporated by reference to exhibit 10.5 to the registrant’s Form SB-2 registration statement as filed on July 8, 2004)
10.5	Geothermal Lease and Agreement dated June 14, 2002, between Jensen Investments Inc. and U.S. Geothermal Inc. (Incorporated by reference to exhibit 10.6 to the registrant’s Form SB-2 registration statement as filed on July 8, 2004)
10.6	Geothermal Lease and Agreement dated March 1, 2004, between Jay Newbold and U.S. Geothermal Inc. (Incorporated by reference to exhibit 10.7 to the registrant’s Form SB-2 registration statement as filed on July 8, 2004)
10.7	Geothermal Lease and Agreement dated June 28, 2003, between Janice Crank and the children of Paul Crank and U.S. Geothermal Inc. (Incorporated by reference to exhibit 10.8 to the registrant’s Form SB-2 registration statement as filed on July 8, 2004)
10.8	Geothermal Lease and Agreement dated December 1, 2004, between Reid S. Stewart and Ruth O. Stewart and US Geothermal Inc. (Incorporated by reference to exhibit 10.9 to the registrant’s Amendment No. 2 to Form SB-2 registration statement as filed on January 10, 2005)
10.9	Geothermal Lease and Agreement, dated July 5, 2005, between Bighorn Mortgage Corporation and US Geothermal Inc. (Incorporated by reference to exhibit 10.11 to the registrant’s Form 10-QSB quarterly report as filed on February 17, 2006)
10.10	Geothermal Lease and Agreement, dated June 23, 2005, among Dale and Ronda Doman, and US Geothermal Inc. (Incorporated by reference to exhibit 10.13 to the registrant’s Form 10-QSB quarterly report as filed on February 17, 2006)
10.11	Geothermal Lease and Agreement, dated June 23, 2005, among Michael and Cleo Griffin, Harlow and Pauline Griffin, Douglas and Margaret Griffin, Terry and Sue Griffin, Vincent and Phyllis Jorgensen, and Alice Mae Griffin Shorts, and US Geothermal Inc. (Incorporated by reference to exhibit 10.14 to the registrant’s Form 10-QSB quarterly report as filed on February 17, 2006)
10.12	Geothermal Lease and Agreement dated January 25, 2006, between Philip Glover and US Geothermal Inc. (Incorporated by reference to exhibit 10.9 to the registrant’s Form 10- QSB quarterly report as filed on February 17, 2006)
10.13	Geothermal Lease and Agreement, dated May 24, 2006, between JR Land and Livestock Inc. and US Geothermal Inc. (Incorporated by reference to exhibit 10.30 to the registrant’s Form 10-KSB annual report as filed on June 29, 2006)
10.14	Employment Agreement dated January 1, 2009 with Kerry D. Hawkley (Incorporated by reference to exhibit 10.16 to the registrant’s Form 10-K annual report as filed on June 15, 2009)
10.15	Employment Agreement dated January 1, 2009 with Douglas J. Glaspey (Incorporated by reference to exhibit 10.16 to the registrant’s Form 10-K annual report as filed on June 15, 2009)
10.16	Escrow Agreement made December 19, 2003, among U.S. Geothermal Inc., Pacific Corporate Trust Company, as escrow agent, and certain security holders (Incorporated by reference to exhibit 10.15 to the registrant’s Form SB-2 registration statement as filed on July 8, 2004)

10.17	Escrow Agreement made December 19, 2003, among U. S. Geothermal Inc., Pacific Corporate Trust Company, as escrow agent, and certain security holders (Incorporated by reference to exhibit 10.16 to the registrant’s Form SB-2 registration statement as filed on July 8, 2004)
10.18	First Amended and Restated Merger Agreement dated November 30, 2003 among U.S. Cobalt Inc., EverGreen Power Inc., U.S. Geothermal Inc., and the stockholders of U.S. Geothermal Inc. (Incorporated by reference to exhibit 10.17 to the registrant’s Form SB-2 registration statement as filed on July 8, 2004)
10.19	Agreement with Dundee Securities Corporation dated June 28, 2004 (Incorporated by reference to exhibit 10.18 to the registrant’s Form SB-2 registration statement as filed on July 8, 2004)
10.20	Amended and Restated Stock Option Plan of U.S. Geothermal Inc. dated September 29, 2006. (Incorporated by reference to exhibit 10.23 to the registrant’s Form SB-2 registration statement as filed on October 2, 2006.)
10.21	Power Purchase Agreement dated December 29, 2004 between U.S. Geothermal Inc. and Idaho Power Company (Incorporated by reference to exhibit 10.19 to the registrant’s Amendment No. 2 to Form SB-2 registration statement as filed on January 10, 2005)
10.22	Engineering, Procurement and Construction Agreement dated December 5, 2005 between U.S. Geothermal Inc. and Ormat Nevada Inc. (Incorporated by reference to exhibit 10.28 to the registrant’s Form 10-QSB quarterly report as filed on February 17, 2006) *
10.23	Amendment to the Engineering, Procurement and Construction Agreement dated April 26, 2006 between U.S. Geothermal Inc. and Ormat Nevada Inc. (Incorporated by reference to exhibit 99.1 to the registrant’s Form 8-K as filed on May 2, 2006)
10.24	Letter of Intent from Eugene Water and Electric Board to U.S. Geothermal Inc. dated February 22, 2006 (Incorporated by reference to exhibit 10.27 to the registrant’s Form SB-2 as filed on September 29, 2006).
10.25	Renewable Energy Credits Purchase and Sales Agreement dated July 29, 2006 between Holy Cross Energy and U.S. Geothermal Inc. (Incorporated by reference to exhibit 10.28 to the registrant’s Form SB-2 as filed on September 29, 2006).
10.26	Transmission Agreement dated June 24, 2005 between Department of Energy’s Bonneville Power Administration - Transmission Business Line and U.S. Geothermal Inc. (Incorporated by reference to exhibit 10.27 to the registrant’s Form 10-QSB quarterly report as filed on August 12, 2005)
10.27	Interconnection and Wheeling Agreement dated March 9, 2006 between Raft River Rural Electric Co-op and U.S. Geothermal Inc. (Incorporated by reference to exhibit 10.28 to the registrant’s Form 10-KSB annual report as filed on June 29, 2006)
10.28	Construction Contract dated May 16, 2006 between Raft River Rural Electric Co-op and U.S. Geothermal Inc. (Incorporated by reference to exhibit 10.31 to the registrant’s Form SB-2 as filed on September 29, 2006).
10.29	Membership Admission Agreement, dated August 9, 2006, among Raft River Energy I LLC, U.S. Geothermal Inc., and Raft River I Holdings, LLC (Incorporated by reference to exhibit 10.1 to the registrant’s Form 8-K as filed on August 23, 2006)
10.30	Amended and Restated Operating Agreement of Raft River Energy I LLC, dated as of August 9, 2006, among Raft River Energy I LLC, Raft River I Holdings, LLC and U.S. Geothermal Inc (Incorporated by reference to exhibit 10.2 to the registrant’s Form 8-K as filed on August 23, 2006).

10.31(2)	Management Services Agreement, dated as of August 9, 2006, between Raft River Energy I LLC and U.S. Geothermal Services, LLC
10.32	Construction contract dated May 22, 2006 between Industrial Builders and U.S. Geothermal Inc. (Incorporated by reference to exhibit 10.31 to the registrant’s Form 10- KSB annual report as filed on June 29, 2006)
10.36	First Amendment to the Amended and Restated Operating Agreement of Raft River Energy I LLC, dated as of November 7, 2006, among Raft River Energy I LLC, Raft River I Holdings, LLC and U.S. Geothermal Inc. (Incorporated by reference to exhibit 10.36 to the registrant’s Form 10-QSB as filed on February 20, 2007).
10.38	Geothermal Lease and Agreement dated August 1, 2007, between Bureau of Land Management and U.S. Geothermal Inc. (Incorporated by reference as exhibit 10.38 to the registrant’s Form 10-K as filed on June 16, 2008)
10.39	Asset Purchase Agreement dated as of March 31, 2008, between U.S. Geothermal Inc., and Empire Geothermal Power LLC and Michael B. Stewart (Incorporated by reference as exhibit 99.1 to the registrant’s Form 8-K current report as filed on April 7, 2008)
10.40	Underwriting Agreement dated April 28, 2008 between U.S. Geothermal, Inc. and Clarus Securities Inc., Toll Cross Securities Inc. and Loewen Ondaatje McCutcheon Limited (Incorporated by reference as exhibit 10.1 to the registrant’s Form 8-K current report as filed on May 2, 2008)
10.41(2)	Report of Independent Registered Public Accounting Firm
10.42	Water Rights Purchase Agreement Michael B. Stewart and U.S. Geothermal Inc. dated March 31, 2008 (Incorporated by reference as exhibit 99.2 to the registrants Form 8-K current report as filed on April 7, 2008.)
13.1(2)	Consolidated Financial Statements of U.S. Geothermal Inc. as of March 31, 2009
13.2 (2)	Financial Statements Raft River Energy I LLC at November 28, 2008 and November 30, 2007 and for the periods then ended together with the Report of the Independent Auditors
21.1(1)	Subsidiaries of the Registrant
23.1(2)	Consent of BehlerMick P.S.
23.2(2)	Consent of GeothermEx Inc.
23.3(2)	Consent of Teplow Geologic
23.4(2)	Consent of Black Mountain Technology
23.5(2)	Consent of PricewaterhouseCoopers LLP
23.6(2)	Consent of Geothermal Science, Inc.
31.1(2)	Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2(2)	Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1(2)	Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2(2)	Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

(1) – Previously filed.         (2) – Filed herewith.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	U.S. Geothermal Inc.
October 23, 2009
	/s/ Daniel J. Kunz
	Daniel J. Kunz
	Chief Executive Officer and President
	(Principal Executive Officer)

EX-10.31

Exhibit 10.31

MANAGEMENT SERVICES AGREEMENT

Dated as of August 9, 2006

between

RAFT RIVER ENERGY I LLC

and

U.S. GEOTHERMAL SERVICES, LLC

TABLE OF CONTENTS

				Page
ARTICLE I AGREEMENT AND DEFINITIONS				1
	SECTION	1.1	Agreement.	1
	SECTION	1.2	Definitions	2
ARTICLE II SERVICES				7
	SECTION	2.1	Appointment	7
	SECTION	2.2	Services.	7
	SECTION	2.3	Personnel.	10
	SECTION	2.4	Standards for Performance of Services.	10
	SECTION	2.5	Authority of Operator	10
	SECTION	2.6	General Limitations	10
ARTICLE III ITEMS TO BE FURNISHED BY OWNER				12
	SECTION	3.1	Access	12
	SECTION	3.2	Manuals and Drawings	12
	SECTION	3.3	Cooperation.	12
ARTICLE IV REPORTING AND INSPECTION				12
	SECTION	4.1	Accounts and Reports	12
	SECTION	4.2	Inspections	13
	SECTION	4.3	Books and Records	13
ARTICLE V BUDGET				14
	SECTION	5.1	Initial Budget	14
	SECTION	5.2	Annual O&M Budget Process	14
ARTICLE VI COMPENSATION AND REIMBURSEMENT				15
	SECTION	6.1	Management Fee.	15
	SECTION	6.2	Reimbursement of O&M Costs	16
	SECTION	6.3	Year-End Adjustments to Management Fee.	16
	SECTION	6.4	Ledger Amounts.	18
	SECTION	6.5	Manner and Time of Payment.	18
	SECTION	6.6	Accounting and Audit Right	18
ARTICLE VII COMPLETION				19
	SECTION	7.1	Undertakings.	19
	SECTION	7.2	Completion Funds.	19
ARTICLE VIII INSURANCE				19
	SECTION	8.1	Liability Insurance to be Provided by Operator	19
	SECTION	8.2	Certificates	20
	SECTION	8.3	Revisions and Deductibles.	21

i

TABLE OF CONTENTS

				Page
	SECTION	8.4	Form and Content	21
	SECTION	8.5	Owner May Obtain Insurance.	21
ARTICLE IX TERM AND TERMINATION				21
	SECTION	9.1	Term.	21
	SECTION	9.2	Termination by Owner.	22
	SECTION	9.3	Termination by Operator	22
	SECTION	9.4	Rights Upon Termination	23
	SECTION	9.5	Suspension of Services	24
ARTICLE X INDEMNIFICATION				24
	SECTION	10.1	By Operator.	24
	SECTION	10.2	By Owner.	24
	SECTION	10.3	Indemnification Notices.	25
	SECTION	10.4	Limitations of Liability.	25
ARTICLE XI EVENT OF FORCE MAJEURE				25
ARTICLE XII CONFIDENTIALITY				26
	SECTION	12.1	Confidential Information	26
	SECTION	12.2	Consultation	27
	SECTION	12.3	Tax Treatment and Structure	27
	SECTION	12.4	Securities Offering.	28
ARTICLE XIII MISCELLANEOUS PROVISIONS				28
	SECTION	13.1	Representations and Warranties.	28
	SECTION	13.2	Relationship of Parties	29
	SECTION	13.3	Amendments	29
	SECTION	13.4	No Waiver.	29
	SECTION	13.5	Counterparts.	30
	SECTION	13.6	Assignment and Subcontracting	30
	SECTION	13.7	Notices	30
	SECTION	13.8	Governing Law	31
	SECTION	13.9	Resolution of Disputes.	31
	SECTION	13.10	Survival.	32
	SECTION	13.11	Partial Invalidity	32
	SECTION	13.12	Documents	32
	SECTION	13.13	Not For Benefit of Third Parties	33
	SECTION	13.14	Cooperation and Further Assurances.	33
	SECTION	13.15	Headings	33

ii

EXHIBITS

Exhibit A	Reimbursable O&M Costs
Exhibit B	Annual O&M Budget for Fiscal Year 2006 and Fiscal Year 2007
Exhibit C	Pro Forma O&M Budget for Fiscal Years 2008 to 2028
Exhibit D	Map of Site
SCHEDULES
Schedule 6.1	Management Fee
Schedule 6.3	Expected Revenues

1

MANAGEMENT SERVICES AGREEMENT

THIS MANAGEMENT SERVICES AGREEMENT, dated as of August 9, 2006 (the “Effective Date”), by and between Raft River Energy I LLC, a Delaware limited liability company (“Owner”), and U.S. Geothermal Services, LLC, a Delaware limited liability company (“Operator”).

RECITALS

WHEREAS, Owner will own a power generating facility located at the Site (as defined herein) (the “Facility”); and

WHEREAS, Operator Parent and Ormat Nevada, Inc., a Delaware corporation (“EPC Contractor”), are parties to the EPC Contract (as defined herein); and

WHEREAS, Operator Parent will assign its rights and obligations under the EPC Contract to Owner pursuant to the Transfer Plan (as defined in the LLC Operating Agreement); and

WHEREAS, Operator Parent and Idaho Power Company, an Idaho corporation (“IPCo”), are parties to a Firm Energy Sales Agreement (the “Energy Sales Agreement”), concerning the sale of electric energy from the Facility to IPCo; and

WHEREAS, Operator Parent will assign its rights and obligations under the Energy Sales Agreement to Owner pursuant to the Transfer Plan (as defined in the LLC Operating Agreement); and

WHEREAS, Owner wishes to retain Operator to perform certain services as more fully described below; and

WHEREAS, Operator agrees to provide such services on the terms and conditions set forth in this Agreement; and

WHEREAS, Operator Parent expects to derive benefit, directly or indirectly, from Owner’s retention of Operator to provide the services contemplated herein.

NOW, THEREFORE, in consideration of the agreements herein contained and other good and valuable consideration, the parties hereby agree as follows.

ARTICLE I

AGREEMENT AND DEFINITIONS

SECTION 1.1

Agreement.

The purpose of this Agreement is to define the terms under which Operator shall provide the Services for Owner. Operator shall perform the Services hereunder as an independent contractor. Legal title to all property purchased by Operator under the terms of this Agreement shall pass immediately to and vest in Owner upon the passage of title from the vendor or supplier thereof to Operator.

1

SECTION 1.2

Definitions.

Unless otherwise required by the context in which any capitalized term appears, capitalized terms used in this Agreement shall have the definitions specified in this Section 1.2. Capitalized terms used but not defined herein shall have the respective meanings ascribed to such terms in the LLC Operating Agreement. The singular shall include the plural and the masculine shall include the feminine and neuter, as the context requires. References to “Articles,” “Sections,” “Schedules” or “Exhibits” shall be to Articles, Sections, Schedules or Exhibits of this Agreement, unless otherwise expressly provided. All references herein to any agreements shall be to such agreement as amended and supplemented or modified to the date of reference. All references to a particular entity shall include a reference to such entity’s successors and permitted assigns. The words “herein,” “hereof” and “hereunder” shall refer to this Agreement as a whole and not to any particular section or subsection of this Agreement. “Includes” or “including” shall mean “including without limitation.”

“Affiliate” means, with respect to any Person, any other Person that, directly or indirectly through one or more intermediaries, controls, is controlled by or is under common control with such first Person. The term “control” (including with correlative meanings, the terms “controlled by” and “under common control with”) means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ownership of voting securities, by contract or otherwise; provided that solely for the purposes of this Agreement, Operator and its Affiliates (determined as provided above, but excluding Owner) shall not be considered to be Affiliates of Owner.

“Agreement” means this Management Services Agreement, including all Exhibits and Schedules hereto.

“Annual O&M Budget” means the annual budget of O&M Costs approved by Owner Management Committee as contemplated by Article V.

“Applicable Law” means any law, statute, ordinance, rule, regulation or permit issued by a Governmental Authority, and any ruling, judgment, order, decree or other requirement having the force of law, including any official interpretation of any of the foregoing, of or by any Governmental Authority, as in effect from time to time, which is applicable to either party, its respective properties and businesses or the transactions contemplated by this Agreement.

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“Bankruptcy” means, with respect to any Person, a situation in which (i) such Person shall file a voluntary petition in bankruptcy or shall be adjudicated a bankrupt or insolvent, or shall file any petition or answer or consent seeking any reorganization, arrangement, composition, readjustment, liquidation, dissolution or similar relief for itself under the present or future applicable federal, state or other statute or law relative to bankruptcy, insolvency, or other relief for debtors, or shall seek or consent to or acquiesce in the appointment of any trustee, receiver, conservator or liquidator of such Person or of all or any substantial part of its properties (the term “acquiesce” as used in this definition, includes the failure to file a petition or motion to vacate or discharge any order, judgment or decree within 45 days after entry of such order, judgment or decree); a court of competent jurisdiction shall enter an order, judgment or decree approving a petition filed against such Person seeking a reorganization, arrangement, composition, readjustment, liquidation, dissolution or similar relief under the present or any future federal bankruptcy act, or any other present or future applicable federal, state or other statute or law relating to bankruptcy, insolvency, or other relief for debtors, and such Person shall acquiesce in the entry of such order, judgment or decree or such order, judgment or decree shall remain unvacated and unstayed for 45 days from the date of entry thereof, or any trustee, receiver, conservator or liquidator of such Person or of all or any substantial part of its property shall be appointed without the consent or acquiescence of such Person and such appointment shall remain unvacated and unstayed for 45 days whether or not consecutive; (ii) such Person shall admit in writing its inability to pay its debts as they mature; (iii) such Person shall give notice to any Governmental Authority of insolvency or pending insolvency, or suspension or pending suspension of operations; or (iv) such Person shall make an assignment for the benefit of creditors or take any other similar action for the protection or benefit of creditors.

“Budgeted Amount for Completion” means the aggregate Capital Contributions of the Members under the LLC Operating Agreement plus any liquidated damages recovered from any Person under a Construction Contract.

“Business Day” means any day other that a Saturday, Sunday or any other day on which banks in the City of New York, New York are required or authorized by law to be closed.

“Confidential Information” means (a) any information (oral or written) furnished by or on behalf of any of the Members concerning it or its owners, members, partners, officers, directors, employees, agents, representatives, advisors or Affiliates, or the Company, and (b) any materials prepared in connection with Meetings of the Members or Meetings of the Directors; provided, that the term “Confidential Information” shall not include any information that (i) was already known by or in the possession of the receiving Person prior to the furnishing of such information by the disclosing Person, (ii) was or is in the public domain (either prior to or after the furnishing of such document or information) through no fault of such receiving Person and not in violation of this Agreement, (iii) was acquired by such receiving Person from another source (if such receiving Person was not aware at the time of such acquisition that such source was under an obligation of confidentiality with respect to such information) or (iv) is independently developed by the receiving Person without use of Confidential Information.

“Construction Contracts” means the EPC Contract, the Drilling Contract, the Interconnection Agreement, the Master Services Agreements, the Pipeline Construction Contract, the Power Line Construction Contract and all other contracts relevant to the build-out and construction of the Facility.

“Deferred Amount” has the meaning set forth in Section 6.1(b).

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“Drilling Contract” means the Daywork Drilling Contract, dated as of May 25, 2006, by and between the Union Drilling, Inc. and U.S. Geothermal, Inc. (as may be amended, restated, supplemented, otherwise modified or replaced).

“Effective Date” has the meaning set forth in the Recitals to this Agreement.

“Energy Sales Agreement” means the Firm Energy Sales Agreement, dated as of December 29, 2004, between Idaho Power Corporation and Owner (as assignee of Operator Parent) (as may be amended, restated, supplemented, otherwise modified or replaced).

“EPC Contract” means that certain Engineering, Procurement and Construction Contract between Owner (as assignee of Operator Parent) and the EPC Contractor, dated as of December 5, 2005, relating to the construction and testing of the Facility (as may be amended, restated, supplemented, otherwise modified or replaced).

“EPC Contractor” has the meaning set forth in the Recitals to this Agreement.

“Event of Force Majeure” has the meaning set forth in Article X.

“Expenditure” has the meaning set forth in Section 2.6(c).

“Facility” has the meaning set forth in the Recitals to this Agreement.

“Facility Documents” means the following documents: this Agreement, the LLC Operating Agreement, the Construction Contracts, the Energy Sales Agreement, the Interconnection Agreement, the Master Services Agreements, the Power Transmission Agreement, the Project Permits, the Site Leases and any other contracts to which Owner is or becomes party in connection with the Facility or the Site.

“Final Completion” means that all construction is completed, the Facility is fully operational, as certified by an independent engineer’s certification, the Placed in Service Date has occurred and the conditions to acceptance of energy set forth in Article IV of the Energy Sales Agreement (or any replacement thereof) have been satisfied.

“Final Completion Date” is December 31, 2007.

“Fiscal Quarter” means each Fiscal Quarter of Owner, as determined pursuant to the LLC Operating Agreement.

“Fiscal Year” means the Fiscal Year of Owner, as determined pursuant to the LLC Operating Agreement.

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“Force Majeure” shall mean acts, events or occurrences beyond the reasonable control of Operator or Owner which delay or otherwise prevent Operator or Owner from timely performing its respective obligations under this Agreement (other than an obligation to pay money), including fires; floods; epidemics; lightning; earthquakes; quarantine; blockade; governmental acts, orders or injunctions; war; insurrection or civil strife; strikes or labor disputes; provided that strikes by any labor employed by Operator or any sub-contractor at the Site, or lockouts or other labor disputes at the Site, will not constitute force majeure events; sabotage; unusual delays in transportation; explosion; and any other similar acts, events or occurrences, but only to the extent such acts, events or occurrences are beyond the reasonable control of Operator or Owner despite its prudent and diligent efforts to prevent, avoid, delay or mitigate such acts, events or occurrences. Such acts, events or occurrences shall not include those that are the result of willful or negligent actions or inactions of either party.

“Governmental Approvals” means any authorization, consent, concession, license, permit, waiver, privilege or approval from, or filing with, or notice to, or certification from any Governmental Authority.

“Governmental Authority” means any government of the United States, any state of the United States or any political subdivision thereof, and any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government and any other governmental or quasi-governmental entity, instrumentality, agency, authority or commission and any self-regulatory organization or securities exchange in each case, having jurisdiction or authority over the matter in question.

“Indemnifiable Expenses” shall mean liabilities, obligations, losses (excluding loss of anticipated profits), damages, penalties, claims (including claims involving liability in tort, for strict liability or otherwise), actions, suits, judgments, costs, expenses and disbursements (including legal fees and expenses and costs of investigation) of any kind and nature whatsoever.

“Indemnitee” has the meaning set forth in Section 9.3.

“Indemnitor” has the meaning set forth in Section 9.3.

“Interconnection Agreement” means the Interconnection and Wheeling Agreement, dated as of March 9, 2006, by and between Owner and Raft River Rural Electric Cooperative, Inc. (as may be amended, restated, supplemented, otherwise modified or replaced).

“IPCo” has the meaning set forth in the Recitals to this Agreement.

“Ledger Amount” has the meaning set forth in Section 6.4.

“LLC Operating Agreement” means the Amended and Restated Operating Agreement of Owner, dated as of August 9, 2006.

“Management Fee” has the meaning set forth in Section 6.1(a).

“Master Services Agreements” means (i) the Master Service Agreement, dated as of June 26, 2006, by and among the Company, Baker Hughes Oilfield Operations, Inc. and Baker Petrolite Corporation, (ii) the Master Service Agreement, dated as of July 17, 2006, by and between the Company and Weatherford International, Inc., (iii) any other master services agreement that the Company may enter into with respect to contracting work, services, supplies and equipment rental in furtherance of or pertaining to development of the Facility and (iv) any agreement entered into under a master agreement referred to in clause (i), (ii) or (iii).

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“Member” and “Members” has the meaning ascribed thereto in the LLC Operating Agreement.

“O&M Costs” means all operating and maintenance costs of any type, kind or nature reasonably incurred by Operator in owning, leasing, operating and maintaining the Facility.

“Operating Procedures” means the Operating Procedures delivered by Operator from time to time pursuant to Section 2.2(a).

“Operator Parent” means U.S. Geothermal Inc., an Idaho corporation.

“Owner” means Raft River Energy I LLC, a Delaware limited liability company.

“Owner Management Committee” means the Management Committee of Owner.

“Operator Parent Guarantee” means that certain secured Guarantee, dated as of the date hereof, by and between Operator Parent and Owner, pursuant to which the full and punctual performance by the Operator hereunder, including the payment of all obligations when due, is guaranteed for the benefit of Owner.

“Party” means each party to this agreement.

“Person” means any individual, corporation, company, partnership, joint venture, trust, Governmental Authority or unincorporated organization.

“Pipeline Construction Contract” means the Construction Contract, dated as of May 22, 2006, by and between the Owner and IBI d/b/a Industrial Builders (as may be amended, restated, supplemented, otherwise modified or replaced).

“Placed In Service Date” is the date that the Facility is “placed in service” for Federal income tax purposes under Section 45 of the Code.

“Power Line Construction Contract” means the Construction Contract for Well Distribution Lines, dated as of May 16, 2006, by and between the Owner and Raft River Rural Electric Cooperative, Inc. (as may be amended, restated, supplemented, otherwise modified or replaced).

“Prime Rate” shall mean the rate equal to the prime commercial lending rate publicly published from time to time by the Wall Street Journal. For purposes of this Agreement, any change in the Prime Rate shall be effective on the date such change in the Prime Rate is announced.

“Project” has the meaning set forth in the LLC Operating Agreement.

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“Project Permits” has the meaning set forth in the LLC Operating Agreement.

“Proposed Budget” has the meaning set forth in Section 5.2.

“Renewable Electricity Production Credits” has the meaning set forth in the LLC Operating Agreement.

“Second Distribution Period” has the meaning set forth in the LLC Operating Agreement.

“Services” has the meaning set forth in Section 2.2.

“Site” means the project site located in Cassia County, Idaho, approximately 40 miles southeast of Burley, the county seat. The project site encompasses 660 acres of fee land divided into two parcels, both located in Township 15 South Range 26 East, Boise Meridian. The first parcel, which contains the office complex and three geothermal production wells, is 240 acres and is located in Sections 22 and 23. The second parcel, 320 acres, is located in Section 25 and contains one production well and two injection wells. The company also holds seven additional leases. The first parcel covers 160 acres and includes the RRGE#2 geothermal production well. The second parcel encompasses private geothermal rights. This description of the Site is qualified by reference to the map of the Site attached hereto as Exhibit D.

“Spare Parts” means the spare parts which a prudent operator would hold in order to operate the Facility in a good, workmanlike, and commercially reasonable manner.

“Semi-Annual Management Fee” has the meaning set forth in Section 6.4.

“Term” has the meaning set forth in Section 9.1.

ARTICLE II

SERVICES

SECTION 2.1

Appointment.

Owner hereby appoints and retains to provide the Services during the term of this Agreement on the terms and conditions set forth in this Agreement. Operator hereby accepts such appointment and agrees to perform the Services in accordance with the terms and conditions of this Agreement.

SECTION 2.2

Services.

Subject to the LLC Operating Agreement and any limitations or restrictions adopted by the Owner Management Committee in accordance therewith, and subject to Sections 2.4 and 2.6, Operator shall perform or cause to be performed the following development, construction, management, administrative and other support services in connection with the operation of the Facility and the day-to-day business of Owner relating to the Facility (collectively, the “Services”):

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(a)

Development and Construction of the Facility. Operator shall be responsible for managing the development and construction of the Facility in accordance with all Applicable Laws and overseeing the implementation and performance of the Construction Contracts.

(b)

Operation of the Facility. Operator shall be responsible for operating and maintaining the Facility in accordance with all Applicable Laws, the LLC Operating Agreement, the Facility Documents, applicable warranty and insurance requirements, and prudent industry standards (including all Applicable Laws and standards relating to safety, the environment and security). As soon as practicable, and in any event no less than three months prior to the Placed In Service Date, Operator shall deliver to Owner detailed Operating Procedures that Operator deems necessary or appropriate to perform its obligations contemplated by this Section 2.2. Such Operating Procedures shall provide for preventative and ordinary maintenance of the Facility, inventory control (including an inventory of Spare Parts) and tracking of equipment history. Owner shall have the right to approve of any Operating Procedures delivered by Operator, and, if Owner does not approve such procedures, Owner and Operator shall mutually agree on a set of Operating Procedures. Subject to Owner’s reasonable approval, Operator shall prepare and deliver to Owner from time to time any amendment or modification to the Operating Procedures that Operator may deem necessary in its performance of its obligations under this Section 2.2. Operator shall comply with its Operating Procedures. Notwithstanding anything herein to the contrary, no approval by Owner of, or failure by Owner to object to, any Operating Procedures shall be deemed to modify, or to waive any nonperformance by Owner of, any of Owner’s obligations under this Agreement.

(c)

General Management and Administration. Operator shall be responsible for the day-to-day management and administration of Owner’s business relating to the Facility.

(d)

Administration of Facility Documents. Operator shall represent Owner and shall administer and perform, on Owner’s behalf, Owner’s obligations and responsibilities under and consistent with each of the Facility Documents. Without limiting the generality of the foregoing, Operator shall be responsible for giving any notices required from Owner under the Facility Documents, and for procuring, maintaining and administering claims under any and all insurance required to be maintained by Owner pursuant to any of the Facility Documents. Operator shall not represent Owner and shall not administer or perform, on Owner’s behalf, any corporate, organizational or other such internal matters of Owner (including with respect to matters identified in Section 4.6(c) of the LLC Operating Agreement).

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(e)

Billing and Collection of Revenues. Operator shall implement and maintain billing and collection procedures in respect of all accounts receivable and other amounts due Owner under each of the Facility Documents.

(f)

Bank Accounts and Disbursement of Funds. Operator shall establish and maintain in the name of Owner one or more bank accounts as may be required or convenient in the reasonable judgment of Operator in connection with the business of Owner relating to the Facility. Operator shall not commingle Owner funds or bank accounts with Operator funds or bank accounts. Operator is authorized to make disbursements and withdrawals from such accounts in order to pay all O&M Costs, including any payments required under any of the Facility Documents and any insurance premiums, accountants’ fees and other professional services fees, taxes, license fees, property taxes or assessments. Operator shall notify Owner of the need to make deposits to and withdrawals from any such accounts and otherwise inform Owner of disbursements of funds which need to be approved or authorized from any such accounts.

(g)

Accounting and Documentation. Operator shall provide full bookkeeping and accounting (including tax accounting) services to Owner and shall, upon request by Owner, prepare (for signature by Owner) and submit all necessary accounting and (subject to Section 6.7 of the LLC Operating Agreement) tax documentation, certifications, filings and notices required to be submitted by Owner pursuant to the Facility Documents or Applicable Law. Nothing in this Section 2.2(g) shall give Operator the right to use any accounting firm other than those indicated in Section 6.5 of the LLC Operating Agreement with respect to the preparation of audited financial statements and Section 6.7 of the LLC Operating Agreement with respect to preparation and filing of tax returns.

(h)

Licenses and Permits. Operator shall monitor and maintain compliance with all required permits, licenses and Governmental Approvals obtained by or for Owner in connection with the operation of the Facility or otherwise. Where permits must be obtained, modified or renewed by Owner and such responsibility cannot been delegated to another Person, Operator shall prepare any application, filing or notice related thereto, shall cause such materials to be submitted to, and shall represent Owner in contacts with, the appropriate Governmental Authority, and shall perform all ministerial or administrative acts necessary for timely issuance and the continued effectiveness thereof. Copies of all permits, licenses and Governmental Approvals obtained by or for Owner shall be maintained by Operator at its offices.

(i)

Public Relations. Operator shall be responsible for all public and community relations matters of Owner relating to the Facility or the Facility Documents. For the avoidance of doubt, Operator shall administer all public and community relations matters in accordance with the provisions of Article XII of this Agreement.

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(j)

Other Assistance. Operator shall provide any other assistance or services reasonably requested by Owner in connection with the Facility or in connection with the management or administration of any of the Facility Documents.

SECTION 2.3

Personnel.

Operator shall provide and make available, or cause to be provided and made available, as necessary, all professional, supervisory, managerial, administrative and other personnel as are necessary to perform the Services, which personnel may be employees of Operator, Affiliates of Operator or third parties, but in no event shall be employees of Owner. Such personnel shall be qualified and experienced in the duties to which they are assigned. The working hours, rates of compensation and all other matters relating to the employment of individuals employed by Operator or its Affiliates in the performance of the Services shall be determined solely by Operator or its respective Affiliates but shall be substantially similar to the rates of compensation and other matters for employees of Operator that perform similar functions for Operator’s own account.

SECTION 2.4

Standards for Performance of Services.

Operator shall perform the Services in a prudent and efficient manner, in accordance with all Applicable Laws, licenses and prudent industry standards, and in accordance with the applicable terms and conditions of the LLC Operating Agreement and the Facility Documents. Operator shall incur or authorize costs on behalf of Owner hereunder only in accordance with requirements of the LLC Operating Agreement and the Facility Documents.

SECTION 2.5

Authority of Operator.

Owner hereby authorizes Operator to do on behalf of Owner, in Owner’s name, all things which are necessary, proper or desirable to perform the obligations of Owner under the Facility Documents, subject to any covenant or other restriction applicable to Owner or Operator under this Agreement, the LLC Operating Agreement or any Facility Document.

SECTION 2.6

General Limitations.

Notwithstanding anything in this Agreement to the contrary, other than as provided for in the Annual O&M Budget or otherwise approved in writing by Owner, Operator shall not (and shall not permit any of its employees, agents, representatives, Affiliates or sub-contractors to):

(a)

Disposition of Assets. sell, lease, pledge, mortgage, encumber, convey, create any lien on, or make any license, exchange or other transfer or disposition of any property or assets of Owner (a “Disposition”), including any property or assets purchased by Operator pursuant hereto; provided that this clause (a) shall not apply to (i) any sale or similar disposition of any obsolete asset which is no longer used or useful in the operation of the Facility or is being replaced in accordance herewith or (ii) other sales or dispositions not exceeding $100,000 in any 12 month period;

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(b)

Contracts. make, enter into, execute, amend, terminate, waive, modify or supplement any contract or agreement (including any Facility Document) on behalf of or in the name of Owner; provided that this clause (b) shall not apply to any contract or agreement (i) to the extent it effects a Disposition permitted under clause (a) above or an Expenditure permitted under clause (c) below or (ii) any change order under the EPC Contract if the aggregate cost of the changes contemplated thereby does not exceed $100,000 and the aggregate cost of the changes contemplated thereby and by other change orders agreed to pursuant to this clause (ii) for the preceding 12 month period do not exceed $200,000;

(c)

Expenditures. make any expenditure on behalf of or in the name of Owner (an “Expenditure”), or consent or agree to make an Expenditure; provided that (i) this clause (c) shall not apply to an Expenditure made to a Person that is not Operator or an Affiliate of Operator if such Expenditure does not exceed the amount specified for such purpose in the applicable Annual O&M Budget by more than 10% or is approved of by Owner (such approval not to be unreasonably withheld, delayed or conditioned) and (ii) in the event of an emergency affecting the safety of natural persons, endangering the Facility or the property of third parties or resulting in a risk that is reasonably expected to cause a suspension in the operation of the Facility, the Operator shall, without approval from Owner, take all actions as may be reasonable and necessary to prevent, avoid, or mitigate injury, damage, loss or suspension, and shall, as soon as practicable, report any relevant injury, damage or loss, including Operator’s response thereto, to Owner;

(d)

Other Actions. take or agree to take any other action or actions that individually or in the aggregate could reasonably be expected to result in a material adverse effect on Owner or the Facility;

(e)

Disputes and Settlements. settle, compromise, assign, pledge, transfer or release, or consent to the compromise, assignment, pledge, transfer or release of, any claim, action, suit, debt, demand or judgment against or due (directly or indirectly, through an indemnity, reimbursement arrangement or otherwise) by Owner, or submit any such claim, dispute or controversy to arbitration or judicial process, or stipulate in respect thereof to a judgment, or consent to the same; provided that Operator may, without approval from Owner, take any such action with respect to a dispute involving, in the aggregate, less than $100,000 (unless such dispute involves an Affiliate of Operator); or

(f)

Limitation on Transactions. engage in any other transaction on behalf of Owner that is either not permitted pursuant to this Agreement, the LLC Operating Agreement or the Facility Documents or not related to the Facility.

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ARTICLE III

ITEMS TO BE FURNISHED BY OWNER

SECTION 3.1

Access.

Owner shall provide Operator with access to the Facility as may be necessary for Operator’s performance of its obligations hereunder; provided that if Operator needs any such access which is not available through existing ownership interests, leases and licenses held by Owner, Operator shall notify Owner thereof and shall take such commercially reasonable steps as shall be required to obtain such access.

SECTION 3.2

Manuals and Drawings.

Owner shall deliver to Operator copies of any and all Facility operating and maintenance manuals, and any drawings record books and vendor manuals, in the possession of Owner, other than any such manuals, drawings or record books that have been provided by Operator or by the EPC Contractor through Operator.

SECTION 3.3

Cooperation.

Owner shall cooperate with any reasonable request of Operator in the performance of Services hereunder.

ARTICLE IV

REPORTING AND INSPECTION

SECTION 4.1

Accounts and Reports.

Operator shall furnish or cause to be furnished to Owner and each Member the following reports:

(a)

Within 15 days after the end of each calendar month, a report, in form and substance reasonable satisfactory to Owner, containing (i) a summary of the operations and the financial results of operations during such month (or, prior to the commencement of operation of the Facility, a summary of the construction or testing progress during such month, in each case together with a comparison to the schedule for construction and testing contemplated by the EPC Contract), and (ii) a table of the actual O&M Costs during such month compared to the then current Annual O&M Budget.

(b)

Within 45 days after the end of each calendar quarter, (i) an unaudited balance sheet of Owner as at the end of such month and unaudited statements of income and of changes in cash flow of Owner for such quarter and for the year-to-date period ended on the last day of such quarter, in each case prepared in accordance with GAAP consistently applied and setting forth in comparative form Owner’s financial statements for the corresponding periods for the prior Fiscal Year, if any. Such quarterly financial statements shall be certified on behalf of Operator by the chief financial officer of Operator stating that, to the best of his or her knowledge, such statements are consistent with the books and records of Owner, have been prepared in accordance with GAAP consistently applied (except as noted and other than as stated in the accompanying notes) and fairly present the financial condition of Owner at the date thereof and for the periods covered thereby, subject to changes resulting from year-end adjustments and accruals.

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(c)

Within 90 days after the end of each Fiscal Year, an audited balance sheet of Owner as of the end of such year and audited statements of income and of changes in cash flow of Owner for such year, including comparisons to the prior year, prepared in accordance with GAAP consistently applied. Owner’s annual financial statements shall be certified by a nationally or regionally recognized accounting firm selected by the Owner Management Committee.

(d)

No later than 30 days prior to the start of each new Fiscal Year, projections and a proposed budget for such new Fiscal Year, all in reasonable detail and prepared on a monthly basis, and promptly after the preparation thereof, any revisions to such projections.

(e)

As promptly as practicable, any notice or written assertion of noncompliance by Owner with any Applicable Law or Facility Document which could reasonably be expected to result in a material adverse effect on the business, assets, condition (financial or other), results of operations or prospects of Owner.

(f)

Any other financial or other information available as any Member shall reasonably request.

SECTION 4.2

Inspections.

Owner and its Members (with the assistance of consultants, assistants and agents as they shall deem proper) shall have full right to inspect the Facility (including meters) and the Site at any time upon reasonable notice to Operator, provided that the proposed time for inspection does not, in Operator’s reasonable judgment, materially interfere with the performance of the Services in accordance herewith, in which case the Operator shall advise as to what time an inspection may be conducted without materially interfering with the performance of the Services in accordance herewith. Operator agrees to cooperate with Owner and its Members (and their consultants, assistants and agents), and assist them in any such inspection of the Facility or Site. Operator acknowledges that IPCo may have certain rights to inspect the Facility pursuant to the Energy Sales Agreement, and Operator agrees to cooperate with any such inspections.

SECTION 4.3

Books and Records.

Owner and its Members shall have the right to inspect Operator’s financial accounts, books and records (including meter records) relating to the operation of the Facility at any time upon reasonable notice, and Operator shall retain all such information for a minimum of five years, or for such longer period as Owner may, in writing, reasonably request.

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ARTICLE V

BUDGET

SECTION 5.1

Initial Budget.

The Annual O&M Budget is attached to this Agreement as Exhibit B for (i) the months in Fiscal Year 2006 from the date hereof to Fiscal Year end and (ii) Fiscal Year 2007.

SECTION 5.2

Annual O&M Budget Process.

(a)

Not later than sixty (60) days prior to the beginning of each Fiscal Year during the term hereof, commencing with Fiscal Year 2008, Operator shall deliver to Owner a budget for such Fiscal Year (the “Proposed Budget”). The Proposed Budget shall provide reasonable detail regarding the O&M Costs that Operator expects to incur for each month during such Fiscal Year, including a provision for required reserves. Such Proposed Budget shall be accompanied by Operator’s forecast of the expected output for the Facility during each such month (including the expected revenue associated therewith) and an indication of any scheduled outages due to regular maintenance. Such Proposed Budget shall also be accompanied by an estimate of O&M Costs and expected output for each of the three Fiscal Years after the Fiscal Year to which the Proposed Budget relates.

(b)

Not later than thirty (30) days after its receipt of a Proposed Budget, Owner shall request a meeting of the Owner Management Committee to review such Proposed Budget. Operator agrees to cooperate with any reasonable request of the Owner Management Committee or any Member relating to its review of a Proposed Budget. The Owner Management Committee may approve of a Proposed Budget as presented or, in consultation with Operator, may approve of another budget with respect to expected O&M Costs. The budget for any Fiscal Year, as so approved by the Owner Management Committee, shall be the Annual O&M Budget for such Fiscal Year; provided that if a budget is not approved by the Owner Committee for any Fiscal Year as of the commencement of such Fiscal Year, or if the budget as so approved does not apply to specified categories of O&M Costs, then (until a budget, or the relevant portion thereof, for such Fiscal Year is approved by the Owner Management Committee) the Annual O&M Budget for such Fiscal Year shall be deemed to be the Annual O&M Budget for the preceding Fiscal Year (if no portion of a budget was approved), or shall be deemed to include the specific categories of O&M Costs from the preceding Annual O&M Budget (if the budget as approved did not approve particular categories of O&M Costs), as the case may be, with each relevant O&M Cost category being adjusted to give effect to any increases in insurance premiums, utility charges and similar third party expenses over which Operator has no control (but still subject to Operator’s obligations under Section 2.4).

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(c)

From time to time during any Fiscal Year, but not more than 2 times in any Fiscal Year (exclusive of any request for approved specific Expenditures under Section 2.6(c)), Operator may notify Owner of proposed modifications to specific items in the then-applicable Annual O&M Budget. Any such notice shall include reasonable detail regarding the proposed modification and the reasons therefore. Any such modification which is approved by the Owner Management Committee shall be deemed to be part of the Annual O&M Budget, effective upon such approval.

ARTICLE VI

COMPENSATION AND REIMBURSEMENT

SECTION 6.1

Management Fee.

(a)

Subject to the provisions of Sections 6.3 and 6.4 hereof, during the term of this Agreement, Owner shall pay Operator a monthly fee equal to the amount scheduled for such period on Schedule 6.1 hereto (the “Management Fee”).

(b)

If, within fifteen (15) days after the end of any calendar month, the amount of cash available to Owner from the conduct of its business relating to the Facility, after taking into account any amounts set aside by Owner as operating or other reserves, shall not be sufficient to pay all costs and expenses necessary to operate and maintain the Facility and conduct the business and affairs of Owner related to the Facility incurred during or in respect of such month (including all costs reimbursable, and the Management Fee payable, to Operator hereunder in respect of such month), Operator shall defer, and Owner shall not be required to pay currently, that portion of the Management Fee for such month which is equal to the amount of such deficiency (a “Deferred Amount”). The Deferred Amount shall not accrue interest. So long as any Deferred Amount shall remain unpaid and be outstanding, (i) Owner shall not make any distribution of cash to the Members and (ii) the amount of cash available to Owner from the conduct of its business relating to the Facility, after taking into account any amounts set aside by Owner as operating or other reserves, at the end of any calendar month shall be applied as follows: first, to pay all costs and expenses necessary to operate and maintain the Facility and conduct the business and affairs of Owner related to the Facility incurred during or in respect of such month, including all costs reimbursable, and the Management Fee payable (to the extent such Management Fee is not deferred pursuant to the second preceding sentence), to Operator hereunder in respect of such month; and, thereafter, to pay to Operator any then outstanding Deferred Amounts in the order in which such Deferred Amounts were incurred until such Deferred Amounts have been paid in full. Any Deferred Amount remaining unpaid after such application of funds shall continue to accrue and be payable until the same shall have been paid in full in accordance with the preceding sentence.

(c)

In the event that the Facility is not “placed in service” for U.S. Federal income tax purposes under Section 45 of the Code prior to December 31, 2007 (or such later date as is required to qualify the Project for Renewable Electricity Production Credits), the Management Fee in each period following such date, as reflected on Schedule 6.1 hereto, will be reduced by ninety percent (90%), and Owner shall only be required to pay Operator a Management Fee for each such affected period equal to ten percent (10%) of the amount otherwise scheduled for such period on Schedule 6.1 hereto. On the first day of the Second Distribution Period, the Management Fee for all periods thereafter shall revert to the full amount scheduled for such period on Schedule 6.1 hereto.

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SECTION 6.2

Reimbursement of O&M Costs.

Operator shall reimburse itself for its payment of O&M Costs permitted under this Agreement as scheduled for such period on Exhibit A hereto, in each case out of Owner’s bank accounts established as contemplated by Section 2.2(f).

SECTION 6.3

Semi-Annual Adjustments to Management Fee.

(a)

Within 60 days following the end of each of the Owner’s second Fiscal Quarters and the end of each of the Owner’s Fiscal Years:

(i)

The aggregate dollar amount of budgeted O&M Costs as reflected in the Annual O&M Budget for the relevant two Fiscal Quarter period shall be subtracted from the aggregate dollar amount of expected revenues from sales of energy produced by the Facility for that two Fiscal Quarter period, as set forth on Schedule 6.3 hereto; the difference, which shall be a positive number, shall be called “Expected Profit”.

(ii)

The aggregate dollar amount of actual O&M Costs for that two Fiscal Quarter period shall be subtracted from the actual revenues from sales of energy produced by the Facility for that two Fiscal Quarter period; if the difference is a positive number, the result shall be called “Actual Profit”, if the difference is a negative number, the result shall be called “Actual Loss”.

(iii)

The result obtained following the calculations required by paragraph (i) shall be compared to the result obtained following the calculations required by paragraph (ii).

(b)

In the event that, for any two Fiscal Quarter period, Actual Profit exceeds Expected Profit, then Owner shall pay to Operator a bonus. The bonus shall have three components and shall be calculated as follows:

(i)

For the first $10,000 by which the actual result exceeds the expected result, in dollars, the first component of the bonus shall equal the product of the difference between the actual result and the expected result, in dollars, multiplied by ten percent (10%); plus

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(i)

If the difference between the actual result and the expected result, in dollars, is more than $10,000, the second component of the bonus shall equal the product of the difference between the actual result and $10,000, in dollars, multiplied by fifty percent (50%); provided that this second component of the bonus shall in no event exceed $20,000; and provided, further, that in the event that Owner intends to enter into any amendment of or replacement for the Energy Sales Agreement as it exists as of August 9, 2006, to allow for the sale of greater than 10 average MW per month from the Facility, Owner shall provide Operator with advance notice of its intention, Operator shall propose adjustments to this second bonus component to the Owner’s Management Committee within ten (10) days of receiving such notice, and the Owner’s Management Committee shall have agreed with Operator on adjustments to this second bonus component prior to entering into such amendment of or replacement for the Energy Sales Agreement; plus

(ii)

If the difference between the actual result and the expected result, in dollars, is more than $10,000, the third component of the bonus shall equal ((A) minus (B)) multiplied by (C), where (A) means the difference between the actual result and $10,000, in dollars, (B) means the dollar amount that constitutes the second component of the bonus (if any), and (C) means ten percent (10%).

The bonus component set forth in clause (ii) shall be effective from the date of this Agreement. The bonus components set forth in clauses (i) and (iii) shall first be effective for the two Fiscal Quarter period immediately following the four year anniversary of the Placed In Service Date (i.e., the date that is 48 months from the Placed In Service Date) and shall not be payable in respect of any two Fiscal Quarter period prior to the four year anniversary of the Placed In Service Date.

(c)

In the event that, for any two Fiscal Quarter period: (A) Expected Profit exceeds Actual Profit or (B) there is Actual Loss when there was Expected Profit, then Operator shall pay to Owner:

(i)

if the absolute value of the difference between the actual result and the expected result, in dollars, is less than or equal to $175,000, then Operator shall pay to Owner an amount equal to the product of the absolute value of the difference between the actual result and the expected result, in dollars, multiplied by ten percent (10%); and

(ii)

if the absolute value of the difference between the actual result and the expected result, in dollars, is in excess of $175,000, then Operator shall pay to Owner an amount equal to absolute value of the difference between the actual result and the expected result, in dollars.

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Clause (ii) shall be effective from the date of this Agreement; however, no payment obligation shall arise under clause (i) before the two Fiscal Quarter period immediately following the four year anniversary of the Placed In Service Date (i.e., the date that is 48 months from the Placed In Service Date).

(d)

In the event that Actual Profit equals Expected Profit, then no additional payment shall be due.

SECTION 6.4

Ledger Amounts.

Notwithstanding the amount that would be payable in respect of two Fiscal Quarter period by Operator to Owner by operation of Section 6.3(c), Operator shall not be required to make a payment in respect of that two Fiscal Quarter period in excess of the Management Fee for that two Fiscal Quarter period, as determined by aggregating the monthly Management Fee payments made to Operator in each month of that two Fiscal Quarter period as set forth on Schedule 6.1 (the “Semi-Annual Management Fee”). If the amount that would be payable in respect of any two Fiscal Quarter by Operator to Owner by operation of Section 6.3(c) at the end of such two Fiscal Quarter period exceeds the Semi-Annual Management Fee for that period, the excess amount shall be recorded in a ledger to be maintained by the Owner and added to all other such excess amounts for any prior periods (the “Ledger Amount”). The Ledger Amount shall be (i) set-off against Management Fees to be paid to Operator in future periods and (ii) set-off against any amount that would be payable by Owner to Operator in any future period by operation of Section 6.3(b), or any combination of the applications contemplated by clauses (i) and (ii), until the Ledger Amount is extinguished in full.

SECTION 6.5

Manner and Time of Payment.

(a)

If any amount due under Section 6.1, 6.2 or 6.3 is not paid within five Business Days after the due date therefor (other than where funds sufficient to pay such amounts are available in Owner’s bank accounts established as contemplated by Section 2.2(f)), such amount shall accrue interest each day from (and including) such due date to (but not including) the date on which such amount is paid at a rate per annum (computed on the basis of the actual number of days elapsed over a year of 365 days or 366 days, as the case may be) equal to the Prime Rate plus two percent (2%).

(b)

Notwithstanding the foregoing, no amount shall be payable to Operator under Sections 6.1, 6.2 or 6.3, and no interest shall accrue under Section 6.5(a), for so long as Operator is in default with respect to any of its material obligations hereunder or such amount is being disputed in accordance with Section 13.9.

SECTION 6.6

Accounting and Audit Right.

Operator shall keep and maintain, in accordance with GAAP consistently applied, all necessary books, records, accounts and other documents sufficient to accurately and completely reflect all Management Fees, bonuses, O&M Costs and other reimbursable costs and expenses incurred pursuant to this Agreement. Such records shall include receipts, memoranda, vouchers and accounts of every kind and nature, as well as complete summaries and reports setting forth all reimbursable man hours expended, payroll incurred and the monthly salary and hourly rate of each and every employee whose payroll costs are included as costs hereunder. Owner, any Member, and any representative of or firm of independent auditors retained by Owner or any Member, shall have access, upon not less than five (5) days advance written notice, to all such records maintained by Operator, for the purposes of auditing and verifying such costs claimed to be due and payable hereunder. Owner shall have the right to reproduce any such records, and Operator shall keep and preserve all such records until the close of the calendar year that is two (2) years from and after the year in which such costs were incurred.

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ARTICLE VII

COMPLETION

SECTION 7.1

Undertakings.

Operator agrees to take all actions necessary or appropriate to cause Final Completion to occur by the Final Completion Date. The foregoing obligation of Operator shall be absolute and unconditional; provided that Owner shall not be obligated to pay any amount pursuant to this Section 7.1 which Owner would not be obligated to pay pursuant to Section 7.2. No amendment, invalidity, breach or unenforceability of any of the Construction Contracts, or waiver of rights thereunder, by any party thereto, shall affect, impair, release or constitute a defense to any of Operator’s obligations hereunder.

SECTION 7.2

Completion Funds.

Operator agrees to pay to Owner an amount necessary and sufficient to cause Final Completion to occur by the Final Completion Date, or as soon as reasonably practicable thereafter, to the extent that the aggregate dollar amount ultimately needed to cause Final Completion to occur, as determined by Owner, exceeds the Budgeted Amount for Completion. Operator hereby agrees that it has an unconditional obligation, after the Budgeted Amount for Completion has been fully utilized, to pay any and all such amounts necessary to cause Final Completion to occur.

ARTICLE VIII

INSURANCE

SECTION 8.1

Liability Insurance to be Provided by Operator.

Without limiting the generality of Section 2.2(c), during the term of this Agreement, Operator shall maintain in effect the following insurance in the following amounts:

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Worker’s Compensation	Statutory
Employer’s Liability	$1,000,000 bodily injury each accident
	$1,000,000 bodily injury by disease, policy limit
	$1,000,000 bodily injury by disease, each employee
Commercial General	$1,000,000 combined single limit per occurrence $2,000,000 in the aggregate
Liability including:
Contractual Liability
Product/Completed Operation Liability
Independent Contractor Liability
XCU Hazards Liability
Comprehensive Automobile	$1,000,000 combined single limit per occurrence
Liability
Covering Owned, Leased or
Rented Vehicles
Excess Liability (Umbrella)	$5,000,000 per occurrence and in the aggregate
All Risk of Physical Loss or Damage	Up to replacement cost
Business Interruption Insurance	Limit to be equal to one year at commercially reasonable terms

If any insurance required to be maintained by Operator hereunder ceases to be reasonably available and commercially feasible in the commercial insurance market, Operator shall provide written notice to Owner, accompanied by a certificate from an independent insurance advisor of recognized national standing, certifying that such insurance is not reasonably available and commercially feasible in the commercial insurance market for plants of similar type. Upon receipt of such notice, subject to Section 8.5, Operator shall use commercially reasonable efforts to obtain other insurance which would provide commercially feasible protection against the risk to be insured and Owner shall not unreasonably withhold its consent to modify such requirement.

Operator shall further contractually require its subcontractors to carry Worker’s Compensation and appropriate Commercial General Liability coverages during their on-site operations.

SECTION 8.2

Certificates.

Upon request, Operator shall furnish certificates of insurance to Owner evidencing the insurance required pursuant to this Article VIII.

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SECTION 8.3

Revisions and Deductibles.

None of the policies required to be carried under this Agreement shall be materially revised or canceled without the prior written consent of Owner. Any deductible payable by Operator under such insurance policies shall be reimbursed by Owner unless the loss was caused by the failure of the Operator to perform the Services in accordance with Section 2.4 or was due to the negligence or willful misconduct of Operator.

SECTION 8.4

Form and Content.

All policies, binders, or interim insurance contracts with respect to insurance maintained by Operator pursuant to this Article VIII shall:

(a)

be placed with insurance companies acceptable to Owner;

(b)

designate Operator and Owner as additional insured’s (except for Worker’s

Compensation and Employer’s Liability insurance coverage); such insurance will be primary and not excess or contributing in respect of any other insurance available to Operator, Owner, or any additional insureds;

(c)

waive any right of subrogation of the insurers thereunder against Owner or Operator and any right of the insurers to any set off or counterclaim or any other deduction whether by attachment or otherwise, in respect of any liability of any such person insured under such policy; and

(d)

provide that not less than thirty (30) days’ prior written notice shall be given to all named insureds in the event of cancellation, termination or material change in the policies whether initiated by Operator or the issuer or underwriter of such insurance.

SECTION 8.5

Owner May Obtain Insurance.

In the event Operator fails to maintain the policies of insurance required to be maintained under this Article VIII, Owner may, at its option, provide such insurance and charge the cost thereof to Operator; provided that such action by Owner shall not release Operator of its obligations to maintain such insurance.

ARTICLE IX

TERM AND TERMINATION

SECTION 9.1

Term.

The term of this Agreement shall commence on the Effective Date and shall terminate upon the earlier of (i) August 9, 2028, and (ii) mutual agreement of Owner and Operator (the “Term”).

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SECTION 9.2

Termination by Owner.

Owner may terminate this Agreement as follows (in each case without prejudice to any other right it may have resulting from any breach or default hereunder by Operator):

(a)

Owner may terminate this Agreement upon notice to Operator in the event (i) of the Bankruptcy of Operator, (ii) that Operator Parent (a) fails to comply with or perform any agreement or obligation under the Operator Parent Guarantee and any applicable grace period has elapsed or (b) disaffirms, disclaims, repudiates or rejects, in whole or in part, or challenges the validity of, the Operator Parent Guarantee, (iii) that the Operator Parent Guarantee expires, is terminated or fails and ceases to be in full force and effect (other than in accordance with its terms) prior to the stated Term of this Agreement and satisfaction of all obligations of the Operator under this Agreement or (iv) that a representation made or repeated, or deemed to be made or repeated by Operator Parent in the Operator Parent Guarantee proves to have been incorrect or misleading in any material respect when made or repeated, or deemed to have been made or repeated.

(b)

Owner may terminate this Agreement upon five days’ prior notice to Operator if Operator: (i) fails to comply with the performance standards set forth in the first sentence of Section 2.4 of this Agreement; (ii) fails to make prompt payment to the EPC Contractor or to any subcontractor for equipment, supplies or labor, (iii) defaults in any material obligation under this Agreement and fails to cure such default within thirty (30) days of receipt of notice thereof from Owner); provided that if such default does not involve solely the payment of money and can be cured within an additional 60 days, then so long as Operator is diligently pursuing such cure and such default does not create any material risk of injury to natural persons or property, such additional 60-day period, or (iv) Operator Parent ceases to be a Member, Operator ceases to be a wholly-owned subsidiary of Operator Parent or the guarantee of Operator’s obligations provided by Operator Parent on the date hereof ceases to be in full force and effect.

(c)

Owner may terminate this Agreement upon thirty days’ prior notice to Operator, in the event (i) Owner (or Operator, on behalf of Owner) sells, transfers, conveys, or otherwise disposes of all or substantially all of the Facility or (ii) the Energy Sales Agreement is terminated prior to its stated expiration date and not immediately replaced.

SECTION 9.3

Termination by Operator.

Operator may terminate this Agreement as follows (in each case without prejudice to any other right it may have resulting from any breach or default hereunder by Owner):

(a)

Operator may terminate this Agreement upon ten business days’ prior notice to Owner if Owner: defaults in any material obligation under this Agreement and fails to cure such default within thirty (30) days of receipt of written notice thereof from Operator; provided that if such default does not involve solely the payment of money and can be cured within an additional 60 days, then so long as Owner is diligently pursuing such cure, such additional 60-day period.

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(b) Operator may terminate this Agreement upon ninety (90) days’ prior notice to Owner in the event that Operator Parent ceases to be a Member (other than as a result of any voluntary transfer by Operator Parent under the LLC Operating Agreement).

SECTION 9.4

Rights Upon Termination.

(a)

Upon any expiration or termination of this Agreement:

(i)

Operator shall deliver all Facility materials and documents to Owner in accordance with Section 13.12, and shall cooperate with Owner and any entity engaged by Owner in replacement of Operator in the transfer of the operations of the Facility to Owner or a new operator of the Facility designated by Owner. Without limiting the foregoing, Operator shall train personnel of Owner or the new operator to operate the Facility and provide Owner and the new operator with information, data and assistance necessary for the safe and efficient operation and maintenance of the Facility (including the Operating Procedures, the prior operating history of the Facility and other details relevant to the management of the Facility); provided that Operator shall not have to undertake such training for more than ninety (90) days and, during such period, Operator shall be entitled to half of all Management Fees it would have been entitled to had this Agreement not been terminated. Operator shall leave the Facility with a full inventory of Spare Parts (located at the Site) and in good operating condition, normal wear and tear excepted. Operator shall maintain insurance in accordance with the terms of this Agreement until the date Operator vacates the Facility; provided that Operator shall not terminate or cancel any such insurance without providing thirty (30) days advance notice of such termination or cancellation to Owner. Operator shall execute all documents and take all other reasonable steps requested by Owner which may be required to assign to and vest in Owner all rights, benefits, interests and titles in connection with such contracts or obligations.

(ii)

Operator shall provide Owner with the non-exclusive right to continue to use any and all patented and/or proprietary information of Operator that Owner reasonably deems necessary to perform the Services. Furthermore, Owner shall have the right to take possession of all of the equipment and supplies located at the Facility for the purposes of performing the Services and may employ any other person, firm, corporation or other entity to perform the Services by whatever method provided herein.

(iii)

Operator shall, at Owner’s request and at Owner’s expense, assist Owner in preparing an inventory of all material, equipment, Spare Parts and supplies in use or in storage at the Facility; assign to Owner all subcontracts and other contractual agreements as may be designated by Owner; and remove from the Site all such equipment, supplies, and rubbish as Owner may reasonably request.

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(iv)

In the event of any termination, Owner shall pay all amounts then due to Operator, including fees, bonuses and any unreimbursed O&M costs advanced by Operator then due. Notwithstanding the foregoing, Owner shall have the right to set off any amounts Operator owes to Owner in making such payment.

(b)

Expiration or termination of this Agreement shall not relieve any party hereto of liability which has accrued or arisen prior to the date of such expiration or termination.

SECTION 9.5

Suspension of Services.

Owner by written notice may require Operator to suspend all or a portion of the Services for a specified period of time. During such suspension, Owner will not seek to replace Operator or hire any other party to provide services without Operator’s consent. In the event any Services are suspended by Owner or by an event of Force Majeure, Operator shall be relieved of any obligations hereunder, to the extent such obligations are affected by such suspension. During the period of suspension or Event of Force Majeure, Operator shall minimize expenditures to control costs and activities of Operator during the suspension or Event of Force Majeure.

ARTICLE X

INDEMNIFICATION

SECTION 10.1

By Operator.

Operator shall indemnify, defend and hold harmless Owner and the Members, and all of their respective officers, directors, employees, agents and representatives, and their Affiliates (other than any Affiliate of Operator), from and against any and all Indemnifiable Expenses arising out of or resulting from (i) the gross negligence or willful misconduct of Operator or any contractor or subcontractor retained by it, or any its officers, directors, agents, employees or personnel of any of them, or (ii) a breach of this Agreement by Operator.

SECTION 10.2

By Owner.

Owner shall indemnify, defend and hold harmless Operator, its Affiliates and all of their respective officers, directors, employees, agents, partners, shareholders and representatives from and against any and all Indemnifiable Expenses arising out of or resulting from the development, construction, operation and management of the Facility; except to the extent such Indemnifiable Expenses arise out of or result from Operator’s gross negligence, willful misconduct or breach of this Agreement.

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SECTION 10.3

Indemnification Notices.

Whenever a party entitled to indemnification under Section 10.1 or 10.2 of this Agreement (an “Indemnitee”) shall learn of a claim which, if allowed (whether voluntarily or by a judicial or quasi-judicial tribunal or agency), would entitle such Indemnitee to indemnification under Section 9.1 or 9.2 of this Agreement, before paying the same or agreeing thereto, the Indemnitee shall promptly notify the party required to pay such indemnification (the “Indemnitor”) in writing of all material facts within the Indemnitee’s knowledge with respect to such claim and the amount thereof; provided that the Indemnitee’s right to indemnification shall be diminished by the failure to give prompt notice only to the extent that the Indemnitee’s failure to give such notice was prejudicial to the interests of the Indemnitor. If, prior to the expiration of twenty (20) days from the giving of such notice, the Indemnitor shall request, in writing, that such claim not be paid, the Indemnitee shall not pay the same, provided that the Indemnitor proceeds promptly to settle or litigate, in good faith, such claim. The Indemnitee shall have the right to participate in any such negotiation, settlement or litigation; provided that if any such claim to which such negotiation, settlement or litigation relates involves amounts in excess of the limitation on liability set forth in Section 9.1, then the Indemnitor shall not settle or compromise such claim unless approved by the Indemnitee. The Indemnitee shall not be required to refrain from paying any claim which has matured by a court judgment or decree, unless an appeal is duly taken therefrom and execution thereof has been stayed, nor shall it be required to refrain from paying any claim where the delay to pay such claim would result in the foreclosure of a lien upon any of the property of the Indemnitee, or where any delay in payment would cause the Indemnitee an economic loss, unless the Indemnitor shall have agreed to compensate the Indemnitee for such loss.

SECTION 10.4

Limitations of Liability.

Notwithstanding any provision in this Agreement to the contrary, neither party, nor their respective Affiliates, nor any of their respective officers, directors, employees, agents, shareholders, partners or representatives, shall have any liability in tort, contract or otherwise to any other party or its Affiliates for (i) any consequential or indirect loss or damage, including loss of revenues, loss of profits, cost of capital, loss of goodwill, increased operating costs or (ii) any other special, punitive or incidental damages whatsoever arising out of or resulting from this Agreement.

ARTICLE XI

EVENT OF FORCE MAJEURE

Neither party shall be considered in default in the performance of its obligations under this Agreement to the extent that the performance of any such obligation is prevented or delayed by any Force Majeure. The party claiming Force Majeure shall give written notice to the other party of any Force Majeure within a reasonable period of time not to exceed ten (10) days after the party claiming the Force Majeure has knowledge of such event. Such notice shall specify the length of interruption of performance of obligations expected to be occasioned by such event and any additional costs expected to be incurred by Operator by reason of such event and shall substantiate the same to the reasonable satisfaction of Owner. The party claiming Force Majeure shall provide the other party with periodic supplemental notices during the period that the Force Majeure continues. Such supplemental notices shall keep the other party informed of any change, development, progress or other relevant information concerning the Force Majeure event. The party claiming Force Majeure shall use diligent and prudent efforts to avoid and minimize the effects of such Force Majeure, but Operator shall not be required to subcontract the Services or to work additional hours for which premium time is payable or to schedule additional work shifts if such contracting, additional hours or additional shifts would not have been required prior to the occurrence of such Force Majeure. Notwithstanding the foregoing, Operator shall take such action if Owner shall agree to pay all reasonable applicable additional charges with respect thereto (less any insurance proceeds received by Operator in respect thereof) and the Services directed to be performed are not prohibited by any applicable labor contract or law.

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ARTICLE XII

CONFIDENTIALITY

SECTION 12.1

Confidential Information.

Each Party agrees (on behalf of itself and each of its Affiliates, members, directors, officers, employees and representatives) that, except as may otherwise be agreed by the Party disclosing Confidential Information, the Party receiving Confidential Information will hold in complete confidence, in accordance with its customary procedures for handling confidential information and in accordance with safe and sound practices, and not disclose it to any other Person; provided, that the receiving Party may disclose Confidential Information:

(a)

to those of its and its Affiliates’ officers, directors, employees, counsel, auditors, accountants, examiners, consultants, advisors and sources of financing who need to know such Confidential Information for the purpose of discussing, advising with respect to or evaluating the Project, the Owner (or any member thereof) or the Operator or an investment in the Project, the Owner (or any member thereof) or the Operator (it being understood and agreed that the receiving Party shall have advised such persons of their obligations concerning the confidentiality of all client affairs and information and shall instruct such persons to maintain the confidentiality of such Confidential Information);

(b)

as may be required by a rule or other requirement of a securities regulator, a stock exchange or a self-regulatory organization;

(c)

in or pursuant to any offering statement or similar document provided to purchasers or potential purchasers of any direct or indirect ownership interests in the Owner (or any member thereof) or the Operator;

(d)

in an action or proceeding brought in pursuit of its rights or in the exercise of its remedies under this Agreement or any other Facility Document;

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(e)

to any rating agency or potential lender to the Owner (or any member thereof) or the Operator;

(f)

to any provider or potential provider of hedging or risk management in connection with any transaction related to the transactions contemplated by the Facility Documents; and

(g)

as requested or required in connection with a judicial, administrative or regulatory proceeding in which a Party or a partner, officer, member, director, employee or Affiliate thereof is involved, pursuant to a court order or subpoena or regulatory or government inquiry or demand or as otherwise by law or regulation.

In the event that the receiving Party receives a request to disclose any Confidential Information under clause (g) in the prior sentence, it will (i) promptly notify the disclosing Party thereof (to the extent permitted by law or regulation and reasonably practicable) so that the disclosing Party may seek a protective order or otherwise seek to resist or narrow such request and (ii) if the receiving Party is nonetheless required to make such disclosure or if it is advised by its counsel that such disclosure is necessary, it will take reasonable steps, at disclosing Party’s request and expense, to attempt to obtain or help the disclosing Party obtain an order or other reliable assurance that confidential treatment will be accorded to such portion of the disclosed information.

SECTION 12.2

Consultation.

Each Party agrees to consult with the other Party before issuing any press release or otherwise making any public or press statement with respect to this Agreement, the transactions contemplated hereby and the Facility and the Site and, except as may be necessary for such Party or any of its Affiliates to comply with the requirements of Applicable Law or of any stock exchange or self-regulatory organization, agrees not to issue any such press release or make any such public or press statement without the prior written approval of the other Party, which shall not be unreasonably withheld; provided, that written approval shall be deemed to be given by any Party that fails to respond within five days of receiving the notice of intention from a Party to issue a press release or make any public or press statement with respect to this Agreement, the transactions contemplated hereby and the Facility and the Site.

SECTION 12.3

Tax Treatment and Structure.

Notwithstanding anything herein to the contrary, any Party (and any owner, member, partner, director, officer, employee, agent, representative, adviser of any Party, and any Affiliate of the foregoing) may disclose to any and all Persons, without limitation of any kind, the tax treatment and tax structure of the transactions contemplated by this Agreement and all materials of any kind (including opinions or other tax analyses) that are provided to it relating to such tax treatment and tax structure; provided, that any such information relating to the U.S. federal income tax treatment or tax structure shall remain subject to the provisions of this Article XII (and the foregoing sentence shall not apply) to the extent reasonably necessary to enable any Person to comply with applicable securities laws. For this purpose, “tax treatment” means U.S. federal income tax treatment and “tax structure” is limited to any facts relevant to the U.S. federal income tax treatment of the transactions.

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SECTION 12.4

Securities Offering.

Notwithstanding any of the foregoing in this Article XII, in connection with any offering of securities by Owner or Operator or an Affiliate thereof (the “Issuer”), in which Goldman, Sachs & Co. or an Affiliate thereof (the “GS Entity”) is involved as underwriter, dealer, agent or other similar participant, nothing in this agreement shall (i) prevent either the Issuer or the GS Entity from complying with all applicable disclosure laws, regulations and principles in connection with such offering or sale of securities, (ii) restrict the ability of the GS Entity to consider information for due diligence purposes or to share information with other underwriters participating in such offering or sale of securities, (iii) prevent the GS Entity from retaining documents or other information in connection with due diligence or (iv) prevent the GS Entity from using any such documents or other information in investigating or defending itself against claims made or threatened by purchasers, regulatory authorities or others in connection with such an offering or sale of securities.

ARTICLE XIII

MISCELLANEOUS PROVISIONS

SECTION 13.1

Representations and Warranties.

Each party, as and to the extent specified below, makes the following representations and warranties, as of the Effective Date, to the other party:

(a)

Corporate Status and Authorization. Such party is validly formed, existing and in good standing under the laws of the jurisdiction of its organization. Such party has all necessary power and authority to enter into and perform its obligations under this Agreement.

(b)

Authorization. The execution, delivery and performance by such party of this Agreement, and the consummation of the transactions contemplated hereby, have been authorized by all necessary corporate action on the part of such party and do not require any authorization or approval of any director, officer, member or Owner of such party that has not been given or obtained.

(c)

Validity. This Agreement has been duly executed and delivered by such party and constitutes the valid and binding obligation of such party, enforceable against such party in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium and other laws affecting the rights of creditors generally and by general principles of equity.

(d)

No Conflict. The execution and delivery of this Agreement and the performance by such party in accordance with its terms do not and will not:

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(i)

violate or conflict with the constitutive documents of such party;

(ii)

violate or conflict with any Applicable Law or any order, decree, judgment, consent, license, permit or other approval of any court or other Governmental Authority which is binding on such party or the property of such party; or

(iii)

violate, result in a default under or result in the termination, acceleration or mandatory prepayment of (with or without the giving of notice, the passage of time or both) any obligation under any contract or indebtedness to which such party is a party or, by which such party or any of its properties are bound.

SECTION 13.2

Relationship of Parties.

Operator shall be an independent contractor with respect to the performance of the Services hereunder. Nothing in this Agreement shall be construed to create between the parties an association, trust, partnership, joint venture or similar business association or relationship, or impose any trust or partnership or similar duty on any party. In no event shall any party represent to any other Person that any such association, trust, partnership, joint venture or similar business association or relationship has been formed. Except as expressly provided herein, nothing in this Agreement shall be construed so as to make any party an agent of the other party, and no agent or representative of either party has or shall have the authority to make, and the parties shall not be bound by or be liable for, any statement, representation, promise, agreement or other binding commitment of any kind on behalf of any other party.

SECTION 13.3

Amendments.

No amendment, modification or other variation of any of the terms of this Agreement will be effective unless it is made or confirmed in writing and signed by or on behalf of each of the parties. Any waiver by any party of any right under this Agreement or of any failure to perform or breach hereof by any other party shall be in writing and signed by the waiving party. No such waiver shall be construed as a waiver of any continuing or succeeding breach of any provision of this Agreement, a waiver or modification of such provision itself, or a waiver or modification of any right under this Agreement, unless the instrument constituting the waiver so states. Any amendment, modification or variation of this Agreement on behalf of Owner shall not be effective under this Agreement unless approved by the Owner Management Committee.

SECTION 13.4

No Waiver.

Failure of any party at any time to require another party’s performance of any obligation under this Agreement shall not affect the right of any party to require performance of that or any other obligation hereunder at any other time. No delay or forbearance of any party in exercising any right or remedy under this Agreement shall affect the ability of that party subsequently to exercise such right or to pursue any remedy, nor shall such delay or forbearance constitute a waiver of any other right or remedy.

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SECTION 13.5

Counterparts.

This Agreement shall become legally binding when both parties sign and deliver any one or more copies of this Agreement, each of which shall be deemed an original and all of which together shall constitute one and the same agreement.

SECTION 13.6

Assignment and Subcontracting.

(a)

Assignment. Operator shall not assign all or any part of its interest in this Agreement without the prior written consent of Owner.

(b)

Subcontractors. Operator shall have the right to have any of the Services performed by subcontractors pursuant to written subcontracts between Operator and such subcontractors with respect to the Services to be performed hereunder. Notwithstanding the foregoing, Operator shall not subcontract the day to day control of the operation or maintenance of the Facility without the prior written consent of Owner. No subcontractor is intended to be nor shall be deemed a third-party beneficiary of this Agreement. Operator shall cause to be assignable to Owner all subcontracts entered into by Operator with subcontractors that obligate Operator to make aggregate expenditures in respect thereof in excess of $20,000 in any calendar year. Operator guarantees compliance by its subcontractors (except any subcontractors who are responsible for performing warranty work on equipment used in the Facility) with the terms and conditions of this Agreement to the same extent as if the services to be performed by such subcontractor were performed by Operator’s own employees.

SECTION 13.7

Notices.

(a)

Any notice to be given under this Agreement shall be in writing. A notice may be delivered personally to a party or sent by pre-paid letter or facsimile transmission to the address or relevant number given below or to such other address or facsimile as may be notified from time to time:

If to Owner:
Name:	Raft River Energy I, LLC
Address:	1509 Tyrell Lane, Suite B
	Boise, Idaho 83706
Attention:	President
Tel. No.:	(208) 424-1027
Fax No.:	(208) 424-1030

30

with a copy to each Member at its address provided for in the LLC Operating Agreement.

If to Operator:

Name:	U.S. Geothermal Services, LLC
Address:	1509 Tyrell Lane, Suite B
	Boise, Idaho 83706
Attention:	President
Tel. No.:	(208) 424-1027
Fax No.:	(208) 424-1030

(b)

A notice shall be deemed to have been served: (i) if personally delivered, at the time of delivery; (ii) if mailed, two working days after the envelope containing the notice was delivered into the custody of the postal authorities; and if communicated by facsimile transmission, at the time of the transmission; except that where, in the case of personal delivery to an address or transmission by facsimile, delivery or transmission occurs after 4:00 p.m. (EST) on a Business Day or on a day which is not a Business Day in the place of receipt, service shall be deemed to occur at 9:00 p.m. (EST) on the next following Business Day in that place, and for this purpose.

(c)

In proving service, it shall be sufficient to prove that personal delivery was made or that the envelope containing the notice was properly addressed and delivered into the custody of postal authorities, authorized to accept the same, or if sent by facsimile, by receipt of automatic confirmation of transmission or answerback; provided that a notice shall not be deemed to be served if communicated by facsimile transmission which is not legible in all material respects; provided, further, that such transmission shall be deemed to be served as of the end of the next Business Day following the transmission if a request for retransmission is not made before the end of the next Business Day following the transmission.

SECTION 13.8

Governing Law.

This Agreement will be governed by and construed in accordance with the laws of the State of New York (including Section 5-1401 of the New York General Obligations Law), but excluding, to the greatest extent a New York Court would permit, any rule of law that would cause the application of the laws of any jurisdiction other than the State of New York.

SECTION 13.9

Resolution of Disputes.

Owner and Operator desire that this Agreement operate between them fairly and reasonably. If during the term of this Agreement a dispute arises between Owner and Operator, or a question of interpretation arises hereunder, then Owner and Operator shall promptly confer and exert their best efforts in good faith to reach a reasonable and equitable resolution of the issue. Any dispute the parties are unable to settle within thirty (30) days after notice from one party to the other party that a dispute exists, or such longer time as the parties may mutually agree, will be submitted to non-binding mediation. The parties shall then select a qualified individual to mediate the dispute, and the selected mediator, in consultation with the parties, shall establish the date of, and procedures with respect to, the mediation. In the event the parties are unable to agree upon the selection of a person to serve as mediator within ten (10) days after the dispute is submitted to mediation procedures, each party shall, within ten (10) days thereafter, identify a person such party believes has the qualifications and experience to mediate a dispute of the nature of the dispute in question, and the persons so identified by the parties shall select the mediator. The parties shall then proceed expeditiously with the mediation of the dispute. In the event the dispute is not resolved by mediation, the parties shall have the right to pursue any legal remedies available to them. Unless otherwise agreed in writing, Operator shall continue to provide the Services, and the parties shall continue to make payments, in accordance with this Agreement during any dispute under this Agreement.

31

SECTION 13.10

Survival.

Notwithstanding anything to the contrary in this Agreement, expiration or termination of this Agreement shall be without prejudice to any liability or obligation of any party arising on or prior to the date of such expiration or termination, which liabilities and obligations shall expressly survive expiration or termination of this Agreement. In addition, the provisions set forth in Articles IX, X, XII and XIII shall survive the expiration or termination of this Agreement.

SECTION 13.11

Partial Invalidity.

The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of its other provisions. Following a determination by a court of competent jurisdiction that any provision of this Agreement is invalid or unenforceable, the parties shall negotiate in good faith new provisions that, as far as legally possible, most nearly reflect the intent of the parties originally expressed herein and that restore this Agreement as nearly as possible to its original intent and effect.

SECTION 13.12

Documents.

All Facility materials and documents prepared or developed for Owner by Operator or its Affiliates, employees, or representatives in connection with the performance of the Services, including all records, documents, reports, files, and accounts, together with any materials and documents furnished to Operator by Owner, shall be delivered to Owner immediately or as soon as practicable at Owner’s principal place of business upon expiration or termination of this Agreement; provided that Operator may retain copies for its own files. If Operator wishes to dispose of any such materials and documents prior to the expiration or termination of this Agreement, Operator shall so advise Owner, and if Owner objects to such disposal it shall so notify Operator and shall designate to Operator a place for delivery of such materials and documents to Owner.

32

SECTION 13.13

Not For Benefit of Third Parties.

Except as otherwise expressly provided herein or in any consent to assignment as contemplated by Section 13.6, this Agreement and each and every provision thereof is for the exclusive benefit of Owner and Operator, and their respective successors and permitted assigns, and is not for the benefit of any third party.

SECTION 13.14

Cooperation and Further Assurances.

The parties shall cooperate with each other with respect to the subject matter of and activities contemplated by this Agreement, and each party shall take such further actions and execute such further instruments or documents as any other party reasonably shall request from time to time to implement the purposes of this Agreement.

SECTION 13.15

Headings.

The headings of this Agreement are for reference only and shall not be deemed to form part of the text or be used in the construction or interpretation of this Agreement.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

33

IN WITNESS WHEREOF, the representatives of the parties have executed this Agreement as of date set forth above.

RAFT RIVER ENERGY I LLC

By: _____________________________________

Name:
Title:

U.S. GEOTHERMAL SERVICES, LLC

By: _____________________________________

Name:
Title:

EX-10.41

Exhibit 10.41

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and
Stockholders of U.S. Geothermal Inc.

We have audited the accompanying consolidated balance sheets of U.S. Geothermal Inc. as of March 31, 2009 and 2008, and the related statements of operations and comprehensive loss, changes in stockholders' equity and cash flows for the years ended March 31, 2009, 2008 and 2007. We also have audited U.S. Geothermal Inc.'s internal control over financial reporting as of March 31, 2009, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). U.S. Geothermal Inc.'s management is responsible for these financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Annual Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on these financial statements and an opinion on the company's internal control over financial reporting based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit the preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of  unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.
 

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluations of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of U.S. Geothermal Inc. as of March 31, 2009 and 2008 and the  results of its operations and its cash flows for the years ended March 31, 2009, 2008 and 2007, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, U.S. Geothermal Inc. maintained, in all material respects, effective internal control over financial reporting as of March 31, 2009, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

As discussed in Note 2 to the consolidated financial statements, certain errors resulting in an understatement of previously reported investments and income from investments in non-consolidated subsidiary, as of March 31, 2009, 2008 and 2007, were discovered by management of the Company during the current year. Accordingly, adjustments have been made to investments, gain from subsidiary and accumulated deficit as of March 31, 2009 and 2008, to correct these errors.

/s/ BehlerMick PS
BehlerMick PS
Spokane, Washington
June 10, 2009, except Note 2 which is dated October 22, 2009

EX-13.1

Exhibit 13.1

U.S. GEOTHERMAL INC.

________

Consolidated Financial Statements (Restated)

March 31, 2009

U.S. GEOTHERMAL INC.
CONSOLIDATED BALANCE SHEETS (RESTATED)
(Stated in U.S. Dollars)

		March 31,			March 31,
		2009			2008
ASSETS
Current:
Cash and cash equivalents	$	3,452,091		$	4,877,252
Restricted cash (note 6)		485,000			285,000
Receivable from subsidiary		271,475			205,033
Accounts receivable, trade		114,424			-
Other current assets		135,805			85,466
Total current assets		4,458,795			5,452,751
Deposit on property acquisition (note 4)		-			11,310,686
Investment in equity securities		150,169			-
Investment in subsidiary (note 5)		18,501,533			17,110,133
Property, plant and equipment, net of accumulated depreciation (note 7)		13,156,700			3,808,786
Intangible assets, net of accumulated amortization (note 8)		16,184,146			3,049,229
Total assets	$	52,451,343		$	40,731,585
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Accounts payable and accrued liabilities	$	449,559		$	485,783
Related party accounts payable		2,491			9,218
Current portion of capital lease obligation		10,998			-
Total current liabilities		463,048			495,001
Long-term Liabilities:
Capital lease obligation, less current portion		38,945			-
Stock compensation payable		1,933,255			1,975,672
Total liabilities		2,435,248			2,470,673
Commitments and Contingencies		-			-
MINORITY INTEREST (note 16)		678,232			-
STOCKHOLDERS’ EQUITY
Capital stock:
Authorized:
250,000,000 common shares with a $0.001 par value
Issued and outstanding:
55,339,253 shares at March 31, 2008 and
62,033,882 shares at March 31, 2009		62,034			55,339
Additional paid-in capital		64,694,849			48,532,730
Accumulated other comprehensive income		95,891			-
Accumulated deficit		(15,514,911	)		(10,327,157	)
Total stockholders’ equity		49,337,863			38,260,912
Total liabilities and stockholders’ equity	$	52,451,343		$	40,731,585

The accompanying notes are an integral part of these consolidated financial statements.

-1-

U.S. GEOTHERMAL INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (RESTATED)
(Stated in U.S. Dollars)

		Years Ended March 31,
		2009			2008			2007
Operating Revenues:
San Emidio plant energy sales	$	1,416,852		$	-		$	-
San Emidio plant energy credit sales		32,437			-			-
Land, water, and mineral rights lease		97,098			121,742			121,174
Management fees		250,000			62,500			-
Gain from investment in subsidiary		539,815			6,479			(3,365	)
Total operating revenues		2,336,202			190,721			117,809
Operating Expenses:
Consulting fees		121,599			112,269			67,913
Corporate administration and development		753,045			580,035			215,914
Professional and management fees		997,452			845,908			708,524
Salaries and wages		1,180,647			617,323			506,354
Stock based compensation		1,614,789			1,903,635			1,129,072
Travel and promotion		511,568			440,196			408,056
San Emidio plant operations		2,265,277			-			-
Land lease and reservation fees		216,491			69,505			-
Total operating expenses		7,660,868			4,568,871			3,035,833
Loss from Operations		(5,324,666	)		(4,378,150	)		(2,918,024	)
Other Income (Loss):
Foreign exchange gain (loss)		(41,507	)		116,547			411,341
Other income (loss)		880			-			-
Interest income		158,771			947,130			693,738
Total other income		118,144			1,063,677			1,105,079
Net Loss Prior to the Allocation of Minority Interest		(5,206,522	)		(3,314,473	)		(1,812,945	)
Minority interest in Gerlach Geothermal, LLC		18,768			-			-
Net Loss		(5,187,754	)		(3,314,473	)		(1,812,945	)
Other Comprehensive Income:
Unrealized gain on investment in equity securities		95,891			-			-
Comprehensive Loss	$	(5,091,863	)	$	(3,314,473	)	$	(1,812,945	)
Basic and Diluted Net Loss per Share	$	(0.08	)	$	(0.06	)	$	(0.04	)
Weighted Average Number of Shares Outstanding for Basic and Diluted Calculations		62,020,474			52,407,704			43,640,303

The accompanying notes are an integral part of these consolidated financial statements.

-2-

U.S. GEOTHERMAL INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (RESTATED)
(Stated in U.S. Dollars)

		For the Years Ended March 31,
		2009			2008			2007
Operating Activities:
Net loss	$	(5,187,754	)	$	(3,314,473	)	$	(1,812,945	)
Add non-cash items:
Depreciation and amortization		865,057			56,769			16,511
Gain of operations of subsidiary		(539,815	)		(6,479	)		3,365
Gain on disposal of equipment		-			(2,154	)		-
Minority interest		(18,768	)		-			-
Unrealized foreign exchange loss		34,237			-			-
Shares issued for other than cash		-			-			65,384
Stock based compensation		1,614,789			1,903,635			1,129,072
Change in non-cash working capital items:
Accounts receivable		(180,866	)		(50,756	)		(154,277	)
Accounts payable and accrued liabilities		102,707			210,790			(160,166	)
Prepaid expenses and other assets		(50,339	)		(57,760	)		(16,277	)
Total cash used by operating activities		(3,360,752	)		(1,260,428	)		(929,333	)
Investing Activities:
Purchases of property, equipment and intangible assets		(21,960,096	)		(3,961,024	)		(2,456,782	)
Cash released from (restricted by) external restrictions		(200,000	)		5,078,400			(5,363,400	)
Cash released from escrow for property acquisition		11,310,686			(11,310,686	)		-
Investment in subsidiaries and equity securities		(851,585	)		(10,743,305	)		(9,917,100	)
Proceeds from equipment disposal		-			14,529			-
Investment in subsidiaries and equity securities		(88,515	)		-			4,917,100
Total cash used by investing activities		(11,789,510	)		(20,922,086	)		(12,820,182	)
Financing Activities:
Principal payments on capital lease obligation		(3,507	)		-			-
Issuance of share capital, net of share issue cost		13,728,608			20,300,605			20,325,177
Total cash provided by financing activities		13,725,101			20,300,605			20,325,177
Increase (Decrease) in Cash and Cash Equivalents		(1,425,161	)		(1,881,909	)		6,575,662
Cash and Cash Equivalents, Beginning of Period		4,877,252			6,759,161			196,499
Cash and Cash Equivalents, End of Period	$	3,452,091		$	4,877,252		$	6,759,161
Supplemental Disclosure:
Non-cash investing and financing activities:
Amendment to geothermal lease with common stock	$	783,000		$	-		$	-
Transfer of property and equipment to subsidiary		-			-			1,363,714
Shares issued with employment agreements		-			-			65,384
Purchase of equipment with capital lease obligation		53,450			-			-
Contribution of geothermal rights by minority interest		697,000			-			-
Purchase of property and equipment on account		145,658			1,172,251			(1,335,714	)

The accompanying notes are an integral part of these consolidated financial statements.

-3-

U.S. GEOTHERMAL INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (RESTATED)
For the Year Ended March 31, 2007
(Stated in U.S. Dollars)

	NUMBER				ADDITIONAL			CAPITAL			STOCK			ACCUMU-
	OF		COMMON		PAID-IN			STOCK			PURCHASE			LATED
	SHARES		SHARES		CAPITAL			ISSUABLE			WARRANTS			DEFICIT			TOTAL
Balance at April 1, 2006	18,263,844	$	18,264	$	4,954,690		$	20,134,260		$	-		$	(5,199,743	)	$	19,907,471
Stock issued as result of employment agreements	49,168		49		65,331			-			-			4			65,384
Stock options granted	-		-		978,772			-			-			-			978,772
Shares issued for stock options and warrants exercised	497,500		498		487,595			-			(137,806	)		-			350,287
Capital stock issued as result of a private placement closed April 3, 2006, net of issuance costs	25,000,000		25,000		20,109,260			(20,134,260	)		-			-			-
Stock purchase warrants expired	-		-		1,186,232			-			(1,186,232	)		-			-
Stock compensation liability	-		-		(2,000,048	)		-			1,324,038			-			(676,010	)
Net loss for the period	-		-		-			-			-			(1,812,945	)		(1,812,945	)
Balance at March 31, 2007	43,810,512	$	43,811	$	25,781,832		$	-		$	-		$	(7,012,684	)	$	18,812,959

The accompanying notes are an integral part of these consolidated financial statements.

-4-

U.S. GEOTHERMAL INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (RESTATED)
For the Years Ended March 31, 2008 and 2009
(Stated in U.S. Dollars)

	NUMBER					ADDITIONAL					ACCUMULATED
	OF			COMMON		PAID-IN		ACCUMULATED			COMPREHENSIVE
	SHARES			SHARES		CAPITAL		DEFICIT			INCOME		TOTAL
Balance at April 1, 2007	43,810,512		$	43,811	$	25,781,832	$	(7,012,684	)	$	-	$	18,812,959
Capital stock issued as result of a private placement closed June 5, 2007, net of issuance costs	9,090,900			9,091		17,757,681		-			-		17,766,772
Shares issued for stock options and warrants exercised	2,437,841			2,437		4,255,203		-			-		4,257,640
Stock compensation liability	-			-		738,014		-			-		738,014
Net loss for the year	-			-		-		(3,314,473	)		-		(3,314,473	)
Balance, March 31, 2008	55,339,253			55,339		48,532,730		(10,327,157	)		-		38,260,912
Capital stock issued as result of a private placement closed April 28, 2008, net of issuance costs	6,382,500			6,383		13,711,784		-			-		13,718,167
Capital stock issued for amendment to royalty agreement with the Kosmos Company	290,000			290		782,710		-			-		783,000
Shares issued for stock options and warrants exercised	22,134			22		10,418		-			-		10,440
Adjustment to entitlement shares from Consolidated Mango and US Cobalt stock consolidations	(5	)		-		-		-			-		-
Stock compensation liability	-			-		1,657,207		-			-		1,657,207
Unrealized gain on investment	-			-		-		-			95,891		95,891
Net loss for the year	-			-		-		(5,187,754	)		-		(5,187,754	)
Balance at March 31, 2009	62,033,882		$	62,034	$	64,694,849	$	(15,514,911	)	$	95,891	$	49,337,863

The accompanying notes are an integral part of these consolidated financial statements.

-5-

U.S. GEOTHERMAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (RESTATED)
March 31, 2009
(Stated in U.S. Dollars)

NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS

When U.S. Cobalt Inc. (“GTH” or the “Company”) completed a reverse take-over on December 19, 2003, the former stockholders of U.S. Geothermal Inc. (“GEO – Idaho”) a company incorporated on February 26, 2002 in the State of Idaho, U.S.A. acquired control of GTH. In connection with the transaction, U.S. Cobalt Inc. changed its name to U.S. Geothermal Inc. and consolidated its common stock on a one new to five old basis. All references to common shares in these financial statements have been restated to reflect the rollback of common stock.

The Company was created to acquire property, construct power plants, and manage the operations of those plants that utilize geothermal resources to produce energy. The Company’s operations have been, primarily, focused in the Western United States of America.

These financial statements have been restated to reflect the correction of an error to record the carrying value of our investment in the subsidiary Raft River Energy I LLC under the hypothetical liquidation at book value method, as further described in Note 2- Restatement f Consolidate Financial Statements for a Correction of an Error.

All references to “dollars” or “$” are to United States dollars and all references to $ CDN are to Canadian dollars.

Basis of Presentation

The Company consolidates subsidiaries that it controls (more-than-50% owned) and entities over which control is achieved through means other than voting rights. These consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. The accounts of the following companies are consolidated in these financial statements:

i)	U.S. Geothermal Inc. (incorporated in the State of Delaware);
ii)	U.S. Geothermal Inc. (incorporated in the State of Idaho);
iii)	Gerlach Geothermal LLC (organized in the State of Delaware);
iv)	U.S. Geothermal Services, LLC (organized in the State of Delaware);
v)	USG Nevada LLC (organized in the State of Delaware);
vi)	USG Gerlach LLC (organized in the State of Delaware); and
vii)	U.S. Geothermal Guatemala, S.A.

All intercompany transactions are eliminated upon consolidation.

Raft River Energy I LLC, previously a 100% owned subsidiary, was consolidated through July 2006, after which the entity is recorded as an investment under the equity method when a new member acquired the controlling interest in this LLC. See Note 5- Investment in Subsidiaries for further discussion.

In cases where the Company owns a majority interest in an entity but does not own 100% of the interest in the entity it recognizes a minority interest. The Company will recognize 100% of the assets and liabilities of the entity, and disclose the minority’s interest. The statements of operations will consolidate the subsidiary’s full operations, and will separately disclose the elimination of the minority’s allocation of profits and losses.

-6-

NOTE 2 – RESTATEMENT OF CONSOLIDATED FINANCIAL STATEMENTS FOR A CORRECTION OF AN ERROR

The Company’s prior accounting for its investment in Raft River Energy I LLC, under closer review, has proved to be in error and the correction will cause the Company to recognize additional income as described below.

The Amended and Restated Operating Agreement contains certain complex liquidation preference provisions which require certain distributions to each of the Members in the event that a liquidation occurs. According to the operating agreement, upon liquidation and, after payment of all outstanding debts, any remaining funds would be distributed to the Members in accordance to their positive capital account balance ratio. Certain contract provisions contain allocation of profit and loss items to arrive at the capital account balances. Since the Company is currently the minority member recording their investment in RREI under the equity method, we modified our allocations utilizing the hypothetical liquidation at book value (“HLBV”) methodology at each balance sheet date to value our investment. In prior reports, the allocation has been calculated using net capital contribution ratios. Because we have modified our approach to use the HLBV method from the inception of the RREI entity, certain adjustments were necessary to reflect this correction of an error in the financial statements of the Company. Changes to the financial statements of the Company are reflected in the following table:

			As Previously
Statement Date	Line Item	As Restated	Reported	Difference
March 31, 2009	Investment in Subsidiary	$ 18,501,533	$ 17,588,888	$ 912,645
	Accumulated Deficit	(15,514,911)	(16,427,556)	912,645
	Gain on investment	539,815	(8,178)	547,993
	Net Loss	(5,187,754)	(5,735,747)	547,993
	EPS	$ (0.08)	$ (0.09)	$ 0.01
March 31, 2008	Investment in Subsidiary	$ 17,110,133	16,745,481	$ 364,652
	Accumulated Deficit	(10,327,157)	(10,691,809)	364,652
	Gain on investment	6,479	(228,234)	234,713
	Net Loss	(3,314,473)	(3,549,186)	234,713
	EPS	$ (0.06)	(0.06)	$ 0.00
March 31, 2007	Investment in Subsidiary	$ 6,360,349	$ 6,230,410	$ 129,939
	Accumulated Deficit	(7,012,684)	(7,142,623)	129,939
	Gain on investment	(3,365)	(133,304)	129,939
	Net Loss	(1,812,945)	(1,942,884)	129,939
	EPS	$ (0.04)	$ (0.04)	$ 0.00

Where necessary, throughout our financial statements and the notes thereto, the information has been corrected to reflect the restated amounts.

An investment in a northwest British Columbia geothermal prospect totaling $4,965 and $4,434 for the years ended March 31, 2009 and March 31, 2008 is also recorded on the balance sheet as an investment in subsidiary in addition to the investment in Raft River Energy I LLC.

-7-

NOTE 3- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The following are summarized accounting policies considered to be significant by the Company’s management:

Accounting Method

The Company’s financial statements are prepared using the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and have been consistently applied in the preparation of the consolidated financial statements.

Use of Estimates

The preparation of financial statements in accordance with generally accepted accounting principles requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities known to exist as of the date the consolidated financial statements are published, and the reported amounts of revenues and expenses during the reporting period. Uncertainties with respect to such estimates and assumptions are inherent in the preparation of the Company’s financial statements; accordingly, it is possible that the actual results could differ from these estimates and assumptions and could have a material effect on the reported amounts of the Company’s consolidated financial position and consolidated results of operations.

Cash and Cash Equivalents

The Company considers all unrestricted cash, short-term deposits, and other investments with original maturities of no more than ninety days when acquired to be cash and cash equivalents for the purposes of the statement of cash flows. Discussion regarding restricted cash is included in Note 5. All investments held by the Company are highly liquid and available on demand.

Trade Accounts Receivable Allowance for Doubtful Accounts

Management estimates the amount of trade accounts receivable that may not be collectible and records an allowance for doubtful accounts, accordingly. The allowance is an estimate based upon aging of receivable balances, historical collection experience, and the periodic credit evaluations of our customers’ financial condition. Receivable balances are written off when we determine that the balance is uncollectible. As of March 31, 2009, there were no balances that were over 90 days past due and no balance in allowance for doubtful accounts was recognized.

Concentration of Credit Risk

The Company’s cash and cash equivalents, including restricted cash, consisted of commercial bank deposits, money market accounts, and petty cash. Cash deposits are held in a commercial bank in Boise, Idaho. The accounts are guaranteed by the Federal Deposit Insurance Corporation (“FDIC”) up to $250,000 per legal entity (after December 31, 2009, deposits will be insured up to $100,000 per account). At March 31, 2009, the Company held deposits of $19,620 that were not subject to FDIC insurance. The money market funds totaled $3,464,906, and are not subject to deposit insurance.

Marketable Securities

We determine the appropriate classification of marketable securities at the time of purchase and reevaluate this designation as of each balance sheet date. We classify these securities as either held-to-maturity, trading, or available-for-sale in accordance with Statement of Financial Accounting Standards No. 115 (“SFAS No. 115”), “Accounting for Certain Investments in Debt and Equity Securities.” As of March 31, 2009, all marketable securities and restricted investments were classified as available-for-sale securities. The Company classifies its investments as “available for sale” because it expects to possibly sell some securities prior to maturity. The Company's investments are subject to market risk, primarily interest rate and credit risk. The fair value of investments is determined using observable or quoted market prices for those securities.

-8-

Available-for-sale securities are carried at fair value, with unrealized gains and losses included as a component of accumulated other comprehensive income (loss). Realized gains and losses, declines in value judged to be other than temporary and interest on available-for-sale securities are included in net income. The cost of securities sold is based on the specific identification method.

Property, Plant and Equipment

Property, plant and equipment are recorded at historical cost. Depreciation is calculated on a straight-line basis over the estimated useful life of the asset. Where appropriate, terms of property rights and revenue contracts can influence the determination of estimated useful lives.

The Company expenses all costs related to the development of geothermal reserves prior to the establishment of proven and probable reserves. Once a resource is considered to be proven, then costs of acquisition and development are capitalized on an area-of-interest basis. If an area of interest is subsequently abandoned, those costs are charged to income in the year of abandonment.

Impairment of Long-Lived Assets

The Company evaluates its long-term assets annually for impairment or when circumstances or events occur that may impact the fair value of the assets. The fair value of geothermal property is primarily evaluated based upon the present value of expected revenues directly associated with those assets. An impairment loss would be recognized if the carrying amount of a capitalized asset is not recoverable and exceeds its fair value. Management believes that there have not been any circumstances that have warranted the recognition of losses due to the impairment of long-lived assets as of March 31, 2009.

Stock Options Granted to Employees and Non-employees

For stock-based compensation, the Company adopted Statement of Financial Accounting Standards No. 123 (revised 2004), “Share-Based Payment” (“SFAS 123(R)”), which requires the measurement of the value of employee services received in exchange for an award of an equity instrument based on the grant-date fair value of the award. For employees, directors and officers, the fair value of the awards are expensed over the vesting period. The current vesting period for all options is eighteen months.

For non-employee stock-based compensation, the Company adopted EITF Issue No. 96-18, “Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services” and EITF Issue No. 00-18, “Accounting Recognition for Certain Transactions involving Equity Instruments Granted to Other Than Employees.” Non-employee stock options have been granted, at the Board of Director’s discretion, to select vendors as a bonus for exceptional performance. Prior to issuance of the awards, the Company was not under any obligation to issue the stock options. Subsequent to the award, the recipient was not obligated to perform any services. Therefore, the fair value of these options was expensed on the grant date, which was also the measurement date.

The Company accounts for stock-based compensation in accordance with SFAS 123(R). Under the fair value recognition provisions of this statement, share-based compensation cost is measured at the grant date based on the value of the award and is recognized as expense over the vesting period. Determining the fair value of share-based awards at the grant date requires judgment. In addition, judgment is also required in estimating the amount of share-based awards that are expected to be forfeited. If actual results differ significantly from these estimates, stock-based compensation expense and our results of operations could be materially impacted.

-9-

Earnings Per Share

The Company has adopted Statement of Financial Accounting Standard No. 128 “Earnings per Share” (“SFAS 128”), which provides for calculation of "basic" and "diluted" earnings per share. Basic earnings per share includes no dilution and is computed by dividing net income available to common shareholders by the weighted average common shares outstanding for the period. Diluted earnings per share reflect the potential dilution of securities that could share in the earnings of an entity similar to fully diluted earnings per share. Although there were common stock equivalents outstanding at March 31, 2009 and 2008, they were not included in the calculation of earnings per share because their inclusion would have been considered anti-dilutive.

Financial Instruments

The Company’s financial instruments consist of cash and cash equivalents, trade account and other receivables, refundable tax credits, and accounts payable and accrued liabilities. Unless otherwise noted, it is management’s opinion that the Company is not exposed to significant interest, currency or credit risks arising from these financial instruments. The fair values of these financial instruments approximate their carrying values, unless otherwise noted.

Refundable tax credit is comprised of Goods and Services Tax (“GST”) which is refundable from the Government of Canada and is included in other current assets.

The Company’s functional currency is the U.S. dollar. Monetary items are converted into U.S. dollars at the rate prevailing at the balance sheet date. Resulting gains and losses are generally included in determining net income for the period in which exchange rates change.

Foreign Operations

The accompanying balance sheet contains certain recorded Company assets (principally cash) in a foreign country (Canada). Although Canada is considered economically stable, it is always possible that unanticipated events in Canada could disrupt the Company’s operations.

Provision for Taxes

Income taxes are provided based upon the liability method of accounting pursuant to Statement of Financial Accounting Standards No. 109, “Accounting for Income Taxes” (“SFAS 109”). Under this approach, deferred income taxes are recorded to reflect the tax consequences in future years of differences between the tax basis of assets and liabilities and their financial reporting amounts at each year-end. A valuation allowance is recorded against deferred tax assets if management does not believe the Company has met the “more likely than not” standard imposed by SFAS 109 to allow recognition of such an asset.

At March 31, 2009, the Company had net deferred tax assets calculated at an expected rate of 34% of approximately $3,464,000 (March 31, 2008 - $2,230,000) principally arising from net operating loss carry forwards and stock compensation. As management of the Company cannot determine that it is more likely than not that the Company will realize the benefit of the net deferred tax asset, a valuation allowance equal to the net deferred tax asset was recorded at March 31, 2009.

The significant components of the deferred tax asset at March 31, 2009 and 2008 were as follows:

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		March 31,			March 31,
		2009			2008
Estimated net operating loss carry forward	$	10,187,000		$	6,559,000
Deferred tax asset	$	3,464,000		$	2,230,000
Deferred tax asset valuation allowance		(3,464,000	)		(2,230,000	)
Net deferred tax asset	$	-		$	-

At March 31, 2009, the Company has net operating loss carry forwards of approximately $10,187,000 ($6,559,000 in March 31, 2008), which expire in the years 2023 through 2027. The change in the allowance account from March 31, 2008 to March 31, 2009 was $1,234,000.

Although we believe that our estimates are reasonable, no assurance can be given that the final tax outcome of these matters will not be different than that which is reflected in our tax provisions. Ultimately, the actual tax benefits to be realized will be based upon future taxable earnings levels, which are very difficult to predict.

Accounting for Income Tax Uncertainties and Related Matters

We may be assessed penalties and interest related to the underpayment of income taxes. Such assessments would be treated as a provision of income tax expense on our financial statements. For the year ended March 31, 2009, no income tax expense has been realized as a result of our operations and no income tax penalties and interest have been accrued related to uncertain tax positions. The Company files income tax returns in the U.S. federal jurisdiction and in the State of Idaho. The Company will be required to file state income tax returns in the State of Oregon in future years. These filings are subject to a three year statute of limitations. Our evaluation of income tax positions included the fiscal years ended March 31, 2009, 2008, 2007 and 2006 which could be subject to agency examinations as of March 31, 2009. No filings are currently under examination. No adjustments have been made to reduce our estimated income tax benefit at fiscal year end. Any valuations relating to these income tax provisions will comply with the principles defined in Financial Accounting Standards No. 157, Fair Value Measurements.

Revenue

Revenue Recognition

The energy sales revenue is recognized when the power is produced and delivered to the customer under the terms defined in the Power Purchase Agreements (“PPA”). Management fee income is recognized when the services have been provided. Royalties and Lease revenues are recognized as the resource has been utilized and other contractual obligations have been met. Revenues from energy credits sales are recognized when the Company has met the terms of certain energy sales agreements with a financially capable buyer and has met the applicable governing regulations.

Revenue Source

All of the Company’s direct and indirect operating revenues originate from energy production from its interests in geothermal power plants located in the states of Idaho and Nevada. All of the management fees and royalty revenues are earned from its subsidiary located in South Eastern Idaho. All of the power sales are earned from a power plant located in North Western Nevada.

Reclassifications

Certain amounts reported in operating revenues in the fiscal year ended March 31, 2007, were reclassified from other revenues to conform with the current presentation. These reclassifications have resulted in no changes to the Company’s accumulated deficit and net losses presented.

-11-

Recent Accounting Pronouncements

Hierarchy of Generally Accepted Accounting Principles

During May 2008, the FASB issued Financial Accounting Standards No. 162, The Hierarchy of Generally Accepted Accounting Principles No. 162 (“SFAS 162”). SFAS 162 is intended to improve financial reporting by identifying a consistent framework, or hierarchy, for selecting accounting principles to be used in preparing financial statements that are presented in conformity with U.S. generally accepted accounting principles for nongovernmental entities. The Company does not expect the adoption of this standard to have a direct material impact on its consolidated financial position or consolidated results of operations.

Guaranteed Insurance Contracts

In May 2008, the FASB issued SFAS 163, Accounting for Financial Guarantee Insurance Contracts - an interpretation of FASB Statement No. 60 (“SFAS 163”). SFAS 163 is generally effective for financial statements issued for fiscal years beginning after December 15, 2008. The Company does not expect that SFAS 163 will have an impact on its financial position or results of operations.

Determining Whether an Instrument (or Embedded Feature) Is Indexed to an Entity’s Own Stock

During June 2008, the FASB issued EITF Issue No. 07-5, “Determining Whether and Instrument (or an Embedded Feature) Is Indexed to an Entity’s Own Stock.” EITF 07-5 provides that an entity should use a two step approach to evaluate whether an equity-linked financial instrument (or embedded feature) is indexed to its own stock, including evaluating the instrument’s contingent exercise and settlement provisions. It also clarifies on the impact of foreign currency denominated strike prices and market-based employee stock option valuation instruments on the evaluation. EITF 07-5 is effective for fiscal years beginning after December 15, 2008. The Company has not yet determined whether this update will have a material impact on its financial statements.

NOTE 4 – ESCROW DEPOSIT ON ACQUISITION

On April 1, 2008, the Company transferred $11,310,686 to the seller from an escrow account related to the acquisition of the geothermal assets located in North Western Nevada.

NOTE 5 – INVESTMENT IN SUBSIDIARIES

RREI resulted from an August 9, 2006 agreement between the Company and Raft River Holdings, LLC, a subsidiary of the Goldman Sachs Group, for construction financing of Phase I of the Raft River project. To accommodate the construction financing, the Company sold 50% of its ownership in Raft River Energy to Raft River Holdings, LLC. As a result of the agreements, the Company was required to contribute cash and property sufficient to complete a 10 megawatt power plant, and Raft River Holdings was required to contribute $34,170,100.

As of March 31, 2009, the Company has contributed $17,953,640 in cash and property to the project, while Raft River Holdings, LLC has contributed $34,170,100.

For periods prior to August 2006, the Company was the 100% owner of RREI and consolidated the loss. For the period August 2006 to September 2008, U.S. Geothermal Inc. recorded RREI under the equity method of accounting for investments in subsidiaries based on the HLBV method.

Effective December 26, 2008, the fiscal year for RREI was changed to a calendar year due to the conversion of Goldman Sachs to a bank holding company. RREI’s latest audited financial information is summarized as follows:

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		(Unaudited)
		As of December		As of November		As of November 30,
		26, 2008		28, 2008		2007
Total current assets	$	1,554,044	$	1,994,238	$	234,382
Property and equipment		49,676,148		50,016,779		50,055,675
	$	51,230,192	$	52,011,017	$	50,290,057
Total liabilities	$	500,629	$	1,434,413	$	4,252,786
Total members’ equity		50,729,563		50,576,604		46,037,271
	$	51,230,192	$	52,011,017	$	50,290,057

		(Unaudited)
		Month Ended		Fiscal Year Ended			Fiscal Year Ended
		December 26,		November 28, 2008			November 30, 2007
		2008
Operating revenues	$	538,309	$	4,880,303		$	96,743
Operating loss		152,483		(528,916	)		(929,615	)
Net loss		152,960		(448,593	)		(834,234	)
U.S. Geothermal Inc., portion of net loss	$	37,089	$	406,222		$	(8,342	)

RREI began commercial operations on January 3, 2008. Due to start up issues, RREI experienced an operating loss for the fiscal year ended November 28, 2008. RREI reported net income of $412,169 for the last six months ended March 27, 2009.

Raft River Energy I is a joint venture between the Company and Raft River I Holdings, LLC a subsidiary of Goldman Sachs Group, Inc. An Operating Agreement governs the rights and responsibilities of both parties. Raft River Energy I is a voting interest entity recorded on the financial records of the Company as an equity investment. For book and income tax purposes, Raft River I Holdings, LLC will receive a greater proportion of the share of losses and other income tax benefits. During the initial years of operations Raft River I Holdings, LLC will receive a larger allocation of cash distributions. The Company’s investment in the Raft River Energy I entity has changed since March 31, 2006 as follows:

Year ended	Activity	Increase (Decrease) in Investment
March 31, 2006	Investment Account Balance	883,437
	Capital Contributions	5,480,277
	Allocation of profit/loss	(3,365)
March 31, 2007	Investment Account Balance	6,360,349
	Capital Contributions	10,641,871
	Allocation of profit/loss	6,479
	Prepaid amount	97,000
March 31, 2008	Investment Account Balance	17,105,699
	Capital Contributions	948,054
	Allocation of profit/loss	539,815
	Prepaid amount	(97,000)
March 31, 2009	Investment Account Balance	18,496,568

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An investment in a northwest British Columbia geothermal prospect totaling $4,965 and $4,434 for the years ended March 31, 2009 and March 31, 2008 is also recorded on the balance sheet as an investment in subsidiary.

NOTE 6 – RESTRICTED CASH

The Company maintains cash balances that are restricted under Letter of Credit covenants for State and Federal well bonding requirements. These bonds renew on an annual basis. Restricted cash balances and explanations of the nature of the restrictions are summarized as follows:

		March 31,
State Agency		2009		2008
Idaho Department of Water Resources, Geothermal Well Bond	$	260,000	$	260,000
State of Nevada Division of Minerals, Statewide Drilling Bond		50,000		-
Bureau of Land Management, Geothermal Lease Bonds		150,000		-
Oregon Department of Geology and Mineral Industries, Mineral Land and Reclamation Program		25,000		25,000
	$	485,000	$	285,000

These bonding requirements ensure that the Company has sufficient financial resources to construct, operate & maintain geothermal wells while safeguarding subsurface, surface and atmospheric resources from unreasonable degradation, and to protect ground water aquifers and surface water sources from contamination. Other future costs of environmental remediation cannot be reasonably estimated and have not been recorded.

NOTE 7 - PROPERTY, PLANT AND EQUIPMENT

Effective May 1, 2008, the Company acquired a production plant and wells located in the San Emidio Desert area north of Reno, Nevada for approximately $4.5 million from Empire Geothermal Power LLC and Michael B. Stewart. The power plant is comprised of four binary cycle units, a wet cooling tower and nine geothermal wells developed in a proven geothermal reservoir. The Company began the expansion of the San Emidio well field with drilling activities that totaled over $1.9 million. The San Emidio well project was still under construction at March 31, 2009.

Construction costs at our project located near Neal Hot Springs, Oregon totaled approximately $2.2 million.

Significant purchases of vehicle furniture and equipment included 3 light trucks, a flow rate separator tank and a rough terrain forklift that amounted to $72,676, $65,415 and $53,450; respectively.

As described in note 14, the Company contributed $300,000 in geothermal and mineral rights to a newly formed company, and the other partner contributed $697,000 in geothermal leases and mineral rights.

Property, plant and equipment categories are summarized as follows:

-14-

		March 31,
		2009			2008
Land	$	384,000		$	384,000
Power production plant and improvements		1,329,527			-
Wells		3,617,312			-
Vehicles, furniture and equipment		704,887			402,660
		6,035,726			786,660
Less: accumulated depreciation		(686,471	)		(73,980	)
		5,349,255			712,680
Construction in progress		7,807,445			3,096,106
	$	13,156,700		$	3,808,786

The construction in progress consists of development activities at Raft River Unit II, Idaho, Neal Hot Springs, Oregon and San Emidio, Nevada.

Depreciation expense was charged to operations for the years ended March 31, 2009, 2008 and 2007 amounted to $865,057, $56,769 and $16,511; respectively.

NOTE 8 – INTANGIBLE ASSETS

During the year ended March 31, 2009, the Company acquired 28,358 acres of geothermal energy leases and certain ground water rights from Empire Geothermal Power LLC and Michael B. Stewart for approximately $12.1 million. These geothermal energy leases and ground water rights are all located north of Reno, Nevada. Intangible assets are summarized as follows:

		March 31,
		2009			2008
Surface water rights	$	4,766,341		$	1,146,003
Geothermal water rights		11,670,371			1,903,226
		16,436,712			3,049,229
Less: accumulated amortization		(252,566	)		-
	$	16,184,146		$	3,049,229

Amortization expense was charged to operations for the years ended March 31, 2009, 2008 and 2007 amounted to $252,566, $0 and $0; respectively.

NOTE 9 - CAPITAL LEASE OBLIGATION

Effective November 10, 2008, the Company entered into a capital lease obligation for the purchase of a forklift that is payable in monthly payments of $1,193 including interest to Wells Fargo Equipment, Inc. The contract includes a purchase option of $5,345 at the end of the lease term scheduled for November 2012. The calculated interest rate was 7.37% per annum. The schedule of minimum lease payments is as follows:

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Period Ended March 31,		Principal		Interest		Totals
2010	$	10,998	$	3,318	$	14,316
2011		11,837		2,479		14,316
2012		12,736		1,580		14,316
2013		14,372		517		14,889
	$	49,943	$	7,894	$	57,837

NOTE 10 - CAPITAL STOCK

The Company is authorized to issue 250,000,000 shares of common stock. All shares have equal voting rights, are non-assessable and have one vote per share. Voting rights are not cumulative and, therefore, the holders of more than 50% of the common stock could, if they choose to do so, elect all of the directors of the Company.

During the quarter ended March 31, 2009, the Company verified an adjustment of 5 shares required for entitlement shares to be issued for the stock consolidations of Consolidated Mango (1999) and US Cobalt (2003) shares. These shares remain in escrow until the Consolidated Mango and US Cobalt shares are redeemed for U.S. Geothermal Inc. common shares.

During the quarter ended December 31, 2008, the Company issued 22,134 common shares to an officer of the Company upon exercise of stock options at a strike price of $0.60 CDN.

During the quarter ended June 30, 2008, the Company entered into an agreement with a Canadian investment dealer, in which an underwriter agreed to purchase 4,260,000 units of the Company’s equity interests. Each unit comprised one common share of the Company’s stock and one half of one common share purchase warrant. The initial offering, completed on April 28, 2008, generated gross proceeds $10,011,000 CDN (approximately $10,154,458) at a price of $2.35 CDN per share. Each warrant will entitle the holder the right to acquire one additional common share of the Company for a period of 24 months following the closing of the offering for $3.00 per share. In addition, the Underwriters exercised their option to purchase an additional 2,122,500 units at the issue price of the offering, resulting in the issuance of a total of 6,382,500 units for aggregate gross proceeds of approximately $15 million CDN.

During the quarter ended June 30, 2008, the Company issued 290,000 common shares at a price of $2.70 per share to the Kosmos Company in exchange for a favorable amendment to the existing royalty agreement. The royalty agreement is applicable to the operations of the newly acquired San Emidio plant.

During the quarter ended March 31, 2008, the Company issued 56,667 common shares to officers, employees and consultants upon exercise of stock options at strike prices ranging from $0.72 CDN to $0.90 CDN (average $0.92).

During the quarter ended December 31, 2007, the Company issued 1,854,141 common shares upon the exercise of 222,550 stock options and 1,631,591 broker compensation options in both U.S. and Canadian dollars. Shares of 15,000 were issued at an exercise price of $2.41. Shares of 1,680,050 were issued at exercise prices that ranged between $0.61 to $1.02 ($0.60 to $1.00 CDN). Shares issued from stock purchase warrants, amounted to 159,091 shares at an exercise price of $2.08.

-16-

During the quarter ended December 31, 2007, the Company issued 235,833 common shares to officers, employees and consultants upon exercise of stock options at strike prices ranging from $0.60 CDN to $1.40 CDN (average $1.03).

NOTE 11 - STOCK BASED COMPENSATION

The Company has a stock option plan (the “Stock Option Plan”) for the purpose of attracting and motivating directors, officers, employees and consultants of the Corporation and advancing the interests of the Corporation. The Stock Option Plan is a 10% rolling plan approved by shareholders in September 2006, whereby the Company can grant options to the extent of 10% of the current outstanding common shares. Under the plan, all forfeited and exercised options can be replaced with new offerings. As of March 31, 2009, the Company can issue stock option grants totaling up to 6,203,388 shares. Options are granted for a term of up to five years from the date of grant. Stock options granted generally vest over a period of eighteen months, with 25% vesting on the date of grant and 25% vesting every six months thereafter. Effective April 1, 2007, all grants will be stated in U.S. dollars. The Company recognizes compensation expense using the straight-line method of amortization. Historically, the Company has issued new shares to satisfy exercises of stock options and the Company expects to issue new shares to satisfy any future exercises of stock options. At March 31, 2009, the Company had 4,239,250 options granted and outstanding.

During the quarter ended March 31, 2009, Company stock options of 188,494 granted to employees and consultants exercisable at a price of $0.60 CDN expired without exercise.

During the quarter ended September 30, 2008, the Company granted 95,000 stock options to employees exercisable at a price of $1.78 until August 9, 2013.

During the quarter ended June 30, 2008, the Company granted 1,505,000 stock options to consultants and employees exercisable at a price of $2.22 until May 19, 2013.

During the quarter ended September 30, 2007, the Company granted 775,000 stock options to consultants and employees exercisable at a price of $2.41 until January 22, 2012.

The following table reflects the summary of stock options outstanding at March 31, 2007 and changes during the years ended March 31, 2008 and 2009:

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				Weighted		Weighted
				Average		Average		Aggregate
	Number of			Exercise		Fair		Intrinsic
	shares under			Price Per		Value		Value
	options			Share		(US)		(US)
Balance outstanding, March 31, 2006	1,065,628		$	0.69 CDN	$	0.37	$	399,146
Forfeited	(145,000	)		0.86 CDN		0.62		(90,487	)
Exercised	(152,500	)		0.63 CDN		0.30		(46,427	)
Granted	2,168,000			1.05 CDN		0.99		2,140,719
Balance outstanding, March 31, 2007	2,936,128		$	0.96 CDN	$	0.82	$	2,402,951
Forfeited	(5,000	)		1.00 CDN		0.80		(4,000	)
Exercised	(806,250	)		0.83 CDN		0.63		(511,494	)
Granted	775,000			2.41		1.95		1,513,964
Balance outstanding, March 31, 2008	2,899,878			1.35 CDN		1.17		3,401,421
Forfeited	(238,494	)		0.98		0.63		(151,013	)
Exercised	(22,134	)		0.60 CDN		0.28		(6,093	)
Granted	1,600,000			2.19		1.22		1,952,000
Balance outstanding, March 31, 2009	4,239,250		$	1.62	$	1.23	$	5,196,315

The fair value of each option award is estimated on the date of grant using the Black-Scholes option-pricing model using the assumptions noted in the following table. Expected volatilities are based on historical volatility of the Company’s stock. The Company uses historical data to estimate option volatility within the Black-Scholes model. The expected term of options granted represents the period of time that options granted are expected to be outstanding, based upon past experience and future estimates and includes data from the Plan. The risk-free rate for periods within the expected term of the option is based upon the U.S. Treasury yield curve in effect at the time of grant. The Company currently does not foresee the payment of dividends in the near term.

The fair value of the stock options granted was estimated using the Black-Scholes option-pricing model and is amortized over the vesting period of the underlying options. The assumptions used to calculate the fair value are as follows:

		Year Ended March 31,
	2009	2008	2007
Dividend yield	0	0	0
Expected volatility	71-82%	77-140%	82-149%
Risk free interest rate	1.74-2.23%	1.74-5.10%	3.94-4.2%
Expected life (years)	3.25	3.18	3.36

Changes in the subjective input assumptions can materially affect the fair value estimate and, therefore, the existing models do not necessarily provide a reliable measure of the fair value of the Company’s stock options.

The following table summarizes information about the stock options outstanding at March 31, 2009:

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OPTIONS OUTSTANDING
		REMAINING	NUMBER OF
EXERCISE	NUMBER OF	CONTRACTUAL	OPTIONS	INTRINSIC
PRICE	OPTIONS	LIFE (YEARS)	EXERCISABLE	VALUE
$ 0.72 CDN	12,500	0.58	12,500	$ 5,325
0.90 CDN	237,500	0.58	237,500	118,332
1.00 CDN	1,443,000	2.00	1,443,000	1,465,385
1.15 CDN	78,750	2.33	78,750	86,626
1.40 CDN	157,500	2.83	157,500	139,271
1.78	95,000	4.48	47,500	40,586
2.22	1,505,000	4.12	752,500	917,596
2.41	710,000	3.33	710,000	501,598
$ 1.62	4,239,250	2.98	3,439,250	$ 3,274,719

The weighted average exercise price and remaining contractual term of options currently exercisable as of March 31, 2009 are $1.48 and 2.72 years; respectively.

The following table summarizes information about the stock options outstanding at March 31, 2008:

OPTIONS OUTSTANDING
		REMAINING	NUMBER OF
EXERCISE	NUMBER OF	CONTRACTUAL	OPTIONS	INTRINSIC
PRICE	OPTIONS	LIFE (YEARS)	EXERCISABLE	VALUE
$ 0.60 CDN	210,628	0.83	210,628	$ 59,807
0.72 CDN	67,500	1.58	67,500	28,756
0.85 CDN	20,000	3.00	20,000	10,716
0.90 CDN	182,500	1.58	182,500	90,929
1.00 CDN	1,423,000	3.00	1,423,000	1,445,075
1.15 CDN	78,750	3.33	78,750	86,626
1.40 CDN	157,500	3.83	118,125	139,271
2.41	760,000	4.33	380,000	536,922
$ 1.35 CDN	2,899,878	3.12	2,480,503	$ 2,398,102

The weighted average exercise price and remaining contractual term of options currently exercisable as of March 31, 2008 are $1.19CDN and 2.93 years; respectively.

A summary of the status of the Company’s nonvested stock options outstanding at March 31, 2007 and changes during the fiscal years ended March 31, 2008 and 2009 are presented as follows:

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		Weighted	Weighted
		Average Grant	Average
	Number of	Date Fair Value	Grant Date
	Options	Per Share	Fair Value
Nonvested, March 31, 2006	142,500	$ 0.69 CDN	$ 0.37
Granted	2,168,000	1.05 CDN	0.54
Vested	(1,094,000)	0.63 CDN	0.29
Forfeited	(145,000)	0.86 CDN	0.62
Nonvested, March 31, 2007	1,071,500	0.96 CDN	0.82
Granted	775,000	2.41	1.54
Vested	(1,422,125)	2.15	1.37
Forfeited	(5,000)	1.00 CDN	0.80
Nonvested, March 31, 2008	419,375	1.12 CDN	1.43
Granted	1,600,000	2.19	1.22
Vested	(980,881)	2.25	1.26
Forfeited	(238,494)	0.98	0.63
Nonvested, March 31, 2009	800,000	$ 2.19	$ 1.20

As of March 31, 2009, there was $546,134 of total unrecognized compensation cost related to nonvested share-based compensation arrangements granted under the Plan. That cost is expected to be recognized over a weighted-average period of 1.5 years. The total fair value of shares vested at March 31, 2009 and 2008 was $1,614,789 and $1,903,635; respectively.

Stock Purchase Warrants

At March 31, 2009, broker warrants at an exercise price of $2.34 totalled 191,475 and share purchase warrants at an exercise price of $3.00 remained outstanding. These warrants expire April 28, 2010.

During the quarter ended December 31, 2008, 295,454 broker warrants at an exercise price of $2.08 expired without exercise.

During the quarter ended June 30, 2008, the Company issued 191,475 broker warrants at an exercise price of $2.34 and 3,191,250 share purchase warrants at an exercise price of $3.00 as part of the private placement of 6,382,500 common shares completed April 28, 2008.

At June 30, 2007, 454,545 share purchase warrants at an exercise price of $2.08 were issued to compensate brokers resulting from the private placement of 9,090,900 common shares issued June 5, 2007. During the quarter ended December 31, 2007, stock purchase warrants representing 159,091 common shares at an exercise price of $2.08 were exercised.

NOTE 12 – FAIR VALUE MEASUREMENT

On April 1, 2008, the Company adopted the provisions of SFAS No. 157 related to its financial assets and liabilities measured at fair value on a recurring basis. SFAS No. 157 establishes a fair value hierarchy that prioritizes the inputs used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurement) and the lowest priority to unobservable inputs (Level 3 measurement).

The three levels of the fair value hierarchy defined by SFAS No. 157 are as follows:

-20-

Level 1 – Quoted prices are available in active markets for identical assets or liabilities. Active markets are those in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis.

Level 2 – Pricing inputs are other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date. Level 2 includes those financial instruments that are valued using models or other valuation methodologies. These models are primarily industry-standard models that consider various assumptions, including quoted forward prices for commodities, time value, volatility factors, and current market and contractual prices for the underlying instruments, as well as other relevant economic measures. Substantially all of these assumptions are observable in the marketplace throughout the full term of the instrument, can be derived from observable data or are supported by observable levels at which transactions are executed in the marketplace.

Level 3 – Pricing inputs include significant inputs that are generally unobservable from objective sources. These inputs may be used with internally developed methodologies that result in management’s best estimate of fair value. Level 3 instruments include those that may be more structured or otherwise tailored to the Company’s needs.

As required by SFAS No. 157, financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement requires judgment, and may affect the valuation of fair value assets and liabilities and their placement within the fair value hierarchy levels.

The following table discloses by level within the fair value hierarchy the Company’s assets and liabilities measured and reported on the Consolidated Balance Sheet as of March 31, 2009 at fair value on a recurring basis:

		Total		Level 1		Level 2		Level 3
Assets:
Money market accounts	$	3,464,906	$	3,464,906	$	-	$	-
Investment in equity securities		150,169		-		-		150,169
	$	3,615,075	$	3,464,906	$	-	$	150,169

On December 14, 2007 the FASB issued a proposed FASB staff position ("FSP") that would amend SFAS 157 to delay its effective date for all non-financial assets and non-financial liabilities, except for those that are recognized or disclosed at fair value in the financial statements on a recurring basis, that is, at least annually. For items within the scope of the proposed FSP the effective date of SFAS 157 would be delayed to fiscal years beginning after November 15, 2008 (fiscal 2010 for the Company) and interim periods within those fiscal years. During February 2008, the FASB confirmed and made effective the FSP. The Company has chosen not to implement SFAS 157 for non-financial assets and non-financial liabilities at this time.

Changes in level 3 assets measured at fair value on a recurring basis for the year ended March 31, 2009:

		Amounts
Investment in equity securities:
Balance at March 31, 2008	$	-
Purchases		88,515
Realized gains/losses		-
Foreign exchange loss		(34,237	)
Unrealized gain included in other comprehensive income		95,891
Balance at March 31, 2009	$	150,169

-21-

The equity securities purchased in June 2008 are not actively traded on a stock exchange. The change in value was calculated based on a subsequent private placement of the securities in January 2009 which reflected an increased market price for the securities.

NOTE 13 - RELATED PARTY TRANSACTIONS

At March 31, 2009 and 2008, the amounts of $2,491 and $9,218; respectively, are payable to directors and officers of the Company. These amounts are unsecured and due on demand.

The Company’s subsidiary Raft River Energy I, LLC owed the Company $271,475 and $205,033 at March 31, 2009 and 2008; respectively, for operating and maintenance expenses. The receivable balance is comprised of unsecured demand obligations due within twelve months. During the year ended March 31, 2009 and 2008, the Company received the following fees from RREI:

		Years Ended March 31,
		2009		2008		2007
Management fees	$	250,000	$	62,500	$	-
Lease and royalties		97,098		121,742		90,206
	$	347,098	$	184,242	$	90,206

The Company incurred the following transactions with directors, officers and a company with a common director:

		Years Ended March 31,
		2009		2008		2007
Administrative services	$	-	$	22,321	$	20,563
Director fees		60,000		41,250		23,250
Consulting fees		-		16,000		24,000
	$	60,000	$	79,571	$	67,813

NOTE 14 - DIFFERENCES BETWEEN CANADIAN AND U.S. GAAP

The Company’s consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”). The material difference in respect to these financial statements between U.S. GAAP and Canadian GAAP is reflected in the recording of Property, Plant and Equipment. Under Canadian GAAP, development and exploration costs associated with the Raft River project (property lease payments, geological consulting fees, well monitoring and permitting, etc.) were recorded as a capital asset. Under U.S. GAAP, these amounts are expensed.

As a result of the above, under Canadian GAAP the following line items in the consolidated balance sheets and income statements would have been presented as follows:

-22-

					Canadian
Consolidated Balance		U.S. GAAP			GAAP			U.S. GAAP			Canadian
Sheets		March 31,			March 31,			March 31,			GAAP March
		2009			2009			2008			31, 2008
Plant, Property and Equipment	$	29,340,846		$	29,781,457		$	6,858,015		$	7,298,626
Total Assets		52,451,343			52,891,954			40,731,585			41,172,196
Stockholders’ Equity		49,337,863			49,778,474			38,260,912			38,880,483
Total Liabilities and Stockholders’ Equity	$	52,451,343		$	52,891,954		$	40,731,585		$	41,172,196
Consolidated Statements		U.S. GAAP			Canadian			U.S. GAAP			Canadian
of Operations and		Year Ended			GAAP Year			Year ended			GAAP Year
Comprehensive Loss		March 31,			Ended March			March 31,			ended March
		2009			31, 2009			2008			31, 2008
Loss from Operations	$	(5,324,666	)	$	(5,324,666	)	$	(4,378,150	)	$	(4,378,150	)
Net Loss	$	(5,187,754	)	$	(5,187,754	)	$	(3,314,473	)	$	(3,314,473	)

NOTE 15 - COMMITMENTS AND CONTINGENCIES

Operating Lease Agreements

The Company has entered into several lease agreements with terms expiring up to December 1, 2034 for geothermal properties adjoining the Raft River Geothermal Property and for Neal Hot Springs. The Company incurred total lease expenses for year ended March 31, 2009, 2008, and 2007 totaled $108,185, $100,128 and $28,698; respectively.

BLM Lease Agreements

Idaho

On August 1, 2007, the Company signed a geothermal resources lease agreement with the United States Department of the Interior Bureau of Land Management (“BLM”). The contract requires an annual payment of $3,502 including processing fees. The primary term of the agreement is 10 years. After the primary term, the Company has the right to extend the contract. BLM has the right to terminate the contract upon written notice if the Company does not comply with the terms of the agreement.

San Emidio

The lease contracts are for approximately 21,905 acres of land and geothermal rights located in the San Emidio Desert, Nevada. The lease contracts have primary terms of 10 years. Per federal regulations applicable for the contracts, the lessee has the option to extend the primary lease term another 40 years if the BLM does not need the land for any other purpose and the lessee is maintaining production at commercial quantities. The leases require the lessee to conduct operations in a manner that minimizes adverse impacts to the environment.

Gerlach

The Gerlach Geothermal LLC assets are comprised of two BLM geothermal leases and one private lease totaling 3,615 acres. Both BLM leases have a royalty rate is based upon 10% of the value of the resource at the wellhead. The amounts are calculated according to a formula established by Minerals Management Service (“MMS”). One of the two BLM leases has a second royalty commitment to a third party of 4% of gross revenue for power generation and 5% for direct use based on BTUs consumed at a set comparable price of $7.00 per million BTU of natural gas. The private lease has a 10 year primary term and would receive a royalty of 3% gross revenue for the first 10 years and 4% thereafter.

-23-

Granite Creek

The Company has three geothermal lease contracts with the BLM for the Granite Creek properties. The lease contracts are for approximately 5,414 acres of land and geothermal water rights located in North Western Nevada. The lease contracts have primary terms of 10 years. Per federal regulations applicable for the contracts, the lessee has the option to extend the primary lease term another 40 years if the BLM does not need the land for any other purpose and the lessee is maintaining production at commercial quantities. The leases state annual lease payments of $5,414, not including processing fees, and expire October 31, 2012.

Office Lease

The Company entered into a 3 year lease contract effective January 1, 2008 through January 31, 2011, for general office space for an executive office located in Boise, Idaho. The lease payments are due in monthly installments that start at $5,637 per month and increase annually to $5,981 per month.

The following is the total contracted lease obligations for the next five fiscal years:

Years Ending
March 31,	Amount
2010	$ 143,377
2011	134,258
2012	74,713
2013	49,103
2014	46,599
Thereafter	98,791

Power Purchase Agreements

The Company has signed a power purchase agreement with Idaho Power Company for sale of power generated from its subsidiary Raft River Energy I, LLC. The Company has also signed a transmission agreement with Bonneville Power Administration for transmission of the electricity from this plant to Idaho Power, and from the phase two plants to other purchasers. These agreements will govern the operational revenues for the initial phases of the Company’s operating activities.

The Company signed a power purchase agreement on March 12, 2008 with Eugene Water and Electric Board for the planned phase two power plant at Raft River, Idaho. The agreement allows for variable output up to a maximum of 16 megawatts with a term of 25 years. The agreement is subject to successful drilling and resource development.

As a part of the purchase of the assets from Empire Geothermal Power, LLC and Michael B. Stewart acquisition (“Empire Acquisition”), a power purchase agreement with Sierra Pacific Power Company was assigned to the Company. The contract has a stated expected output of 3,250 kilowatts maximum per hour and extends through 2017. All power produced will be purchased and there are no penalties for not meeting or exceeding expected output levels.

Construction Contract

On December 5, 2005, the Company signed a contract (the “Ormat EPC Agreement”) with Ormat Nevada, Inc. (“Ormat”) for Ormat to construct a 13 megawatt geothermal power plant at Raft River, Idaho. As part of the Agreement, Ormat has guaranteed certain performance specifications and plant components. As of March 31, 2009, the Company retains $75,000 for release to Ormat upon Ormat’s completion of certain punch list items, namely, the repairs to the grounding grid and the reduction of the oversplash of water in the cooling tower. As a result of negotiations, Ormat issued a credit of $200,000 against an outstanding invoice.

-24-

The Company paid the net amount due less the $200,000 and $75,000 retainage to secure release of a lien on the project filed by Ormat.

NOTE 16 – JOINT VENTURES

Raft River Energy I LLC

Raft River Energy I is a joint venture between the Company and Raft River I Holdings, LLC a subsidiary of Goldman Sachs Group, Inc. An Operating Agreement governs the rights and responsibilities of both parties. At fiscal year end, the Company had contributed approximately $17.9 million in cash and property, and Raft River I Holdings, LLC has contributed approximately $34 million in cash. Profits and losses are allocated to the members based upon hypothetical liquidation at book value method. For income tax purposes, Raft River I Holdings, LLC will receive a greater proportion of the share of losses and other income tax benefits. This includes the allocation of production tax credits, which will be distributed 99% to Raft River I Holdings, LLC and 1% to the Company during the first 10 years of production. During the initial years of operations Raft River I Holdings, LLC will receive a larger allocation of cash distributions. During the initial term of the agreement, the Company accounts for its investment in this LLC under the equity method as a voting interest entity.

Gerlach Geothermal LLC

On April 28, 2008, the Company formed Gerlach Geothermal, LLC (“Gerlach”) with our partner, Gerlach Green Energy, LLC (“GGE”). The purpose of the joint venture is the exploration of the Gerlach geothermal system, which is located in northwestern Nevada, near the town of Gerlach. Based upon the terms of the members’ agreement, the company owns a 60% interest and GGE owns a 40% interest in Gerlach Geothermal, LLC. The agreement gives GGE an option to maintain its 40% ownership interest as additional capital contributions are required. If GGE dilutes to below a 10% interest, their ownership position in the joint venture would be converted to a 10% net profits interest. During the quarter end March 31, 2009, the Company contributed $746,000 in cash and $300,000 for a geothermal lease and mineral rights; and the GGE contributed $697,000 of geothermal lease, mineral rights and exploration data.

The consolidated financial statements reflect 100% of the assets and liabilities of Gerlach, and report the current minority interest of GGE. The full results of Gerlach’s operations will be reflected in the statement of operations with the elimination of the minority’s interest identified.

NOTE 17 – PRO FORMA FINANCIAL INFORMATION

With the acquisition of the assets at San Emidio effective May 1, 2008, we are required to report selected information for our consolidated statements of operations on a pro forma basis as if the San Emidio acquisition had been completed at the beginning of the periods being reported on. Selected line item information is as follows:

		For the Three Months Ended,						For the Year Ended,
		March 31,						March 31,
		2009			2008			2009			2008
Energy Sales	$	425,056		$	380,790		$	1,700,222		$	1,523,158
Plant Operations	$	679,583		$	581,386		$	2,718,332		$	2,325,544
Net Loss	$	(244,674	)	$	(166,117	)	$	(978,696	)	$	(664,469	)
Loss per share	$	(0.00	)	$	(0.00	)	$	(0.02	)	$	(0.01	)
Weighted average shares		62,033,884			53,469,527			62,020,474			52,407,704

-25-

NOTE 18 – SUBSEQUENT EVENTS

Department of Energy Loan Guarantee

On February 26, 2009, the Company submitted an application for the Neal Hot Springs project to the Department of Energy (“DOE”) Energy Efficiency, Renewable Energy and Advanced Transmission and Distribution Solicitation loan guarantee program under Title XVII of the Energy Policy Act of 2005. The Company was notified that its project application is complete, the power plant technology choice qualifies as new or improved under the program, and the project has been selected to proceed in the project loan process. The Company announced on May 26, 2009, that it has been selected by the DOE to enter into due diligence review on an $85 million project loan for the Neal Hot Springs project located in eastern Oregon. If awarded, the loan is expected to provide 80% of the $106 million estimated total capital cost. The new plant, designed to deliver 22 megawatts of power net to the grid, is scheduled to begin commercial operations in late 2011.

Employee Stock Options

On May 26, 2009, the Company announced the regular annual grant of employee stock options pursuant to its Stock Option Plan to directors, employees and consultants to acquire 1,795,000 shares exercisable at a price of $0.92 per share for a term of 5 years expiring May 26, 2014.

Production Pump at Raft River Energy I, LLC

On June 1, 2009, the production pipe column on a well at Raft River Energy I, LLC failed. This is the pipe that carries the geothermal fluid to the surface and supports the pump weight. The repair process has started and the pipe column and pump have been removed from the well. While the final repair costs have not been determined, initial estimates indicate that repair costs could exceed $600,000. Plant energy production has been reduced due to the failure. If the repair process goes according to plan, the repairs will be completed by June 19, 2009.

-26-

EX-13.2

Exhibit 13.2

RAFT RIVER ENERGY I LLC

Financial Statements

November 28, 2008

Report of Independent Auditors

To the Members of Raft River Energy I LLC:

In our opinion, the accompanying balance sheets and the related statements of operations, of cash flows and of members' equity present fairly, in all material respects, the financial position of Raft River Energy I LLC at November 28, 2008 and November 30, 2007, and the results of its operations and its cash flows for the three years in the period ended November 28, 2008 in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP

February 16, 2009
Portland, Oregon

RAFT RIVER ENERGY I LLC

BALANCE SHEETS

		November 28,			November 30,
		2008			2007
ASSETS
Current:
Cash and cash equivalents	$	1,270,847		$	167,585
Accounts receivable		540,600			59,131
Inventory		67,722			-
Other current assets		115,069			7,666
Total current assets		1,994,238			234,382
Property, Plant and Equipment:
Property and equipment, net accumulated depreciation		49,595,456			44,225
Construction in progress		421,323			50,011,450
Total property, plant and equipment (net)		50,016,779			50,055,675
Total Assets	$	52,011,017		$	50,290,057
LIABILITIES
Current:
Accounts payable and accrued liabilities	$	1,272,555		$	4,136,786
Related party accounts payable		161,858			116,000
Total current liabilities		1,434,413			4,252,786
MEMBERS’ EQUITY
Class A units - Raft River Holdings, LLC		34,143,100			34,170,100
Class B units - U.S. Geothermal Inc.		17,953,640			12,938,714
Accumulated deficit		(1,520,136	)		(1,071,543	)
Total members' equity		50,576,604			46,037,271
Total Liabilities and Members' Equity	$	52,011,017		$	50,290,057

The accompanying notes are an integral part of these financial statements.

-1-

RAFT RIVER ENERGY I LLC

STATEMENTS OF OPERATIONS

					For the Year			For the Year
		For the Year			Ended			Ended
		Ended			November 30,			November 24,
		November 28,			2007			2006
		2008			(Note 7	)		(Note 7	)
Operating Revenue:
Energy sales	$	4,285,076		$	96,743		$	-
Renewable energy credit sales		595,228			-			-
Total operating revenues		4,880,304			96,743			-
Operating Expenses:
Insurance		191,116			17,858			9,514
Office and administration		37,859			58,424			100,430
Travel and promotion		22,879			33,774			27,868
Management and professional fees		466,427			458,489			10,971
Plant and well field		1,392,098			193,041			17,820
Salaries and related costs		616,205			171,202			79,276
Lease, rent and royalties		206,554			61,265			-
Utilities		608,197			24,450			-
Depreciation		1,719,927			7,855			-
Loss on equipment disposal		147,958			-			-
Total operating expenses		5,409,220			1,026,358			245,879
Loss from Operations		(528,916	)		(929,615	)		(245,879	)
Other Income:
Other income		-			-			86
Interest income		80,323			95,381			8,484
Total other income		80,323			95,381			8,570
Net Loss	$	(448,593	)	$	(834,234	)	$	(237,309	)

The accompanying notes are an integral part of these financial statements.

-2-

RAFT RIVER ENERGY I LLC

STATEMENTS OF CASH FLOWS

		For the Year			For the Year			For the Year
		Ended			Ended			Ended
		November 28,			November 30,			November 24,
		2008			2007			2006
Cash Flow from Operating Activities:
Net loss	$	(448,593	)	$	(834,234	)	$	(237,309	)
Add/deduct items not affecting cash:
Depreciation		1,719,927			7,855			1,925
Loss on disposal of equipment		147,958			-			-
Distribution of capital for operating expenses		(27,000	)		-			-
Net changes in:
Accounts receivable		(481,469	)		(59,131	)		-
Inventory		(67,722	)		-			-
Accounts payable and accrued liabilities		365,892			(42,897	)		55,073
Other current assets		(107,403	)		1,016			(8,682	)
Total cash provided (used) by operating activities		1,101,590			(927,391	)		(188,993	)
Cash Flow from Investing Activities:
Purchases of property, plant and equipment		(4,713,254	)		(30,509,135	)		(13,951,996	)
Total cash used by investing activities		(4,713,254	)		(30,509,135	)		(13,951,996	)
Cash Flow from Financing Activities:
Proceeds from revolving loan facility		-			-			4,917,000
Repayment of revolving load facility		-			-			(4,917,000	)
Capital contributions from member U.S. Geothermal Inc.		4,714,926			6,575,000			5,000,000
Capital contributions from member Raft River Holding, LLC		-			21,620,000			12,550,100
Total cash provided by financing activities		4,714,926			28,195,000			17,550,100
Increase (Decrease) in Cash and Cash Equivalents		1,103,262			(3,241,526	)		3,409,111
Cash and Equivalents at the Beginning of the Period		167,585			3,409,111			-
Cash and Equivalents at the End of Period	$	1,270,847		$	167,585		$	3,409,111

The accompanying notes are an integral part of these financial statements.

-3-

RAFT RIVER ENERGY I LLC

STATEMENTS OF CASH FLOWS - Continued

		For the Year		For the Year		For the Year
		Ended		Ended		Ended
		November 28,		November 30,		November 24,
		2008		2007		2006
Schedule of Non-Cash Transactions:
Equipment contributed by member U.S. Geothermal Inc.	$	300,000	$	-	$	1,363,714
Other Items:
Accounts payable for capital expenditures	$	1,056,345	$	4,240,610	$	3,304,979

The accompanying notes are an integral part of these financial statements.

-4-

RAFT RIVER ENERGY I LLC

STATEMENT OF MEMBERS' EQUITY

					Class B Units -
		Class A Units -			U.S.
		Raft River			Geothermal,
		Holdings			Inc.			Total
Balance, November 25, 2005	$	-		$	-		$	-
Capital Contributions		12,550,100			6,363,714			18,913,814
Net loss		(136,915	)		(100,394	)		(237,309	)
Balance, November 24, 2006		12,413,185			6,263,320			18,676,505
Capital Contributions		21,620,000			6,575,000			28,195,000
Net loss		(673,142	)		(161,092	)		(834,234	)
Balance, November 30, 2007		33,360,043			12,677,228			46,037,271
Capital Contributions		-			5,014,926			5,014,926
Distributions		(27,000	)		-			(27,000	)
Net loss		(292,533	)		(156,060	)		(448,593	)
Balance, November 28, 2008	$	33,040,510		$	17,536,094		$	50,576,604

The accompanying notes are an integral part of these financial statements.

-5-

RAFT RIVER ENERGY I LLC

NOTES TO THE FINANCIAL STATEMENTS
NOVEMBER 28, 2008

NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS

Raft River Energy I LLC (the "Company") is a limited liability company organized in the State of Delaware by U.S. Geothermal Inc. on August 18, 2005, for the purpose of constructing and operating a geothermal power plant located near Malta, Idaho. The Company’s power plant is considered to be phase I of a Raft River, Idaho geothermal project expected to consist of three phases. As defined in the Membership Admission agreement, the Company is owned by U.S. Geothermal Inc. and Raft River I Holdings LLC, which is a Delaware limited liability company that is a subsidiary of The Goldman Sachs Group Inc. (collectively referred to as “the members”). As defined in the Management Services Agreements, U.S. Geothermal Services LLC, (a wholly owned subsidiary of U.S. Geothermal Inc.) is the Company’s Operator.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Accounting Method

The Company’s financial statements are prepared using the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America (“GAAP”) which have been consistently applied.

Accounts Receivable and Allowance for Doubtful Accounts

Accounts receivable are stated at their estimated net realizable value. The Company has considered the economic conditions, historical trends, contractual terms and financial stability of its major customer when calculating an allowance for uncollectible accounts. At fiscal year end, management determined that all accounts receivable were collectible and an accrual for an allowance for doubtful accounts was not necessary. Uncollectible accounts are removed when they are deemed uncollectible. Recovered bad debts are recorded as income in the period collected.

Cash and Cash Equivalents

Cash and cash equivalents consist of cash deposits and short term instruments with maturities of no more than ninety days when acquired.

Concentration of Risk

The Company’s cash and cash equivalents consisted of commercial bank deposits and a money market account. All cash equivalents are held in a commercial bank located in Boise, Idaho. Deposits held in the regular checking account are subject to Federal Deposit Insurance Corporation (“FDIC”) up to $250,000. The Company’s cash deposits, at November 28, 2008, totaled $1,270,886 ($1,190,887 was not FDIC insured). The money market funds, at November 28, 2008, totaled $12,275, and were not subject to FDIC insurance.

-6-

Contributed Capital and Membership Structure

Agreements between U.S. Geothermal Inc. and Raft River Holdings LLC were completed for construction financing of Phase I of the Raft River project. To accommodate the construction financing, U.S. Geothermal, Inc. sold 50% of its ownership in the Company to Raft River Holdings, with U.S. Geothermal Inc. owning 500 Class B member units and Raft River Holdings owning 500 Class A member units.

As of November 28, 2008, U.S. Geothermal Inc. has contributed $17,953,640 in cash and property to the project, while Raft River I Holdings LLC has contributed $34,143,100 (net of distributions of $27,000) in cash. Losses prior to the date of the agreements (from inception to July 2006) have been allocated 100% to U.S. Geothermal Inc., while profits and losses subsequent to the agreements (August 2006 to November 2008) have been allocated based on the capital contribution ratio.

Change from Development Stage

Pursuant to Statement of Financial Accounting Standards No. 7, “Accounting and Reporting by Development Stage Enterprises” (“SFAS 7”), the Company was considered to be a development stage enterprise prior to January 3, 2008. Among other provisions, SFAS 7 stipulated the reporting of inception to date results of operations, cash flows and other financial information. On January 3, 2008, the Company began generating revenues from planned commercial operations. Consequently, these financial statements are reported in accordance with generally accepted accounting principles for an operating company and do not reflect inception to date information.

Estimates

The preparation of financial statements in accordance with generally accepted accounting principles requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities known to exist as of the date the financial statements are published, and the reported amounts of revenues and expenses during the reporting period. Uncertainties with respect to such estimates and assumptions are inherent in the preparation of the Company’s financial statements; accordingly, it is possible that the actual results could differ from these estimates and assumptions and could have a material effect on the reported amounts of the Company’s financial position and results of operations.

Financial Instruments

The Company’s financial instruments consist of cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities. Unless otherwise noted, it is management’s opinion that the Company is not exposed to significant interest, currency or credit risks arising from these financial instruments. The fair values of these financial instruments approximate their carrying values, unless otherwise noted.

-7-

Impairment of Long-Lived Assets

The Company evaluates its long-term assets annually for impairment, or when circumstances or events occur that may impact the fair value of the assets. The fair value of geothermal property is primarily evaluated based upon the present value of expected cash flows directly associated with those assets. An impairment loss would be recognized if the carrying amount of a capitalized asset is not recoverable and exceeds its fair value. Management believes that there have not been any circumstances that have warranted the recognition of losses due to the impairment of long-lived assets as of November 28, 2008.

Inventory

Inventory consists of supplies and replacement parts needed to maintain the power plant and are not intended for resale. Upon purchase, items are recorded at cost and maintained at the lesser of cost or fair market value. Inventory items are charged to operations in the period they are utilized.

Lease Arrangements

Arrangements which potentially convey the right to use property, plant, or equipment for a stated period of time are analyzed in accordance with EITF 01-08, "Determining Whether an Arrangement Contains a Lease" to assess whether they should be accounted for as leases. For any arrangements that are found to meet the definition of a lease, an assessment is made as to whether they are capital leases or operating leases in accordance with SFAS 13, "Accounting for Leases".

Property, Plant and Equipment

Costs of acquisition of geothermal properties are capitalized on an area-of-interest basis. If an area of interest is abandoned, the costs thereof are charged to income in the year of abandonment. Property, plant and equipment are recorded at historical cost. Depreciation is calculated on a straight-line basis over the estimated useful life of the asset. Major improvements that significantly increase the useful lives and/or the capabilities of the assets are capitalized. Expenditures for repairs and maintenance are charged to expense as incurred.

Estimated useful lives by asset categories are summarized as follows:

	Estimated Useful
Asset Categories	Lives in Years
Furniture, vehicle and other equipment	4
Power plant, buildings and improvements	15 to 30
Wells	30
Well pumps and components	5 to 15
Pipelines	30
Transmission lines	30

-8-

Revenue

Revenue Recognition

Energy Sales

The Company’s primary operating revenue originates from electrical power generated by the Company’s geothermal power plant. The revenue is recognized when the power is produced and delivered to the customer who is reasonably assured to be able to pay under the terms defined in the Power Purchase Agreement (PPA).

Renewable Energy Credits

Revenues from Renewable Energy Credits (“RECs”) are recognized when the Company has met the terms of certain energy sales agreements with a financially capable buyer and has met the applicable governing regulations. The Company earns one REC for each megawatt hour produced from the geothermal power plant. Each REC is certified by Western Electricity Coordinating Council (“WREGIS”) and sold under a REC Purchase and Sales Agreement.

Revenue Source

All of the Company’s energy sales are received from one major power company that, primarily, operates in the State of Idaho. All of the power generated originates from the one power plant that utilizes a geothermal reservoir located in south eastern Idaho. Over 99% of the accounts receivable balance at fiscal year end represented a balance due from one major customer.

NOTE 3 - PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment are detailed as follows:

		Balance			Balance
		November 28,			November 30,
		2008			2007
Furniture and equipment	$	73,431		$	54,005
Power plant, buildings and improvements		26,120,756			-
Wells		15,339,317			-
Well pumps		2,715,806			-
Pipelines		5,553,048			-
Transmission lines		1,517,849			-
		51,320,207			54,005
Less: accumulated depreciation		(1,724,751	)		(9,780	)
		49,595,456			44,225
Construction in progress		421,323			50,011,450
	$	50,016,779		$	50,055,675

The majority of construction in progress costs, at November 30, 2007, were transferred to property, plant and equipment on January 3, 2008, when the power plant became operational. At November 28, 2008, construction in progress consisted of costs incurred for a reverse osmosis unit that was placed into operations in December 2008.

-9-

NOTE 4 - RELATED PARTY TRANSACTIONS

The amounts payable to U.S. Geothermal Inc. and U.S. Geothermal Services, LLC as of November 28, 2008 and November 30, 2007, were $161,858 and $55,073; respectively. The amounts payable are unsecured and due on demand. U.S. Geothermal Inc. is the managing member of the Company. U.S. Geothermal Services, LLC is a wholly owned subsidiary of U.S. Geothermal Inc.

The Company’s related party transactions are summarized as follows:

		For the Year		For the Year		For the Year
		Ended November		Ended November		Ended November
		28, 2008		30, 2007		24, 2006
Capital expenditures	$	87,510	$	965,546	$	266,669
Office and administration		31,298		97,559		19,787
Travel and promotion		22,879		-		-
Management and professional fees		291,925		-		-
Plant and well field		1,000,351		-		-
Salaries and related costs		616,205		171,202		76,276
Lease, rent and royalties		163,219		-		-
Utilities		7,383		-		-
Bank charges, Ormat letter of credit		-		83,486		12,451
	$	2,220,770	$	1,317,793	$	378,183

Management Services Agreement

The Company has entered into a management services agreement with U.S. Geothermal Services, LLC effective August 9, 2006, to provide certain management and operating services. The contract terminates upon the earlier of mutual agreement of the contracting parties or August 9, 2028. The quarterly management fee starts at $62,500, and in addition there are incentive payments linked to certain performance targets. During the fiscal year ended November 28, 2008, the Company paid U.S. Geothermal Services, LLC $227,708 for management services.

Well Field Lease Contract

On November 2, 2006, the Company signed a lease contract with a primary term of 20 years for the groundwater rights needed for cooling purposes at the Facility payable to U.S. Geothermal Inc. (“lessor”). The annual rate of $90,000 is based upon the facility’s expected needs of 900 acre feet per annum (“a.f.a.”) ($10,000 per 100 a.f.a.). Based upon the needs of the facility and proper notice given by the lessor, the contract allows for an increase in the amount of water available for lease according to the noted rate. The payments are due annually within ten business days following the anniversary of the (“placed in service”) date. The initial placed in service date was January 3, 2008, which is the date the facility became commercially operational. During the fiscal year ended November 28, 2008, the Company paid the lessor the “initial rent payment” of $90,000 due for the period of time from the contract date to the initial placed in service date. For the fiscal year, the Company incurred an additional $74,475 for lease costs, of which $6,975 was unpaid at November 28, 2008.

-10-

The schedule of estimated lease payments for the primary contract term is as follows:

For the Fiscal
Year Ended	Amounts
2009	$ 90,000
2010	90,000
2011	90,000
2012	90,000
2013	90,000
Thereafter	1,170,000
Total	$ 1,620,000

NOTE 5 - COMMITMENTS AND CONTINGENCIES

Operating Lease Agreements

The Company has entered into several lease agreements with terms expiring up to December 1, 2033, for geothermal properties adjoining the Raft River Geothermal Property. The schedule of estimated annual lease payments is as follows:

For the Fiscal
Year Ended	*Amounts
2009	$ 117,578
2010	119,481
2011	120,600
2012	120,936
2013	121,287
Thereafter	1,650,436
Total	$ 2,250,318

* The schedule includes the expected annual related party well field lease payments described in Note 4.

The terms of the management services agreement and the well field lease contract are described in Note 4.

Power Purchase Agreement

The Company has signed a twenty year power purchase agreement with Idaho Power Company for sale of power generated from its planned phase one power plant. It has been determined this meets the definition of a lease arrangement under EITF 01-08 and will be accounted for as an operating lease. As there is no minimum payment, lease income will be recognized as revenue when sales of power occur.

Power Transmission

The Company has also signed a transmission agreement with Bonneville Power Administration for transmission of the electricity from this plant to Idaho Power, and a contract to sell the renewable energy credits for the first ten years to Holy Cross Energy.

-11-

NOTE 6 - MEMBERS' INTERESTS

The Company has issued two classes of member units, the Class A units and the Class B units. Each class of ownership gives the owner participating rights in the business and results in equity ownership risks. The rights attached to the different classes will vary over time, in accordance with the terms of the Membership Admission Agreement. The agreement requires the Company to track separately the capital accounts of the members after November 24, 2006. The profits and losses of the Company are allocated on the basis of the ratios of the capital contributions. For income tax purposes, the Class A units will receive a greater proportion of the share of losses and other income tax benefits. This includes the allocation of production tax credits, which will be distributed 99% to the Class A units and 1% to the class B units during the first 10 years of production. During the initial years of operations Class A units will receive a larger allocation of distributions.

Under the terms of the Membership Admission Agreement, as of November 28, 2008, Raft River I Holdings LLC, has contributed their full obligation of $34.2 million in cash, and U.S. Geothermal Inc. has contributed $17.9 million in assets to the Company. U.S. Geothermal Inc.’s contribution consisted of $16.5 in cash and approximately $1.4 million in property. In the event that additional financing is required, U.S. Geothermal Inc. is obligated to provide such financing.

NOTE 7 – RECLASSIFICATION OF OPERATING EXPENSES

For reporting purposes, the Company has reclassified, expanded and consolidated certain operating cost line items as originally reported for the fiscal years ended November 30, 2007 and November 24, 2006 to improve comparability with the operating results for the fiscal year ended November 28, 2008. The changes did not affect the net operating loss reported in the fiscal years ended November 30, 2007 and November 24, 2006. The primary purpose of the change originated with the Company’s change in status from a development stage company to an operational entity. The following table summarizes the changes:

		Originally Reported
		for the Year		Reclassified for the
		Ended November		Year Ended
		30, 2007		November 30, 2007
Operating Expenses:
Insurance	$	17,858	$	17,858
Office and administration		119,231		58,424
Travel and promotion		33,774		33,774
Professional and management fees		458,489		458,489
Plant and well field		201,865		193,041
Salaries and related costs		171,202		171,202
Lease, rent and royalties		-		61,265
Utilities		-		24,450
Depreciation		-		7,855
Interest and bank charges		400		-
Miscellaneous expense		23,539		-
Total operating expenses	$	1,026,358	$	1,026,358

-12-

		Originally Reported		Reclassified for the
		for the Year Ended		Year Ended
		November 24, 2006		November 24, 2006
Operating Expenses:
Insurance	$	9,514	$	9,514
Office and administration		51,552		100,430
Travel and promotion		27,868		27,868
Professional and management fees		10,971		10,971
Plant and well field		17,820		17,820
Salaries and related costs		79,276		79,276
Interest and bank charges		44,363		-
Miscellaneous expense		4,515		-
Total operating expenses	$	245,879	$	245,879

NOTE 8 – INCOME TAX

The Company is a Limited Liability Corporation that is treated as a partnership for tax purposes with each of the Members accounting for their share of the tax attributes and liabilities. Accordingly, there are no deferred income tax amounts recorded in these financial statements.

-13-

EX-23.1

Exhibit 23.1

Board of Directors
U.S Geothermal, Inc.
Boise, ID

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the use of our audit report dated June 10, 2009, except Note 2 which is dated October 22, 2009, on the consolidated financial statements of U.S. Geothermal, Inc. for the years ended March 31, 2009, 2008 and 2007, as filed with the Form 10-K/A and by reference to the outstanding Forms S-3 (333-158355), S-3A (333-151858) and S-8 (333-141262) as previously filed.

/s/ BehlerMick PS                                       
BehlerMick PS
Spokane, Washington

October 22, 2009

EX-23.2

Exhibit 23.2

	GeothermEx, Inc.	3260 BLUME DR., SUITE 220 RICHMOND, CALIFORNIA 94806
TELEPHONE: (510) 527-9876 FAX: (510) 527- 8164 E-MAIL: mw@geothermex.com

Consent of GeothermEx Inc.

In connection with U.S. Geothermal Inc's registration statement on Form 10K, S-3, S-8 and related filings under the United States Securities Act of 1933, I, Subir Sanyal, on behalf of GeothermEx Inc. ("GeothermEx"), hereby consent to the use of GeothermEx's name and to the use of the "Technical Report On The Taft River Geothermal Resource, Cassia County Idaho" dated August 2002, and the "Results From The short-Term Well Testing Program At the Raft River Geothermal Field, Cassia County, Idaho" dated October 2004 (together with the "Technical Reports", references to the Technical Reports, or portions thereof, or information derived from the Technical Reports, in the Registration Statement.

Dated at Richmond, California, this 10^th day of August, 2009.

/s/ Subir K. Sanyal                             
Name: Subir K.Sanyal
Title: President

EX-23.3

Exhibit 23.3

TEPLOW GEOLOGIC
1518 Excelsior Ave.
Oakland, CA 94602
Tel: 510-530-2210, Fax: 510-530-1098
Cell: 510-918-2210, E-mail: teplow@aol.com

August 8, 2009

To Whom It May Concern:

Re: Consent of Teplow Geologic

In connection with U.S. Geothermal Inc’s registration statement on Form 10K, S-3, S-8 and related filings under the United States Securities Act of 1933, I, William Teplow, on behalf of Teplow Geologic. (“Teplow”), hereby consent to the use of Teplow’s name and to the use of the “Preliminary Assessment of the Neal Hot Spring Geothermal Prospect” dated June 16, 2006, references to the Technical Report, or portions thereof, or information derived from the Technical Report, in the Registration Statement.

Dated at Oakland, California this 8^th day of August, 2009.

/s/ William Teplow                                 
William Teplow
Consulting Geologist

EX-23.4

Exhibit 23.4

Consent of Black Mountain Technology

In connection with U.S. Geothermal Inc’s registration statement of Form 10K, S-3, S-8 and related filings under the United States Securities Act of 1933, I, Susan Petty, on behalf of Black Mountain Technology (“Black Mountain”), herby consent to the use of Black Mountain’s name and to the use of the “Empire Geothermal Project Evaluation” dated August, 2006, as updated March 2008, references to the Project Evaluation, or portions thereof, or information derived from the Project Evaluation, in the Registration Statement.

Dated at Seattle, Washington, this 20 day of August, 2009.

/s/ Susan Petty                           
Name: Susan Petty
Title: Principal & Owner

EX-23.5

Exhibit 23.5

Consent of Independent Accountants

We hereby consent to the incorporation by reference in the Registration Statement on Form S-8 (No. 333-141262) and Form S-3 (No. 333-151858) of U.S. Geothermal Inc. of our report dated February 16, 2009 relating to the financial statements of Raft River Energy I, LLC, which appears in this Form 10-K (Amendment No.1) of U.S. Geothermal Inc.

　

/s/ PricewaterhouseCoopers LLP               
Portland, Oregon
October 23, 2009

EX-23.6

Exhibit 23.6

Consent of Geothermal Science, Inc.

In connection with U.S. Geothermal Inc’s registration statement of Form 10K, S-3, S-8 and related filings under the United States Securities Act of 1933, I, Richard Holt, on behalf of Geothermal Science, Inc. (“Geothermal”), herby consent to the use of Geothermal’s name and to the use of the “Assessment of the Geothermal Potential, Neal Hot Springs, Malheur County, Oregon” dated February 5, 2009, references to the Assessment, or portions thereof, or information derived from the Assessment, in the Registration Statement.

Dated at Boise, Idaho, this 11^th day of August, 2009.

/s/ Richard J. Holt                           
Name: Richard J. Holt
Title: Owner

EX-31.1

EXHIBIT 31.1

CERTIFICATIONS

I, Daniel J. Kunz, certify that:

1.         I have reviewed this annual report on Form 10-K/A of U.S. Geothermal Inc. for the period ended March 31, 2009;

2.         Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.         Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.         The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we have:

a)         Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)         Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)         Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)         Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.         The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)         all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)         any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

October 23, 2009	By	/s/ Daniel J. Kunz
		Daniel J. Kunz
		Chief Executive Officer and President

EX-31.2

EXHIBIT 31.2

CERTIFICATIONS

I, Kerry D. Hawkley, certify that:

1.         I have reviewed this annual report on Form 10-K/A of U.S. Geothermal Inc. for the period ended March 31, 2009;

2.         Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.         Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.         The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we have:

a)         Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)         Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)         Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)         Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.         The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)         all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)         any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

October 23, 2009	By	/s/ Kerry D. Hawkley
		Kerry D. Hawkley
		Chief Financial Officer

EX-32.1

EXHIBIT 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED
PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of U.S. Geothermal Inc. (the “Company”) on Form 10-K/A for the period ended March 31, 2009, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Daniel J. Kunz, President & Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)     The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2)     The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

By	/s/ Daniel J. Kunz
	Daniel J. Kunz
	Chief Executive Officer and President

October 23, 2009

EX-32.2

EXHIBIT 32.2

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED
PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of U.S. Geothermal Inc. (the “Company”) on Form 10-K/A for the period ended March 31, 2009, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Kerry D. Hawkley, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)     The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2)     The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

By	/s/ Kerry D. Hawkley
	Kerry D. Hawkley
	Chief Financial Officer

October 23, 2009