(All amounts in US dollars unless otherwise stated and all MW according
to the Geothermal Reporting Code.)
VANCOUVER, May 12 /CNW/ - Magma Energy Corp. (TSX: MXY) today reported its financial and operating results for the
third quarter of fiscal 2011 ending March 31, 2011. Highlights of the
Quarterly revenue of $18.7 million, EBITDA of $5.2 million and net
income of $9.0 million ($0.03 per share).
Merger announced with Plutonic Power Corp. and name changed to Alterra
Power Corp. Transaction is effective May 13 and adds hydro, wind and
potentially solar power production to Magma's geothermal portfolio,
taking total power capacity to 366 megawatts generating 1,800 gigawatt
hours of electricity annually.
Awards of the Mensano and Roccastrada geothermal concessions in Italy,
located in a renowned geothermal power production area in Tuscany.
Subsequent to the quarter Magma was also awarded two geothermal
concessions, Loriscota and Crucero, in a promising region of southern
Subsequent to the quarter an agreement was reached to sell a 25%
interest in Magma's 98.5%-owned HS Orka subsidiary to a group of
Icelandic pension funds for ISK 8.06 billion (approximately $71.5
million). This transaction is expected to close in late May.
Ross Beaty, Chairman and CEO, commented, "In this third quarter of
fiscal 2011 we continued our rapid growth by agreeing to combine with
Plutonic Power to create Alterra Power Corp. This will build us into a
larger, stronger, more diversified clean energy company. Geothermal
power will remain a core focus of Alterra, but we will also have hydro,
wind and possibly solar power assets and a broader mix of growth
opportunities. And equally important - we have an outstanding team of
clean energy operators and developers to deliver greater value creation
for all shareholders."
(expressed in thousands of dollars, except for GWh and per share
Financial highlights of Q3 2011 are summarized below. Results for the
three and nine months ended March 31, 2011 include the consolidation of
results of HS Orka since August 17, 2010 when Magma acquired control
and are therefore not comparable with prior periods.
For the Three
March 31, 2011
For the Three
March 31, 2010
For the Nine
March 31, 2011
For the Year Ended
June 30, 2010
(audited, except Net
Production and EBITDA)
Net Production (GWh)
Other income (expenses)
Net income (loss) for the period
Gain (loss) per share - basic
Gain (loss) per share - diluted
Cash and cash equivalents
1 EBITDA is defined by the Company as earnings before interest and other
financing costs, taxes, depreciation and amortization, as well as
before deductions for non-cash charges related to employee
compensation, equity earnings/losses, loss on re-measurement of equity
interest, gain on bargain purchase and changes to the balance sheet
carrying value of long-term debt. The Company discloses EBITDA as it is
a measure used by analysts and by management to evaluate the Company's
performance. As EBITDA is a non-GAAP measure, it may not be comparable
to EBITDA calculated by others. In addition, as EBITDA is not a
substitute for net earnings, readers should consider net earnings in
evaluating the Company's performance.
For the third quarter of fiscal 2011 revenue from energy sales was $18.7
million and total costs of production were $13.6 million, for a gross
profit of $5.2 million. Approximately 46% of HS Orka's revenue is
generated from sales under power purchase agreements with prices
indexed to the price of aluminum, resulting in higher revenue as
aluminum prices increase. The average London Metal Exchange aluminum
price for the three months ended March 31, 2011 was $2,524 per tonne
versus $2,368 per tonne for the second quarter of this fiscal year. HS
Orka contributed $17.3 million of revenue and accounted for $11.8
million of production costs. The increase in revenue due to higher
aluminum prices was slightly offset by a weaker US dollar. Our Soda
Lake operation contributed revenue of $1.4 million and accounted for
$1.8 million of production costs, $0.7 million higher than in Q2 2011
primarily due to non-recurring maintenance work completed in the
EBITDA for the quarter was $5.2 million compared to an EBITDA loss for
the same period last year of $0.2 million. The net income for the
quarter was $9.0 million or $0.03 per share, against net income of $0.1
million ($0.00/share) for the same period last year. The year-on-year
increase in net income for the quarter of $8.9 million was primarily
related to increased gross profit of $5.0 million and net gains from
changes to the fair value of debt and derivatives of $18.0 million.
These were offset by increased interest and other financing costs of
$2.9 million; increased general, administrative and professional fee
expenses of $1.9 million due, in part, to one-off costs incurred in the
Plutonic transaction and Nordural arbitration case; and increased
future income tax expense of $5.4 million.
On a cash basis for the quarter ended March 31, 2011, the Company spent:
$5.2 million on investing activities, including net investments of $1.6
million related to acquisitions and exploration activities for the
Company's portfolio of exploration projects; $1.6 million on plant and
equipment; and $2.0 million for a convertible debenture related to the
acquisition of Plutonic. At March 31, 2011, Magma had cash and cash
equivalents of $19.8 million, working capital of $3.8 million
(including $28.3 million in restricted cash), and long-term
non-recourse debt of $293.2 million.
Subsequent to the quarter Magma agreed to sell a 25% interest in its HS
Orka subsidiary to a group of Icelandic pension funds for a price of
ISK 8.06 billion (approximately $71.5 million). The pension funds will
also hold an option until February 10, 2012 to purchase new shares from
HS Orka treasury that, if exercised, would increase their stake in HS
Orka to 33.4% at a cost of ISK 4.7 billion (approximately $41.7
million). The transaction is subject to a number of conditions,
including further due diligence, and is expected to close in May.
HS Orka Operations
The Svartsengi 75 MW power plant and associated 150 MW district heating
system, as well as the 100 MW Reykjanes power plant produced as
expected during the quarter. Production at Svartsengi was 118.3 GWh
while the Reykjanes power plant produced 208.4 GWh. A 30 MW
higher-priced power purchase agreement was signed with Iceland Silica
Company to replace a soon-expiring 30 MW contract.
A two-phase expansion of the Reykjanes plant's output to 180 MW from 100
MW is planned, pending permitting and new agreements with one or more
power purchasers. For the 50 MW Phase I, the Fuji Electric turbine is
on site, drilling of well RN-30 is ongoing with the first results
expected in June, and a draft permit is being negotiated. $41.7 million
out of a budget of $131 million has been spent on the project and the
remaining cost for the expansion is expected to be funded mainly from
HS Orka's cash on hand and non-recourse debt financing.
Soda Lake Operation
Soda Lake's output for the quarter was 20.6 GWh, slightly above budget
and reflecting gains from the Phase 1 productivity improvements. Well
25A-33 was placed in service as an injection well in February and flow
testing is underway to determine if could be used as a production well.
Two step-out drilling targets were selected for deeper slim hole
drilling during the second half of 2011.
During the quarter Magma continued work on the Phase 2 expansion, with
an updated resource assessment, further temperature gradient well
drilling and seismic data analysis being used to define the development
strategy. Should a successful target be recognized, production drilling
could commence in late 2011.
In Chile, at Magma's Mariposa reservoir, plans for additional slim holes
and large diameter exploration drilling are underway and a partner is
actively being sought for this next phase of exploration. Additional
exploration drilling is planned in November. Preliminary exploration
work was completed on the nearby Los Cristales concession and at Tres
Puntas in the Atacama region of northern Chile.
Magma acquired new concessions in Italy, Mensano and Roccastrada,
covering a total of 48,446 hectares near the historic geothermal field
of Lardarello. Based on prior work, high enthalpy geothermal systems
are inferred in both concessions. A detailed exploration program will
begin on both concessions to confirm the resources and to define the
best location and targets for the exploration wells to be drilled in
the following phase.
In Peru, Magma has applied for a total of 27 geothermal concessions and
subsequent to the quarter was awarded the first two, Loriscota and
Crucero. The concessions cover a total of 37,400 hectares located
northwest of Candarave, in a promising region of southern Peru
characterized by volcanoes and geothermal systems of significant size.
Full scale exploration is planned to commence in early July.
Magma continues to evaluate the potential of all of its 12 US
exploration and development properties. All of the currently planned
exploration program expenditures are discretionary.
Mr. Beaty concluded, "Alterra Power will be one of Canada's leading
clean energy companies and the only one with a mix of all of the
dominant forms of renewable energy. Our growing financial strength will
reduce our cost of capital for our many growth projects. Once the
Plutonic transaction is wrapped up in the next few days, I look forward
to continuing the very rapid growth we have seen in our short history
About Magma Energy Corp.
Magma Energy Corp. is a geothermal power company which owns and operates
198 MW of geothermal energy projects while actively exploring for and
developing new projects. Magma has an extensive portfolio of properties
throughout the western United States, Iceland, South America and Italy,
including one operating power plant in Nevada and two in Iceland. For
more information, visit www.magmaenergycorp.com.
Magma Energy will host a conference call to discuss financial and
operating results on Friday, May 13, 2011 at 11:30 am ET (8:30 am PT).
North American participants dial 1-888-231-8191 and International
participants dial 1-647-427-7450. The call will be broadcast live on
the Internet at http://www.newswire.ca/en/webcast/viewEvent.cgi?eventID=3506580. The call will be available for replay for one week after the call by
dialing 1-800-642-1687 / 1-416-849-0833 (for North American and
International callers) and entering replay pin number 6353 9361.
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, management's expectations regarding our growth, results of
operations, revenues, requirements for capital, future demand for and
prices of electricity, business prospects and opportunities,
exploration and development, geothermal resources, recoverable
geothermal energy or energy generation capacities. Such forward-looking
information reflects management's current beliefs and is based on
information currently available to management.
Future results could differ materially from those reported or
anticipated. Accordingly, prospective investors should not place undue
reliance on the current reported financial results. Other than as
required by applicable securities laws, we assume no obligation to
update or revise such forward-looking information to reflect new events
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 is based
upon what management believes to be reasonable assumptions, including,
but not limited to, assumptions about: 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
exploration, 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.