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Magma presentation-feb 21-2011


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  • 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. MAGMA ENERGY - STRATEGY & VALUE CREATION Magma’s mission: to build a leading global geothermal power company 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 strategy: DISCOVERY UTILITY RETURNS CASH FLOWS broad asset portfolio and scale = PROJECT VALUE $ “discovery returns” and “utility cash flows”  Reduces drilling risk and high front- end capital risk FEASIBILITY  Improves margins with PERMITTING lower cost of capital OPERATIONS FINANCING ACQUISITION  Better multiples EXPLORATION CONSTRUCTION TIME We are a power company and an energy resource company3
  • 4. 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  Emerging geothermal markets with world-class potential  Strong government support for geothermal projects4
  • 5. MAGMA ENERGY – EXECUTION TO DATE From 2008 startup, the world’s fastest growing geothermal power company POWER  GROWTH 1750 250 Installed Capacity (MW) Production (GWh) 1500 190 1,650 200 1250 1000 150 1,023 750 100 500 23 50 250 0 16 91 0 2008 2009 2010 2011e GEOTHERMAL RESERVES & RESOURCES GROWTH 1600 Inferred Indicated Reserves 1200 195 181 800 86 60 990 400 11 555 199 0 (1) MW  2008 2009 2010 (1)5 Geothermal Reporting Code verified MW
  • 6. MAGMA ENERGY – GROWING FINANCIAL STRENGTH $80  REVENUE  $70  $60  Millions USD $50  $40  $30  $20  $10  $‐ Jan ‐ Jun /08 July/08 ‐ Jan ‐ Dec/10 Jan ‐ Dec/11e EBITDA  $25 Dec/09  $20 Millions USD  $15  $10  $5  $‐  $(5)  $(10) 2008/09 actual and 2009/2010 reflects Magma’s equity portion in HS Orka Jan ‐ Jun /08 July/08 ‐ Jan ‐ Dec/10 Jan ‐ Dec/11e 2011 is an estimate and reflects Magmas consolidated portion in HS Orka Assumed aluminum price of USD 2,300/tonne and 111 ISK/USD Dec/096
  • 7. Q2 OPERATING AND FINANCIAL HIGHLIGHTS Magma gained control of HS Orka during Q1, full consolidation of results occured in Q2 ACTUAL Expressed in thousands of US dollars, except for MWh and per share amounts Year End 2011-Q2 2011- H1 June 30-2010 NET PRODUCTION (MWh) 351,461 688,707 62,072 TOTAL REVENUE 18,751 26,795 5,056 GROSS PROFIT 5,485 7,082 1,659 EBITDA (1) 6,155 11,749 (3,261) TOTAL ASSETS 656,222 656,222 198,703 TOTAL LIABILITIES 427,093 427,093 56,633 (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 charges related to employee compensation, equity earnings/losses, loss on re-measurement of equity interest, NCI, gain on bargain purchase and changes to the balance sheet carrying value of long-term debt and derivatives. The Company discloses EBITDA as it is a measure used by analysts and by management to evaluate the Companys performance. As EBITDA 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 net earnings in evaluating the Companys performance.7
  • 8. NORTH AMERICAN PUBLIC GEOTHERMAL COMPANIES 700 600 500 400 MW 300 200 100 0 (1) Ram Power U.S. Geo NGP Magma Ormat Operating Development through 2013 (1) Geothermal Reporting Code verified MW Source: Jacob Securities Inc8
  • 9. PROGRESS AND NEXT STEPS OUR PROGRESS  Now the 2nd largest public geothermal developer in North America  Existing Iceland infrastructure allows for rapid, low cost expansions  Major discovery in Chile NEXT STEPS  Complete Iceland expansions  Fulfill potential at Soda Lake, NV and develop other US assets  Develop Mariposa, Chile and explore other Chile/Peru assets9
  • 10. CREATING VALUE VALUE PROPOSITION  Renewable production and steady cash flow  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 EXPECTED ORGANIC GROWTH 700 6000 643 600 5000 INSTALLED CAPACITY (MW) 500 4000 443 400 GWh 3000 307 300 248 198 2000 200 190 84 1000 100 11 0 0 2008 2009 2010 2011 2012 2013 2014 2015+ Soda Lake Iceland Nevada Chile10
  • 11. TSX MXY11
  • 12. APPENDIX12
  • 13. 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 31,067 175 140 500 Advanced Mariposa - Chile 3 104,000 320 McCoy - Nevada 4 4,621 170 Early Stage Argentina 26,922 Chile 158,000 Peru 7,900 USA 34,977 (1) Reporting Code Estimate GeothermEx 370,368 195 MW 181 MW 990 MW (2) Reporting Code Estimate Mannvit Engineering (3) Reporting Code Estimate SKM (4) Independent estimate P90 Geo Hills Associates Plant Property McCoy13
  • 14. MAGMA IS AN UNDERVALUED ENERGY COMPANY BOE RESERVES & RESOURCES EV/BOE RESERVES & RESOURCES 2,500 $6.00 2,000 $5.00 $4.00 MM BOE 1,500 CDN $ / BOE $3.00 1,000 $2.00 500 $1.00 - $- STP MXY CLL STP MXY CLL BOE Reserves BOE Resources EV/BOE Reserves EV/BOE Resources CO2 CREDITS (PENALTIES) FROM . . . . . @ $15/tonne TSX symbols: RESERVES & RESOURCES ≈ $14 billion credit STP Southern Pacific MXY Magma Energy 1,200 over 30 years CLL Connacher Oil & Gas 1,000 MEGA TONNES 800 600 400 Assumptions: 200 0.62 bbl/MWh(th) 0.1 MW(e) / MW(th) - 30 years of assumed project life (200) STP MXY CLL 430 kg CO2 emitted per BOE (400)14
  • 15. ICELAND EXPANSION HIGHLIGHTS Potential to expand from 175 MW to 405 MW PPA discussions with Nordural and others on-going 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  Signing of new PPA that is not Al price-linked 50 MW phase expansion commenced; as of Dec 2010 $39 MM already invested Next 30 MW phase requires no additional drilling ~CapEx for full 230 MW expansion is ~$643 MM; will be staged CONCEPTUAL PRODUCTION GROWTH EXPANSION BUDGET Reykjanes 3 $131 MM Reykjanes 4 $ 66 MM Krýsuvik 1 $ 155 MM Krýsuvik 2 $ 145 MM Eldvörp $ 145 MM15
  • 16. PRODUCTION - SODA LAKE, NEVADA Ramping up to capacity of 23 MW  Current throughput is 84,000 GWh/yr Phase 2 expansion - achieve reservoir capacity 61 MW16
  • 17. ADVANCED DEVELOPMENT - MARIPOSA, CHILE 320 MW Inferred Resource discovered by MP- 03 DRILL SITE Magma in 2009 50 MW Phase 1 exploitation plan approved in April 2010 Completed $21 MM slim hole drill program for resource confirmation >$100/MWh power rates and drilling incentives available <25 km from 2 transmission lines under development MP- 02 MP- 01 MP- 0317
  • 18. 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. John Carson: Executive Vice President Mr. Carson is a highly experienced renewable energy business leader with a core expertise in structuring and leading financial transactions. His financing experience includes senior positions held with GE Energy Financial Services, Terra-Gen Power and Noble Environmental Power, and he has closed over US$2 billion of transactions, primarily in the renewable energy space. MAGMA ENERGY CORP MAGMA ENERGY GLOBAL OPERATIONS Lyle Braaten: Secretary & General Counsel Monte Morrison: USA Lawyer. Extensive experience negotiating commercial Country Manager & VP Operations agreements and implementing large infrastructure Professional Engineer with 25 years experience projects managing the operations and maintenance of geothermal power plants Annette Cusworth: Chief Financial Officer John Selters: CHILE & ARGENTINA Chartered Accountant with over 20 years experience in Country Manager the public and private sectors Mining engineer with over 40 years experience in Latin America Dr. Catherine Hickson: VP Exploration & Chief Geologist Dick Benoit: USA World renowned volcanologist with over 25 years Exploration Manager experience in Canadian and international geosciences Over 35 years experience in the geothermal industry both nationally and internationally Anders Kruus: VP Corporate Relations Finance professional with over 20 years international Mark Kumataka: USA experience in capital markets and corporate finance Chief Engineer Professional Engineer with over 30 years experience in geothermal resource management in U.S. & Latin Asgeir Margeirsson: VP Operations & Development, America Country Manager Iceland, Chairman HS Orka An extensive career in geothermal power development both within Iceland and internationally18
  • 19. 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 1966-979 he worked in a variety of positions in the forest industry, from 1979-989 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.19
  • 20. NEWS - FLOW CATALYSTS LOCATION GOAL TARGET DATE Peru Exploration results On-Going Soda Lake, Nevada Application for US Treasury Grant Q-1 Mariposa, Chile Slim hole drilling results Q-2 Soda Lake, Nevada New PPA with NV energy Q-2 Reykjanes, Iceland PPA negotiations with Nordural and others Q-2 McCoy, Nevada Slim hole drilling results Q-420
  • 21. OWNERSHIP, CAPITAL STRUCTURE & COVERAGE CAPITAL STRUCTURE: AS OF DEC 31/2010 MAGMA ENERGY SHAREHOLDERS ISSUED & OUTSTANDING 313.8 MM (DEC 2010) OPTIONS 3.3 MM 26% Board and Management LONG TERM DEBT US $284.4 MM 40% Strategic Partner (AltaGas) CASH US $ 20.3 MM Estimated Institutional SHAREHOLDERS’ EQUITY US $229.1 MM 29% 5% Estimated Retail ANALYST COVERAGE CONTACT Cormark Securities MacMurray Whale Jacob Securities John McIlveen REGIONAL REPRESENTATION OF Mackie Research Capital Matthew Gowing National Bank Financial 5% SHAREHOLDERS (DEC 2010) Jeremy Mersereau Pritchard Capital Partners Veny Aleksandrov 26% USA Raymond James Securities Steven Li Salman Partners Mike Plaster Canada 46% Wellington West Capital Mgmt Sean Peasgood 12% Europe INDEX COVERAGE 11% Ardour Global Alternative Energy Index Other S&P/TSX Clean Technology Index Unknown Retail21
  • 22. TSX MXY22 22-Feb-11