MAGMA ENERGY CORP ANNOUNCES 2011 FIRST QUARTER RESULTS

(All amounts in US dollars unless otherwise stated and all MW according to the Geothermal Reporting Code.)

VANCOUVER, Nov. 15 /PRNewswire-FirstCall/ - Magma Energy Corp. (TSX:MXY) today reported its financial and operating results for the first quarter of 2011 ending September 30, 2010.  The highlight of the quarter was the increase of Magma's interest in HS Orka in Iceland to 84.21% on August 17 and to 98.53% on September 3.  Magma's financial results include both equity income and the consolidated results of HS Orka subsequent to Magma obtaining control.  These first quarter results are not reflective of financial results in the future which will report fully consolidated results and therefore comparisons of revenues and expenses are not meaningful this quarter.

Ross Beaty, Chairman and CEO, commented, "Magma continued its rapid production and resource growth in the first quarter of 2011 with active drilling programs in Nevada and Chile and with completion of our acquisition of 98.5% of HS Orka in Iceland.  These activities have increased Magma's overall geothermal power production to 190 MW, our geothermal Indicated Resources to 181 MW and Inferred Resources to 990 MW.  Our first quarter statements are unusually complex due to the accounting rules for our multi-stage HS Orka transaction, but future results will be more straightforward and will demonstrate to Magma's stakeholders the outstanding long-term value of this acquisition."

Financial Results

(expressed in thousands of dollars, except for MWh and per share amounts)

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. The Company discloses EBITDA as it is a measure used by analysts and by management to evaluate the Company's 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 Company's performance.

Revenues from energy sales were $8.0 million and gross profit was $1.2 million for the first quarter of fiscal 2011. The net income for the period was $13.4 million or $0.05 per share. EBITDA for the quarter was $5.9 million compared to an EBITDA loss for the same period last year of $2.5 million.

It is estimated that Magma's revenues, had HS Orka been consolidated at the beginning of the quarter, would have been approximately $15 million, net income would have been approximately $22.6 million and EBITDA would have been $8.8 million. HS Orka's revenues are approximately 7% higher than in the same period of last year.  Approximately 46% of HS Orka's revenues are sold under power purchase agreements with prices indexed to the price of aluminum, resulting in higher revenues as aluminum prices increase.  The average London Metal Exchange aluminum price for the three months ended September 30, 2010 was $2,107 per tonne versus $1,842 per tonne for the same period last year.

The increase in net income for the quarter of $16.0 million compared to the same quarter last year was primarily related to $8.4 million equity income from Magma's investment in HS Orka earned before attaining control of HS Orka on August 17, 2010, gains from changes to fair value of debt and derivatives of $7.6 million and higher foreign exchange gains of $6.0 million offset by higher finance costs of $2.4 million and higher future income tax expense of $3.4 million. 

On a cash basis for the quarter ended September 30, 2010, the Company spent $43.6 million on investing activities, including investments of $29.5 million to acquire the additional interest in HS Orka, $6.3 million to acquire and explore the Company's portfolio of exploration projects and $8.5 million on the Soda Lake and HS Orka expansions.  During the quarter, Magma issued 40,334,628 common shares for net cash of $41.3 million.  Magma used these proceeds along with a $CDN 10 million credit facility to acquire an additional 52.35% of HS Orka. At September 30, 2010, Magma had cash and cash equivalents of $46.2 million, working capital of $5.6 million, and long-term non-recourse debt of $275.0 million. 

HS Orka Operations

The Svartsengi 75 MW power plant and associated 150 MW district heating system, as well as the 100 MW Reykjanes power plant produced as expected during the quarter.  Production at Svartsengi was 97,941 MWh while the Reykjanes power plant produced 215,008 MWh.  Permitting work and flow testing of well RN-29 is ongoing as part of the 50 MW Reykjanes expansion.  $41.7 million out of a budget of $116 million has been spent on the project and the remaining cost for the expansion is expected to be funded mainly from HS Orka's cash on hand and project debt financing. 

Soda Lake Operation

Soda Lake's output for the quarter was 14,093 MWh.  Management expects the output to rise in the next quarter due to cooler seasonal temperatures combined with the Phase 1 productivity improvements. Upon completion of Phase 1, the Company will apply for the US Federal Treasury Grant for up to 30% of the eligible project costs.  Approximately $20 million has been spent on Phase 1.  During the quarter, Magma continued to make progress on the Phase 2 expansion at Soda Lake with temperature gradient well drilling and data analysis from the 3D seismic survey conducted in July as part of the $5 million grant awarded to Magma last year.

Exploration Activities

Exploration work during the quarter consisted mainly of drilling at the Mariposa reservoir in Chile and environmental and geosciences work at Magma's 12 US properties.  In Chile, a third slim hole was completed subsequent to quarter end. The data from all three slim holes as well as other exploration information will be used to update the current 320 MW Inferred Resource estimate and plan large diameter well drilling in 2011. Concurrent with the slim hole drilling, transmission routes for the initial 50 MW project were also evaluated.  Magma was recently awarded two new concessions in Chile, Tres Puntes and Los Cristales.

In Peru, Magma is awaiting the award of several concessions and has published its first concession area, Crucero, with title expected to be awarded before the end of the 2010.

Outlook

Mr. Beaty concluded, "Our current focus is to continue our rapid production and resource growth by boosting production at HS Orka and Soda Lake and advancing our Mariposa project in Chile to large-diameter drilling. We are reviewing opportunities to finance these activities through partnerships, while continuing to aggressively build our global exploration portfolio."

About Magma Energy Corp.

Magma Energy Corp. is a geothermal power company which operates, develops, explores and acquires geothermal energy projects.  We have an extensive portfolio of properties throughout the western United States, Iceland and Latin America, including one operating power plant in Nevada and two in Iceland. 

Cautionary Note regarding Forward-Looking Statements and Information

This news release contains 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, revenues, requirements for capital, future demand for and prices of electricity, business prospects and opportunities, exploration and development, geothermal resources, recoverable geothermal energy or energy generation capacities. Such forward-looking information reflects management's current beliefs and is based on information currently available to management. 

In addition, it is worthy of note that the financial results of HS Orka represent the first operating year of the company in its present form.  As such, future results could differ materially from those reported or anticipated.  Accordingly, prospective investors should not place undue reliance on the current reported financial results.  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.

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.  The forward-looking information is 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, 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 reserve estimation methodology and analysis used to estimate the quantity of potentially recoverable thermal 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; 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.           

SOURCE Magma Energy Corp.