Magma Energy Corp buys stake in Icelandic geothermal power company HS Orka

Alexander Richter 24 Jul 2009

Magma Energy Corp. acquires a 10.8 percent share in the Icelandic geothermal power company HS Orka from Icelandic Geysir Green Energy.

Already reported about the possibility that this deal might happen, it is now official and provided in an official statement by both companies.

“Geysir Green Energy (Geysir), the Iceland-based geothermal company, and the Canadian geothermal company Magma Energy Corporation (Magma) today announced an agreement whereby Magma will acquire a 10.8 percent share in the Icelandic geothermal power company HS Orka from Geysir. Under the same agreement, Magma will receive an option to acquire about 5 percent of new shares in HS Orka by making a capital infusion of US$15 million into the business by late 2011. This cash infusion will accelerate HS Orka’s project development.

The companies also announced a partnership agreement whereby they will work together on selected geothermal projects in Iceland and internationally.

In today’s transaction, Geysir sold Magma 10.8 percent share in HS Orka for just over ISK 3 billion (approximately US$25 million). Magma will hold an option to purchase up to ISK 2 billion (approximately US$15 million) of new shares in HS Orka.

After Magma´s acquisition of the shares from Geysir and purchase of new capital in HS Orka, Magma’s consolidated share will be 16 percent, leaving Geysir with 52 percent.

Magma Energy is a geothermal energy company with a goal of becoming a global leader in its field. Magma owns and operates a geothermal power plant in the U.S. State of Nevada, and is involved in multiple geothermal projects in the USA and in South America. Magma’s investment in HS Orka and partnership with Geysir strengthen its operations as it gains access to the experience and expert geothermal knowledge within those companies.

Geysir has a strong position in the geothermal industry in Iceland as well as in Germany, China, USA and the Philippines. The company aims to strengthen its Icelandic energy operations and utilize its knowledge and expertise internationally wherever opportunities arise.

Ásgeir Margeirsson, CEO, Geysir Green Energy, said that this agreement is an important step for the Geysir group of companies. The agreement empowers HS Orka to push forward in developing a 100 MW extension to its geothermal power plant. “Much of the power is sold under US dollar contracts to a large aluminium smelter that is currently under construction in south-west Iceland. HS Orka has a very strong business plan; much which is related to the supply of green electricity to the significant Icelandic aluminium smelter industry. We are very happy to see that Magma has endorsed the HS Orka business plan in such a significant manner”.

Ross J. Beaty, founder, Chairman and CEO of Magma Energy, emphasized that Magma is an energy company, not an investment company, and that all investments are long-term. “Having seen for myself the amount of specialization, knowledge and opportunities that exist for developing geothermal energy in Iceland, collaborating with Geysir and HS Orka is absolutely the right move for us at this juncture. This will most certainly strengthen Iceland’s energy sector both technically and financially“.

Source: official announcement via Geysir Green Energy