The pension funds will also hold an option until 10 February 2012 to buy new shares from HS Orka treasury that, if exercised, will increase their stake in HS Orka to 33.4% at an additional cost of ISK4.7bn ($41.7m).
Magma has agreed to provide the pension funds with significant minority shareholder rights to appoint board members and participate in the major decisions of HS Orka as long as they continue to hold at least a 22.5% interest.
The transaction, which is subject to a number of conditions including further due diligence, is expected to close next month.
Magma operates, develops, explores and acquires geothermal energy projects.
