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Exhibit 9.1







NEVADA GEOTHERMAL POWER INC. CONSOLIDATED FINANCIAL STATEMENTSJUNE 30, 2010(Expressed in US Dollars)(AUDITED)


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Deloitte & Touche LLP2800 - 1055 Dunsmuir Street4 Bentall CentreP.O. Box 49279Vancouver BC V7X 1P4CanadaTel: 604-669-4466Fax: 604-685-0395www.deloitte.ca
  Report of Independent Registered Chartered Accountants To the Shareholders of
Nevada Geothermal Power Inc. We have audited the consolidated balance sheets of Nevada Geothermal Power Inc. as at June 30, 2010 and 2009 and the consolidated income statements, statements of comprehensive loss and cash flows for the years then ended. 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 in accordance with Canadian generally accepted auditing standards and the standards of the Public Company Accounting Oversight Board (United States). These standards require that we plan and perform an audit to obtain reasonable assurance 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. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, these consolidated financial statements present fairly, in all material respects, the financial position of the Company as at June 30, 2010 and 2009 and the results of its operations and its cash flows for the years then ended in accordance with Canadian generally accepted accounting principles. We have also, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Companys internal control over financial reporting as of June 30, 2010, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated September 27, 2010, expressed an unqualified opinion on the Companys internal control over financial reporting.   Independent Registered Chartered Accountants
September 27, 2010 Membre de / Member of Deloitte Touche Tohmatsu


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Comments by Independent Registered Chartered Accountants on Canada-United States of America reporting difference The standards of the Public Company Accounting Oversight Board (United States) require the addition of an explanatory paragraph (following the opinion paragraph) when the financial statements are affected by conditions and events that cast substantial doubt on the Company's ability to continue as a going concern, such as those described in Note 1 to the consolidated financial statements. Although we conducted our audits in accordance with both Canadian generally accepted auditing standards and the standards of the Public Company Accounting Oversight Board (United States), our report to the shareholders dated September 27, 2010 is expressed in accordance with Canadian reporting standards which do not permit a reference to such conditions and events in the auditors report when these are adequately disclosed in the financial statements.  Independent Registered Chartered Accountants
September 27, 2010


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Report of Independent Registered Chartered Accountants To the Shareholders of Nevada Geothermal Power Inc. We have audited the internal control over financial reporting of Nevada Geothermal Power Inc. (the Company) as of June 30, 2010, based on the criteria established in Internal Control - Integrated Frameworkissued by the Committee of Sponsoring Organizations of the Treadway Commission. The Company's management is responsible 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 Report of Management on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company's internal control over financial reporting based on our audit. We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. A company's internal control over financial reporting is a process designed by, or under the supervision of, the company's principal executive and principal financial officers, or persons performing similar functions, and effected by the company's board of directors, management, and other personnel 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 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 the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the 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 Company maintained, in all material respects, effective internal control over financial reporting as of June 30, 2010, based on the criteria established in Internal Control - Integrated Frameworkissued by the Committee of Sponsoring Organizations of the Treadway Commission.


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We have also audited, in accordance with Canadian generally accepted auditing standards and the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements as at and for the year ended June 30, 2010, of the Company and our report dated September 27, 2010, expressed an unqualified opinion on those financial statements.  Independent Registered Chartered Accountants
Vancouver, Canada
September 27, 2010 Page 2


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NEVADA GEOTHERMAL POWER INC.CONSOLIDATED BALANCE SHEETSAs at June 30, 2010 and 2009(AUDITED)(Expressed in US Dollars)(see Note 1  Nature of Operations and Going oncern) 2010
     
     
     2009ASSETSCurrentCash and cash equivalents
     $
     6,435,375
     
     $
     2,390,428Restricted cash (Note 21 e)
     
     -
     
     
     16,370,100Accounts receivable
     
     2,479,746
     
     
     115,039Marketable securities (Note 6)
     
     71,388
     
     
     85,985Inventory
     
     161,881
     
     
     -Future financing costs
     
     1,778,152
     
     
     755,032Prepaid expenses
     
     206,200
     
     
     146,39511,132,742
     
     
     19,862,979Restricted Cash(Note 21 e)
     
     4,005,672
     
     
     2,225,336Property, Plant and Equipment(Note 7)
     
     169,716,976
     
     
     112,148,391Intangible Assets(Note 8)
     
     1,005,082
     
     
     13,014Interests in Geothermal Properties(Note 9)
     
     1,413,309
     
     
     88,561,126$
     187,273,781
     
     $
     222,810,846LIABILITIESCurrentAccounts payable and accrued liabilities
     $
     3,243,124
     
     $
     17,438,406Deferred construction amounts payable
     
     -
     
     
     9,028,380Short-term portion of long-term liabilities (Note 13)
     
     153,708,330
     
     
     149,095,125156,951,454
     
     
     175,561,911Long-term Payables(Note 11)
     
     486,913
     
     
     632,182Lease Obligations(Note 12)
     
     32,108
     
     
     -Cash Settled Option(Note 14)
     
     2,722,396
     
     
     1,820,844Asset Retirement Obligation(Note 15)
     
     1,291,274
     
     
     932,689Future Income Tax Liability(Note 16)
     
     -
     
     
     1,320,440161,484,145
     
     
     180,268,066SHAREHOLDERS' EQUITYShare Capital(Note 17)
     
     54,942,619
     
     
     53,857,748Contributed Surplus
     
     4,143,381
     
     
     4,250,432Accumulated Other Comprehensive Income
     
     2,112,789
     
     
     1,862,302Deficit
     
     (35,409,153
     )
     
     (17,427,702
     )25,789,636
     
     
     42,542,780$
     187,273,781
     
     $
     222,810,846
  Commitments (Note 21)Subsequent Events (Note 25) Approved on behalf of the Board of Directors: Brian Fairbank
     
     Domenic FalconeDirector
     
     Director
  The accompanying notes are an integral part of these consolidated financial statements. 5


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NEVADA GEOTHERMAL POWER INC.CONSOLIDATED INCOME STATEMENTFor the Years Ended June 30, 2010, 2009 and 2008(AUDITED)(Expressed in US Dollars) 2010
     
     
     2009
     
     
     2008RevenueElectricity sales (Note 5)
     $
     11,839,010
     
     $
     -
     
     $
     -Direct cost of energy production
     
     (7,654,668
     )
     
     -
     
     
     -Gross margin
     
     4,184,342
     
     
     -
     
     
     -ExpensesAccounting, audit and tax
     
     782,639
     
     
     672,248
     
     
     50,386Accretion of asset retirement obligation
     
     73,535
     
     
     58,446
     
     
     20,931Amortization
     
     76,199
     
     
     88,421
     
     
     61,877Consulting fees
     
     626,441
     
     
     306,861
     
     
     270,472Investor communication
     
     149,894
     
     
     249,154
     
     
     455,457Insurance
     
     94,137
     
     
     50,461
     
     
     60,005Legal
     
     988,744
     
     
     229,459
     
     
     264,392Office and administrative expenses
     
     458,142
     
     
     315,786
     
     
     516,428Salaries and wages
     
     1,202,916
     
     
     959,202
     
     
     835,477Stock-based compensation
     
     224,500
     
     
     307,359
     
     
     858,890Travel and business development
     
     244,818
     
     
     126,021
     
     
     161,8604,921,965
     
     
     3,363,418
     
     
     3,556,175Other (Expenses) IncomeChange in fair value of cash settled option (Note 14)
     
     (901,552
     )
     
     (61,343
     )
     
     -Financing expenses
     
     (893,011
     )
     
     -
     
     
     -Foreign exchange loss
     
     (85,116
     )
     
     (1,737,199
     )
     
     (309,394
     )Loss on disposal of equipment
     
     -
     
     
     (8,395
     )
     
     (3,286
     )Options proceeds in excess of mineral property costs
     
     -
     
     
     -
     
     
     129,305Impairment of marketable securities
     
     (75,429
     )
     
     -
     
     
     -Undrawn commitment fee
     
     -
     
     
     (264,925
     )
     
     -Interest expense (Note 19)
     
     (15,365,331
     )
     
     -
     
     
     -Interest income
     
     76,611
     
     
     346,520
     
     
     313,783(17,243,828
     )
     
     (1,725,342
     )
     
     130,408Net Loss
     $
     (17,981,451
     )
     $
     (5,088,760
     )
     $
     (3,425,767
     )Loss per share (Basic & diluted)
     $
     (0.19
     )
     $
     (0.05
     )
     $
     (0.04
     )Weighted average number of commonshares issued and outstanding (Basic & diluted)
     
     95,280,808
     
     
     94,438,849
     
     
     79,122,910
  The accompanying notes are an integral part of these consolidated financial statements. 6


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NEVADA GEOTHERMAL POWER INC.CONSOLIDATED STATEMENTS OF CASH FLOWSFor the Years Ended June 30, 2010, 2009 and 2008(AUDITED)(Expressed in US Dollars) 2010
     
     
     2009
     
     
     2008Cash flows used in operating activitiesNet Loss for the period
     $
     (17,981,451
     )
     $
     (5,088,760
     )
     $
     (3,425,767
     )Items not requiring (providing) cash:Amortization
     
     4,979,583
     
     
     88,421
     
     
     61,877Accretion of asset retirement obligation
     
     73,535
     
     
     58,446
     
     
     20,931Change in fair value of cash settled option
     
     901,552
     
     
     61,343
     
     
     -Foreign exchange loss
     
     -
     
     
     1,737,199
     
     
     -Interest deferred and non-cash interest
     
     6,221,851
     
     
     -
     
     
     -Impairment of marketable securities
     
     75,429
     
     
     -
     
     
     -Loss on disposal of equipment
     
     -
     
     
     8,395
     
     
     3,286Marketable securities received as option payment
     
     -
     
     
     -
     
     
     (68,303
     )Recruitment fees
     
     -
     
     
     -
     
     
     129,875Stock-based compensation
     
     224,500
     
     
     307,359
     
     
     858,890Undrawn commitment fee
     
     -
     
     
     264,925
     
     
     -Changes in non-cash working capital:(Increase) decrease in accounts receivable
     
     (1,984,956
     )
     
     28,599
     
     
     (70,016
     )Increase in inventory
     
     (161,881
     )
     
     -
     
     
     -Increase (decrease) in accounts payable
     
     167,975
     
     
     416,249
     
     
     (2,350,441
     )(Increase) decrease in prepaid expenses
     
     (51,111
     )
     
     (766,847
     )
     
     21,734(7,534,974
     )
     
     (2,884,671
     )
     
     (4,817,934
     )Cash flows used in investing activitiesDecrease (increase) in restricted cash
     
     14,655,186
     
     
     (17,920,984
     )
     
     (3,710
     )Acquisition of intangible assets
     
     (1,020,836
     )
     
     (21,938
     )
     
     (27,396
     )Acquisition and construction of property, plant and equipment
     
     (51,235,605
     )
     
     (66,278,862
     )
     
     (12,629,675
     )Cash grant received
     
     57,872,513
     
     
     -
     
     
     -Interests in geothermal properties
     
     (429,499
     )
     
     (39,604,566
     )
     
     (20,210,945
     )Proceeds from disposal of equipment
     
     -
     
     
     31,454
     
     
     1,03419,841,759
     
     
     (123,794,896
     )
     
     (32,870,692
     )Cash flows from financing activitiesNet proceeds from private placements
     
     -
     
     
     -
     
     
     13,909,223Lease obligation payments
     
     (1,139
     )
     
     -
     
     
     -Loan advances
     
     19,989,898
     
     
     139,292,591
     
     
     20,166,304Loan repayment
     
     (28,879,380
     )
     
     (20,723,093
     )
     
     -Future financing costs
     
     (186,888
     )
     
     (574,802
     )
     
     -Proceeds from agents' units exercised
     
     -
     
     
     -
     
     
     1,401,703Proceeds from agents' options exercised
     
     297,985
     
     
     -
     
     
     -Proceeds from options exercised
     
     455,335
     
     
     94,899
     
     
     349,337Proceeds from warrants exercised
     
     -
     
     
     -
     
     
     27,222(8,324,189
     )
     
     118,089,595
     
     
     35,853,789Effect of exchange rate changes on cash andcash equivalents
     
     62,351
     
     
     (492,960
     )
     
     599,060Increase (decrease) in cash and cash equivalents
     
     4,044,947
     
     
     (9,082,932
     )
     
     (1,235,777
     )Cash and cash equivalents, beginning of period
     
     2,390,428
     
     
     11,473,360
     
     
     12,709,137Cash and cash equivalents, end of period
     $
     6,435,375
     
     $
     2,390,428
     
     $
     11,473,360
  Additional Cash Flow Information(Note 23) The accompanying notes are an integral part of these consolidated financial statements. 7


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NEVADA GEOTHERMAL POWER INC.CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSSFor the Years Ended June 30, 2010, 2009 and 2008(AUDITED)(Expressed in US Dollars) 2010
     
     
     2009
     
     
     2008Net loss for the period
     $
     (17,981,451
     )
     $
     (5,088,760
     )
     $
     (3,425,767
     )Other comprehensive income (loss)Foreign translation gain (loss)
     
     189,655
     
     
     (1,596,563
     )
     
     1,325,969Decrease in unrealized holding gain on marketable securities
     
     (14,597
     )
     
     (94,656
     )
     
     (10,889
     )Impairment of marketable securities included in income statement
     
     75,429
     
     
     -
     
     
     -Comprehensive loss
     $
     (17,730,964
     )
     $
     (6,779,979
     )
     $
     (2,110,687
     )
  8


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NEVADA GEOTHERMAL POWERINC.CONSOLIDATED STATEMENTSOFCHANGESINSHAREHOLDERS EQUITYFor the years ended June 30, 2010 and 2009(AUDITED)(Expressedin US Dollars) Other Comprehensive Income (Loss)Shares
     
     Share Capital
     
     ContributedSurplus
     
     
     CurrencyTranslationDifferences
     
     
     Revaluation ofMarketableSecurities
     
     
     Deficit
     
     
     TotalShareholders'EquityBalance, June 30, 2008
     
     94,169,504
     $
     53,701,819
     $
     4,004,103
     
     $
     3,519,697
     
     $
     33,824
     
     $
     (12,338,942
     )
     $
     48,920,501Issued for cashStock options exercised
     
     378,000
     
     94,899
     
     -
     
     
     -
     
     
     -
     
     
     -
     
     
     94,899Stock options exercised - stock option valuation
     
     -
     
     61,030
     
     (61,030
     )
     
     -
     
     
     -
     
     
     -
     
     
     -Stock options granted
     
     -
     
     -
     
     307,359
     
     
     -
     
     
     -
     
     
     -
     
     
     307,359Currency translation difference
     
     -
     
     -
     
     -
     
     
     (1,596,563
     )
     
     -
     
     
     -
     
     
     (1,596,563
     )Decrease in marketable securities
     
     -
     
     -
     
     -
     
     
     -
     
     
     (94,656
     )
     
     -
     
     
     (94,656
     )Net loss for the year
     
     -
     
     -
     
     -
     
     
     -
     
     
     -
     
     
     (5,088,760
     )
     
     (5,088,760
     )Balance, June 30, 2009
     
     94,547,504
     
     53,857,748
     
     4,250,432
     
     
     1,923,134
     
     
     (60,832
     )
     
     (17,427,702
     )
     
     42,542,780Issued for cashStock options exercised
     
     714,000
     
     455,335
     
     -
     
     
     -
     
     
     -
     
     
     -
     
     
     455,335Agent options exercised
     
     315,000
     
     297,985
     
     -
     
     
     -
     
     
     -
     
     
     -
     
     
     297,985Stock options exercised - option valuation
     
     -
     
     224,813
     
     (224,813
     )
     
     -
     
     
     -
     
     
     -
     
     
     -Agent options exercised - option valuation
     
     -
     
     106,738
     
     (106,738
     )
     
     -
     
     
     -
     
     
     -
     
     
     -Stock options granted
     
     -
     
     -
     
     224,500
     
     
     -
     
     
     -
     
     
     -
     
     
     224,500Currency translation difference
     
     -
     
     -
     
     -
     
     
     189,655
     
     
     -
     
     
     -
     
     
     189,655Decrease in marketable securities
     
     -
     
     -
     
     -
     
     
     -
     
     
     (14,597
     )
     
     -
     
     
     (14,597
     )Impairment of marketable securities
     
     -
     
     -
     
     -
     
     
     -
     
     
     75,429
     
     
     -
     
     
     75,429Net loss for the period
     
     -
     
     -
     
     -
     
     
     -
     
     
     -
     
     
     (17,981,451
     )
     
     (17,981,451
     )Balance, June 30, 2010
     $
     95,576,504
     $
     54,942,619
     $
     4,143,381
     
     $
     2,112,789
     
     $
     -
     
     $
     (35,409,153
     )
     $
     25,789,636
  The accompanying notes are an integral part of these consolidated financial statements. 5


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NEVADA GEOTHERMAL POWER INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTSJUNE 30, 2010(AUDITED) 
          (Expressed in US Dollars) 1.
        NATURE OF OPERATIONS AND GOING CONCERN
  Nevada Geothermal Power Inc. (the Company or Nevada Geothermal) was incorporated on April 13, 1995 under the laws of British Columbia and became a revenue generating company during the second fiscal 2010 quarter, the fourth calendar quarter of 2009. The Company was in the development stage until that point. The Companys common shares are traded on the TSX Venture Exchange under the trading symbol NGP and on the OTC Bulletin Board in the United States under the symbol NGLPF. The Company is a generator of geothermal electrical power and a developer of geothermal projects. Nevada Geothermals principal operation is the Faulkner I power plant located in northern Nevada (Blue Mountain). Revenue is generated by the Company from selling electrical power to NV Energy (NVE) under a 20-year Power Purchase Agreement (PPA). The Company is also continuing its exploration, evaluation and further development of other geothermal property interests at Pumpernickel Valley, Black Warrior and Edna Mountain in Nevada, as well as Crump Geyser in Oregon. On August 29, 2008, the Company closed a financing with Trust Company of the West (TCW) to issue up to $180 million of debt for the continued development of its Blue Mountain power plant project. As at June 30, 2010, $163,957,365 was outstanding under the debt agreement. At June 30, 2010, the Company was not in compliance with all the terms of the TCW loan, and accordingly the loan was classified as a short-term liability. Consequently, as at June 30, 2010, the Company had a working capital deficiency of $145,818,712. In addition, the Companys cumulative operating losses and development costs have resulted in accumulated losses totalling $35,409,153. On November 20, 2009, the Company and TCW reached an agreement in principle to waive budget non compliance and, until the earlier of the closing of a potential John Hancock Life Insurance Company (John Hancock) loan and March 31, 2010, an interest coverage covenant, in return for 4.5 million warrants exercisable at CAD1.50 (Note 21(f)) . Subsequently both parties agreed to extend the agreement beyond March 31, 2010, without other changes, until the potential John Hancock loan closed. The John Hancock loan was closed on September 3, 2010. On September 3, 2010, the Company entered into a Consent and Waiver agreement with TCW, rectifying the non-compliance with loan terms, and issued the warrants, as more fully discussed in Note 25. Although the Company has successfully declared commercial operation at its Blue Mountain power plant facility, there exists substantial doubt regarding the going concern assumption since the Company has no track record of operating profitably, and the Company must increase power production to meet loan covenants, such as a covenanted interest coverage ratio. The Companys ability to continue on as a going concern is dependent on meeting the covenants of its loan agreements, the achievement of profitable operations, completing its current drilling program successfully and increasing power production under its PPA with NVE and the Companys ability to raise additional capital from lenders, shareholders and other investors to support ongoing business activities. These consolidated financial statements do not include any adjustments that might result from the outcome of these uncertainties. 6


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NEVADA GEOTHERMAL POWER INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTSJUNE 30, 2010(AUDITED) 
          (Expressed in US Dollars) 2.
        SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
  a.
        Basis of Presentation and Consolidation
  These financial statements have been prepared in accordance with Canadian generally accepted accounting principles (GAAP) and are expressed in US dollars. The major differences between Canadian and US GAAP which affect the Companys financial statement are described in note 22. The financial statements include the accounts of the Company and its wholly owned subsidiaries: Blue Mountain Power Company Inc., incorporated in the province of British Columbia;NGP Chile Ltda., incorporated in Chile;Desert Valley Gold Co., incorporated in the State of Nevada;Nevada Geothermal Power Company, incorporated in the State of Nevada;Nevada Geothermal Operating Company, a Delaware limited liability company;NGP Blue Mountain Holdco LLC, a Delaware limited liability company;NGP Blue Mountain I LLC, a Delaware limited liability company (NGP I);NGP Pumpernickel I;NGP Black Warrior I; andNGP Crump I. All significant inter-company balances and transactions have been eliminated upon consolidation. b.
        Use of Estimates
  The preparation of financial statements in accordance with Canadian generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from managements best estimates as additional information becomes available in the future. Significant areas of estimation include the following: Estimates of the useful lives and residual values of property, plant and equipment;Assumptions made around estimated future cash flows relating to the long-term liability (note 13);Assumptions made as a part of the fair value calculations for the cash settled option;The calculation of the fair value of the asset retirement obligation;The calculation of the stock-based compensation expense;Determining the realizable amount of future income tax assets;Recognition and measurement of contingent liabilities; andCash flow forecasts used for the purpose of impairment testing. 7


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NEVADA GEOTHERMAL POWER INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTSJUNE 30, 2010(AUDITED) 
          (Expressed in US Dollars) 2.
        SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
  c.
        Foreign Currency Translation
  Items included in the financial statements of each entity in the Group are measured using the currency of the primary economic environment in which the entity operates (the functional currency). The consolidated financial statements are presented in US dollars. Transactions and balances:
    Monetary assets and liabilities denominated in foreign currency are translated at exchange rates in effect at balance sheet dates. Revenues and expenses are translated at the exchanges rates prevailing on the transaction dates. Realized and unrealized exchange gains and losses are included in the statement of loss and deficit. Group companies:
    The results and financial position of all Group companies that have a functional currency different from the presentation currency are translated into the Groups presentation currency using the current rate method: Statements of loss and deficit and cash flow statements are translated at the average exchange rates prevailing during each reporting period.Assets and liabilities are translated at the exchange rates prevailing at balance sheet date.All resulting exchange differences arising from the translation are included as a separate component of other comprehensive income. All subsidiaries are classified as self-sustaining. d.
        Cash and Cash Equivalents
  Cash and cash equivalents consist of cash and highly liquid investments with original maturity dates of 90 days or less. Cash subject to restrictions that prevent its use for current purposes is presented as restricted cash. e.
        Marketable Securities
  In accordance with section 3855 Financial Instruments  Recognition and Measurement of the Canadian Institute of Chartered Accountants (CICA) Handbook, the Company has designated its marketable securities, composed of publicly traded shares of another resource company, as available-for-sale financial assets. Accordingly, marketable securities are carried at fair value, and changes in fair value are recognized in other comprehensive income, except for impairment losses. The cumulative gain or loss previously recognized in other comprehensive income is recognized in net income for the period at the time the marketable securities are derecognized. The fair value of publicly traded securities is based on quoted market prices. 8


---

NEVADA GEOTHERMAL POWER INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTSJUNE 30, 2010(AUDITED) 
          (Expressed in US Dollars) 2.
        SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
  f.
        Inventory
  Inventory consists of spare parts, and is stated at the lower of cost and net realizable value. g.
        Future Financing Costs
  Transaction costs incurred in anticipation of future financing transactions are carried on the balance sheet until the financing transaction takes place, at which time these costs are offset against the fair value of the liability or equity raised. Transaction costs incurred in respect of transactions that are abandoned are expensed when the transaction is abandoned. h.
        Property, Plant and Equipment and Amortization
  Property, plant and equipment are recorded at cost and amortized over their estimated useful lives as follows: Computers
        Declining balance
        30%Field Equipment
        Declining balance
        30%Leasehold improvements
        Straight line
        5 yearsOffice furniture and equipment
        Declining balance
        20%Vehicles
        Declining balance
        20%Plant
        Straight line
        5  30 yearsWellfield
        Straight line
        20 years
  The cost includes all costs attributable to the acquisition, construction, development or betterment of an asset, and in the case of the wellfield, all costs of acquisition, exploration and development of the Blue Mountain geothermal property interest. The Companys assets under construction are recorded at cost and include direct construction and development costs as well as overhead costs directly attributed to the construction activities of the Blue Mountain Project. Capitalization of costs ceases when an item of property, plant and equipment, or a portion thereof, is substantially complete and ready for productive use. Revenue derived from an item of property, plant, and equipment prior to substantial completion is included in cost. Upon substantial completion, the balance included in assets under construction is transferred to plant and wellfield. Major spare parts are carried as property, plant and equipment, but are not amortized until placed in use. i.
        Government Assistance
  Government grants are recorded as a reduction of the related expenditure or item of property, plant and equipment where there is reasonable assurance that the Company has complied with all conditions necessary to receive the grants and collection is reasonably assured. 9


---

NEVADA GEOTHERMAL POWER INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTSJUNE 30, 2010(AUDITED) 
          (Expressed in US Dollars) 2.
        SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
  j.
        Intangible Assets
  Intangible assets are recorded at cost and amortized over their estimated useful lives as follows: Computer software
        Straight line
        1  5 yearsWater rights
        Straight line
        30 yearsRoyalty rights
        Straight line
        30 years
  k.
        Interests in Geothermal Properties
  Costs of acquisition, exploration and development of geothermal properties are capitalized on an area-of-interest basis. Amortization of geothermal property costs will commence at the time each property becomes capable of production. If an area of interest is abandoned, the costs thereof are charged to income in the year of abandonment. l.
        Impairment of Long-Lived Assets
  The Company applies the CICA Handbook Section 3063, Impairment of Long-Lived Assets, which addresses the recognition, measurement and disclosure of the impairment of long-lived assets. Section 3063 requires that an impairment loss be recognized if the carrying amount of a long-lived asset is not recoverable. The carrying amount of a long-lived asset is not recoverable if the carrying amount exceeds the sum of the undiscounted cash flows expected to result from its use and eventual disposition. Any impairment loss to be recognized is measured as the amount by which the carrying amount of the long-lived asset exceeds its fair value. m.
        Asset Retirement Obligations (AROs)
  Future costs to retire an asset, including environmental costs, remediation and ongoing treatment and monitoring of the site, are recognized at fair value in the period in which they are incurred, when a reasonable estimate of fair value can be made. The asset retirement cost is capitalized as part of the assets carrying value and amortized over the assets useful life. In subsequent periods, the liability is adjusted for any changes in the liability resulting from the passage of time as well as for revisions to the amount or timing of the underlying cash flows. Changes in fair value resulting from the passage of time are recognized in the income statement. Changes in the fair value resulting from revisions to the amount or timing of the underlying cash flows are capitalized to the related asset. 10


---

NEVADA GEOTHERMAL POWER INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTSJUNE 30, 2010(AUDITED) 
          (Expressed in US Dollars) 2.
        SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
  n.
        Financial Instruments
  Financial instruments carried on the balance sheet include cash and cash equivalents, restricted cash, accounts receivable, marketable securities, accounts payable and accrued liabilities, long-term payables, long-term liabilities and derivatives, namely the cash settled option. The Company classifies its financial instruments into one of the following categories: held to maturity, available-for-sale, held for trading, loans and receivables or financial liabilities. Financial assets classified as held to maturity, loans and receivables and financial liabilities other than those held for trading are measured at amortized cost. Available-for-sale financial assets are measured at fair value with unrealized gains and losses recorded in other comprehensive income. Instruments classified as held for trading, such as the cash settled option, are measured at fair value with unrealized gains and losses recognized in the statement of loss and deficit for the period. As at June 30, 2010, the Company had not entered into any hedging arrangements. o.
        Long-term Liabilities
  Long-term liabilities are recognized initially at fair value, net of transaction costs incurred. Long-term liabilities are subsequently stated at amortized cost using the effective interest rate method. The effective interest rate is calculated by estimating the cash flows associated with the loan, considering all contractual terms of the financial instrument. The calculation includes all fees paid or received between the parties to the contract that are an integral part of the effective interest rate, transaction costs, and all other premiums or discounts. When the estimated future cash flows change, the Company adjusts the carrying amount of the loan to reflect actual and revised estimated cash flows. The Company recalculates the carrying amount by computing the present value of estimated future cash flows at the financial instrument's original effective interest rate. p.
        Leases
  i)
        Finance Leases
  Leases of property, plant and equipment, where the Company has substantially all the risks and rewards of ownership are classified as finance leases. Finance leases are capitalized at the inception of the lease at the lower of the fair value of the leased property or the present value of the minimum lease payment. The corresponding rental obligations, net of finance charges, are classified as liabilities. The interest element is charged to the income statement over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability of each period. The property, plant and equipment acquired under finance leases are depreciated over the shorter of the useful life of the assets or the lease term. 11


---

NEVADA GEOTHERMAL POWER INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTSJUNE 30, 2010(AUDITED) 
          (Expressed in US Dollars) 2.
        SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
  p.
        Leases (continued)
  ii)
        Operating Leases
  Leases where a significant portion of risks and rewards of ownership are retained by the lessor are classified as operating leases. Operating lease costs are charged against operating profit on a straight-line basis over the period of the lease. q.
        Revenue
  The Company recognizes revenue from the sale of energy produced and the related Portfolio Energy Credits in terms of its PPA with NV Energy when the energy is supplied to the buyer, as metered at the point of interconnection with the transmission system. r.
        Stock-based Compensation
  The Company grants stock options to officers, directors, employees and outside consultants. The plan is classified as an equity settled stock-based compensation plan. Accordingly, the fair value of stock options is expensed with an offsetting credit to contributed surplus. The fair value of stock options which vest immediately is recorded at the date of grant and the fair value of options which vest in the future is recognized on a straight-line basis over the vesting period. Upon exercise of options, any consideration received, together with the related portion of contributed surplus, is credited to share capital. The Company accrues compensation costs based on the assumption that all instruments subject only to a service requirement will vest. The effect of actual forfeitures is recognized as they occur. The Company uses the Black-Scholes option valuation model to estimate the fair value of stock-based compensation. The Black-Scholes option valuation model requires the input of subjective assumptions. Changes in these assumptions can materially affect the fair value estimate. s.
        Borrowing Costs
  Interest costs on borrowings incurred to finance the construction of property, plant and equipment and the development of geothermal properties are capitalized during the period of time that is required to complete and prepare the asset for its intended use. 12


---

NEVADA GEOTHERMAL POWER INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTSJUNE 30, 2010(AUDITED) 
          (Expressed in US Dollars) 2.
        SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
  t.
        Income Taxes
  Income taxes are accounted for under the asset and liability method of accounting. Under this method, future tax assets and liabilities are recognized for the future tax consequences attributable to the differences between the financial statement carrying amounts of assets and liabilities and their respective tax bases. Future income tax assets or liabilities are measured using the substantially enacted tax rates anticipated to apply in the periods when the temporary differences are expected to reverse. Future tax assets are recognized to the extent that they are considered more likely than not to be realized. u.
        Segmental Reporting
  The Company has identified each of its geothermal properties as an operating segment, but aggregates its projects in the development phase as one reportable segment. The development phase projects segment consists of the Crump Geyser, Pumpernickel, Edna Mountain and Black Warrior geothermal projects. Inter-segment transactions and balances have been eliminated in the preparation of the segment report. v.
        Loss Per Common Share
  Basic loss per share is computed using the weighted average number of common shares outstanding during the period. Diluted per share information is calculated using the number of common shares that would have been outstanding if the dilutive potential common shares had been issued. The dilutive effect of stock options and warrants is calculated using the treasury stock method, which assumes that any proceeds from the exercise of stock options, warrants, and other instruments would be used to purchase common shares at the average market price during the period. No adjustment to diluted earnings per share is made if the result of these calculations is anti-dilutive. w.
        Changes in Accounting Policies
  The Company made the following changes to its accounting policies during the year ended June 30, 2010: i)
        CICA handbook section 3064, Goodwill and Intangible Assets
  In February 2008, the CICA issued handbook section 3064  Goodwill and Intangible Assets, which replaces Section 3062, Goodwill and Intangible Assets, and Section 3450, Research and Development Costs. This new section establishes standards for the recognition, measurement and disclosure of goodwill and intangible assets and also prescribes the recognition and measurement of impairment losses. The Company implemented the new standard during the year, and reclassified software in the amount of $13,014 as at June 30, 2009 from property, plant and equipment to intangible assets. 13


---

NEVADA GEOTHERMAL POWER INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTSJUNE 30, 2010(AUDITED) 
          (Expressed in US Dollars) 2.
        SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
  w.
        Changes in Accounting Policies (continued)
  ii)
        CICA handbook section 3862, Financial Instruments  Disclosures
  Section 3862 was amended during June 2009 to enhance the disclosure requirements regarding liquidity risk of financial instruments and to add new disclosure requirements about fair value measurements of financial instruments. The Company implemented the new standard in the year. (See Note 18(a)). iii)
        CICA handbook section 1506, Accounting Changes
  In June 2009, Section 1506, Accounting Changes, was amended to exclude from its scope changes in accounting policies upon the complete replacement of an entity's primary basis of accounting. The amendment applies to interim and annual financial statements relating to fiscal years beginning on or after July 1, 2009. The Company has implemented the new standard during the year. x.
        Comparative Figures
  Certain comparative figures have been reclassified to conform with the current period presentation. Future financing costs have been disclosed separately on the face of the balance sheet, and changes in future financing costs have been disclosed in cash flow from financing activities on the cash flow statement. 3. FUTURE ACCOUNTING CHANGES
  a)
        CICA handbook section 1582, Business Combinations, section 1601, Consolidated Financial Statements and section 1602, Non-controlling interests
  The abovementioned sections were released in January 2009. Section 1582 should be applied prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after January 1, 2011. Sections 1601 and 1602 apply to interim and consolidated financial statements for financial years beginning on or after January 1, 2011. Earlier application of all three sections is permitted, but all three sections have to be adopted together with effect from the beginning of the fiscal year of adoption. The adoption of the new standards will result in a number of changes to the treatment of acquisitions, notably the measurement of non-controlling interests at fair value by the parent group, the requirement to expense acquisition costs, and the accounting for contingent consideration as a financial liability, measured at fair value. The effect of the new standard on the Company will depend on the circumstances of future business combinations, if any. 14


---

NEVADA GEOTHERMAL POWER INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTSJUNE 30, 2010(AUDITED) 
    (Expressed in US Dollars)

3. FUTURE ACCOUNTING CHANGES (Continued)
  b)
        CICA handbook section 3855, Financial Instruments
  In June 2009, the CICA amended Section 3855, Financial Instruments - Recognition and Measurement, to clarify the application of the effective interest method after a debt instrument has been impaired. This Section has also been amended to clarify when an embedded prepayment option is separated from its host debt instrument for accounting purposes. This amendment applies to interim and annual financial statements relating to fiscal years beginning on or after January 1, 2011. c)
        EIC 175, Multiple Deliverable Revenue Arrangements
  In December 2009, the CICA issued EIC 175, Multiple Deliverable Revenue Arrangements, replacing EIC 142, Revenue Arrangements with Multiple Deliverables. This abstract provides updated guidance on whether multiple deliverables exist, how the deliverables in an arrangement should be separated and the consideration allocated; requires, in situations where a vendor does not have vendor-specific objective evidence or third party evidence of selling price, that the entity allocate revenue in an arrangement using estimated selling prices of deliverables; eliminates the use of the residual method and requires an entity to allocate revenue using the relative selling price method; and requires expanded qualitative and quantitative disclosures regarding significant judgments made in applying this guidance. This EIC is effective for years beginning on or after January 1, 2011. d)
        International Financial Reporting Standards
  The Company will be adopting International Financial Reporting Standards (IFRS) for financial years beginning on or after January 1, 2011, with its first annual report under IFRS for the year ending June 30, 2012, and its first interim report under IFRS for the quarter ending September 30, 2011. Comparative information in respect of the 2011 financial year will be provided in both cases. 4.
        CAPITAL MANAGEMENT
  The Companys objectives when managing capital are to: i)
        ensure there are adequate capital resources to safeguard the Companys ability to continue as a going concern;ii)
        maintain adequate levels of funding to support the exploration and development of its geothermal properties;iii)
        maintain investor, creditor and market confidence to sustain future development of the business; andiv)
        provide returns to shareholders and benefits for other stakeholders.
  15


---

NEVADA GEOTHERMAL POWER INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTSJUNE 30, 2010(AUDITED) 
          (Expressed in US Dollars) 4.
        CAPITAL MANAGEMENT (Continued)
  The capital structure of the Company consists of share capital, contributed surplus and deficit, and long-term liabilities. As at June 30, 2010, this amounted to $177,385,177 (2009 - $189,775,603). The Companys Blue Mountain project started to generate revenue during the 2010 financial year. The project is currently funded by a loan provided by TCW, the terms of which provide for the loan to be repaid from available cash flow. The lender has the right to receive cash interest plus 60% of available project cash, as defined, which increases to 100% if target loan balances are exceeded. Target loan balances are currently exceeded, and accordingly no cash from the Blue Mountain project is currently available to fund the Companys other projects. The Pumpernickel Valley, Black Warrior, Crump Geyser and Edna Mountain projects are currently funded by equity financing in combination with government grants. The Company manages its capital in a manner that provides sufficient funding for exploration and development activities. Annual budgets and rolling forecasts are used to determine the necessary capital requirements. The budgets are prepared by management, approved by the Board of Directors and are updated for changes in the underlying assumptions, economic conditions and risk characteristics of the underlying assets, as necessary. The Company is not subject to externally imposed capital requirements. 5.
        ECONOMIC RELIANCE
  All the Companys revenue is derived from a 20-year power contract with NVE, an operating electric public utility. 6.
        MARKETABLE SECURITIES
  2010
        
        2009Number
          of Shares
        Amount
        Number   
of Shares
        AmountSierra Geothermal Power Corp.Cost - common shares
        400,000
        $146,817
        400,000
        $146,817Unrealized (loss) gain
        -
        -
        -
        (60,832)Impairment of marketable securities
        -
        (75,429)
        -
        -400,000
        471,388
        400,000
        $85,985
  During the year ended June 30, 2010, the Company recognized an impairment loss due to the significant and prolonged declined in the fair value of the investment. 16


---

NEVADA GEOTHERMAL POWERINC.NOTESTOCONSOLIDATED FINANCIAL STATEMENTSJUNE 30, 2010(AUDITED)(Expressedin US Dollars) 7.
        PROPERTY, PLANT AND EQUIPMENT
  Computers
        
        
        Officefurniture andequipment
        
        
        Fieldequipment
        
        
        Vehicles
        
        
        Leaseholdimprovements
        
        
        Land
        
        
        Plant
        
        
        Wellfield
        
        
        Construction inprogress
        
        
        Spare parts
        
        
        TotalCostBalance as at June 30, 2009
        $
        93,743
        
        $
        54,341
        
        $
        73,008
        
        $
        126,762
        
        $
        -
        
        $
        161,187
        
        $
        -
        
        $
        -
        
        $
        111,768,024
        
        $
        -
        
        $
        112,277,065Additions
        
        8,382
        
        
        20,322
        
        
        -
        
        
        62,641
        
        
        12,200
        
        
        210,801
        
        
        -
        
        
        -
        
        
        32,346,996
        
        
        159,067
        
        
        32,820,409Plant placed in service
        
        -
        
        
        -
        
        
        -
        
        
        -
        
        
        -
        
        
        -
        
        
        130,083,568
        
        
        6,810,240
        
        
        (136,893,808
        )
        
        -
        
        
        -Transfer from geothermal property interests
        
        -
        
        
        -
        
        
        -
        
        
        -
        
        
        -
        
        
        -
        
        
        -
        
        
        87,565,210
        
        
        -
        
        
        -
        
        
        87,565,210Cash grant received
        
        -
        
        
        -
        
        
        -
        
        
        -
        
        
        -
        
        
        -
        
        
        (33,669,875
        )
        
        (24,202,638
        )
        
        -
        
        
        -
        
        
        (57,872,513
        )Foreign exchange movement
        
        7,507
        
        
        3,804
        
        
        -
        
        
        -
        
        
        -
        
        
        -
        
        
        -
        
        
        -
        
        
        -
        
        
        -
        
        
        11,311Balance as at June 30, 2010
        $
        109,632
        
        $
        78,467
        
        $
        73,008
        
        $
        189,403
        
        $
        12,200
        
        $
        371,988
        
        $
        96,413,693
        
        $
        70,172,812
        
        $
        7,221,212
        
        $
        159,067
        
        $
        174,801,482Accumulated amortizationBalance as at June 30, 2009
        $
        48,798
        
        $
        23,729
        
        $
        31,844
        
        $
        24,303
        
        $
        -
        
        $
        -
        
        $
        -
        
        $
        -
        
        $
        -
        
        $
        -
        
        $
        128,674Amortization for the period
        
        16,451
        
        
        9,366
        
        
        12,349
        
        
        30,319
        
        
        406
        
        
        -
        
        
        2,359,721
        
        
        2,521,805
        
        
        -
        
        
        -
        
        
        4,950,417Foreign exchange movement
        
        3,744
        
        
        1,671
        
        
        -
        
        
        -
        
        
        -
        
        
        -
        
        
        -
        
        
        -
        
        
        -
        
        
        -
        
        
        5,415Balance as at June 30, 2010
        $
        68,993
        
        $
        34,766
        
        $
        44,193
        
        $
        54,622
        
        $
        406
        
        $
        -
        
        $
        2,359,721
        
        $
        2,521,805
        
        $
        -
        
        $
        -
        
        $
        5,084,506Carrying amountsAt June 30, 2009
        $
        44,945
        
        $
        30,612
        
        $
        41,164
        
        $
        102,459
        
        $
        -
        
        $
        161,187
        
        $
        -
        
        $
        -
        
        $
        111,768,024
        
        $
        -
        
        $
        112,148,391At June 30, 2010
        $
        40,639
        
        $
        43,701
        
        $
        28,815
        
        $
        134,781
        
        $
        11,794
        
        $
        371,988
        
        $
        94,053,972
        
        $
        67,651,007
        
        $
        7,221,212
        
        $
        159,067
        
        $
        169,716,976
  Property, plant and equipment amortization of $4,886,369 (2009  nil) has been included in Direct cost of energy production. Test revenue totaling $337,793 (2009  nil) was generated prior to the substantial completion of the power plant and has been recorded as a reduction of the capitalized cost of the plant. Interest of $8,282,391 was capitalized to property, plant and equipment during the year (2009 - $9,573,084) . During the year, vehicles purchased under capital leases amounted to $40,347 (2009  nil) and amortization for these vehicle amounted to $2,017 (2009  nil). 17


---

NEVADA GEOTHERMAL POWER INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTSJUNE 30, 2010(AUDITED) 
          (Expressed in US Dollars) 8.
        INTANGIBLE ASSETS
  Software
        
        
        Waterrights
        
        
        Royaltyrights
        
        
        TotalCostBalance as at June 30, 2009
        $
        66,556
        
        $
        -
        
        $
        -
        
        $
        66,556Additions
        
        3,820
        
        
        17,016
        
        
        1,000,000
        
        
        1,020,836Foreign exchange movement
        
        3,339
        
        
        -
        
        
        -
        
        
        3,339Balance as at June 30, 2010
        $
        73,715
        
        $
        17,016
        
        $
        1,000,000
        
        $
        1,090,731Accumulated amortizationBalance as at June 30, 2009
        $
        53,542
        
        $
        -
        
        $
        -
        
        $
        53,542Amortization for the period
        
        12,169
        
        
        331
        
        
        16,667
        
        
        29,167Foreign exchange movement
        
        2,940
        
        
        -
        
        
        -
        
        
        2,940Balance as at June 30, 2010
        $
        68,650
        
        $
        331
        
        $
        16,667
        
        $
        85,649Carrying amountsAt June 30, 2009
        $
        13,014
        
        $
        -
        
        $
        -
        
        $
        13,014At June 30, 2010
        $
        5,065
        
        $
        16,685
        
        $
        983,333
        
        $
        1,005,082
  Intangible asset amortization of $17,016 (2009  nil) has been included in Direct cost of energy production. 9.
        INTERESTS IN GEOTHERMAL PROPERTIES
  The acquisition and deferred exploration and development expenditures of the Companys geothermal property interests, all located in the U.S., are as follows: 2010
        
        2009Blue Mountain Project - Nevada
        
        $
        -
        $
        87,565,210Pumpernickel Valley Project - Nevada
        (a)
        
        315,595
        
        118,455Crump Geyser - Oregon
        (b)
        
        642,011
        
        501,709Black Warrior Peak Project - Nevada
        (c)
        
        426,215
        
        375,752Edna Mountain Project - Nevada
        (d)
        
        29,488
        
        -$
        1,413,309
        $
        88,561,126
  During the period, construction of the Blue Mountain Faulkner I power plant was completed and the plant commenced operating commercially. Therefore, acquisition and deferred exploration and development expenditures relating to the project have been transferred to property, plant and equipment (Note 7). a)
        Pumpernickel Valley Project, Nevada
  The Company has private and federal geothermal leases comprising a total holding of 2,810 hectares (6,942 acres). The Company leases geothermal rights from Newmont USA, certain private land owners and the United States Bureau of Land Management (BLM). Under an agreement with Ormat Nevada Inc. (Ormat), the Company gave Ormat a right of first refusal for the supply of the Pumpernickel project equipment in return for a BLM lease and preferred equipment pricing. The Newmont lease grants the Company the exclusive geothermal, surface and water rights. The Company pays $3/acre, with all rental payments creditable to royalties due upon production of: 18


---

NEVADA GEOTHERMAL POWER INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTSJUNE 30, 2010(AUDITED) 
          (Expressed in US Dollars) 9.
        INTERESTS IN GEOTHERMAL PROPERTIES (Continued)
  a)
        Pumpernickel Valley Project, Nevada (continued)
 31⁄2% of gross proceeds from electrical power sales (less taxes and transmission costs);5% of the gross proceeds of a sale of any substances in an arms length transaction;2% of the gross proceeds from the sale of, or manufacture, of by-products;10% of net profits from the use of substances at a commercial facility other than an electric power generating facility; andSubstances or electrical power used by the Company for operations at an on-site electrical generating plant or other commercial facilities are not subject to royalties. The BLM lease transferred from Ormat is encumbered by a royalty interest (0.5%) payable to Ehni Enterprises Inc. The following costs have been incurred on the project: 2010
        
        
        2009AcquisitionProperty leases, permits and regulatory
        $
        41,120
        
        $
        24,852Deferred explorationCamp and field supplies
        
        35,329
        
        
        8,007Drilling, refund
        
        -
        
        
        (5,739
        )Feasibility study
        
        41,504
        
        
        -Geological and geophysical
        
        38,226
        
        
        23,107Non-geological consulting
        
        2,560
        
        
        33,471Testing
        
        820
        
        
        4,128Write-down of Sierra Geothermal receivable
        
        37,581
        
        
        30,629Costs incurred during the year
        
        197,140
        
        
        118,455Balance, beginning of year
        
        118,455
        
        
        -Balance, end of year
        $
        315,595
        
        $
        118,455
  19


---

NEVADA GEOTHERMAL POWER INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTSJUNE 30, 2010(AUDITED) 
          (Expressed in US Dollars) 9.
        INTERESTS IN GEOTHERMAL PROPERTIES (Continued)
  b)
        Crump Geyser, Oregon
  On August 1, 2005, the Company leased 2,916 hectares (7,205 acres) of geothermal land located in south-eastern Oregon. The leases are on private land and are subject to a royalty of 3.5% of the gross revenues from the availability, sale or use of electricity. The following costs have been incurred on the project: 2010
        
        
        2009AcquisitionProperty leases, permits and regulatory
        $
        43,633
        
        $
        29,577Deferred explorationDepartment of Energy ("DOE") funding
        
        (134,189
        )
        
        -Drilling
        
        6,703
        
        
        -Camp and field supplies
        
        60,356
        
        
        2,964Geological and geophysical
        
        141,218
        
        
        37,506Legal and consulting (non-geological)
        
        22,580
        
        
        4,786Reports and maps
        
        -
        
        
        1,340Costs incurred during the year
        
        140,302
        
        
        76,173Balance, beginning of year
        
        501,709
        
        
        425,536Balance, end of year
        $
        642,011
        
        $
        501,709
  20


---

NEVADA GEOTHERMAL POWER INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTSJUNE 30, 2010(AUDITED)(Expressed in US Dollars) 9.
        INTERESTS IN GEOTHERMAL PROPERTIES (Continued)
  c)
        Black Warrior Peak Project, Nevada
  The project is located in Washoe and Churchill Counties, Nevada. The Company has a total of 2,539 hectares (6,273 acres) of both private land and federal lands including water and surface rights. The private leases are subject to a royalty of 3.5% on gross revenue from electricity sales. The Company can purchase the royalty for $1 million. The following costs have been incurred on the project: 2010
        
        
        2009AcquisitionProperty leases, permits and regulatory
        $
        33,668
        
        $
        33,409Deferred explorationDOE funding
        
        (17,269
        )
        
        -Camp and field supplies
        
        15,814
        
        
        5,199Drilling
        
        84
        
        
        26,857Geological and geophysical
        
        15,983
        
        
        110,654Legal and consulting (non-geological)
        
        2,183
        
        
        12,678Reports and maps
        
        -
        
        
        535Costs incurred during the year
        
        50,463
        
        
        189,332Balance, beginning of year
        
        375,752
        
        
        186,420Balance, end of year
        $
        426,215
        
        $
        375,752
  d)
        Edna Mountain Project, Nevada
  The project is located in Humboldt County, Nevada. The Company has a total of 1,036 hectares (2,560 acres) of federal land located a few miles northeast of the Pumpernickel Project. The following costs have been incurred on the project: 2010
        
        
        2009Acquisition
        $
        28,730
        
        $
        -Property leases, permits and regulatoryDeferred explorationCamp and field supplies
        
        344
        
        
        -Geological and geophysical
        
        414
        
        
        -Costs incurred during the year
        
        29,488
        
        
        -Balance, beginning of year
        
        -
        
        
        -Balance, end of year
        $
        29,488
        
        $
        -
  21


---

NEVADA GEOTHERMAL POWER INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTSJUNE 30, 2010(AUDITED)(Expressed in US Dollars) **10.**
        GOVERNMENT ASSISTANCE
  The Company applies, when available, for various grants and/or assistance from the various levels of the U.S. Government. During the year ended June 30, 2010, the Company applied for and received a cash grant under Section 1603, Division B of the American Recovery and Reinvestment Act of 2009. The cash grant has a value of 30% of the total eligible capital costs for the Blue Mountain project. On November 12, 2009, the Company received $57.9 million from U.S Department of Treasury. Under the grant, in certain limited circumstances, a percentage of the grant would be repayable until five years after the property was placed in service. The limited circumstances are the disposal of the property to a disqualified person or if the property ceases to qualify as a specified energy property, as defined in the Section 1603. On October 29, 2010, the Company was awarded two grants from the DOE under the American Reinvestment and Recovery Act geothermal technologies program. The program calls for cost sharing grants on exploration and drilling work. The Company was awarded $1,764,272 for the Crump Geyser geothermal project and $1,597,847 for the Black Warrior geothermal project. As at June 30, 2010, the Company has received $134,189 (2009  nil) for Crump Geyser and $17,269 (2009  nil) for Black Warrior. **11.**
        LONG-TERM PAYABLES
  Long-term payables consist of Nevada Sales and Use Tax deferred on plant construction purchases. The deferred taxes are payable over a period starting during 2009/2010 and ending October 31, 2013. Payments of approximately $23,000 are due each month until October 2013. The amounts recorded in the financial statements are the scheduled repayments discounted at an effective interest rate of 14% per year. The current portion of the Sales and Use Tax has been included in accounts payable. As at June 30, 2010, the Company owes $839,536 (2009 - $1,250,829) of Sales and Use Taxes. 2010
        
        
        2009Taxes payable
        $
        680,646
        
        $
        1,012,448Short-term portion included in accounts payable
        
        (193,733
        )
        
        (380,266
        )Long-term portion
        $
        486,913
        
        $
        632,182
  22


---

NEVADA GEOTHERMAL POWER INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTSJUNE 30, 2010(AUDITED)
    (Expressed in US Dollars)

12.
      LEASE OBLIGATIONS




2010
      
      
      2009Leases payable
      $
      39,208
      
      $
      -Short-term portion included in accounts payable
      
      (7,100
      )
      
      -Long-term portion
      $
      32,108
      
      $
      -





The following is a schedule of future minimum lease payments under a financing lease expiring April 30, 2015:

2010
      
      
      20092011
      $
      9,530
      
      $
      -2012
      
      9,530
      
      
      -2013
      
      9,530
      
      
      -2014
      
      9,530
      
      
      -2015
      
      7,940
      
      
      -Total minium lease payments
      
      46,060
      
      
      -Amount representing interest at 6.75%
      
      (6,852
      )
      
      -$
      39,208
      
      $
      -





**13.**
      LONG-TERM LIABILITIES





2010
      
      
      2009Long-term liabilities - TCW Loan
      $
      153,708,330
      
      $
      149,095,125Short-term portion - TCW Loan
      
      (153,708,330
      )
      
      (149,095,125
      )$
      -
      
      $
      -





On August 29, 2008, the Company closed a financing with TCW, a New York based investment management firm, for an amount of up to $180 million.

As at June 30, 2010, the total amount due under the TCW loan is $163,957,364 (2009 -$159,598,619). The effective interest rate of the instrument over its expected life is 17%.

a)
      The principal terms of the TCW loan are:





-  14% interest per annum, payable quarterly, over a 15 year term maturing November 30, 2023;
  -  Accrued interest was added to the principal prior to commercial operation and thereafter 6% interest per annum may be deferred if enough cash is not available to fund the full interest payments; 
  -  The principal is repaid from available cash flow  the lender has the right to receive cash interest plus 60% of available project cash, which will increase to 100% if target loan balances are exceeded; 
  -  Upon the earlier of repayment of the debt and maturity, the lender can exercise a cash settled option for a nominal exercise price and receive in cash an amount equal to 7.5% of the fair market value of the equity of NGP Blue Mountain I LLC (NGP I) (See Note 14);

23

---

NEVADA GEOTHERMAL POWER INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTSJUNE 30, 2010(AUDITED)(Expressed in US Dollars) 13.
        LONG-TERM LIABILITIES (Continued)
  - The last $10 million of the $180 million commitment resulted in an increase of the cash settled option by 0.5% interest in the project for each million drawn, 5% in total;
    - The loan may be refinanced under certain circumstances. Refinancing of the balance in excess of $70 million prior to refinancing target date is subject to a 2% prepayment fee. Refinancing of the balance below $70 million, and the total balance after refinancing target date, is subject to a make-whole premium equal to the difference between the present value of the remaining payments discounted at the yield of similar maturity United States Treasury securities and the principal amount of the loan being repaid; and
    - The refinancing target date was the later of 30 days after commercial operation or substantial completion, and was not to be later than February 28, 2010, however, this was modified by the agreement in principle discussed under b) below. b)
        Agreement in principle:
  As at June 30, 2010, the Company was not in compliance with the terms of the TCW loan. The non-compliance results from the Company having exceeded the maximum loan amount of $180 million, and having exceeded the drilling expenditure budget by more than $3.8 million, as well as some instances of technical non-compliance with other loan terms. In addition, the terms of the loan are structured in such a way as to require the Company to refinance a significant portion of the debt outstanding as at balance sheet date shortly after the later of commercial operation and substantial completion of the electricity generation plant, in order to avoid debt covenant violations relating to interest coverage ratios and the make-whole premium referred to under a) above. As a result, for balance sheet purposes, the TCW long-term loan has been classified as a short-term liability. On November 20, 2009, TCW agreed in principle to waive the non-compliance until March 31, 2010 in return for 4.5 million NGP Inc. warrants exercisable at CAD1.50 (Note 21(f)). Subsequently, TCW agreed to extend the agreement in principle, without change, until the John Hancock loan closed. The John Hancock loan was closed on September 3, 2010, and a repayment of $81,076,669 was made on the TCW loan. At the same time, the Company entered into a Consent and Waiver agreement with TCW, rectifying the non-compliance with loan terms, and issued the warrants, as more fully discussed in Note 25. c)
      Security: At June 30, 2010, the financing provided by TCW was secured by a pledge of all the equity interests of both NGP Blue Mountain Holdco LLC (Holdco) and NGP I, and over substantially all the assets of NGP I. Holdcos assets comprise the equity interests of NGP I. NGP Is assets include the Companys Blue Mountain leases and the electricity generation plant. In addition, TCW has a first priority lien on certain accounts established in connection with the financing to hold the proceeds of advances provided by TCW and revenues generated by operation of the project. NGP Is assets are not available to satisfy the obligations and debts of other group companies. 24


---

NEVADA GEOTHERMAL POWER INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTSJUNE 30, 2010(AUDITED)(Expressed in US Dollars) 13.
        LONG-TERM LIABILITIES (Continued)
  2010
        
        
        2009Opening balance
        $
        149,095,125
        
        $
        -Loan proceeds
        
        19,989,898
        
        
        148,166,680Loan repayments
        
        (38,895,227
        )
        
        -Transaction costs
        
        (61,558
        )
        
        (8,874,089
        )Net cash (repaid) borrowed during the period
        
        (18,966,887
        )
        
        139,292,591Fair value of cash settled option at inception
        
        -
        
        
        (1,759,501
        )Interest
        
        23,264,074
        
        
        11,167,014Commitment fee added to loan balance
        
        -
        
        
        264,925Interest accretion
        
        4,004,359
        
        
        907,974Adjustment: change in estimate of future cash flows
        
        (3,688,341
        )
        
        (777,878
        )Balance, end of year
        $
        153,708,330
        
        $
        149,095,1252010
        
        
        2009Balance, end of year per financial statements
        $
        153,708,330
        
        $
        149,095,125Add back:Transaction costs
        
        8,935,647
        
        
        8,874,089Fair value of cash settled option at inception
        
        1,759,501
        
        
        1,759,501Interest accretion
        
        (4,912,333
        )
        
        (907,974
        )Adjustment: change in estimate of future cash flows
        
        4,466,219
        
        
        777,878Amount owing to TCW
        $
        163,957,364
        
        $
        159,598,619
  14.
        CASH SETTLED OPTION
  2010
        
        
        2009Opening balance
        $
        1,820,844
        
        $
        -Fair value at inception
        
        -
        
        
        1,759,501Change in fair value recorded in income
        
        901,552
        
        
        61,343Balance, end of year
        $
        2,722,396
        
        $
        1,820,844
  Due to the Company drawing the final $10 million of the lenders $180 million commitment, the lender acquired the right to an additional 5% cash settled option, increasing the option to 12.5% of the fair market value of the equity in NGP Blue Mountain I LLC at maturity of the loan. The fair value of the cash settled option at June 30, 2010 incorporates the additional 5% interest in the fair value of the equity NGP Blue Mountain I, LLC that the holder is entitled to, along with an update to the forecasted power production. 25


---

NEVADA GEOTHERMAL POWER INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTSJUNE 30, 2010(AUDITED)(Expressed in US Dollars) 15.
        ASSET RETIREMENT OBLIGATION
  The asset retirement obligation arises from the Companys investment in the Blue Mountain project. Although the ultimate amount of the site restoration and reclamation costs is uncertain due to uncertainty regarding the extent of the liability and the costs that will have to be incurred to settle the liability, the present value of these obligations is based on information currently available. Such costs include: land rehabilitation, demolition of buildings, removal of cement and restoration of wells as well as removal of power poles and other costs. The majority of costs attributed to these commitments and contingencies are expected to be incurred after 2039, and are to be funded mainly from the Companys cash provided by operating activities. The Companys provision for future site reclamation and closure costs is based on known United States federal and local laws and regulations concerning environmental requirements. The total undiscounted amount of expected cash flows required to settle the asset retirement obligation is estimated at $11,964,587 (2009 - $10,580,156). The liability for the expected cash flows, as reflected in the consolidated financial statements, has been discounted at a credit adjusted risk-free rate of 7.50% (2009  9.31%). 2010
        
        
        2009Opening Balance
        $
        932,689
        
        $
        1,054,645Additional liabilities incurred - plant
        
        -
        
        
        168,380Additional liabilities incurred - wells
        
        165,680
        
        
        235,140Revision of prior years estimates
        
        119,370
        
        
        (583,922
        )Accretion expense
        
        73,535
        
        
        58,446Balance, end of year
        $
        1,291,274
        
        $
        932,689
  15.
        INCOME TAXES
  The recovery of income taxes shown in the income statement differs from the amounts obtained by applying statutory rates due to the following: 2010
        
        
        2009Statutory tax rate
        
        29.25
        %
        
        29.25
        %Expected income tax recovery at statutory rates
        $
        (5,259,574
        )
        $
        (1,488,462
        )Increase in recovery resulting from higherrates for foreign subsidiaries
        
        (728,659
        )
        
        (62,029
        )Change in tax rates
        
        422,988
        
        
        (427,727
        )Non-deductible and non-taxable items
        
        3,805,854
        
        
        632,480Benefit of losses not recognized
        
        6,953,992
        
        
        5,110,018Change in valuation allowance
        
        (5,194,601
        )
        
        (3,764,280
        )Future income tax expense
        $
        -
        
        $
        -
  26


---

NEVADA GEOTHERMAL POWER INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTSJUNE 30, 2010(AUDITED)(Expressed in US Dollars) 16.
        INCOME TAXES (Continued)
  The significant components of the Companys future tax assets (liability) are as follows: 2010
        
        
        2009Operating losses
        $
        16,018,980
        
        $
        9,636,851Cash settled option
        
        327,384
        
        
        20,856Share issuance costs
        
        141,876
        
        
        321,898Other
        
        53,927
        
        
        13,05416,542,167
        
        
        9,992,659Valuation allowance
        
        (5,924,515
        )
        
        (3,037,933
        )Net future income tax assets
        
        10,617,653
        
        
        6,954,726Geothermal properties and property,plant and equipment
        
        (10,617,653
        )
        
        (8,275,166
        )Net future income tax liability
        $
        -
        
        $
        (1,320,440
        )
  The Company has non-capital losses carried forward of approximately CAD 11,874,662 (2009  CAD 9,571,192) and USD 38,890,833 (2009  USD 20,674,890), that may be available for tax purposes. Non-capital losses for tax purposes will expire as follows, if they remain unused at that time: 2014
        
        $
        425,8622015
        
        
        1,005,4412023
        
        
        40,2022024
        
        
        325,0552025
        
        
        160,1002026
        
        
        1,703,9682027
        
        
        4,250,2342028
        
        
        7,817,2782029
        
        
        13,522,0582030
        
        
        20,821,797$
        50,071,995
  27


---

NEVADA GEOTHERMAL POWER INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTSJUNE 30, 2010(AUDITED)(Expressed in US Dollars) 17.
        SHARE CAPITAL
  a)
        Authorized
  Unlimited voting common shares  no par value.
    25,000,000 first preferred shares  no par value (none issued).
    25,000,000 second preferred shares  no par value (none issued).
    Issued
    See Consoldiated Statement of Changes in Shareholders Equity. b)
        Stock Options
  During the year ended June 30, 2010, the Company received $455,335 (2009 - $94,899) from the exercise of 714,000 (2009  378,000) stock options. A summary of the changes in stock options for the year ended June 30, 2010 is below: NumberofOptions
        
        
        WeightedAverageExercisePriceCADBalance, June 30, 2008
        8,009,000
        
        $
        0.78Granted
        1,966,000
        
        
        0.58Exercised
        (378,000
        )
        
        (0.28
        )Expired
        (301,000
        )
        
        (0.55
        )Forfeited
        -
        
        
        -Balance, June 30, 2009
        9,296,000
        
        $
        0.76Granted
        480,000
        
        
        1.00Exercised
        (714,000
        )
        
        (0.67
        )Expired
        (560,750
        )
        
        (1.09
        )Forfeited
        (9,750
        )
        
        (0.57
        )Balance, June 30, 2010
        8,491,500
        
        $
        0.77
  28


---

NEVADA GEOTHERMAL POWER INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTSJUNE 30, 2010(AUDITED)(Expressed in US Dollars) 17.
        SHARE CAPITAL (Continued)
  b)
        Stock Options (continued)
  As at June 30, 2010, the following stock options were outstanding: ExercisePriceCAD
        OutstandingOptions
        RemainingContractualLife
        NumberExercisable$0.45 - $0.64
        1,528,500
        3.7
        1,420,250$0.65 - $0.84
        3,665,000
        1.9
        3,615,000$0.85 - $1.04
        2,643,000
        2.0
        2,530,500$1.05 - $1.24
        655,000
        3.2
        655,0008,491,500
        2.3
        8,220,750
  The Company has a stock option plan that provides for the issuance of options to its directors, officers, employees and consultants. The maximum number of outstanding options is 10% of the issued and outstanding common shares at any point in time. During the year ended June 30, 2010, the Company recorded $224,500 (2009 -$307,359) in stock-based compensation for options granted. The exercise price of each option equals the market price of the Companys stock on the date of the grant. Historically, most options granted vested immediately. During the prior fiscal year, the Board approved a policy under which employee options vest over an 18-month period. The fair value of each option granted is estimated on the date of grant using the Black-Scholes option pricing model with the following weighted average assumptions: 2010
        2009Risk free interest rate
        1.13 -1.33%
        0.80-3.76%Expected life
        3 years
        2 yearsExpected volatility
        70-71%
        58-79%Expected dividend yield
        0%
        0%Weighted average fair value of options granted
        $0.49
        $0.16
  29


---

NEVADA GEOTHERMAL POWER INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTSJUNE 30, 2010(AUDITED)(Expressed in US Dollars) 17.
        SHARE CAPITAL (Continued)
  c)
        Agents Compensation Options
  A summary of the changes in agents compensation options for the year ended June 30, 2010 is below: Numberof Options
        
        
        WeightedAverageExercise PriceCADBalance, June 30, 2008 and 2009
        1,050,000
        
        $
        1.00Grant
        -
        
        
        -Exercised
        (315,000
        )
        
        1.00Expired
        (735,000
        )
        
        (1.00
        )Balance, June 30, 2010
        -
        
        $
        -
  18.
        FINANCIAL INSTRUMENTS
  a)
        Fair value of financial assets and financial liabilities
  The fair values of the following financial assets and liabilities approximate their carrying values, due to the relatively short periods to maturity of these items: cash and cash equivalents, amounts receivable, restricted cash, accounts payable and accrued liabilities and deferred construction amounts payable. The fair value of the marketable securities is based on market prices as at June 30, 2010. Changes to the fair value of marketable securities are recorded as other comprehensive income, shown in the statement of shareholders equity. For the year ended June 30, 2010, the Company recorded a decrease of $14,625 (2009 - $94,656) in marketable securities. The fair value of the cash settled option is based on a discounted cash flow model. The calculation was performed using a market related electricity price of $91/MWh, interest rates varying between 5.08% and 14%, and a discount rate varying between 8.32% and 10.97%. For the year ended June 30, 2010, the Company recorded a loss of $901,552 (2009 - $61,343) on the change in fair value of the cash settled option, which is reported on the income statement. The use of a discount rate of 10.5% for the whole period of the fair value calculation would have resulted in a liability value of $1,267,025. Sensitivty analysis for reasonably possible changes in interest rates and electricity prices is provided Note 18 b)i. The fair values of the long-term liability, lease obligations, and long-term payables are estimated for disclosure purposes by discounting the future contractual cash flows at the interest rate that would be available to the Company at the balance sheet date. The effective interest rate of the long-term liability over its expected life is 17.34%. The effective rate of the long-term payables is 14% and the fair value calculation was performed using an estimated interest rate of 7.50%. The effective and fair value interest rate for the lease obligation is 6.75%. 30


---

NEVADA GEOTHERMAL POWER INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTSJUNE 30, 2010(AUDITED)(Expressed in US Dollars) 18.
        FINANCIAL INSTRUMENTS (Continued)
  a)
        Fair value of financial assets and financial liabilities (continued)
  In accordance with Section 3862 of the CICA Handbook, the following table outlines the classification, carrying amounts and fair values of our financial assets and liabilities. The carrying amounts for accounts payable and accrued liabilities (classified as other financial liabilities) and amounts receivable (classified as loans and receivables) are a reasonable approximation of their fair value, and are therefore not disclosed in the table below. CarryingAmount
        Fair ValueFinancial asset (liability)
        
        
        
        Level 1 Input
        
        
        Level 2 Input
        
        
        Level 3 Input
        
        
        TotalFinancial assets held for tradingCash and cash equivalents
        $
        6,435,375
        
        $
        6,435,375
        
        $
        -
        
        $
        -
        
        $
        6,435,375Restricted cash
        
        4,005,672
        
        
        4,005,672
        
        
        -
        
        
        -
        
        
        4,005,672Available-for-sale financial assetsMarketable securities
        
        71,388
        
        
        71,388
        
        
        -
        
        
        -
        
        
        71,388Financial liabilities held for tradingCash settled option
        
        (2,722,396
        )
        
        -
        
        
        -
        
        
        (2,722,396
        )
        
        (2,722,396
        )Other financial liabilitiesLease obligation
        
        (39,208
        )
        
        -
        
        
        (39,208
        )
        
        -
        
        
        (39,208
        )Long-term payables
        
        (680,645
        )
        
        -
        
        
        (751,435
        )
        
        -
        
        
        (751,435
        )Long-term liability
        
        (153,708,330
        )
        
        -
        
        
        (190,608,877
        )
        
        -
        
        
        (190,608,877
        )
  Level 1:
        quoted prices (unadjusted) in active markets for identical assets or liabilities.Level 2:
        inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).Level 3:
        inputs for the asset or liability that are not based on observable market data (unobservable inputs).
  There were no transfers between different levels in the fair value hierarchy during the year. A reconciliation of the opening and closing balance of the cash settled option is provided in Note 14. b)
        Financial risk factors
  The Companys activities expose it to a variety of financial risks, including market risk (this includes currency risk, interest rate risk and other price risk) as well as credit risk and liquidity risk. The Company does not participate in the use of financial instruments to mitigate these risks and has no designated hedging transactions. The Board approves and monitors the risk management processes. The Boards main objectives for managing risks are to ensure liquidity, the fulfillment of obligations, the continued development of the Companys geothermal properties, and to limit exposure to credit and market risks. The types of risk exposure and the way in which such exposures are managed are as follows: 31


---

NEVADA GEOTHERMAL POWER INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTSJUNE 30, 2010(AUDITED)(Expressed in US Dollars) 18.
        FINANCIAL INSTRUMENTS (Continued)
  b)
        Financial risk factors (continued)
  i.
        Market Risk
  Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of the changes in market prices. Currency risk The operating results and financial position of the Company are reported in US dollars. The Company operates in Canada and the United States. The Companys US operations functional currency is the US dollar, and these operations are therefore subject to risk arising from future transactions as well as recognized assets and liabilities which are denominated in currencies other than US dollars. The Companys Canadian operations functional currency is the Canadian dollar and these operations are therefore subject to risk arising from future transactions as well as recognized assets and liabilities which are denominated in currencies other than Canadian dollars. The sensitivity analysis below provides details on the effect of a reasonably possible change in exchange rates on the net income and other comprehensive income of the Company. The effect on other comprehensive income arises from the translation of the financial statements of the Companys Canadian operations into US dollars. Carrying amount of asset (liability) June 30, 2010
        
        
        5% increase in value of CAD
        
        
        5% decrease in value of CADEffect on net incomeCash and cash equivalents denominated inUSD in Canadian Operations
        $
        804,190
        
        $
        (40,518
        )
        $
        40,518Effect on other comprehensive incomeCash and cash equivalents denominated in CAD
        
        989,575
        
        
        52,052
        
        
        (47,097
        )Amounts receivable denominated in CAD
        
        25,056
        
        
        1,318
        
        
        (1,192
        )Accounts payable and accrued liabilities
        
        (650,508
        )
        
        (34,217
        )
        
        30,960$
        1,168,313
        
        $
        (21,365
        )
        $
        23,189
  Cash flow and fair value interest rate risk Financial instruments with floating rates are subject to cash flow interest rate risk; financial instruments with fixed rates are subject to fair value interest rate risk. The Company invests its cash and cash equivalents in certificates of deposit and guaranteed investment certificates and bankers acceptances with terms of 90 days or less in order to maintain liquidity while achieving a satisfactory return for shareholders. A balance is maintained between fixed and floating rate instruments. The long-term liability has a fixed interest rate of 14% and is subject to fair value interest rate risk. The instrument is carried at amortized cost, and changes in market interest rates will not affect income. 32


---

NEVADA GEOTHERMAL POWER INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTSJUNE 30, 2010(AUDITED)(Expressed in US Dollars) 18.
        FINANCIAL INSTRUMENTS (Continued)
  b)
        Financial risk factors (continued)
  i.
        Market Risk (continued)
  Carrying amount of asset (liability) June 30, 2010
        
        
        1% increase in interest rates
        
        
        1% decrease in interest ratesEffect on net incomeCash and cash equivalents with floating rates
        $
        5,468,231
        
        $
        109,685
        
        $
        (71,850
        )Cash settled option
        
        (2,722,396
        )
        
        112,721
        
        
        (191,590
        )$
        2,745,835
        
        $
        222,406
        
        $
        (263,440
        )
  Other price risk Other price risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices, such as commodity or equity prices. The Company is subject to other price risk arising from a number of balances and transactions. In the first place, the fair value of the marketable securities is affected by equity prices. Carrying amount of asset (liability) June 30, 2010
        
        
        50% increase in share price
        
        
        50% decrease in share priceEffect on other comprehensive incomeMarketable securities
        $
        71,388
        
        $
        35,694
        
        $
        (35,694
        )
  In addition the fair value of the cash settled option is affected by estimated market prices for electricity beyond the contracted period. Carrying amount of asset  (liability) June 30, 2010
        
        
        5% increase in electricity prices
        
        
        5% decrease in electricity pricesEffect on net incomeCash settled option
        $
        (2,722,396
        )
        $
        (352,156
        )
        $
        358,223
  Revenue, from excess electricity produced, is also influenced by market prices for electricity. A reasonable possible change in market prices for electricity would not have had a material impact on the Companys financial statements. 33


---

NEVADA GEOTHERMAL POWER INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTSJUNE 30, 2010(AUDITED)(Expressed in US Dollars) 18.
        FINANCIAL INSTRUMENTS (Continued)
  b)
        Financial risk factors (continued)
  ii.
        Credit Risk
  The Company has limited exposure to credit risk, since credit risk primarily arises from the Companys cash and cash equivalents, restricted cash and accounts receivable. The risk exposure is limited to the carrying amounts of these items at the balance sheet date. Cash and cash equivalents are held as cash deposits and invested in bankers acceptance, guaranteed investment certificates and certificates of deposit with various maturity dates. Restricted cash consists of certificates of deposit held with the Bank of the West. The Company periodically assesses the quality of its investments and is satisfied with the credit ratings of its banks and their certificates of deposit and guaranteed investment certificates. Accounts receivable consist of amounts due from NV Energy (NVE) for electricity, insurance proceeds and sales goods and services tax recoverable. To reduce credit risk, the Company regularly reviews the collectability of its amounts receivable and establishes an allowance based on its best estimate of potentially uncollectable amounts, if required. There were no amounts past due as at year-end. iii.
        Liquidity Risk
  Liquidity risk is the risk that the Company will encounter difficulty in meeting its obligations associated with financial liabilities that are settled by delivering cash or another financial asset. The Company strives to ensure there are sufficient funds available to meet short-term business requirements, taking into account the Companys holdings of cash and cash equivalents. Management prepares annual operating and capital expenditure budgets and prepares monthly cash flows and liquidity forecasts. The Company closed a $98.5 million, 4.14% loan financing with John Hancock on September 3, 2010, and made a repayment of $81,076,669 on the TCW loan. At the same time, the Company entered into a Consent and Waiver agreement with TCW, rectifying the non-compliance with loan terms. Interest coverage on the new John Hancock loan and the remaining balance of the TCW loan will ultimately depend on the profitability of the Company and power production after additional drilling work has been completed. The Company will need to take further steps to reduce cost of financing (such as monetizing tax benefits) and increase power production. Without successfully increasing power production, that may require additional drilling, and new financing or restructuring of current financing, the Company may not be able to comply with loan convenants. The Company is planning additional wells to support higher power production, and is also exploring additional sources of financing. However, the additional power production may not be sufficient and it is not certain that the Company will be able to obtain additional financing and maintain compliance with loan covenants under the TCW and new John Hancock loans. 34


---

NEVADA GEOTHERMAL POWER INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTSJUNE 30, 2010(AUDITED)(Expressed in US Dollars) 18.
        FINANCIAL INSTRUMENTS (Continued)
  b)
        Financial risk factors (continued)
  iii.
        Liquidity Risk (continued)
  Repayment of the TCW loan will take place on a quarterly basis based on available cash flow as defined in the TCW loan agreement. In the event that cash flows available for the repayment are not sufficient to cover the interest payment then due, interest up to a maximum of 6% may be added to the outstanding balance. Principal repayments may be deferred until November 30, 2023 if sufficient cash flows are not available earlier. The Company cannot access cash flow from the project if the TCW target loan balances are exceeded, which is still the case after the closing of the John Hancock loan. Repayment of the John Hancock loan will also take place on a quarterly basis, based on a loan amortization schedule that has been designed based on forecasted cash flows to maintain a minimum interest coverage ratio. The table below presents a maturity analysis of the Companys financial liabilities that shows the remaining contractual maturities as at June 30, 2010: Carrying amount
        
        
        Contractual cash flows
        
        
        Within 1 year
        
        
        1 - 5 years
        
        
        More than 5 yearsLong-term leases
        $
        39,208
        
        $
        46,061
        
        $
        9,530
        
        $
        36,531
        
        $
        -Long-term payables
        
        680,645
        
        
        839,536
        
        
        276,979
        
        
        562,557
        
        
        -Long-term liability
        
        153,708,330
        
        
        238,575,958
        
        
        102,988,815
        
        
        57,717,160
        
        
        77,869,983Cash settled option
        
        2,722,396
        
        
        9,415,803
        
        
        -
        
        
        -
        
        
        9,415,803
  For balance sheet purposes, the TCW liability has been classified as short-term, since the Company was not in compliance with all the terms of the loan agreement as at June 30, 2010. The contractual cash flows presented above were calculated with reference to the total expected cash flows over the expected life of the liability. Actual cash flows could ultimately differ in timing and/or amounts. The cash flow could occur earlier if there is future non-compliance with the terms of the loan agreement. The total cash repayable will also be affected by the amount of the available cash flow from the project as well as the terms of any future potential refinancing of the liability. 35


---

NEVADA GEOTHERMAL POWER INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTSJUNE 30, 2010(AUDITED)(Expressed in US Dollars) 19.
        INTEREST EXPENSE
  For the year ended June 30, 2010, the Company recorded $15,365,331 in interest expense (2009  nil). Details are as follows: 2010
        
        
        2009
        
        
        2008Accretion on long-term payables
        $
        65,283
        
        $
        -
        
        $
        -Lease obligations
        
        451
        
        
        -
        
        
        -Long-term liabilities - cash interest
        
        15,621,998
        
        
        -
        
        
        -Long-term liabilities - accretion
        
        2,715,378
        
        
        -
        
        
        -Long-term liabilities - change in estimates
        
        (3,038,446
        )
        
        -
        
        
        -Other
        
        667
        
        
        -
        
        
        -Total interest expense
        $
        15,365,331
        
        $
        -
        
        $
        -
  20.
        RELATED PARTY TRANSACTIONS AND AMOUNTS OWING
  Related party transactions are in the normal course of operations and are measured at the exchange amount, which is the amount of consideration established and agreed by the related parties. As at June 30, 2010, a total of $68,040 (2009 - $108,386) was owing to directors, officers and companies controlled by directors of the Company. This amount is included in accounts payable and accrued liabilities, is unsecured and payable on demand. During the year ended June 30, 2010 and 2009, the following were paid to or accrued for directors, officers, former officers and companies controlled by directors of the Company: 2010
        
        
        2009
        
        
        2008Directors' fees
        $
        72,055
        
        $
        77,702
        
        $
        57,516Consulting, including financing success fee
        
        351,484
        
        
        1,184,131
        
        
        813,458Rent
        
        -
        
        
        -
        
        
        11,489Recruitment fees
        
        -
        
        
        -
        
        
        129,801Property, plant and equipment
        
        -
        
        
        -
        
        
        101,054
  Consulting costs for 2009 primarily resulted from success fees paid to a director of the Company in connection with successfully arranging the Companys TCW loan and letters of credit in support of the Limited Notice to Proceed contracted with Ormat. 36


---

NEVADA GEOTHERMAL POWER INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTSJUNE 30, 2010(AUDITED)
          (Expressed in US Dollars)  **21.**
      **COMMITMENTS** a)
        The Company has entered into operating leases for premises, vehicles and geothermal resources. The minimum annual commitments (including work commitments) are as follows:
  2010
        
        
        20092010
        $
        -
        
        $
        703,3302011
        
        512,747
        
        
        711,8762012
        
        526,292
        
        
        677,5832013
        
        538,278
        
        
        694,3292014
        
        525,506
        
        
        487,5232015
        
        214,501
        
        
        198,4682016 and thereafter
        
        2,418,951
        
        
        1,918,951$
        4,736,275
        
        $
        5,391,790
  b)
        Under the terms of the power purchase agreement (PPA) with NVE, the Company is liable for the cost of alternative power and renewable energy credits in certain circumstances, particularly if the minimum power under the PPA is not available. Under terms of the PPA, the Company has cash collateralized $3,805,672 in letters of credit in favor of NVE, with the Bank of the West.c)
        During the year, the Company issued two additional letters of credit, secured by cash, in the amounts of $50,000 and $100,000, to the State of Oregons Department of Geology and Mineral Industries and Nevada Division of Minerals, respectively, as reclamation bonds.d)
        During the year, the Company was released from letter of credit commitments by Ormat Technologies Inc. and NVE, under the Engineering, Procurement and Construction contract (EPC) and Large Generator Interconnect Agreement respectively, reducing restricted cash.e)
  Restricted Cash (relating to collateralized amounts) Short-termBeneficiary
        Issuing Bank
        
        2010
        
        
        2009Ormat
        Bank of the West
        $
        -
        
        $
        15,000,000NV Energy  LGIA
        Bank of the West
        
        -
        
        
        1,370,100$
        -
        
        $
        16,370,100
  Restricted Cash (relating to collateralized amounts) Long-termBeneficiary
        Issuing BankNV Energy  PPA
        Royal Bank of Canada
        $
        -
        
        $
        645,000Oregon Dept. of Minerals  Reclamation
        Bank of the West
        
        150,000
        
        
        -Nevada Division of Minerals - Reclamation
        Bank of the West
        
        50,000
        
        
        -NV Energy  PPA
        Bank of the West
        
        3,805,672
        
        
        1,580,336$
        4,005,672
        
        $
        2,225,336
  37


---

NEVADA GEOTHERMAL POWER INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTSJUNE 30, 2010(AUDITED)
          (Expressed in US Dollars) 21.
        COMMITMENTS (Continued)
 f)
        On November 20, 2009, the Company reached an agreement in principle with TCW regarding the non-compliance with loan covenants and the use of grant proceeds for additional drilling. The proposed agreement was subject to review and final approval by both parties. The proposed agreement included waivers by TCW of: non-compliance with budget requirements, a yield maintenance penalty and interest coverage covenant. The waivers facilitated the Companys declaration of commercial operation under the PPA with NVE. In return, the Company agreed to issue TCW 4.5-million warrants, exercisable at CAD1.50, with a term of 5 years. The warrants must be exercised within 30 days if the Companys shares trade above CAD2.00 for 20 consecutive days. The Company issued the warrants on September 3, 2010, concurrent with the closing of the John Hancock loan.
  22.
        MATERIAL DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES
  The Company prepares its financial statements in accordance with GAAP, which differ in certain respects from those principles that the Company would have followed had its financial statements been prepared in accordance with accounting principles generally accepted in the United States ("US GAAP"). The major differences between Canadian and US GAAP, which affect the Companys financial statements, are described below, and their effect on the financial statements is summarized as follows: 2010
        
        
        2009
        
        
        2008Net loss - Canadian GAAP
        $
        (17,981,451
        )
        $
        (5,088,760
        )
        $
        (3,425,767
        )Add:Amortization (iii)
        
        1,732,543
        
        
        -
        
        
        -Deduct:Difference in capitalized interest (ii)
        
        (56,708
        )
        
        -
        
        
        -Interests in geothermal properties (i & ii)
        
        (417,393
        )
        
        (2,204,043
        )
        
        (25,742,445
        )Net loss - US GAAP
        $
        (16,723,009
        )
        $
        (7,292,803
        )
        $
        (29,168,212
        )Basic and diluted loss per common share - US GAAP$
        (0.18
        )
        $
        (0.08
        )
        $
        (0.37
        )Weighted average shares outstanding - US GAAP
        
        95,280,808
        
        
        94,438,849
        
        
        79,122,910
  38


---

NEVADA GEOTHERMAL POWER INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTSJUNE 30, 2010(AUDITED)
          (Expressed in US Dollars) 22.
        MATERIAL DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (GAAP) (Continued)
  The Companys US comprehensive loss is comprised as follows: 2010
        
        
        2009
        
        
        2008Net loss - US GAAP
        $
        (16,723,009
        )
        $
        (7,292,803
        )
        $
        (29,168,212
        )Other comprehensive income (loss)Foreign translation gain
        
        189,655
        
        
        1,380,863
        
        
        452,333Decrease in unrealized holding gains on marketable securities
        
        (14,597
        )
        
        (94,656
        )
        
        (10,889
        )Impairment of marketable securities included in income statement
        
        75,429
        
        
        -
        
        
        -Comprehensive loss - US GAAP
        $
        (16,472,522
        )
        $
        (6,006,596
        )
        $
        (28,726,768
        )
  Statement of Cash Flows - US GAAP 2010
        
        
        2009
        
        
        2008Cash flows from (used in):Cash flows used in operating activitiesNet loss in accordance with US GAAP
        $
        (16,723,009
        )
        $
        (7,292,803
        )
        $
        (29,168,212
        )Adjustments to reconcile net loss to net cash used in operating activities:Amortization
        
        3,247,040
        
        
        88,421
        
        
        61,877Accretion of asset retirement obligation
        
        73,535
        
        
        58,446
        
        
        643,322Change in fair value of cash settled option
        
        901,552
        
        
        61,343
        
        
        -Foreign exchange loss
        
        -
        
        
        1,737,199
        
        
        -Interest deferred and non-cash interest
        
        6,221,851
        
        
        -
        
        
        -Impairment of marketable securities
        
        75,429
        
        
        -
        
        
        -Loss on disposal of equipment
        
        -
        
        
        8,395
        
        
        3,286Marketable securities received as option payment
        
        -
        
        
        -
        
        
        (68,303
        )Recruitment fees
        
        -
        
        
        -
        
        
        129,875Stock-based compensation
        
        224,500
        
        
        307,359
        
        
        858,890Interest allocated to resource property costs
        
        -
        
        
        -
        
        
        642,334Undrawn commitment fee
        
        -
        
        
        264,925
        
        
        -Change in non-cash working capital(Increase) decrease in accounts receivable
        
        (1,984,956
        )
        
        28,599
        
        
        (70,016
        )Increase in inventory
        
        (161,881
        )
        
        -
        
        
        -Increase (decrease) in accounts payable
        
        167,975
        
        
        (3,894,046
        )
        
        1,916,334(Increase) decrease in prepaid expenses
        
        (51,111
        )
        
        (766,847
        )
        
        21,734(8,009,075
        )
        
        (9,399,009
        )
        
        (25,028,879
        )Cash flows used in investing activitiesDecrease (increase) in restricted cash
        
        14,655,186
        
        
        (17,920,984
        )
        
        (3,710
        )Acquisition of intangible assets
        
        (1,020,836
        )
        
        (21,938
        )
        
        (27,396
        )Acquisition and construction of property, plant and equipment
        
        (51,191,003
        )
        
        (66,730,935
        )
        
        (12,629,675
        )Cash grant received
        
        57,872,513
        
        
        -
        
        
        -Interests in geothermal properties
        
        -
        
        
        (32,638,155
        )
        
        -Proceeds from disposal of equipment
        
        -
        
        
        31,454
        
        
        1,03420,315,860
        
        
        (117,280,558
        )
        
        (12,659,747
        )
  39


---

NEVADA GEOTHERMAL POWER INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTSJUNE 30, 2010(AUDITED)
          (Expressed in US Dollars) 22.
        MATERIAL DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (GAAP) (Continued)
  Statement of Cash Flows in Accordance with US GAAP (continued) Cash flows used in financing activities
        
        2010
        
        
        2009
        
        
        2008Net proceeds from private placements
        
        -
        
        
        -
        
        
        13,909,223Lease obligation payments
        
        (1,139
        )
        
        -
        
        
        -Loan advances
        
        19,989,898
        
        
        139,292,591
        
        
        20,166,304Loan repayment
        
        (28,879,380
        )
        
        (20,723,093
        )
        
        -Future financing costs
        
        (186,888
        )
        
        (574,802
        )
        
        -Proceeds from agents' units exercised
        
        -
        
        
        -
        
        
        1,401,703Proceeds from agents' options exercised
        
        297,985
        
        
        -
        
        
        -Proceeds from options exercised
        
        455,335
        
        
        94,899
        
        
        349,337Proceeds from warrants exercised
        
        -
        
        
        -
        
        
        27,222(8,324,189
        )
        
        118,089,595
        
        
        35,853,789Effect of foreign exchange on cash and cash equivalents
        
        62,351
        
        
        (492,960
        )
        
        599,060Increase (Decrease) in cash and cash equivalents
        $
        4,044,947
        
        $
        (9,082,932
        )
        $
        (1,235,777
        )
  Shareholders' Equity
        
        2010
        
        
        2009
        
        
        2008Shareholders' Equity - Canadian GAAP
        $
        25,789,636
        
        $
        42,542,780
        
        $
        48,920,501Accumulated Other Comprehensive Loss
        
        794,377
        
        
        794,377
        
        
        (2,183,048
        )Amortization
        
        1,732,543
        
        
        -
        
        
        -Difference in capitalized interest (ii)
        
        (56,708
        )Interests in Geothermal Properties
        
        (50,689,313
        )
        
        (50,271,920
        )
        
        (48,067,878
        )Shareholders' Equity - US GAAP
        $
        (22,429,465
        )
        $
        (6,934,763
        )
        $
        (1,330,425
        )Interests in Geothermal Properties
        
        2010
        
        
        2009
        
        
        2008Interests in Geothermal Properties - Canadian GAAP
        $
        1,413,309
        
        $
        88,561,126
        
        $
        50,250,926Costs of interests in Geothermal Properties expensed per US GAAP (i)
        
        (1,413,309
        )
        
        (49,477,543
        )
        
        (50,250,926
        )Difference in capitalized interest (ii)
        
        -
        
        
        (452,073
        )
        
        -Interests in Geothermal Properties - US GAAP
        $
        -
        
        $
        38,631,510
        
        $
        -
  40


---

NEVADA GEOTHERMAL POWER INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTSJUNE 30, 2010(AUDITED)
          (Expressed in US Dollars) **22.**
      **MATERIAL DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (GAAP) (Continued)**  Property, Plant and Equipment
        
        2010
        
        
        2009
        
        
        2008Property, Plant and Equipment - Canadian GAAP
        $
        169,716,976
        
        $
        110,840,965
        $
        
        18,561,283Costs of interests in Geothermal Properties expensed per US GAAP (i)
        
        (48,481,627
        )
        
        -
        
        
        -Difference in capitalized interest (ii)
        
        (56,708
        )
        
        452,073
        
        
        -Amortization (iii)
        
        1,732,543
        
        
        -
        
        
        -Property, Plant and Equipment - US GAAP
        $
        122,911,184
        
        $
        111,293,038
        $
        
        18,561,283
  Material variations in the accounting measurement principles, practices and methods used in preparing these consolidated financial statements from measurement principles, practices and methods accepted in the United States are described and quantified below. i.
        Deferred Exploration Expenditures  Interests in Geothermal Properties
  Under Canadian GAAP, the Company capitalizes costs of exploration relating to its interests in geothermal properties. Under US GAAP, all such costs are expensed until the Company has determined that the property is economically feasible and capable of commercial production. The Company uses the following indicators of economic feasibility: 
        
        A third party assessment of the resource.
        
        Contracts indicating the recoverability of expenditures.
        
        The development of an economic model indicating the feasibility of the project.
        
        Financing to complete the project.
  The Company determined that the Blue Mountain project was economically feasible on August 29, 2008. As a result, costs incurred after the determination of economic feasibility of the Blue Mountain project in the years-ended June 30, 2009 and June 30, 2010, have been capitalized. ii.
        Capitalization of Interest
  Under Canadian GAAP, actual interest costs on borrowings incurred to finance the construction of property, plant and equipment and the development of geothermal properties are capitalized during the period of time that is required to complete and prepare the asset for its intended use. Under US GAAP, the amount of interest capitalized is calculated by applying a capitalization rate to the average amount of accumulated expenditures for the Blue Mountain project. Additionally, not all of the interest capitalized for Canadian GAAP was capitalized for US GAAP as some of the expenditures relating to the Blue Mountain project were expensed under US GAAP during the year ended June 30, 2009. 41


---

NEVADA GEOTHERMAL POWER INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTSJUNE 30, 2010(AUDITED)
          (Expressed in US Dollars) 22.
        MATERIAL DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (GAAP) (Continued)
  iii.
        Property, Plant and Equipment
  During the year ended June 30, 2010, construction for the Blue Mountain Faulkner I power plant was completed and the plant commenced operating commercially. Under CDN GAAP acquisition and deferred exploration and development expenditures relating to the project have been transferred to property, plant and equipment. Under US GAAP some of these exploration and development costs were incurred prior to economic feasibility and have been expensed. As a result the carrying value transferred to property plant and equipment and the related amortization of those costs differs under US GAAP. iv.
        Recent Accounting Pronouncements
  During fiscal 2010, the Company adopted the Financial Accounting Standard Board (FASB) Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles in accordance with FASB ASC Topic 105, Generally Accepted Accounting Principles (the Codification). The Codification has become the source of authoritative U.S. GAAP recognized by the FASB to be applied by nongovernmental entities. Rules and interpretive releases of the Securities and Exchange Commission (SEC) under authority of federal securities laws are also sources of authoritative GAAP for SEC registrants. Effective with the Companys adoption on September 1, 2009, the Codification has superseded all prior non-SEC accounting and reporting standards. All other non-grandfathered non-SEC accounting literature not included in the Codification has become non-authoritative. As the adoption of the Codification only affected how specific references to GAAP literature have been disclosed in the notes to our consolidated financial statements, this did not have a material effect on the Company's consolidated financial statements. In November 2008, the Emerging Issues Task Force (EITF) reached a consensus on Issue No. 08-6 Equity Method Investment Accounting Considerations (EITF 08-6) (Codified within ASC 323), which clarifies the accounting for certain transactions and guidance on a number of factors, including, determination of the initial carrying value of an equity method investment, performing an impairment assessment of an underlying indefinite-lived intangible asset of an equity method investment, accounting for an equity method investees issuance of shares and accounting for a change in an investment from the equity method to the cost method. The adoption of EITF 08-6 did not have an effect on the Company's consolidated financial statements. In April 2009, the FASB issued ASC 820-10-65 formerly FASB Staff Position FAS 157-4, Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly (FSP 157-4). This provides significant guidance for determining when a market has become inactive as well as guidance for determining whether transactions are not orderly. It also provides guidance on the use of valuation techniques and the use of broker quotes and pricing services. It reiterates that fair value is based on an exit price and also that fair value is market-driven and not entity-specific. The adoption of ASC 820-10-65 did not have a material effect on the Company's consolidated financial statements. 42


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NEVADA GEOTHERMAL POWER INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTSJUNE 30, 2010(AUDITED)
          (Expressed in US Dollars) 22.
        MATERIAL DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (GAAP) (Continued)
  iv.
        Recent Accounting Pronouncements (continued)
  In June 2009, the FASB issued new guidance, which is now a part of ASC 860-10 (formerly SFAS Statement No 166), to improve the relevance, representational faithfulness, and comparability of the information that a reporting entity provides in its financial statements about a transfer of financial assets; the effects of a transfer on its financial position, financial performance, and cash flows; and a transferors continuing involvement, if any, in transferred financial assets. The FASB undertook this project to address (1) practices that have developed since the issuance of FASB Statement No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities (which is now a part of ASC 860-10), that are not consistent with the original intent and key requirements of that Statement and (2) concerns of financial statement users that many of the financial assets (and related obligations) that have been derecognized should continue to be reported in the financial statements of transferors. This new guidance is effective for fiscal years beginning after November 15, 2009 and is not expected to have a material impact on the Companys consolidated financial statements. The Company will implement the guidance in the year ending June 30, 2011. In June 2009, the FASB issued new guidance which is now part of ASC 810-10 (formerly SFAS Statement No. 167), to improve financial reporting by enterprises involved with variable interest entities. The FASB undertook this project to address (1) the effects on certain provisions of FASB Interpretation No. 46 (revised December 2003), Consolidation of Variable Interest Entities (which is now part of ASC 810-10), as a result of the elimination of the qualifying special-purpose entity, and (2) constituent concerns about the application of certain key provisions of ASC 810-10, including those in which the accounting and disclosures under ASC 810-10 do not always provide timely and useful information about an enterprises involvement in a variable interest entity. This new guidance is effective as of the beginning of each reporting entitys first annual reporting period that begins after November 15, 2009, for interim periods within that first annual reporting period, and for interim and annual reporting periods thereafter. Earlier application is prohibited. This new guidance is not expected to have a material impact on the Companys consolidated financial statements. The Company will implement the guidance in the year ending June 30, 2011. In August 2009, the FASB issued Accounting Standards Update (ASU) No. 2009-05, Measuring Liabilities at Fair Value (ASU 2009-05). This update provides amendments to ASC 820, Fair Value Measurements and Disclosure, for the fair value measurement of liabilities when a quoted price in an active market is not available. ASU 2009-05 is effective for reporting periods beginning after August 28, 2009. The Company will implement the guidance in the year ending June 30, 2011. 43


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NEVADA GEOTHERMAL POWER INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTSJUNE 30, 2010(AUDITED)
          (Expressed in US Dollars) 22.
        MATERIAL DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (GAAP) (Continued)
  iv.
        Recent Accounting Pronouncements (continued)
  This new guidance is not expected to have a material impact on the Companys consolidated financial statements. In September 2009, the FASB issued ASU No. 2009-12, Investments in Certain Entities That Calculate Net Asset Value Per Share (or Its Equivalent) (ASU 2009-12). This update provides amendments to ASC Topic 820, Fair Value Measurements and Disclosure, permitting companies to estimate the fair value of investments within ASC 820s scope using the net asset value per share. ASU 2009-05 is effective for reporting periods ending after December 15, 2009. The Company will implement the guidance in the year ending June 30, 2011. This new guidance is not expected to have a material impact on the Companys consolidated financial statements. In September 2009, the FASB reached a consensus on ASU 2009-13, Revenue Recognition (ASC 605), Multiple-Deliverable Revenue Arrangements (ASU 2009-13), and ASU 2009-14 Software (ASC 985), Certain Revenue Arrangements That Include Software Elements (ASU 2009-14). ASU 2009-13 modifies the requirements that must be met for an entity to recognize revenue from the sale of a delivered item that is part of a multiple-element arrangement when other items have not yet been delivered. ASU 2009-13 eliminates the requirement that all undelivered elements must have either: (i) VSOE or (ii) third-party evidence, or TPE, before an entity can recognize the portion of an overall arrangement consideration that is attributable to items that already have been delivered. In the absence of VSOE or TPE of the standalone selling price for one or more delivered or undelivered elements in a multiple-element arrangement, entities will be required to estimate the selling prices of those elements. Overall arrangement consideration will be allocated to each element (both delivered and undelivered items) based on their relative selling prices, regardless of whether those selling prices are evidenced by VSOE or TPE or are based on the entitys estimated selling price. The residual method of allocating arrangement consideration has been eliminated. ASU 2009-14 modifies the software revenue recognition guidance to exclude from its scope tangible products that contain both software and non-software components that function together to deliver a products essential functionality. These new updates are effective for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010. Early adoption is permitted. These provisions are not expected to have a material impact on the Companys consolidated financial statements. The Company will implement the new provisions in the year ending June 30, 2011. In January 2010, the FASB issued ASU 2010-06, Fair Value Measurements and Disclosures (Topic 820), Improving Disclosures about Fair Value Measurements, amending ASC 820. ASU 2010-06 requires entities to provide new disclosures and clarify existing disclosures relating to fair value measurements. The new disclosures and clarifications of existing disclosures are effective for interim and annual reporting periods beginning after December 15, 2009, except for the disclosures about purchases, sales, issuances, and settlements in Level 3 fair value measurements, which are effective for fiscal years beginning after December 15, 2010 and for interim periods within those fiscal years. The Company will implement ASU 2010-06 in the year ending June 30, 2011. The adoption of ASU 2010-06 is not expected to have material impact on the Companys consolidated financial statements. 44


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NEVADA GEOTHERMAL POWER INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTSJUNE 30, 2010(AUDITED)
          (Expressed in US Dollars) 22.
        MATERIAL DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (GAAP) (Continued)
  iv.
        Recent Accounting Pronouncements (continued)
  In March 2010, the FASB issued ASU2010-11, Scope Exception Related to embedded Credit Derivatives (ASC 815). This statement clarifies that certain embedded derivatives, such as those contained in certain securitizations, collateralized debt obligations and structured notes, should be considered embedded credit derivatives subject to potential bifurcation and separated fair value accounting. This statement allows any beneficial interest issued by a securitization vehicle to be accounted for under the fair value option at transition. This new accounting guidance will become effective on July 1, 2010. The Company will implement the guidance in the year ending June 30, 2011. This new accounting guidance may have a material impact on the Companys consolidated financial condition, results of operations or cash flows depending on the status of any loans outstanding or completed after the adoption of this statement. 45


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NEVADA GEOTHERMAL POWER INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTSJUNE 30, 2010(AUDITED)
          (Expressed in US Dollars) 23.
        ADDITIONAL CASH FLOW INFORMATION
  The changes in these balances have been excluded from cash flows used in investing activities. a)
        
        Cash and cash equivalents is comprised of
        
        2010
        
        
        2009Cash
        $
        6,435,375
        
        $
        1,279,346Short-term deposits
        
        -
        
        
        1,111,082$
        6,435,375
        
        $
        2,390,428b)
        
        Interest
        
        2010
        
        
        2009Interest Received
        $
        76,611
        
        $
        346,520Interest Paid
        
        10,015,847
        
        
        962,357c)
        
        Supplementary Non-Cash Investing Information
        
        2010
        
        
        2009Amount of accounts payable for future financing costs
        $
        1,016,462
        
        $
        180,230Amount of accounts payable for geothermal property interests
        
        45,138
        
        
        57,243Amount of accounts payable for property, plant and equipment
        
        1,184,371
        
        
        16,394,756Amount of deferred construction amounts payable
        
        -
        
        
        9,028,380Amount of future income tax included in construction in progress
        
        -
        
        
        1,320,440Amount of accounts receivable for property, plant and equipment for insurance claim
        
        377,828
        
        
        -
  46


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NEVADA GEOTHERMAL POWER INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTSJUNE 30, 2010(AUDITED)
          (Expressed in US Dollars) 24.
        SEGMENTAL ANALYSIS
  Blue Mountain -
        
        
        Development
        
        
        Corporate andFaulkner I
        
        
        phase
        
        
        reconciling
        
        
        TotalPower Plant
        
        
        projects
        
        
        items
        
        
        2010Revenue from electricity sales
        
        $
        11,839,010
        
        $
        -
        
        $
        -
        
        $
        11,839,010Amortization
        
        
        4,863,018
        
        
        39,679
        
        
        76,886
        
        
        4,979,583Interest expense
        
        
        15,364,880
        
        
        451
        
        
        -
        
        
        15,365,331Interest income
        
        
        65,733
        
        
        87
        
        
        10,791
        
        
        76,611Net Loss
        
        
        15,047,745
        
        
        266,750
        
        
        2,666,956
        
        
        17,981,451Interest deferred and non-cash interest
        
        
        6,220,949
        
        
        451
        
        
        -
        
        
        6,221,400Property, plant and equipment
        
        
        168,012,969
        
        
        131,299
        
        
        1,572,708
        
        
        169,716,976Interests in geothermal properties
        
        
        -
        
        
        1,413,309
        
        
        -
        
        
        1,413,309Segment assets
        
        
        181,850,600
        
        
        1,920,867
        
        
        3,502,314
        
        
        187,273,781Segment liabilities
        
        
        160,685,006
        
        
        148,630
        
        
        650,509
        
        
        161,484,145
  All of the Companys geothermal properties are located in the U.S.; the Companys head office is located in Canada. 25.
        SUBSEQUENT EVENTS
  Except as disclosed elsewhere in these consolidated financial statements, the following are significant events subsequent to June 30, 2010: a)
        On August 23, 2010, the Company settled all disputes that arose under the EPC contract as a result of the facility shutdown between January 16, and February 23, 2010, due to a short-circuit caused by faulty layout of underground cables. The settlement consisted of a cash payment of $1 million, power plant spares and extended warranties.b)
        On September 27, 2010, the Company closed a non-brokered private placement for 20,700,000 units at a price of CAD 0.50 to raise gross proceeds of CAD 10,350,000. Each unit consists of one common share and one three year transferable share purchase warrant, with one warrant entitling the holder to purchase one additional common share of the Company at a price of CAD 0.70 per warrant share.
  In the event that the closing price of the Companys common shares on the TSX Venture Exchange is CAD 1.00 or greater per share for a period of 20 consecutive trading days, the Company may accelerate the expiry date of the warrants, and in such case, the warrants must be exercised within 30 days. 47


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NEVADA GEOTHERMAL POWER INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTSJUNE 30, 2010(AUDITED)
          (Expressed in US Dollars) 25.
        SUBSEQUENT EVENTS (Continued)
  c)
        On September 3, 2010, the Companys subsidiary NGP I closed a financing with John Hancock for $98.5 million.
  The principle terms of the John Hancock loan are: - The DOE will guarantee 80% of the principal and interest of the new loan; - The proceeds of the John Hancock loan were used for partial repayment of the TCW loan, funding of security requirements under the PPA, funding of reserve accounts, and certain transaction costs; - A maturity date of December 31, 2029; - An interest rate of 4.14%; - During an event of a default, the interest rate will increase by the lesser of 2% per annum and the maximum amount allowed by law. The DOE will not guarantee payment of this interest; - Payments are to be made quarterly, consisting of a blend of principal and interest; - The John Hancock loan is a senior secured obligation of NGP I; and - John Hancock has first priority security interest in NGP Blue Mountain Holdco LLCs equity interest in NGP I and all NGP I assets. TCW released the NGP I security held in respect of the TCW loan upon closing of the John Hancock loan but has retained its lien on the equity interests in NGP Blue Mountain Holdco LLC. d)
        Concurrent with the closing of the John Hancock loan, the Company issued TCW 4.5 million warrants exercisable at price of CAD 1.50 for a period of five years. If the Companys share price closes at CAD 2.00 or greater for a period of 20 consecutive trading days, the Company shall give written notice to TCW that if the warrants are not exercised within 30 days of the notice, the warrants shall expire.e)
        A director of the Company received a success fee of $492,500 on the closing of the John Hancock loan.f)
        On September 13, NVE challenged the Companys force majeure claim relating to the January electrical failure referred to in a) above. The Company does not believe it has any liability since it believes the challenge is without merit.
  48


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