Magma Caps Up Icelandic Geothermal

I usually try not to push obvious corporate development, but these guys have positioned them selves to be the dominant geothermal player. This acquisition buys into the best technical brains available to the industry with the best experience. This means that they are positioned to absorb literally billions in new capital for expansion.

They have just become large and any further luck will make them dominant.

Also the industry needs Icelandic expertise to be broadly shared as quickly as possible. I am sure that this will produce that effect.

Anyway, good luck to them and we can add it as a creditable geothermal company to our model portfolio to keep a watch on. There will soon be dozens of start ups who will inevitably chew through capital breaking into this budding industry. This company could step well ahead of the pack.

Magma caps '09 with Iceland geothermal win

by Staff Writers

http://www.energy-daily.com/reports/Magma_caps_09_with_Iceland_geothermal_win_999.html

Vancouver, British Columbia (UPI) Sep 15, 2009

Magma Energy Corp. announced Tuesday it would pursue acquisition of a larger stake in Iceland's geothermal giant HS Orka and increase its geothermal power production footprint worldwide.

Reporting its audited financial and operating results for the fourth quarter and fiscal year ended June 30, 2009, the Vancouver-based company outlined its international operations, including its recent acquisition of 32.32 percent of HS Orka from Reykjavik Energy and two other HS Orka shareholders.

Magma was set up in January 2008. Its acquisition of the HS Orka stake is the largest foreign investment in Iceland since the collapse of its banking sector in 2008.

The agreement provides that a Magma wholly owned subsidiary will purchase the interest for about $29.5 million and a bond for about $68.8 million repayable in a single installment in seven years with interest at 1.52 percent.

The bond will be secured by the shares acquired by Magma in the transaction. Closing of the transaction is expected in late September, Magma said.

On July 23, 2009, Magma announced that it had signed an agreement to acquire a 10.78 percent shareholding in HS Orka and had an option to acquire about 5 percent additional shareholding in the company. If both transactions conclude, Magma would hold a 43.1 percent direct interest in HS Orka and an option to invest $15 million in HS Orka's expansion plans, increasing its stake up to 48.1 percent.

Magma says its mission is to be "the pre-eminent geothermal energy company in the world." The company currently owns one operating geothermal plant and an extensive portfolio of geothermal exploration and development projects in Argentina, Chile, Peru and the western United States, and is actively expanding its projects portfolio worldwide.

Magma CEO Ross Beaty said the Iceland deal gives Magma access to the country's substantial geothermal resources and a highly skilled domestic workforce.

He said the company had a great first full year of operations, raising more than $130 million in tough financial markets, acquiring assets in Nevada and initiating geothermal exploration in Nevada, Idaho, Oregon, Peru, Chile and Argentina.

Magma ended the year with a successful initial public offering and listing on the Toronto Stock Exchange and is entering its second full year in a healthy condition, Beaty said.

HS Orka is the largest privately owned energy company in Iceland with installed geothermal power capacity of 175 megawatts. It plans to increase geothermal power production to 425 megawatt by 2015.

Magma was advised on the transaction by Glacier Partners Corp., a corporate advisory boutique focused on the geothermal energy sector. Glacier Partners CEO Magnus Bjarnason said Magma's acquisition was "a milestone for Iceland" as it recognized the country's "leadership in geothermal energy development."
Environmental campaigners, including singer-songwriter Bjork, have argued against overexploitation of geothermal energy, which they want conserved for future generations.

Geothermal Power Progress

These extracts from today’s news release and its corporate site from the public company Nevada Geothermal power Inc. give us a good overview of a specialist sector of the energy production industry. Obviously high quality hot rocks are not a common place occurrence. Their exploitation, however, has clearly been mastered both in Iceland and the USA. This means that with the 2005 advent of a competitive regulatory scheme, we can expect this sector to steadily expand to full build out.

Current estimates suggest that this type of power can supply at least twenty percent of American energy needs. I also suspect that those estimates will turn out to be hopelessly conservative. The reason for that is that once a field is fully developed, it should be simple to drill a second set of production wells simply to a deeper level. As technology improves, several such additional sets of wells might be drilled with very little loss in thermal efficiency. There is a huge amount of heat within the hot rock formation and it travels slowly with plenty more heat trying to move in.

Obviously a modest reduction in formation temperature will open a heat gradient that will accelerate the replacement of any heat removed. This is just another way of saying that at the early stage of exploitation, the system is hugely under engineered for obvious economic reasons and it is not possible to take full advantage of the depth dimension as related costs are climbing rapidly in that direction.

What is quite clear is that the technology and related infrastructure is now straight of the shelf for this industry, and that with incentive driven financing clearly available, we can expect all prime quality geothermal sites to experience a steady build out, not unlike the oil and gas industry. Perhaps we need to describe this type of installation as primary geothermal. The second stage geothermal development will focus on accepting a smaller heat gradient in the production fluid and using the Reverse Rankin Cycle to produce power. As one would expect, the capital cost will also be much higher, and again the place to do this would be at the plant producing primary power. A little bit of giving it one last squeeze.

This means that the next twenty years will see a huge build out of this particular power protocol, since the technical issues are behind us. Or at least decision makers think so.


Thu May 8, 2008
Nevada Geothermal's Blue Mountain Well 58-15 Update

VANCOUVER, B.C., May 8, 2008, Nevada Geothermal Power Inc. (NGP)

(TSX-V: NGP, OTC-BB: NGLPF) announced today the completion of Well 58-15 to a depth of 5706 feet (1740 metres) at a step-out location 0.8 miles (1.2 kilometres) from production Well 26A-14. Upon completion, the well has been confirmed as a producer with geothermal fluid production between 4675 and 5603 feet (1425 and 1708 metres).

Preliminary flow tests indicate that Well 58-15 will be a high-temperature producer. The well flows unassisted at flow rates higher than previous wells and at temperatures greater than 400ºF (200ºC).

Fierce geothermal fluid flow and debris exiting from the well precluded Welaco Well Analysis Group (Welaco) from completing temperature/pressure/spinner (TPS) surveys in the open hole. The deepest Welaco data was at 1820 feet which confirmed a temperature of 404ºF (207ºC) - the highest measured temperature in any well to date at Blue Mountain.

Indications are that Well 58-15 will be as good a producer as other wells reported to date. Currently, a liner is being installed to stabilize the well and the test separator is being modified to accommodate higher flow rates. Subsequently, production testing, including flowing TPS surveys as well as injection testing, will be conducted under the supervision of GeothermEx Inc. to fully determine the production and injection capacity characteristics of Well 58-15.

Nevada Geothermal Power Inc. ( OTCBB: NGLPF, TSX.V: NGP) an emerging renewable energy producer focusing on the development of CLEAN electrical power from high temperature geothermal resources. NGP currently has four geothermal projects which, once developed, could have a cumulative generation capacity of over ~200 MW or enough green energy to meet the annual electrical demand of ~200,000 homes. The four properties: Blue Mountain, Pumpernickel, Black Warrior, all of which are ideally situated in Nevada and Crump Geyser, Oregon.

Blue Mountain Faulkner I (phase 1) geothermal project is on the road to revenue. Some of the highlights are:

20-year power purchase agreement (PPA) with Nevada Power Company

Large generation interconnection (LGIA) for up to 75 MW approved

Environmental assessment approved (FONSI)

US$140 million construction financing expected to close on or before May 31, 2008

Well field development ongoing

Ormat Technologies, EPC contract: fixed price, guaranteed completion of power plant

TURN ON THE POWER: 4th quarter 2009

Geothermal power benefits:

Geothermal is an economically-viable source of energy

Geothermal is readily available

Geothermal power plants provide reliable base load electricity

Geothermal energy use relies on proven technology with a long operating life

Geothermal benefits from incentives such as tax legislation and regional renewable energy targets.

Rocked by sky-high energy prices and alarmed by the specter of global warming governments around the globe are promoting the development of clean renewable energy such as geothermal. The State of Nevada legislated in 2003 a Renewable Portfolio Standard (RPS) which has rejuvenated Nevada's established geothermal power industry. Oregon and California too have implemented progressive RPS's.

Today, Nevada is one of the top producers of geothermal power, with 308 MW installed capacity. Geothermal energy provides about 9% of northern Nevada's electrical. Nevada has some of the largest untapped geothermal resources in the US with a potential for 2,500 to 3,700 MW of electricity. Wells and springs exist or the entire state, offering extensive opportunity for development of moderate and high-temperature resources for power generation