News

Magma Energy Corp. possibly part in Icelandic transaction

Alexander Richter 27 Jun 2009

Canadian Magma Energy Corp. is said to be taking part in a transaction that would secure Geysir Green Energy buying a 34.7 percent stake in HS Orka (the power generation part of formerly Hitaveita Sudurnesja) in Iceland and this way acquiring a 10.8 percent stake in the company itself.

Reported by the Icelandic media today, Canadian Magma Energy Corp. is possibly taking part in a transaction that would secure Geysir Green Energy buying an additional 34.7 percent stake in HS Orka (the power generation part of formerly Hitaveita Sudurnesja) in Iceland. This would bring the total stake by GGE in the company to 66.7 percent.

In the official announcement by Geysir Green Energy it is said that “Reykjanes City and Geysir Green Energy have entered negotiations regarding Reykjanes’s acquisition of HS Orka’s land and resources in the Reykjanes Peninsula to ensure that the peninsula’s geothermal resources remain public property.  If the acquisition goes through the income for Reykjanes City from resource charges would be over ISK 50 million annually and rising. The decision to enter into these negotiations was introduced at a Reykjanes City council meeting yesterday.

If all goes as planned, Reykjanes City will buy Geysir’s 32% share in HS Veitur worth ISK 4 billion, in addition to purchasing land and geothermal resources from HS Orka for ISK 840 million. In turn Reykjanes City will sell most of its shares in HS Orka to Geysir Green Energy for ISK 13 billion and by so doing freeing up considerable capital.

To finance this acquisition, as well as the future development of HS Orka, Geysir has recruited a foreign company that specialises in development in the field of renewable energy. It will buy 10,8% of Geysir’s share in HS Orka. Geysir’s collaboration with the foreign energy company will ensure Geysir’s majority holding in HS Orka, which will increase its capital share soon.”

Geysir Green Energy currently holds a 32% stake in HS Orka (generation) and the same stake in HS Veita (distribution).

The “foreign company” as put forward by Icelandic newspaper Morgunbladid is Magma Energy Corp., the Canadian geothermal development and power producer, currently going through a successful IPO in Canada.

The paper writes that Magma Energy will finance the acquisition of Geysir Green Energy and in the process of it acquire a 10.8 percent stake in HS Orka by Geysir Green, if all goes as planned. This will come to light in the next few weeks.

Foreign investors could then acquire an even larger stake with a capital increase of the company.  The company has also further interest in buying the stake in HS Orka held by Reykjavik Energy (Orkuveita Reykjavikur) and the municipality of Hafnafjordur. This combined stake is around 32 percent.

A not binding bid for this stake will be opened this coming Monday (June 29, 2009) in a process led by an Icelandic corporate advisory firm. There are a number of representatives from various foreign energy companies in Iceland at this point in time to follow this.

Source: Geysir Green Energy announcement, Icelandic Morgunbladid (Icelandic)