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MAGMA ENERGY CORP. AND PLUTONIC POWER CORPORATION ANNOUNCE MERGER TO CREATE ALTERRA POWER CORP.
MAGMA ENERGY CORP. AND PLUTONIC POWER CORPORATION ANNOUNCE MERGER TO CREATE ALTERRA POWER CORP.

Mar. 7, 2011 (Canada NewsWire Group) --

VANCOUVER, March 7 /CNW/ - Magma Energy Corp (TSX:MXY) and Plutonic Power Corporation (TSX:PCC) today announced that they have entered into an arrangement agreement (the "Arrangement Agreement") to merge and create Alterra Power Corp. ("Alterra"), a leading renewable power producer, with a post-deal market capitalization of approximately $575 million.

Under the terms of the Arrangement Agreement, each Plutonic shareholder will receive 2.38 shares of Magma for each Plutonic share held, and Magma will change its name to Alterra. The exchange ratio represents a premium to Plutonic shareholders of 32% over Plutonic's 20 day weighted average share price on the Toronto Stock Exchange. At the conclusion of the merger there will be 470 million shares of Alterra issued and outstanding and 487 million shares on a fully diluted basis.

Merged Entity Highlights

    <<
    -  Solid base of producing assets in three key renewable energy sectors:
       Geothermal, hydro and wind. Six operating plants in three locations:
       two geothermal plants in Iceland and one in Nevada; two hydro plants
       in British Columbia; one wind farm in British Columbia; and an option
       on one solar project in Ontario.

    -  Increased production capacity: 2011 production capacity of 198
       megawatts generating 1,340 gigawatt hours/year from Magma's geothermal
       assets and 168 megawatts generating 460 gigawatt hours/year from
       Plutonic's hydro and wind assets.

    -  Significant immediate increase in cash flow generation to both
       companies.

    -  Strong growth platform in geothermal, wind and hydro sectors:
       Near-term growth in Iceland and Nevada geothermal production;
       near-term growth prospects in British Columbia hydro and wind assets
       and Ontario solar assets; significant large long-term growth prospects
       in Chile, Peru, Nevada and Iceland geothermal assets and British
       Columbia hydro assets.

    -  Shared commitment to social responsibility: Both Magma and Plutonic
       recognize a commitment to social responsibility and sustainable
       development of renewable energy projects. The shared values and
       experience in this area will be a competitive advantage in creating
       long term value for shareholders and the communities in which Alterra
       operates.

    -  Complementary management teams: Magma's and Plutonic's highly regarded
       management teams blend renewable energy exploration, development,
       financing and operations skill sets.

    -  Significant administration synergies: Estimated at $2.2 million per
       year.

    -  Financial support: Magma to provide short term financial support to
       Plutonic by subscribing for a $10 million convertible debenture.
    >>

Ross Beaty, Magma's Chairman and CEO commented, "This merger will strengthen both companies and will create a larger, more diversified renewable energy company with assets across a broader spectrum of the clean energy industry. It has the potential to lower the cost of capital to develop each company's existing growth assets, to enable those assets to be developed more quickly, and to better attract new opportunities for future development. Geothermal will remain a core focus of the new company, but hydro, wind and solar assets will be solid business platforms for future growth. In the renewable energy business, bigger is better and this combination will achieve that while enhancing returns to each company's shareholders."

Donald McInnes, Plutonic's Vice-Chairman and CEO said, "2010 was a breakout year for Plutonic having completed the transition into an operating company. To continue to build on the success of our history as a project developer, a merger with Magma will provide our shareholders with the best path to further value creation achieved through a larger market size, greater liquidity, better access to capital, and diversity of geography and technology with a healthy development pipeline that provides significant growth opportunities."

Alterra Management Team and Board of Directors

Ross Beaty will be the Executive Chairman and CEO and Donald McInnes will be Executive Vice-Chairman. Bruce Ripley will be Chief Operating Officer and John Carson will be Executive Vice President.

The Board will initially be comprised of the following seven directors:

    <<
    Ross Beaty
    Donald McInnes
    David Cornhill
    David O'Brien
    Donald Shumka
    Paul Sweeney
    Walter Segsworth
    >>

Transaction Summary

The proposed merger will be effected by way of a plan of arrangement under the Business Corporations Act (British Columbia). Each Plutonic shareholder will receive 2.38 shares of Magma for each Plutonic share held. All outstanding options to purchase Plutonic shares will be exchanged for options to purchase common shares of Alterra in accordance with the same exchange ratio.

Completion of the merger is conditional on approval of Magma and Plutonic shareholders at special meetings expected to be held in late April 2011, and satisfaction of other customary approvals, including regulatory, stock exchange and court approvals.

The Arrangement Agreement contains standard deal protections, including a commitment by Plutonic not to solicit alternative transactions, a ten business day right for Magma to match any superior proposal received by Plutonic and payment by Plutonic to Magma of a termination fee of $5.7 million if the transaction is not completed in specified circumstances.

Magma has subscribed for a $10 million unsecured convertible debenture from Plutonic. These proceeds will be used by Plutonic to fund working capital and repayment of a $8 million promissory note held by GE Energy Financial Services Holding Company. The convertible debenture bears interest at the rate of 8% per annum on drawn amounts, will mature on August 31, 2011 and will be convertible into Plutonic shares at any time at the option of Magma at a conversion price of $2.90 per Plutonic share. In certain circumstances, Magma can put any undrawn amount of the convertible debenture to Plutonic prior to conversion.

A full copy of the Arrangement Agreement will be filed by each of Magma and Plutonic with Canadian securities regulatory authorities and will be available at www.sedar.com. In addition, a detailed description of the Arrangement Agreement will be included in the joint management information circular which will be mailed to Magma and Plutonic shareholders later this month.

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