Magma Energy, Plutonic Power merge to form Alterra Power Corp.

Source: Magma Energy Corp.

Magma Energy Corp (TSX:MXY) and Plutonic Power Corporation (TSX:PCC) have entered into an 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. 

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."
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.



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