Magma Energy provides development update in Q2 results release

In its release announcing second quarter results for 2011, Magma Energy provides an update on its activities, and highlights the completion of Magma’s acquisition of a 98.53% stake in HS Orka, the completion of Soda Lake’s Phase I expansion and the completion of the slim-hole drilling program at Mariposa, Chile.

Ross Beaty, Chairman and CEO, commented, “In this second quarter of 2011 we boosted our existing production at Soda Lake, made significant progress on our immediate expansion opportunity in Iceland and completed our slim-hole drilling program at Mariposa with strong results. We are in well-advanced discussions with a group of Icelandic pension funds on the sale of a minority interest in HS Orka, as well as with potential partners for our Mariposa project in Chile. We are looking forward to filing our Energy Grant application for Soda Lake Phase 1 and to continuing Phase 2 of our expansion plans there. At the end of the quarter Magma’s overall geothermal power production was 190 MW, our geothermal Indicated Resources were 181 MW and Inferred Resources were 990 MW. We are well-positioned to further advance all of these assets during 2011.”

HS Orka Operations

The Svartsengi 75 MW power plant and associated 150 MW district heating system, as well as the 100 MW Reykjanes power plant produced as expected during the quarter. Production at Svartsengi was 117,079 MWh while the Reykjanes power plant produced 214,248 MWh. A two-phase expansion of the Reykjanes plant’s output to 180 MW from 100 MW is planned, pending permitting and new Power Purchase Agreements with one or more power purchasers. For Phase I, the 50 MW Fuji Electric turbine has been installed and a Draft Conditional Permit for the expansion has been received. $38.6 million out of a budget of $131 million has been spent on the project and the remaining cost for the expansion is expected to be funded mainly from HS Orka’s cash on hand and debt financing.

Soda Lake Operation

Soda Lake’s output for the quarter was 20,134 MWh, significantly higher than any other comparable period due to the completion of the Phase 1 productivity improvements, comprising two new production wells, a steam/mixing well system, plant refurbishments and the drilling of an injection well. The estimated net gain is 4 MW (24,000 MWh/year). Approximately $21 million has been spent on Phase 1, and the Company is now applying for the US Treasury Grant for up to 30% of the eligible project costs. During the quarter, Magma began work on the Phase 2 expansion with further temperature gradient well drilling and seismic data analysis.

Exploration Activities

Exploration work during the quarter consisted mainly of completing slim-hole drilling and analysis at the Mariposa reservoir in Chile, following which plans for large diameter exploration wells are being developed and partners are actively being sought. In Peru we have applied for a total of 27 geothermal concessions and are anticipating the awarding of the concessions shortly. Magma continued environmental and geosciences work at our 12 US properties, of note with a draft Environmental Assessment being submitted for McCoy for a planned Phase 1 drilling program later in 2011.

Outlook

Mr. Beaty concluded, “We remain focused upon expanding our production at HS Orka and Soda Lake, advancing our Mariposa project in Chile to large-diameter drilling and commencing detailed exploration of our Peruvian and U.S. properties concessions. We will bolster our ability to finance these activities through partnerships, supporting grant and loan programs and appropriate debt facilities, and we will continue to seek opportunities to expand our global asset portfolio. Finally, I welcome John Carson to the Company as Executive Vice President. He is a seasoned renewable energy financial executive and adds great depth to our senior management team.”

Source: Company release via PR Newswire