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Market: TSX-V
Sector: Renewable Energy
EPIC: MXY
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Magma Energy
www.magmaenergycorp.com
Magma Energy Corp. operates, develops, explores and acquires geothermal energy projects. The Company has a portfolio of properties throughout the western United States, Iceland and Latin America. The properties include three producing power plants in Iceland and Nevada that produce 186 megawatts of geothermal power, and in-ground energy resources of 171 megawatts of indicated geothermal resources and 990 megawatts of inferred geothermal resources.
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Magma Energy to acquire Plutonic Power in $190 million deal

7th Mar 2011, 8:44 am by Deborah Sterescu
Magma Energy and Plutonic Power to create Alterra Power Corp Magma Energy and Plutonic Power to create Alterra Power Corp

Magma Energy Corp (TSE:MXY) said Monday it has agreed to buy Plutonic Power Corp (TSE:PCC) for roughly C$190 million to expand its presence in the renewable power sector.

The new company, to be called Alterra Power Corp, with a post-deal market cap of roughly $575 million, will see its production capacity increase to 198 megawatts in 2011.

Under the terms of the transaction, each Plutonic shareholder will receive 2.38 Magma shares for each Plutonic share held. The exchange ratio represents a 32% premium to Plutonic's shareholders based on the company's 20-day weighted average share price on the Toronto Stock Exchange, both parties said.

"This merger will strengthen both companies and will create a larger, more diversified renewable energy company with assets across a broader spectrum of the clean energy industry," said Magma chairman and CEO Ross Beaty.

The combined entity will have assets in three key renewable energy sectors, including geothermal, hydro and wind, and will have six operating plants across Iceland, Nevada and British Columbia.

Magma, one of the world's largest deveopers of geothermal projects, said that geothermal will remain a core focus of the new company, but hydro, wind and solar assets will be "solid business platforms" for future growth.

"[The merger] has the potential to lower the cost of capital to develop each company's existing growth assets, to enable those assets to be developed more quickly, and to better attract new opportunities for future development," added Beaty.

Alterra will be run by Beaty, while Plutonic CEO Donald McInnes will become executive vice chairman of the new company. Magma said it has also agreed to provide short-term financial support to Plutonic by subscribing to a $10 million convertible debenture offering.

The merger, which has been approved by both boards, is still subject to shareholder approvals of the two companies, as well as regulatory approvals and other closing conditions. So far, the largest shareholders of both Magma and Plutonic have entered into lock-up agreements to vote in favour of the deal.

Vancouver-based Plutonic has agreed not to solicit any other transactions, and has committed to pay Magma a break fee of $5.7 million should the deal not complete under certain circumstances. Plutonic's operating facilities are held in a partnership with GE Energy Financial Services.

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