Canada’s Magma Energy Corp. (TSX: MXY) signed an agreement to acquire from Geysir Green Energy a minority interest in HS Orka, a geothermal company in Iceland.
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. The company’s 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.
Closing of the transaction is expected in September, 2009.
Ross Beaty, Magma’s CEO, 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 raised C$100 million ($91.7 million) in its initial public offering (IPO), which closed July 7. The company currently has one operating power generation plant (the Soda Lake Operation in Nevada), and a portfolio of exploration properties throughout the western United States, Chile, Argentina and Peru.
About Iceland’s Geothermal Industry and Geysir Green Energy.
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 geothermal assets elsewhere in the world.
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