Canadian GTO Resources acquiring Ram Power Inc. – a bigger story behind it?

Alexander Richter 2 Jul 2009

The acquisition of Ram Power by GTO Resources, a listed shell company, could imply further consolidation in the geothermal market in North America. So this is a very interesting development that involves Icelandic Geysir Green Energy, which holds 37 percent in Ram Power.

In a release, GTO Resources Inc. (NEX:GTR.H) announces signing a letter of intent to acquire Ram Power, Inc.

This is pretty interesting news as it could imply further consolidation in the geothermal market in North America. After the currently successful IPO of Magma Energy Corp., this could mean that more players will team up, creating bigger and stronger entities. This could help smaller developers to create more leverage both for securing necessary financing and getting projects ready.

The model here is that a listed shell-company acquires a player, which then itself becomes listed without having to go through an IPO. This allows further players to enter at a later stage, but also provide a way for investors to enter this new structure.

Ram Power Inc. (RPI), a California-based company engaged in developing cutting-edge geothermal and solar thermal solutions, was founded in 2008 by Hezy Ram. Mr. Ram previously led the North American Business Development Department of Ormat Technologies.

Ram Power Inc. is owned to 37% by Icelandic Geysir Green Energy and it is to be expected that Geysir Green will take a similar share in GTO Resources in this transaction.

In the release GTO Resources (“GTO”) announces “that it has entered into a letter of intent with geothermal power developer Ram Power, Inc. (“Ram”) dated June 30, 2009 (the “Letter of Intent”). The Corporation has agreed to acquire all of the issued and outstanding securities of Ram (the “Proposed Acquisition”), such that Ram will become a wholly-owned subsidiary of the Corporation upon completion of the Proposed Acquisition. The Letter of Intent contemplates that the Proposed Acquisition is one of the steps in a strategic plan to target and attract other industry players in the geothermal power sector (each a “Business Combination”).

Ram is a private corporation incorporated under the laws of the State of Delaware with a head office in Reno, Nevada, engaged primarily in the development of geothermal projects in the United States. The Proposed Acquisition was negotiated at arm’s length.

The Proposed Acquisition: It is intended that GTO will acquire the securities of Ram from each of the securityholders pursuant to a share purchase agreement. The conditions to the Proposed Acquisition also include among others, the prior or concurrent closing of (i) a Business Combination satisfactory to both parties; and (ii) the Financing (as defined below).

Prior to or concurrent with the Proposed Acquisition a financing of such dollar amount satisfactory to both Ram and GTO and commensurate with the magnitude of a Business Combination (the “Financing”) will be completed as a condition to closing the Proposed Acquisition. The use of proceeds of the Financing will be utilized to develop key projects of a Business Combination. The terms and conditions of the Financing will be negotiated by the parties.

Upon closing of the Proposed Acquisition and a Business Combination, the board of directors of GTO shall appoint a new management team that will include the current management of Ram and GTO will change its name to “Ram Power Corporation”.

In connection with the Letter of Intent, GTO is pleased to announce that it has retained the services of Cormark Securities Inc. to act as financial advisor to GTO in connection with the Proposed Acquisition and Business Combination(s) and as lead agent in connection with the Financing.

Summary Information Relating to Ram

The following information relating to Ram has been provided to the Corporation by Ram.

Ram is a renewable energy development company with the primary mission of developing geothermal power projects in North America. Ram’s management team brings world class expertise and decades of experience in developing and financing renewable energy projects.

Description of Significant Conditions to Closing

Completion of the Proposed Acquisition is subject to the satisfaction of a number of conditions, including, but not limited to, acceptance of the TSX Venture Exchange. Other necessary conditions to the closing of the Proposed Acquisition, include obtaining all other necessary director, shareholder, regulatory and third-party approvals and authorizations, the completion of a definitive agreement setting forth the terms and conditions set out in the Letter of Intent and the completion of due diligence. There can be no assurance that the Proposed Acquisition will be completed as proposed or at all.

If and when a definitive agreement between Ram and GTO is reached, GTO will issue a subsequent press release containing the details of the Proposed Acquisition.

The Common Shares are currently halted from trading and will remain halted until further notice.

Source: Company statement via Marketwire