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Transcript of Magma presentation-dec
DEC 2010TSX : MXY
A GLOBAL GEOTHERMAL POWER COMPANY
CAUTION REGARDING FORWARD-LOOKING STATEMENTS
These slides and the accompanying oral presentation contain certain “forward-looking information” within the meaning of Canadiansecurities laws, which may include, but is not limited to, statements with respect to future events or future performance,management’s expectations regarding our growth, results of operations, estimated future revenues, requirements for additionalcapital, production costs and revenue, future demand for and prices of electricity, business prospects, opportunities and estimates ofrecoverable geothermal energy “resources” or “reserves” or energy generation capacities (at either P90 or based on the GeothermalCode for Public Reporting). Such forward-looking information reflects management’s current beliefs and is based on informationcurrently available to management.
A number of known and unknown risks, uncertainties and other factors, may cause our actual results or performance to materiallydiffer from any future results or performance expressed or implied by the forward-looking information. Such factors include, amongothers, those discussed in the section of our prospectus entitled “Risk Factors”. These factors should be considered carefully. Theforward-looking information is also based upon what management believes to be reasonable assumptions, including, but not limitedto, assumptions about: the success and timely completion of planned exploration and expansion programs, including expansion andimprovements to operations in Iceland and to our Soda Lake Operation in Nevada; the growth rate in net electricity consumption;support and demand for non-hydroelectric renewables; government initiatives to support the development of renewable energygeneration; the accuracy of resource and reserve estimation methodology and probabilistic analysis used to estimate the quantity ofpotentially recoverable energy; geological, geophysical, geochemical and other conditions at our properties; the reliability of technicaldata, including extrapolated temperature gradient, geophysical and geochemical surveys and geothermometer calculations; capitalexpenditure estimates; availability of capital to fund exploration, development and expansion programs; the differences in financialresults reported under IFRS and Canadian GAAP; and general economic conditions. Forward-looking information and statementsare also based upon the assumption that none of the identified risk factors that could cause actual results to differ materially from theforward-looking information and statements will occur.
There can be no assurance that the forward-looking information will prove to be accurate, as actual results and future events coulddiffer materially from those anticipated in such information. Accordingly, prospective investors should not place undue reliance onforward-looking information. Other than as required by applicable securities laws, we assume no obligation to update or revise suchforward-looking information to reflect new events or circumstances.
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MAGMA ENERGY - STRATEGY & VALUE CREATION
Geothermal power can be the lowest cost and cleanest form of electricity generation
� Potentially a great cash generator without incentives
� Incentives (USA, Europe, Chile) greatly improve margins
Magma’s mission: to build a leading pure play geothermal power company
Magma’s strategy: broad asset portfolio and scale =
“discovery returns” and “utility returns”
� Reduces drilling risk and high front-end capital risk
� Improves margins with lower cost of capital
� Better multiples
We are a power company and an energy resource company
3
DISCOVERYRETURNS
UTILITYRETURNS
ACQUISITIONEXPLORATION
FEASIBILITY
PERMITTING
FINANCING
CONSTRUCTION
OPERATIONS
TIME
PR
OJE
CT
VA
LU
E $
BALANCED PORTFOLIO: GLOBAL EXPLORATION & OPERATIONS
ICELAND:
� 2 power plants with 175 MW capacity
� 80 MW of expansions underway
� Additional 150 MW of defined expansion plans
USA:
� 23 MW power plant with expansion potential
� Steady, predictable and long-life cash flow
� Excellent government support for geothermal projects
� 12 other exploration properties
CHILE / PERU:
� Huge (320 MW) inferred resource discovered at low cost
� Positioned in emerging world-class geothermal markets
� Growing government support for geothermal projects
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Mission: To build a leading pure play geothermal power company
Strong team of explorers, builders and operators
Execution: From 2008 startup, the world’s fastest growing geothermal power company
Growing financial strength
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2008 2009 2010
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POWER GROWTH
MAGMA ENERGY - CORPORATE SUMMARY
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2008 2009 2010
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1
GEOTHERMAL RESERVES
& RESOURCES GROWTH
Inferred Indicated Reserves
1Geothermal Reporting Code verified MW
22008 and 2009 actuals (2009 reflects Magma’s equity portion in HS Orka)
32010 is an estimate and reflects Magma's equity and newly consolidated portion in HS Orka
2
3322 2
Magma gained control of HS Orka during Q1, full consolidation of results occur in Q2
Q1 OPERATING AND FINANCIAL HIGHLIGHTS
Expressed in thousands of US dollars, except for MWh and per share amounts
ACTUAL
2010-Q1 Year EndJune 30-2010
NET PRODUCTION (MWh) 372,042 62,072
TOTAL REVENUE 8,044 5,056
GROSS PROFIT 1,191 1,659
EBITDA (1) 5,910 (3,261)
EARNINGS (LOSS) PER SHARE .05 (0.07)
TOTAL ASSETS 656,006 198,703
TOTAL LIABILITIES 415,542 56,633
CASH GENERATED BY OPERATING ACTIVITIES 12,472 89
6
(1) EBITDA is defined by the Company as earnings before interest and other financing costs, taxes, depreciation and amortization, as well as before deductions for non-cash chargesrelated to employee compensation, equity earnings/losses, loss on re-measurement of equity interest, NCI, gain on bargain purchase and changes to the balance sheet carryingvalue of long-term debt and derivatives. The Company discloses EBITDA as it is a measure used by analysts and by management to evaluate the Company's performance. AsEBITDA is a non-GAAP measure, it may not be comparable to EBITDA calculated by others. In addition, as EBITDA is not a substitute for net earnings, readers should consider netearnings in evaluating the Company's performance.
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Ram Power U.S. Geo NGP MAGMA Ormat
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Operating Development through 2013
DEVELOPERS
NORTH AMERICAN PRIMARY GEOTHERMAL COMPANIES
(1) Geothermal Reporting Code verified MW
Source: Jacob Securities Inc
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(1)
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2008 2009 2010 2011 2012 2013 2014 2015+
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EXPECTED ORGANIC GROWTH
Soda Lake HS Orka Nevada Mariposa
CREATING VALUE
OUR PROGRESS� Existing Iceland infrastructure allows for
rapid, low cost expansions
� Now the 2nd largest North American based primary geothermal developer
� Major discovery in Chile
NEXT STEPS� Complete expansions at HS Orka, Iceland
� Fulfill potential at Soda Lake, NV and develop other US assets
� Develop Mariposa, Chile and explore other Chile/Peru assets
VALUE PROPOSITION� Non-declining assets providing steady
production and cash flow (forever)
� Strong inventory of development prospects
� Sufficient resources to increase existing company proved reserves six-fold
�Growing portfolio size reduces risk
� Large team of geothermal experts - core asset
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TSX MXY
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www.magmaenergycorp.com
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APPENDIX
MAGMA ENERGY - GLOBAL PROJECT PIPELINE
STAGE PROPERTYAREA RESERVES RESOURCES
(HA) PROVED INDICATED INFERRED
Operations Soda Lake - Nevada1 2,881 20 41
HS Orka - Iceland2
31,067 175 140 500Advanced Mariposa - Chile
3104,000 320
McCoy - Nevada4
4,621 170Early Stage Argentina [2] 26,922
Chile [2] 158,000
Peru [7] 7,900
USA [11] 34,977
370,368 195 MW 181 MW 990 MW
PlantProperty
11
(1) Reporting Code Estimate GeothermEx(2) Reporting Code Estimate Mannvit Engineering (3)
Reporting Codes Estimate SKM(4)
Independent estimate P90 Geo Hills Associates
McCoy
$-
$1.00
$2.00
$3.00
$4.00
$5.00
$6.00
STP MXY CLL OPC
CD
N $
/ B
OE
EV/BOE RESERVES & RESOURCES
EV/BOE Reserves EV/BOE Resources
(1,500)
(1,000)
(500)
-
500
1,000
1,500
STP MXY CLL OPC
ME
GA
TO
NN
ES
CO2 CREDITS (PENALTIES) FROM RESERVES & RESOURCES
-
500
1,000
1,500
2,000
2,500
STP MXY CLL OPC
MM
BO
E
BOE RESERVES & RESOURCES
BOE Reserves BOE Resources
MAGMA IS AN UNDERVALUED ENERGY COMPANY
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. . . . . @ $15/tonne
≈ $14 billion credit over 30 years
TSX symbols: STP Southern Pacific
MXY Magma Energy
CLL Connacher Oil & Gas
OPC OPTI Canada
Assumptions:
0.62 bbl/MWh(th)
0.1 MW(e) / MW(th)
30 years of assumed project life
430 kg CO2 emitted per BOE
HS ORKA EXPANSION HIGHLIGHTS
Potential to expand from 175 MW to 405 MW
PPA discussions with Nordural and Others on-going
CapEx for full 230 MW expansion is ~$560 M; will be staged
50 MW phase expansion commenced; significant equity already invested
Next 30 MW phase requires no additional drilling
~46% of HS Orka’s revenue currently indexed to aluminum price
� Future PPA’s with smelters and/or other power off-takers will impact HS Orka’s on-going sensitivity to aluminum prices
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CONCEPTUAL PRODUCTION GROWTH
PRODUCTION - SODA LAKE, NEVADA
Ramping up to capacity of 23 MW
� Current installed throughput is 84,000 GWh/yr
Phase 2 expansion - achieve reservoir capacity 61 MW
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320 MW Inferred Resource discovered by Magma in 2009
50 MW Phase 1 exploitation plan approved in April 2010
$15M resource confirmation program underway to drill additional slim holes
>$100/MWh power rates and drilling incentives available
<25 km from 2 transmission lines under development
ADVANCED DEVELOPMENT - MARIPOSA, CHILE
MP- 03 DRILL SITE
MP- 01MP- 02
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MP- 03
WORLD CLASS MANAGEMENT TEAM
Dick Benoit: USAExploration Manager
Over 35 years experience in the geothermal industry both nationally and internationally
Mark Kumataka: USAChief Engineer
Professional Engineer with over 30 years experience in geothermal resource management in U.S. & Latin America
Ásgeir Margeirsson: ICELANDPresident & CEO
An extensive career in geothermal power development both within Iceland and internationally
Monte Morrison: USACountry Manager & VP Operations
Professional Engineer with 25 years experience managing the operations and maintenance of geothermal power plants
John Selters: CHILE & ARGENTINACountry Manager
Mining engineer with over 40 years experience in Latin America
Lyle Braaten: Secretary & General Counsel
Lawyer. Extensive experience negotiating commercial agreements and implementing large infrastructure projects
Annette Cusworth: Chief Financial Officer
Chartered Accountant with over 20 years experience in the public and private sectors
Dr. Catherine Hickson: VP Exploration & Chief Geologist
World renowned volcanologist with over 25 years experience in Canadian and international geosciences
Alison Thompson: VP Corporate Relations
Masters of Chemical Engineering and Queen’s MBA; Extensive experience in the energy industry; Chair of CanGEA
Andrea Zaradic: VP Operations & Development
Mechanical Engineer with 20 years experience in engineering design, construction, commissioning and operations with large international mining projects
Ross Beaty: Chairman & CEOGeologist and resource company entrepreneur with 38 years experience in the international minerals industry.Founder and chair of Magma Energy Corp and Pan American Silver Corp. (TSX: PAA, NASDAQ: PAAS) andseveral other resource companies that were successfully built and divested.
MAGMA ENERGY GLOBAL OPERATIONSMAGMA ENERGY CORP
16
INSTITUTIONAL QUALITY BOARD OF DIRECTORS
Ross Beaty - Chairman and CEO
David W. Cornhill - [Independent] Member Audit, Compensation and Governance Committees
Mr. Cornhill is the founder, Chairman and Chief Executive Officer of AltaGas Income Trust, one of Canada’s largest energy infrastructure groups, focused on gas and power infrastructure and renewable energy (wind and hydro). With more than 25 years of experience in the energy industry, Mr. Cornhill also sits on several private and public boards including AltaGas Utility Group and Ivey Business School.
Robert Pirooz - [Independent] Chair Corporate Governance Committee, Member Compensation Committee
Mr. Pirooz studied commerce at Dalhousie University and received a Juris Doctor degree from the University of British Columbia in 1989. From May 1990 to February 1998, Mr. Pirooz practiced law primarily in the areas of corporate, commercial and securities law. Mr. Pirooz' extensive legal and business background spans over 20 years and includes the role of General Counsel for the BCR Group of companies and Pan American Silver Corp, a role in which he currently serves, and as principal in the Lumina group of resource companies. Currently a director of 5 public companies, Mr. Pirooz has worked with Ross Beaty since early 1998.
Donald Shumka - [Independent] Chair Audit Committee, Member Governance Committee
Mr. Shumka is Managing Director of Walden Management Ltd., a financial consulting firm. Mr. Shumka received his Bachelor of Arts degree from the University of British Columbia and a Master of Business Administration from Harvard University. From 1966 -1979 he worked in a variety of positions in the forest industry, from 1979 -1989 he was Vice President and Chief Financial Officer of West Fraser Timber Co. Ltd. and from 1989 - 2004 he headed the Forest Products Group for two Canadian investment banks. Mr. Shumka is active in the not for profit sector and is currently the Chair of the British Columbia Arts Council.
Paul Sweeney - [Independent] Chair Compensation Committee, Member Audit Committee
Mr. Sweeney has over 30 years experience in financial management of mining and renewable energy companies. He is currently Executive Vice-President, Business Development, of Plutonic Power Corporation, a run-of-river hydro developer. He has served as CFO of a number of successful mineral resource companies including Canico Resources and Sutton Resources and is a Director of several resource companies including Pan American Silver Corp. where he chairs the audit committee.
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NEWS-FLOW CATALYSTS
LOCATION GOAL TARGET DATE
Peru Exploration results On-Going
Mariposa, Chile Slim hole drilling results Q-4
Soda Lake, Nevada Phase 1 expansion complete Q-4
McCoy, Nevada Slim hole drilling results Q-1 / 2011
Soda Lake, Nevada New PPA with NV energy Q-1 / 2011
Reykjanes, Iceland PPA negotiations with Nordural and others Q-2 / 2011
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11%
51%5%
13%
20%
REGIONAL REPRESENTATION
OF SHAREHOLDERS
(JULY 2010)
U.S.A.
Canada
Europe
Other
Retail (Unknown Location)
OWNERSHIP, CAPITAL STRUCTURE & COVERAGE
19
CAPITAL STRUCTURE: AS OF SEPT 31/2010
ISSUED & OUTSTANDING 288.9 M
OPTIONS 3.3 M
LONG TERM DEBT US $275.0 M
CASH US $ 46.2 M
SHAREHOLDERS’ EQUITY US $240.5 M
ANALYST COVERAGE CONTACT
Cormark Securities MacMurray Whale
Jacob Securities John McIlveen
Mackie Research Capital Matthew Gowing
National Bank Financial Jeremy Mersereau
Pritchard Capital Partners Veny Aleksandrov
Raymond James Securities Steven Li
Salman Partners Mike Plaster
Stifel Nicolaus Dilip Warrier
Wellington West Capital Mgmt Sean Peasgood
INDEX COVERAGE
Ardour Global Alternative Energy Index
S&P/TSX Clean Technology Index
43%
6%20%
31%
MAGMA ENERGY SHAREHOLDERS
(July 2010)
Board and Management
Strategic Partner (AltaGas)
Estimated Retail
Estimated Institutional
20
TSX MXY
30-Nov-10
www.magmaenergycorp.com