* Magma has been keen to expand outside geothermal sector
* Deal adds solar, hydro and wind assets to Magma
* Plutonic shares rise 9.5 pct, Magma down 3 pct (Adds analyst’s comment, context, byline)
By Nicole Mordant
VANCOUVER, March 7 (Reuters) - Magma Energy Corp MXY.TO said on Monday it will buy fellow Canadian clean energy company Plutonic Power Corp PCC.TO for C$190 million ($195.5 million) as it looks for ways to expand and cut its cost of doing business.
Magma, North America’s second-largest geothermal energy company, has been hunting for opportunities outside the geothermal sector, which it says has limited growth potential.
By buying Plutonic in an all-share deal, Magma will add hydroelectric, wind and solar energy projects in Canada to its suite of geothermal operations in Iceland, the United States and South America.
“It is good for both companies. It is much harder to survive as a small independent company,” NCP Northland Capital Partners analyst Tania Maciver said.
“It is a good answer for Plutonic. Magma has a very good profile in the industry. It allows them to access capital at a much lower cost than before,” she told Reuters.
Plutonic’s stock was 6.2 percent higher, or up 15 Canadian cents, at C$2.57 on the Toronto Stock Exchange on Monday afternoon. Magma fell 9 Canadian cents, or 7 percent, to C$1.13.
Plutonic shareholders will receive 2.38 shares of Magma for each share held, equal to about C$2.90 per Plutonic share -- a 20 percent premium to the stock’s Friday closing price.
The combined company will be called Alterra Power Corp and have a market value of about C$575 million.
Geothermal energy will remain a core focus of the new company, but hydro, wind and solar assets will be solid business platforms for future growth, Magma Chief Executive Ross Beaty said.
Geothermal energy is a renewable source of power that uses hot water and steam produced deep inside the earth to power turbines for electricity.
“No other renewable energy public company in North America holds this diversified portfolio,” Beaty said.
“The power business is all about the cost of capital, and size matters,” he said on a conference call.
Conditions have been ripe for consolidation in Canada’s green energy sector as small, cash-hungry developers seek scarce capital to advance government power contracts. [ID:nN11159132]
Beaty said last month that Magma is looking for investments outside the geothermal industry because the sector’s scope for growth is limited. [nN15215534]
The combined company will have six operating plants in three locations, including Magma’s two geothermal plants in Iceland and one in Nevada, and Plutonic’s two hydro projects in British Columbia. Plutonic, with partner General Electric (GE.N), also owns a wind farm in British Columbia and has the option to set up a solar project in Ontario.
Beaty will become executive chairman and CEO of Alterra. Plutonic’s CEO Donald McInnes will become executive vice-chairman.
The transaction already has the support of 38.7 percent of Magma’s shareholders and 20.2 percent of Plutonic‘s, including institutional investor Goodman & Co, the companies said. Shareholder meetings will be held in late April to seek approval for the deal.
$1=$0.97 Canadian Additional reporting by Sakthi Prasad and Bhaswati Mukhopadhyay in Bangalore; editing by Rob Wilson and Peter Galloway