* Sells 66.667 mln shares at C$1.50 each
* International book three times oversubscribed
* Shares to trade under symbol MXY.TO (Adds analyst comments, IPO details)
By Pav Jordan
TORONTO, June 26 (Reuters) - Canada’s Magma Energy Corp, a geothermal power company active in the western United States and South America, has raised C$100 million ($87 million) in an initial public offering taken up by investors around the world, sources close to the deal told Reuters.
The deal, spearheaded by Magma chairman and mining guru Ross Beaty, is the largest of its kind in Canada so far this year and will supply Vancouver, British Columbia-based Magma with the funds it needs for expansion and exploration programs at late- and early-stage projects in the United States, Argentina, Chile and Peru.
Under the terms of the IPO, Magma sold 66.667 million shares at C$1.50 each.
Magma shares will start to trade under the symbol MXY.TO on the Toronto Stock Exchange on July 7.
“If successful, then I think it’s fantastic for the whole geothermal sector,” said John McIlveen, research director at Jacob & Co Securities Inc, an investment bank that specializes in renewable energy.
“It’s been the ugly sister and this has raised the profile, not just in North America, but on a worldwide basis.”
The global market for public offerings perked up in the second quarter of 2009 as new issues by already public firms reached record levels, and top bankers are forecasting a pick-up in IPOs by year-end.
With calmer markets and some successful deals, investor confidence is returning, setting the stage for recovery by 2010.
It is the first major IPO in Canada since May last year, but it is likely only one of several expected in 2009, particularly in the power sector.
Capital Power Corp, an independent power generating company with interests in 31 facilities in Canada and the United States, filed a preliminary prospectus this week to sell some 20 million shares in an initial public offering that would raise as much as C$433 million at C$24 per share, the upper end of what it expects to sell the stock at.
Geothermal and other renewable energy sources are being tapped increasingly as global electricity consumption rises and as non-carbon emitting sources are sought.
The Magma deal was led by Raymond James Ltd and Cormark Securities Inc and had a global book, with 45 percent of the deal in Canada, 30 percent in the United States, and 25 percent in Europe and Asia.
Other members of the syndicate are Canaccord Capital Corp, National Bank Financial Inc, Dundee Securities Corp, Jacob & Company Securities Inc and Wellington West Capital Markets Inc.
“The book was about three times oversubscribed,” said one source with knowledge of the deal.
That means the deal’s 10-million-share overallotment option will likely be taken up quickly, giving the company another C$15 million.
The success of the IPO has been attributed in part to Beaty, who is also Magma’s chief executive, and who made his mark as a mining entrepreneur.
“Obviously people really follow past successes and they run with it. It’s a good business and I’m glad he’s doing it,” said one investment banker who looked at the deal but didn’t end up buying any stock.
“He sees good trends, and geothermal is a good trend.”
The preliminary prospectus was filed on June 1 with the hope of raising about C$50 million.
Geothermal energy is derived from heat stored underground, where temperatures range from slightly below room temperature just below the surface to more than 5,000 Celsius at the Earth’s core.
Currently, geothermal power represents only a fraction of global electricity consumption.
“It’s the least understood of all the renewables. People understand that the sun shines and the wind blows, but they don’t understand that 3 kilometres below your feet is some very hot water that we can turn into electricity,” said McIlveen, who is also director at the Canadian Geothermal Energy Association.
Magma has one operating power generation plant, Soda Lake in Nevada, four advanced-stage exploration properties and 14 early-stage exploration properties in the Western United States, Chile, Argentina and Peru.
“That’s going to take a lot of money to develop, so he’s going to have to come back to market,” said an investor with knowledge of the deal.
$1=$1.15 Canadian Additional reporting by Susan Taylor in Ottawa; editing by Peter Galloway and Rob Wilson