Magma Energy: Interest In Geothermal Energy Producer
Magma Energy Corp. announces that it has signed an agreement to acquire from Geysir Green Energy a minority interest in HS Orka, a large producing geothermal company in Iceland. The agreement provides that Magma will purchase an 8.62% shareholding in HS Orka for 2.5 billion Icelandic Króner ("ISK") (approximately US$20 million) payable at closing and a 2.16% shareholding in HS Orka for 625 million ISK (approximately US$5 million) payable by March 31, 2010. In connection with the purchase, Magma will also obtain an option to acquire approximately a 5% additional shareholding in HS Orka by making a capital infusion of US$15 million into HS Orka.
HS Orka is the largest privately owned energy company in Iceland. Installed geothermal power capacity is 175 megawatts ("MW") from the Svartsengi and Reykjanes power plants. In addition, HS Orka generates 150 MW of thermal energy for district heating. Expansions are planned that will increase HS Orka's geothermal power production to 425 MW by 2015. HS Orka's 75 MW Svartsengi plant began production in 1978 and its 100 MW Reykjanes plant began production in 2006. Much of the power is sold under US dollar contracts to a large aluminum smelter that is one of the world's lowest cost aluminum producers. The expansion plans of HS Orka will provide power to a new aluminum smelter that is currently under construction.
The agreement is subject to approval by the TSX. Other closing conditions include a waiver of pre-emptive rights held by third party shareholders of HS Orka and satisfactory negotiations with third parties in respect of HS Orka's debt agreements. Closing of the transaction is expected in September, 2009. A comprehensive technical report prepared by an independent engineering firm Mannvit Engineering will be filed on SEDAR after closing.
Ross Beaty, Magma's Chief Executive Officer, said, "This transaction will increase Magma's direct and indirect installed gross geothermal power production to 26 MW immediately and up to 91 MW after HS Orka's planned expansions and Magma's current 12 MW expansion at its existing Soda Lake operation in Nevada. In addition, it gives Magma exposure to the large and well developed Icelandic geothermal industry, enabling synergies with Magma's other geothermal assets internationally and other opportunities for growth within Iceland's geothermal community."
Magma was advised on the transaction by Glacier Partners, an investment advisory firm specializing in the geothermal and seafood industries.
About Magma Energy Corp.
Magma Energy Corp. is a geothermal power company which is actively engaged in operating, developing, exploring and acquiring geothermal energy projects. We currently have one operating power generation plant (the Soda Lake Operation in Nevada), and an extensive portfolio of exploration properties throughout the western United States, Chile, Argentina and Peru.
About Iceland's Geothermal Industry and Geysir Green Energy.
Iceland has one of the world's largest and best developed geothermal industries, supported by substantial geothermal resources and a highly skilled domestic workforce. Geothermal energy accounts for 23% of Iceland's electricity demand and powers many of Iceland's homes and businesses, including Iceland's large aluminum industry.
Geysir Green Energy is a private geothermal development company with a majority stake in HS Orka, a 100% interest in geothermal drilling company Iceland Drilling, and significant geothermal assets elsewhere in the world.
Magma Energy Corp.
Andrea Zaradic, Vice President, Corporate Development