Boston-based Denham Capital agreed to provide the financing in the form of preferred equity securities, in the deal that closed Tuesday. Merrill Lynch also agreed to convert its outstanding notes into Vulcan preferred equity.

Vulcan, based in Bend, Ore., owns one of the country's largest geothermal energy portfolios. The privately held company leases more than 160,000 acres in Arizona, California, Nevada and Oregon.

Vulcan officials said the Denham investment will be used to develop property with the potential to generate up to 2,000 megawatts of geothermal power.

"This investment by Denham allows the company to move forward aggressively with our business plan of developing steam resources and power projects, and supporting long-term power purchase agreements," Vulcan President and Chief Executive Steve Munson said in a statement.

Geothermal energy is produced by drilling for underground reservoirs of superheated water. The steam that rises to the surface is then used to power electric turbines.

Seven Western states had 2936.5 MW of geothermal projects under development as of January 2008, according to the Geothermal Energy Association, an industry trade group. An additional 3313.8 MW of new capacity is under development.

On Wednesday, Nevada regulators approved Las Vegas-based Nevada Power Co.'s planned 30-MW geothermal project on federal land in northern Nevada. Nevada Power is a wholly owned subsidiary of Sierra Pacific Resources.

Utah-based Raser Technologies Inc. signed a letter with Merrill Lynch earlier this month for financing and tax equity funding for a 10 MW geothermal power plant in Hidalgo, County, N.M. Merrill committed to providing up to $43 million of construction and debt financing and up to $27 million of tax equity capital.

Merrill has also agreed to provide Raser with financing to build a 10 MW geothermal plant in Beaver, Utah.

"[Vulcan] seems to be characteristic of the growing industry," noted Mark Taylor, an analyst with New Energy Finance. "Deals are getting bigger and more frequent."

Through the first half of 2008, U.S. geothermal companies secured $238 million in asset financing for new projects, compared with $72 million in disclosed deals during the year-earlier period, Taylor noted.

In a new research paper, Frost & Sullivan analyst Gouri Nambudripad noted that geothermal energy production accounts for less than 1 percent of global energy use. Interest in the sector is growing, he noted, because of the rising cost of oil and hand-wringing over climate change.

"Geothermal energy has several advantages when compared to other renewable energy sources as well as carbon-emitting fuels," he said. "The sector is something to watch out for in the next few years."

Geothermal, which relies on a continuous source of heat to produce energy, has a capacity of more than 70 percent, according to the Frost & Sullivan analysis. Solar energy, in comparison, has a capacity factor of roughly 20-35 percent.