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Magma Energy releases financial results for the financial year 2010

Reykjanes geothermal power plant of HS Orka, Iceland (source: flickr/ ThinkGeoEnergy, creative commons)
Alexander Richter 29 Sep 2010

Magma Energy Corp releases financial results for the fourth quarter and audited 2010 year end results with a loss of C$16.4m for the year.

In a release today, Canadian listed Magma Energy Corp. announces its financial results for the fourth quarter and year end results for its financial year ending June 30, 2010.

“Commenting on today’s announcement, Ross Beaty, Chairman and CEO, said “2010 has been an exciting inaugural year for Magma Energy as a public company. Since our IPO in July 2009, we have grown our production from 11 megawatts to 186 megawatts and have increased our reserves and resources nearly seven-fold. We have a balanced portfolio of operations and exploration in three core geothermal regions in the world, Iceland, Chile and Nevada, including a leading exploration position in the US to complement our expanding Soda Lake operations, enabling us to participate in the country’s generous renewable energy grant programs. I look forward to continued rapid growth in the forthcoming year.”

Financial Results

Magma commenced operations in 2008, began generating revenue in October, 2008 and as at June 30, 2010 held only a 46.18% interest in HS Orka requiring it to equity account for HS Orka’s operations. Subsequent to year-end, Magma acquired another 52.35% of HS Orka and will now consolidate its results. Therefore, Magma’s financial results presented here are not reflective of financial results in the future and comparisons of revenues and expenses are not meaningful.”Revenues from energy sales were $5.1 million, and gross profit from the Soda Lake operations was $1.7 million. The net loss for the year of $16.4 million or ($0.07) per share was primarily related to a non-cash $10.8 million equity loss from Magma’s investment in HS Orka, increased expenses of $10.0 million related primarily to Magma’s rapid growth and the write-off of $0.9 million of geothermal properties partially offset by the Soda Lake operational gross profit of $1.7 and foreign currency gains of $4.3 million.

At June 30, 2010 Magma owned 46.18% of HS Orka and recorded a $10.8 million equity loss for the period. While HS Orka’s income from operations was 70% higher than the same period last year, HS Orka reported a net loss of $18.2 million for the six months ended June 30, 2010. This loss was primarily the result of a non-cash loss of $31.8 million in the fair value of embedded derivatives in sales contracts. Approximately 50% of HS Orka’s power sales are partially indexed to the price of aluminum resulting in embedded derivatives. Changes in the forward price of aluminum result in a fair value change of the derivative. At June 30, 2010 the forward price of aluminum on the London Metal Exchange was lower than the value at December 31, 2009. HS Orka’s EBITDA for the six months ended June 30, 2010 was $12.1 million.

On a cash basis for the year ended June 30, 2010, the Company spent $97.8 million on investing activities, including investments of $67.7 million to acquire a 46.18% interest in HS Orka, $16.0 million to acquire and explore the Company’s portfolio of exploration projects and $13.4 million on the Soda Lake expansion and other equipment. At June 30, 2010, Magma had cash and cash equivalents of $25.3 million, working capital of $21.4 million, and long-term debt with a fair value $49.3 million. Subsequent to year end, the Company completed a secondary equity offering for net proceeds of C$43.3 million and entered into a credit facility agreement of C$10.0 million.”

Mr. Beaty concluded, “Geothermal power is a great, clean energy source. I am really pleased we have already built a large, sustainable geothermal energy company and look forward to continuing growth in the years ahead as we seek to further expand our Soda Lake and HS Orka operations, further develop Mariposa and continue to discover new geothermal resources in Nevada, Chile, Peru and Iceland.”

The announcement further provides details on the development of its operations and projects.

Source: PR Newswire