Magma Energy has signed an agreement with Geysir Green Energy (GGE) to purchase all of GGE's stake in Iceland-based geothermal company HS Orka.
As a result of this purchase, Magma’s stake in HS Orka will increase to 98.53%. The transaction will increase the company’s geothermal power production to 186MW, its geothermal reserves to 193MW and its indicated and inferred geothermal resources to 1,161MW. The remaining 1.5% stake in HS Orka is held by four Icelandic municipalities.
HS Orka currently produces 175MW of geothermal power and 150MW of thermal energy for district heating, and has near-term expansion plans.
The agreement provides that Magma’s wholly-owned subsidiary will purchase GGE’s remaining interest in HS Orka for approximately $84.5m and by assuming a bond issued by GGE with a face value of approximate net present value of $36m.
Magma plans to finance this transaction by bridge financing, conventional debt and/or equity financing, and/or sale of a minority stake in HS Orka to other Icelandic or offshore investors. The agreement is subject to several closing conditions and is expected to close in late July 2010.