JULY 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 informationCode 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 limitedg p g p gto, 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 financialexpenditure 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 ony p g y, p p pforward-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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Geothermal - What is it?
Geothermal is a proven, global, underexploited, base-load, renewable energy sourceLiterally heat from the earth, derived from deep natural magma (molten rock)Requires Heat, Permeability and Water
CAPACITY FACTORS FOR
Surface
Solar
RENEWABLE POWER
1 – 3 km
D ill h l
Run of River
Wind
Drill hole depths
0 25 50 75 100
Geothermal
Percentage
Source: University of Utah – the Energy & Geosciences Institute (EGI) Source: Canadian Geothermal Energy Association
3
Magma Energy - Strategy & Value Creation
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 Better multiples
Portfolio acquisition & discovery highlights: Nevada: 13.5 MW power plant with 47.5 MW
expansion potentialp p Iceland: 98.5% interest in HS Orka’s 2 power plants
producing 175 MW with 230 MW expansion potential Chile: discovery of 320 MW Inferred Resource Plus a further 21 early stage and 4 advanced stage projects
We are a power company and an energy asset holder
Income growth and sub-surface capital asset growth
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 Incentives (USA, Europe, Chile) greatly improve margins
4
Magma Energy Corp - Corporate Summary
Mission: To build a leading pure play geothermal power company Strong team of explorers, builders and operatorsExecution: From 2008 startup, the world’s fastest growing geothermal power company
186
100125150175200
MW
PRODUCTION GROWTH
854
1,354
800
1000
1200
1400
W 1
GEOTHERMAL RESERVES& RESOURCES GROWTH
11
84
0255075
2008 2009 2010 YTD
M
1990
200
400
600
2008 2009 2010 YTD
MW
$15
$20
$25 EBITDA
Growing financial strength
$
$50
$60
D
REVENUE
$10
‐$5
$‐
$5
$10
$15
MIL
LIO
NS
USD
$
$10
$20
$30
$40
Millions USD
‐$10
JAN ‐ JUN /08 JULY/08 ‐ DEC/09 JAN ‐ DEC/10
$‐
Jan ‐ Jun /08 July/08 ‐ Dec/09 Jan ‐ Dec/10
5
1 Independently verified MW2 2008 and 2009 actuals (2009 reflects Magma’s equity portion in HS Orka)3 2010 is an estimate and reflects Magma's equity portion in HS Orka
2 3322 2
North American Primary Geothermal Companies
600
700DEVELOPERS
400
500
300
400
MW
100
200
0SGP Raser Ram Power U.S. Geo NGP Cal Energy MAGMA Ormat
Operating Development through 2013
1 1 1 1 12
1 Data from Jacob Securities Inc2 Geothermal Reporting Code verified MW
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Magma Energy Corp - Global Project Pipeline
STAGE PROPERTYAREA(HA)
INDICATED &INFERRED
RESOURCES
PROVEDRESERVES
Operations Soda Lake, Nevada (100%) (1) 2,881 41 20
HS Orka Iceland (98 53%) (2) 31 067 630 173HS Orka, Iceland (98.53%) ( ) 31,067 630 173
Advanced Chile (2) (3) 104,000 320
USA (4) (4) 18,491 170
Early Stage Argentina (2) 39,057
Peru (7) 7,900
USA (12) 38,016
241,413 1,161 MW 193 MW(1) Reporting Code Estimate GeothermEx(2) Reporting Code Estimate Mannvit Engineering, acquisition
expected to close July ‘10(3) Reporting Codes Estimate SKM(4)(4) Independent estimate P90 Geo Hills Associates
PlantProperty
77
Advanced Development - Mariposa, Chile
MP-02 DRILL SITE320 MW Inferred Resource discovered by Magma in 2009
50 MW Phase 1 exploitation plan p papproved 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 MP-01MP-02development
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Production - Soda Lake, Nevada
13.5 MW with facility nameplate capacity of 23 MW Currently operating at 60% capacity
Phase 1 expansion to 23 MW - currently underway New production well recently connected to the plant Converting non-commercial well drilled 2009 into an injector Target blended PPA rate of $85/MWh to reflect expanded capacity
and market conditions Average cost of acquisition and expansion ~ $1 5 Million/MW Average cost of acquisition and expansion ~ $1.5 Million/MW Projected EBITDA ~ $6.5 Million
Phase 2 expansion - achieve reservoir capacity 61 MW Additional 14 MW expected by 2013
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HS Orka Acquisition - Overview
Magma acquiring 98.5% of HS Orka 3 separate deals (2009 - 2010) Cost for HS Orka:
$135.7 million cash
PROPERTY RESERVES RESOURCES
PROVED INDICATED INFERRED COMMENT
SVARTSENGI 75 MW No further expansions planned thus far
REYKJANES 100 MW 90 MW
45 MW of steam behind pipe in 3 production wells and sea outflow canal; 50 MW Fuji $135.7 million cash
$ 95 million vendor bonds1
$2.4 M/MW2 for 175 MW in production $0.52 M/MW2 for 175 MW Reserves and
640 MW Resources
REYKJANES 100 MW 90 MW ; jturbine arrived June 2010; further production drilling underway
ELDVÖRP 50 MW Steam behind pipe from 1 production well
KRÝSUVÍK 500 MW4 MW of steam behind pipe from 2 production wells that are candidates for stimulation; 9 slim wells; 19 temperature gradient wells
TOTAL MW 175 MW 640 MW1 Bonds indexed to price of aluminum with an average
coupon rate of 2.4% and 2016 maturity
2 Includes $186.7 million HS Orka non-recourse long term debt*
* Basket of foreign currency with an average coupon rate of 2.8% and maturities ranging from 2016-2031
Delivery of 50 MW turbine units ‐ June 2010Delivery of 50 MW turbine units ‐ June 2010
Magma gains: Large producing asset base creates
strong income statement & balance sheet Significant expansion potentialSignificant expansion potential World class geothermal team
Iceland’s largest private energy company (9% of country’s power
l )supply)
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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 drillingNext 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 pricesto aluminum prices
Assumptions: Economic model based on London Metal
Exchange (LME) forward aluminum prices
CONCEPTUAL PRODUCTION GROWTH
Exchange rate 125 ISK/USD Expansion financed with 40% equity and
60% debt at a 6% interest rate Capital costs $2.2 - $2.5 M/MW C t PPA P i i Current PPA Pricing
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HS Orka Financial Highlights1
BALANCE SHEET HIGHLIGHTSACTUAL
1
2009 2010 - Q1CURRENT ASSETS 16.0 49.2
NON-CURRENT ASSETS 320.5 308.7 $1,500$2,000
$2,500 $3,000
$3,500
$ / t
onne
HISTORICAL DAILY LME ALUMINUM PRICES
TOTAL ASSETS 336.5 357.9
CURRENT LIABILITIES 43.1 29.9
LONG-TERM DEBT 190.2 186.7TOTAL LIABILITIES 223.8 217.7
TOTAL SHAREHOLDERS’ EQUITY 112 7 140 2
$1,000
$1,500
TOTAL SHAREHOLDERS’ EQUITY 112.7 140.2TOTAL LIABILITIES & SHAREHOLDERS’ EQUITY
336.5 357.9
INCOME STATEMENT HIGHLIGHTSACTUAL1
2009 2010 - Q1 201022009 2010 - Q1 2010ALUMINUM PRICE (USD/TONNE) 1,699 2,194 2,296
MW IN OPERATION 175 175 175
NET GENERATION (GWH/YEAR) 1,358 328.1 1,363
OPERATING REVENUE 49.81 14.50 63.75
COSTS (31.29) (8.78) (33.11)
EBITDA 18.52 5.72 30.64EXPANSION INVESTMENT 9.89 5.07 27.67
EXISTING LONG TERM DEBT 190.21 186.66 164.70
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All values in US $ millions1 As reported under IFRS2 2010 is an estimate
Near-Term Milestones
LOCATION MILESTONE TARGET DATE
Desert Queen, Nevada Temperature Gradient Drilling Results , p g
Reykjanes, Iceland 80 MW Expansion Program Begins
Mariposa, Chile Slim Hole Drilling Results On-Goingp , g g
Peru Exploration Results On-Going
HS Orka, Iceland Acquire Controlling Interest (98.5%) Q-3HS Orka, Iceland Acquire Controlling Interest (98.5%) Q 3
Reykjanes, Iceland PPA Negotiations with Nordural and Others Q-3
Soda Lake, Nevada Phase 1 Expansion Resource Confirmed Q-3Soda Lake, Nevada Phase 1 Expansion Resource Confirmed Q 3
Soda Lake, Nevada New PPA with NV Energy Q-3
Soda Lake Nevada Phase 1 Expansion Complete; 23 MW Online Q-4Soda Lake, Nevada Phase 1 Expansion Complete; 23 MW Online Q-4
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Organic Growth - Advanced Projects Development Timeline
636 MW
438 MW
302 MW
438 MW
1
196 MW
245 MW
84 MW
11 MW
14
1 Includes 98.5% stake in HS Orka
Ownership, Capital Structure & Coverage
Magma’s largest shareholders Ross Beaty / Sitka Foundation - 45.38%
(Sitka is a private environmental foundation)
CAPITAL STRUCTURE: AS OF MAR 31/10
ISSUED & OUTSTANDING (1) 248,577,974OPTIONS 2,776,667WARRANTS 0
Institutional shareholders - 34.58%
Retail shareholders - 15.48%
AltaGas Income Trust - 4.56%
FULLY DILUTED 251,354,641
LONG TERM DEBT (2) US $ 51.1 M
CASH US $ 40.5 M
SHAREHOLDERS’ EQUITY US $ 156.5 MS O S QU $
(1) 100M shares held by Ross Beaty/Sitka Foundationrestricted sale until 2013
(2) Bond has a face value of US $70.2 M
ANALYST COVERAGE CONTACT
C k S iti M M Wh l h l @ kCormark Securities MacMurray Whale [email protected]
Dundee Capital Markets Ian Tharp [email protected]
Jacob Securities John McIlveen [email protected]
Mackie Research Capital Matthew Gowing [email protected]
National Bank Financial Jeremy Mersereau [email protected]
P it h d C it l P t V Al k d l k d @ it h d it lPritchard Capital Partners Veny Aleksandrov [email protected]
Raymond James Securities Steven Li [email protected]
Salman Partners Mike Plaster [email protected]
Thomas Weisel Partners Dilip Warrier [email protected]
Wellington West Capital Sean Peasgood [email protected]
I C
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INDEX COVERAGEArdour Global Alternative Energy Index Olushola Ashiru [email protected]
World Class Management Team
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) and several other resource companies that were successfully built and divested including Northern Peru for $455 Million and Global Copper Corp for $415 Million
Dick Benoit: USAExploration Manager Over 35 years experience in the geothermal industry both nationally and internationally
Lyle Braaten: Secretary & General CounselLawyer. Extensive experience negotiating commercial agreements and implementing large infrastructure projects
MAGMA ENERGY GLOBAL OPERATIONSMAGMA ENERGY CORP
nationally and internationally
Mark Kumataka: USAChief EngineerProfessional Engineer with over 30 years experience in geothermal resource management in U.S. & Latin America
Ásgeir Margeirsson: ICELAND
Annette Cusworth: Chief Financial OfficerCertified General Accountant with over 20 years experience in the public and private sectors
Dr Catherine Hickson: VP Exploration & Chief Geologist Ásgeir Margeirsson: ICELANDPresident & CEOAn extensive career in geothermal power development both within Iceland and internationally
Monte Morrison: USACountry Manager & VP Operations Professional Engineer with 25 years experience managing
Dr. Catherine Hickson: VP Exploration & Chief GeologistWorld renowned volcanologist with over 25 years experience in Canadian and international geosciences
Alison Thompson: VP Corporate RelationsMasters of Chemical Engineering and Queen’s MBA; Extensive experience in the energy industry; Chair of g y p g g
the operations and maintenance of geothermal power plants
John Selters: CHILE & ARGENTINACountry ManagerMining engineer with over 40 years experience in Latin America
Extensive experience in the energy industry; Chair of CanGEA
Andrea Zaradic: VP Operations & DevelopmentMechanical Engineer with 20 years experience in engineering design, construction, commissioning and operations with large international mining projects
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Institutional Quality Board of Directors
Ross Beaty - Chairman and CEO
David W. Cornhill - [Independent] Member Audit, Compensation and Governance CommitteesMr. 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 CommitteeMr. 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 CommitteeMr. 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 as ce es de t a d C e a c a O ce o est ase be Co td a d o 989 00 e eadedthe 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 CommitteeMr. 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 Canicohydro 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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Road to Success = Explore ► Acquire ►Build ► Produce
USA
USAICELAND
USA
CHILE
ICELANDUSA
18
Global Advanced & Early Stage Project Pipeline
STAGE PROPERTY AREAINDICATED &
INFERREDRESOURCES
EXPLORATION RESULTS
EXPANSIONS & ADVANCED STAGE (Ha) MW
CHILE Mariposa (1) 104,000 320 2 slim hole, 3 more underway; 3 fumarole fields
ICELAND HS Orka(2)
31,067 63049 MW of steam behind pipe from 6 production wells and outflow canal; 3 reservoirs; 50 MW Fuji turbine delivered June 2010; further drilling underway
USA Soda Lake(3)
2,881 41Production well drilling on-going> 100 wells on site including slim holes, temperature gradient USA Soda Lake 2,881 41 g , p gand production/injection wells
USA McCoy (4)
7,815 80 7 slim holes; 55 temperature gradient wells
USA Panther Canyon (4)
4,515 34 85 temperature gradient wells
USA Desert Queen (4)
5,448 36 13 temperature gradient wells, 4 new wells drilled
USA Thermo (4)
713 20 1 slim hole; 21 temperature gradient wells
EARLY STAGE
ARGENTINA 2 Concessions 39,057 - 50 temperature gradient wells; hot springs, vents
PERU 7 C i 7 900PERU 7 Concessions 7,900 - 34 hot springs on properties; sulphur deposits
USA 12 Leases NV + OR 38,016 - 1 dry production well (injection candidate); 9 slim holes; numerous temperature gradient wells
TOTAL 241,413 1,161
(1) Reporting Code Estimate GeothermEx
19
(2) Reporting Code Estimate Mannvit Engineering, acquisition expected to close July ‘10
(3) Reporting Codes Estimate SKM(4) Independent estimate P90 Geo Hills Associates
8-Jul-1020