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A GLOBAL GEOTHERMAL POWER COMPANY


OCT 2010
TSX : MXY
CAUTION REGARDING FORWARD-LOOKING STATEMENTS


    These slides and the accompanying oral presentation contain certain “fo...
MAGMA ENERGY - STRATEGY & VALUE CREATION


     Geothermal power can be the lowest cost and cleanest form of
     electric...
BALANCED PORTFOLIO: GLOBAL EXPLORATION & OPERATIONS


                        ICELAND:
                           98.5% in...
MAGMA ENERGY - CORPORATE SUMMARY


        Mission: To build a leading pure play geothermal power company
        Strong t...
NORTH AMERICAN PRIMARY GEOTHERMAL COMPANIES


          700
                          DEVELOPERS
          600


         ...
MAGMA IS AN UNDERVALUED ENERGY COMPANY


             BOE RESERVES & RESOURCES                                            ...
CREATING VALUE


     OUR PROGRESS
       Existing Iceland infrastructure allows for
       rapid, low cost expansions
   ...
www.magmaenergycorp.com
          TSX   MXY


9
APPENDIX




10
MAGMA ENERGY - GLOBAL PROJECT PIPELINE


                                                         AREA      RESERVES      ...
HS ORKA ACQUISITION - OVERVIEW


     Magma acquired 98.5% of HS Orka                                  PROPERTY RESERVES  ...
HS ORKA EXPANSION HIGHLIGHTS


      Potential to expand from 175 MW to 405 MW

      PPA discussions with Nordural and Ot...
PRODUCTION - SODA LAKE, NEVADA


      Ramping up to capacity of 23 MW
         Currently operating at 60% capacity

     ...
ADVANCED DEVELOPMENT - MARIPOSA, CHILE


      320 MW Inferred Resource discovered                         MP- 03 DRILL SI...
WORLD CLASS MANAGEMENT TEAM


                 Ross Beaty: Chairman & CEO
                 Geologist and resource company ...
INSTITUTIONAL QUALITY BOARD OF DIRECTORS


            Ross Beaty - Chairman and CEO




            David W. Cornhill - [...
NEWS-FLOW CATALYSTS


     LOCATION               GOAL                                        TARGET DATE

     Desert Que...
OWNERSHIP, CAPITAL STRUCTURE & COVERAGE


                              MAGMA ENERGY SHAREHOLDERS          CAPITAL STRUCTU...
www.magmaenergycorp.com

                     TSX    MXY




20   7-Oct-10
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Magma - Corporate Presenation - October 2010

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Transcript of "Magma - Corporate Presenation - October 2010"

  1. 1. A GLOBAL GEOTHERMAL POWER COMPANY OCT 2010 TSX : MXY
  2. 2. CAUTION REGARDING FORWARD-LOOKING STATEMENTS These slides and the accompanying oral presentation contain certain “forward-looking information” within the meaning of Canadian securities 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 additional capital, production costs and revenue, future demand for and prices of electricity, business prospects, opportunities and estimates of recoverable geothermal energy “resources” or “reserves” or energy generation capacities (at either P90 or based on the Geothermal Code for Public Reporting). Such forward-looking information reflects management’s current beliefs and is based on information currently available to management. A number of known and unknown risks, uncertainties and other factors, may cause our actual results or performance to materially differ from any future results or performance expressed or implied by the forward-looking information. Such factors include, among others, those discussed in the section of our prospectus entitled “Risk Factors”. These factors should be considered carefully. The forward-looking information is also based upon what management believes to be reasonable assumptions, including, but not limited to, assumptions about: the success and timely completion of planned exploration and expansion programs, including expansion and improvements 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 energy generation; the accuracy of resource and reserve estimation methodology and probabilistic analysis used to estimate the quantity of potentially recoverable energy; geological, geophysical, geochemical and other conditions at our properties; the reliability of technical data, including extrapolated temperature gradient, geophysical and geochemical surveys and geothermometer calculations; capital expenditure estimates; availability of capital to fund exploration, development and expansion programs; the differences in financial results reported under IFRS and Canadian GAAP; and general economic conditions. Forward-looking information and statements are also based upon the assumption that none of the identified risk factors that could cause actual results to differ materially from the forward-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 could differ materially from those anticipated in such information. Accordingly, prospective investors should not place undue reliance on forward-looking information. Other than as required by applicable securities laws, we assume no obligation to update or revise such forward-looking information to reflect new events or circumstances. 2
  3. 3. 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 DISCOVERY UTILITY RETURNS RETURNS Better multiples PROJECT VALUE $ Capital Growth Income Growth We are a power company and an energy Feasibility Permitting Operation resource company Acquisition Financing Exploration Construction TIME 3
  4. 4. BALANCED PORTFOLIO: GLOBAL EXPLORATION & OPERATIONS ICELAND: 98.5% in 2 power plants producing 175 MW 80 MW of expansions underway Additional 150 MW of defined expansion plans USA: Producing 13.5 MW with 47.5 MW expansion potential Steady, predictable and long-life cash flow Excellent government support for geothermal projects 13 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 4
  5. 5. MAGMA ENERGY - CORPORATE SUMMARY 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 200 1400 175 PRODUCTION GROWTH GEOTHERMAL RESERVES 1200 193 150 186 & RESOURCES GROWTH 171 1000 125 800 MW 100 MW 1 75 600 86 60 50 84 400 990 25 11 200 555 0 199 2008 2009 2010 YTD 0 2008 2009 2010 YTD Inferred Indicated Reserves Growing financial strength $25 $60 EBITDA $20 $50 REVENUE MILLIONS USD $15 $40 Millions USD $10 $30 $5 $20 $- $10 $(5) $- $(10) 2 3 2 3 Jan - Jun /08 July/08 - 2 Jan - Dec/10 JAN - JUN /08 JULY/08 - 2 JAN - DEC/10 Dec/09 DEC/09 1 Geothermal Reporting Code verified MW 2 2008 and 2009 actuals (2009 reflects Magma’s equity portion in HS Orka) 3 5 2010 is an estimate and reflects Magma's equity portion in HS Orka
  6. 6. NORTH AMERICAN PRIMARY GEOTHERMAL COMPANIES 700 DEVELOPERS 600 500 400 MW 300 200 100 0 Raser Ram Power U.S. Geo NGP Cal Energy MAGMA (1) Ormat Operating Development through 2013 Source: Jacob Securities Inc (1) Geothermal Reporting Code verified MW 6
  7. 7. MAGMA IS AN UNDERVALUED ENERGY COMPANY BOE RESERVES & RESOURCES EV/BOE RESERVES & RESOURCES 2,500 $6.00 BOE Resources EV/BOE Reserves BOE Reserves $5.00 EV/BOE Resources 2,000 $4.00 CDN $ / BOE MM BOE 1,500 $3.00 1,000 $2.00 500 $1.00 - $- UTS STP MXY CLL OPC UTS STP MXY CLL OPC . . . . . @ $15/tonne CO2 CREDITS (PENALTIES) FROM RESERVES & RESOURCES ≈ $14 billion credit over 30 years 1,500 1,000 MEGA T ONNES 500 TSX symbols: - UTS UTS Energy UTS STP MXY CLL OPC STP Southern Pacific (500) MXY Magma Energy (1,000) CLL Connacher Oil & Gas OPC OPTI Canada (1,500) 7
  8. 8. 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 636 Chile/Peru assets VALUE PROPOSITION 438 Non-declining assets providing steady 302 production and cash flow (forever) 245 196 Strong inventory of development prospects Sufficient resources to increase existing 84 company proved reserves six-fold 11 Growing portfolio size reduces risk Large team of geothermal experts - core asset 8
  9. 9. www.magmaenergycorp.com TSX MXY 9
  10. 10. APPENDIX 10
  11. 11. MAGMA ENERGY - GLOBAL PROJECT PIPELINE AREA RESERVES RESOURCES STAGE PROPERTY (HA) PROVED INDICATED INFERRED Operations Soda Lake - Nevada1 2,881 20 41 HS Orka - Iceland 2 31,067 173 130 500 Advanced Mariposa - Chile 3 104,000 320 McCoy - Nevada4 4,621 170 Early Stage Argentina [2] 39,057 Peru [7] 7,900 USA [11] 34,977 (1) Reporting Code Estimate GeothermEx (2) Reporting Code Estimate Mannvit Engineering 224,503 193 MW 171 MW 990 MW (3) Reporting Codes Estimate SKM (4) Independent estimate P90 Geo Hills Associates Plant Property McCoy 11
  12. 12. HS ORKA ACQUISITION - OVERVIEW Magma acquired 98.5% of HS Orka PROPERTY RESERVES RESOURCES COMMENT 3 separate deals (2009 - 2010) PROVED INDICATED INFERRED Cost for HS Orka: SVARTSENGI 75 MW No further expansions planned 45 MW of steam behind pipe for expansion $133 million cash and share REYKJANES 100 MW 80 MW phases; 50 MW turbine arrived May2010; subscriptions further production drilling underway $ 90 million vendor bonds1 ELDVÖRP 50 MW Steam behind pipe from 1 production well $2.4 M/MW2 for 175 MW in production 4 MW of steam behind pipe from 2 plus other opportunities KRÝSUVÍK 500 MW production wells that are candidates for 1 Bonds indexed to price of aluminum with an average stimulation; 9 slim wells; 19 temperature coupon rate of 2.4% and 2016 maturity gradient wells 2 Includes $171.2 million HS Orka non-recourse to TOTAL MW 175 130 500 Magma 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 - May 2010 Magma gains: Large producing asset base creates strong income statement & balance sheet Significant expansion potential World class geothermal team Iceland’s largest private energy company 12
  13. 13. 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 CONCEPTUAL PRODUCTION GROWTH 13
  14. 14. PRODUCTION - SODA LAKE, NEVADA Ramping up to capacity of 23 MW Currently operating at 60% capacity Phase 1 expansion to 23 MW - currently underway Target blended PPA rate of $85/MWh to reflect expanded capacity and market conditions 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 14
  15. 15. ADVANCED DEVELOPMENT - MARIPOSA, CHILE 320 MW Inferred Resource discovered MP- 03 DRILL SITE 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 MP- 02 MP- 01 MP- 03 15
  16. 16. WORLD CLASS MANAGEMENT TEAM Ross Beaty: Chairman & CEO Geologist 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. MAGMA ENERGY CORP MAGMA ENERGY GLOBAL OPERATIONS Lyle Braaten: Secretary & General Counsel Dick Benoit: USA Lawyer. Extensive experience negotiating commercial Exploration Manager agreements and implementing large infrastructure Over 35 years experience in the geothermal industry both projects nationally and internationally Annette Cusworth: Chief Financial Officer Mark Kumataka: USA Chief Engineer Certified General Accountant with over 20 years Professional Engineer with over 30 years experience in experience in the public and private sectors geothermal resource management in U.S. & Latin America Dr. Catherine Hickson: VP Exploration & Chief Geologist Ásgeir Margeirsson: ICELAND World renowned volcanologist with over 25 years President & CEO experience in Canadian and international geosciences An extensive career in geothermal power development both within Iceland and internationally Alison Thompson: VP Corporate Relations Monte Morrison: USA Masters of Chemical Engineering and Queen’s MBA; Country Manager & VP Operations Extensive experience in the energy industry; Chair of Professional Engineer with 25 years experience managing the CanGEA operations and maintenance of geothermal power plants Andrea Zaradic: VP Operations & Development John Selters: CHILE & ARGENTINA Mechanical Engineer with 20 years experience in Country Manager engineering design, construction, commissioning and Mining engineer with over 40 years experience in Latin operations with large international mining projects America 16
  17. 17. 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. 17
  18. 18. NEWS-FLOW CATALYSTS LOCATION GOAL TARGET DATE Desert Queen, Nevada Temperature gradient drilling results Reykjanes, Iceland 80 MW expansion program begins Soda Lake, Nevada Phase 2 expansion commenced HS Orka, Iceland Acquire controlling interest Mariposa, Chile Slim hole drilling results On-Going Peru Exploration results On-Going McCoy, Nevada Slim hole drilling results Q-4 Soda Lake, Nevada New PPA with NV energy Q-4 Soda Lake, Nevada Phase 1 expansion complete; 23 MW online Q-4 Reykjanes, Iceland PPA negotiations with Nordural and others Q-2 / 2011 18
  19. 19. OWNERSHIP, CAPITAL STRUCTURE & COVERAGE MAGMA ENERGY SHAREHOLDERS CAPITAL STRUCTURE: (JULY 2010) ISSUED & OUTSTANDING(1) 288.9 M 32% 35% Sitka Foundation OPTIONS 3.4 M Board & Management W ARRANTS 0 Strategic Partner (AltaGas) LONG TERM DEBT(2)(3) US $ 49.3 M Estimated Retail CASH(3) US $ 25.3 M 8% 20% 5% Estimated Institutional SHAREHOLDERS’ EQUITY(3) US $ 142.9 M (1) 100 M shares held beneficially for the Sitka Foundation (www.sitkafoundation.org) no resale until 2013 (2) Bond has a face value of US $70.2 M (3) As of June 30/2010 ANALYST COVERAGE CONTACT REGIONAL REPRESENTATION Cormark Securities MacMurray Whale 11% 20% OF SHAREHOLDERS Jacob Securities John McIlveen (JULY 2010) Mackie Research Capital Matthew Gowing National Bank Financial Jeremy Mersereau U.S.A. 13% Pritchard Capital Partners Veny Aleksandrov Canada Raymond James Securities Steven Li 5% 51% Europe Salman Partners Mike Plaster Other Stifel Nicolaus Dilip Warrier Retail (Unknown Location) Wellington West Capital Mngt Sean Peasgood INDEX COVERAGE Ardour Global Alternative Energy Index S&P/TSX Clean Technology Index 19
  20. 20. www.magmaenergycorp.com TSX MXY 20 7-Oct-10
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