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Message: Announce Intent to Combine Businesses and Concurrently Raise $100 Million Equity

Announce Intent to Combine Businesses and Concurrently Raise $100 Million Equity

posted on Jul 15, 2009 03:06PM
July 15, 2009
Geothermal Power Companies Announce Intent to Combine Businesses and Concurrently Raise $100 Million Equity Financing
VANCOUVER, BRITISH COLUMBIA--(Marketwire - July 15, 2009) -


GTO Resources Inc. (NEX:GTR.H) ("GTO"), Polaris Geothermal Inc. ("Polaris") (TSX:GEO), Western GeoPower Corp. ("Western") (TSX VENTURE:WGP) and Ram Power, Inc., a private Delaware corporation ("Ram") are pleased to announce that they have entered into a letter of intent dated July 14, 2009 ("LOI") with respect to a proposed business combination to create a new, publicly-traded geothermal power company (the "Transaction"). The LOI is in addition to the letter of intent with Ram announced by GTO on June 30, 2009.

The parties to the LOI believe that the benefits of the Transaction are numerous and include:

- The formation of a growth-focused geothermal power company with a diversified project portfolio spanning all development stages from exploration to producing

- Introduction of a premier geothermal development and acquisition team with experience gained from Ormat Technologies Inc., a global leader in geothermal power

- Greater market value of combined entity intended to support increased market liquidity and, accordingly, ability to attract capital

- Synergies in development, operation and administration expenses

In connection with and as a condition within the LOI, GTO intends to raise approximately $100 million in a private placement offering of subscription receipts, entitling purchasers to receive common shares in the combined entity following the business combination. The subscription receipts will be offered at an anticipated price of $3.00 per GTO share (after giving effect to a 10 for 1 consolidation) and the proceeds will be held in escrow pending the completion of the Transaction. The use of proceeds of the equity financing will be utilized to develop key projects of the combined businesses.

The Transaction will be subject to security holder, court and regulatory approval, including the approval of applicable stock exchanges in Canada.

The relative ownership positions for the respective companies' equity security holders and the implied common share values based on a $3.00 per GTO (post consolidation) share offering price are as follows:

          Pro Forma Number
              of Shares in      % Ownership in
           Combined Entity     Combined Entity  Implied Share Price
         (pre-issue, post-   (pre-issue, post-     at $3.00 per GTO
Party        consolidation)      consolidation)               Share
Polaris       33.6 million                54.1%               $0.76
Western       18.1 million                29.2%               $0.20
Ram            9.6 million                15.4%        N/A (private)
GTO            0.8 million                 1.3%               $0.30
TOTAL         62.1 million                 100%
The financial statements of each of Polaris and Western for the year ended December 31, 2008 (audited) and for the three months ended March 31, 2009 (unaudited) are available on under the profiles of Polaris and Western, respectively.

The LOI provides that GTO, Polaris and Western will negotiate and enter into a definitive arrangement agreement and Ram and GTO will enter into a share purchase and sale agreement. Further details regarding the proposed business combination shall be detailed in a joint information circular (the "Joint Circular") which will be mailed to securityholders of GTO, Polaris and Western in connection with special shareholders' meetings to approve the Transaction.

Cormark Securities Inc. has been retained as financial advisor to GTO in connection with the Transaction and as lead agent in connection with the equity financing.

Closing of the Transaction contemplated by the LOI is subject to a number of conditions and approvals which include completion of a $100 million equity financing on acceptable terms; the satisfactory completion of due diligence investigations; the completion of a definitive agreement setting forth the terms and conditions set out in the LOI; approval of securityholders of GTO, Polaris and Western at a special meeting of such securityholders; approval of shareholders of Ram, approval of holders of debentures of Polaris; approval of certain lenders of Western; court approval; and the approval of all relevant regulatory authorities and third parties. There can be no assurance that the Transaction or the equity financing will be completed as proposed or at all. The LOI provides for termination rights, including in the event the Transaction is not completed by October 30, 2009.

The common shares of GTO are currently halted from trading and will remain halted until further notice.

Investors are cautioned that except as disclosed in the Joint Circular, any information released or received in connection with the Transaction may not be accurate or complete and should not be relied upon.

This press release does not constitute an offer to sell or a solicitation of an offer to buy any of the securities described herein. The securities have not been and will not be registered under the United States Securities Act of 1933, as amended (the "U.S. Securities Act"), or any state securities laws and may not be offered or sold within the United States or to United States Persons unless registered under the U.S. Securities Act and applicable state securities laws or an exemption from such registration is available.


Ram is a renewable energy development company with several geothermal projects under development in California and Nevada, USA. Ram's management team brings world class expertise and decades of experience in developing and financing geothermal energy projects.


Polaris Geothermal is a Canadian company (continued under the laws of Yukon), focused on the generation of renewable energy projects in Latin America and other parts of the world. Polaris has a 10 MW geothermal power plant operating at San Jacinto Tizata with further expansion of that project currently under development.


Western GeoPower Corp. is a Canadian renewable energy company (incorporated under the laws of British Columbia) dedicated to the development of geothermal energy projects for the delivery of clean, sustainable, baseload electricity generation. Western is developing the Western GeoPower Unit 1 geothermal power plant at The Geysers Geothermal Field in Sonoma County, California, USA and has geothermal projects under development in California, USA and British Columbia, Canada.

All references to "$" or "dollars" are to Canadian dollars.
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