VANCOUVER, B.C., CANADA, SEPTEMBER 1, 2009 - Magma Energy Corp. (TSX:MXY) announces that it has signed an agreement to acquire 32.32% of Iceland geothermal company HS Orka hf ("HS Orka") from Reykjavik Energy ("RE") and two other HS Orka shareholders. As previously announced, Magma was selected as preferred bidder by RE to acquire this significant stake in HS Orka. The agreement provides that Magma's wholly owned subsidiary will purchase the interest for 3.7 billion Icelandic Króner ("ISK") (approximately US$29.5 million) and a bond for the US Dollar Equivalent of 8.7 billion ISK (approximately US$68.8 million) repayable in a single installment in seven years with interest at 1.52% per annum. The bond will be secured by the shares acquired by Magma in this transaction.
The agreement is subject to several closing conditions including approval by the TSX, 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 late September, 2009.
On July 23, 2009, Magma announced that it had signed an agreement to acquire a 10.78% shareholding in HS Orka, which agreement included an option to acquire approximately a 5% additional shareholding in HS Orka. If both transactions conclude, Magma would hold a 43.1% direct interest in HS Orka and an option to invest US$15 million in HS Orka's expansion plans which would increase Magma's stake up to 48.1%.
Ross Beaty, Magma's Chief Executive Officer, said, "We view this as a long term investment in HS Orka. We intend to work closely with all stakeholders to maximize HS Orka's value for all. The transaction provides HS Orka with a strong financial partner and provides Magma with exposure to Iceland's substantial geothermal resources and highly skilled domestic workforce".
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 in Nevada known as Soda Lake and an extensive international portfolio of exploration properties throughout the western United States, Chile, Argentina and Peru.
Contact: Andrea Zaradic, Vice President, Corporate Development
Magma Energy Corp.
Cautionary Note regarding Forward-Looking Statements and Information
This news release contains certain "forward-looking information" within the meaning of Canadian securities laws, which may include, but is not limited to, statements with respect to future events or future performance, prospects for closing our acquisition of an interest in HS Orka including required consents and third party negotiations, our plans to expand our operations and HS Orka's plans to expand their geothermal power production, management's expectations regarding our growth, business prospects and opportunities and geothermal energy generation capacities. Such forward-looking information reflects management's current beliefs and is based on information currently available to management.
A number of known and unknown risks, uncertainties and other factors, may cause our actual results or performance to materially differ from any future results or performance expressed or implied by the forward-looking information. The forward-looking information can be identified by terms such as plans, planned, anticipated, expects and is based upon what management believes to be reasonable assumptions, including, but not limited to, assumptions about: conditions to closing our acquisition of an interest in HS Orka being met and consents being received, the success and timely completion of planned exploration and expansion programs, the growth rate in net electricity consumption; support and demand for non-hydroelectric renewables; government initiatives to support the development of renewable energy generation; the accuracy of reserve estimation methodology and analysis used to estimate the quantity of potentially recoverable thermal energy; geological, geophysical, geochemical and other conditions at our properties; the reliability of technical data, including extrapolated temperature gradient, geophysical and geochemical surveys and geothermometer calculations; capital expenditure estimates; availability of capital to fund development and expansion programs; and general economic conditions.
Forward-looking information and statements are also based upon the assumption that none of the identified risk factors that could cause actual results to differ materially from the forward-looking information and statements will occur.
There can be no assurance that the forward-looking information will prove to be accurate, as actual results and future events could differ materially from those anticipated in such information. Accordingly, prospective investors should not place undue reliance on forward-looking information. Other than as required by applicable securities laws, we assume no obligation to update or revise such forward-looking information to reflect new events or circumstances.