MAGMA ENERGY ANNOUNCES HS ORKA'S RELEASE OF MID YEAR FINANCIAL RESULTS

VANCOUVER, Aug. 31 /CNW/ - Magma Energy Corp. (TSX: MXY) reports that Icelandic geothermal company HS Orka hf ("HS Orka"), held 84.21% by Magma Energy, today released its audited financial and operating results for the six months ended June 30, 2010. These results may be accessed at: http://ow.ly/2wY0h

HS Orka prepares its financial statements in accordance with International Financial Reporting Standards and are reported in Icelandic kroner. Summarized below are HS Orka's financial results presented in US dollars and reconciled with Canadian GAAP. At June 30, 2010 Magma Energy owned a 46.18% interest in HS Orka and accounts for its investment using the equity method of accounting.

While HS Orka's results from operating activities were 70% higher than the same period last year, HS Orka reported a net loss of $18.2 million for the six months ended June 30, 2010. This loss was primarily the result of a $31.8 million loss in the change in fair value of embedded derivatives in sales contracts. Approximately 50% of HS Orka's power sales agreements are partially indexed to the price of aluminum resulting in embedded derivatives. Changes in the forward price of aluminum result in a fair value change of the derivative. At June 30, 2010 the forward price of aluminum on the London Metal Exchange was lower than the value at December 31, 2009. This resulted in a non-cash loss of $31.8 million in the change in fair value of embedded derivatives in sales contracts.

HS Orka Financial Results

(expressed in millions of US dollars and reconciled with Canadian GAAP - unaudited)

Summary financial information with respect to the operations of HS Orka, on a 100% basis is as follows

    
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                                                  For the            For the
                                         Six Months Ended         Year Ended
                                            June 30, 2010  December 31, 2009
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    Total revenue                                    27.5               49.8
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    Cost of energy production                       (18.1)             (35.5)
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    Gross profit                                      9.4               14.3
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    Other operating expenses                         (1.5)              (2.9)
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    Results from operating activities                 7.9               11.4
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    Other income (expenses)                         (29.6)              46.3
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    Income tax recovery (expense)                     3.5               (7.4)
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    Income (loss) for the period                    (18.2)              50.3
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    EBITDA                                           12.1               19.1
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    Total assets                                    299.2              318.5
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    Total liabilities                               201.3              217.8
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    Cash and cash equivalents                         7.7                1.2
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    Working capital (deficiency)*                  20.4                6.6
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    * current assets - current liabilities (net of current portion
        of long term debt)
    

Magma Energy's year end results for the period ending June 30, 2010 will be announced after markets close on September 28, 2010.

About HS Orka

HS Orka is the largest privately owned energy company in Iceland producing 9% of the country's power needs. Installed geothermal power capacity is 175 MW from the Svartsengi and Reykjanes power plants. In addition, HS Orka generates 150 MW of thermal energy for district heating. Expansions are planned that will increase HS Orka's geothermal power production to 405 MW by 2016.

About Magma Energy Corp.

Magma Energy Corp. is a global 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 second 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. 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.

For further information: Alison Thompson, Vice President, Corporate Relations, Magma Energy Corp., Phone: [phone], Email: [email protected]