Magma Energy Completes Purchase Of Initial Interest In Icelandic Geothermal Energy Producer

Vancouver, Canada - Magma Energy announces that it has closed an agreement to acquire from Geysir Green Energy an 8.6% stake in HS Orka. , a large producing geothermal company in Iceland, for 2.5 billion Icelandic Kronur ("ISK") (approximately $20 million).

The agreement provides that Magma will purchase a further 2.16% share in HS Orka for 625 million ISK (approximately $5 million) payable by March 31, 2010. Magma also holds an option to acquire an additional stake in HS Orka by making a capital infusion of $15 million into HS Orka at any time in the next two years. A previously announced agreement to purchase a 32% stake in HS Orka is expected to close in late November.

HS Orka is the largest privately owned energy company in Iceland. Installed geothermal power capacity is 175 megawatts ("MW") from the Svartsengi and Reykjanes power plants. In addition, HS Orka generates 150 MW of thermal energy for district heating. Expansions are planned that will increase HS Orka's geothermal power production to 425 MW by 2015. HS Orka's 75 MW Svartsengi plant began production in 1978 and its 100 MW Reykjanes plant began production in 2006.

Much of the power is sold under US dollar contracts to a large aluminum smelter that is one of the world's lowest cost aluminum producers. The expansion plans of HS Orka will provide power to a new aluminum smelter that is currently under construction.

Source: IWR Online, 19 Nov 2009