Following a thorough due diligence, 14 pension funds, which in recent months have examined the possible purchase of a stake in HS Energy, have decided to enter into an agreement with Magma Energy Sweden AB (“Magma Sweden”), a wholly-owned subsidiary of Alter Power (formerly Magma Energy). This transaction, which was previously announced on April 18, 2011, has now been formalized with the completion of a definitive Share Purchase Agreement and is expected to close by June 2, 2011. Under the terms of the agreement, Magma Sweden will sell a 25% interest in its 98.5%-owned Icelandic geothermal power company, HS Energy, to Jarðvarmi slhf, an entity established to manage its holdings on behalf of the funds.
According to the agreement, Jarðvarmi slhf will acquire 25% of HS Energy at a price of 4.63 per share. The purchase price amounts to almost 8.1 billion ISK (US $69.8 million), with the payment taking place June 1, 2011. Jarðvarmi slhf will also purchase options on new shares in HS Energy at a price of 5.35 per share; if the option is exercised in full, Jarðvarmi slhf will hold 33.4 % of HS Energy. The agreement also includes Jarðvarmi slhf subscription rights for up to 50% of HS Energy through the purchase of additional shares that the company may release in the future.
Jarðvarmi slhf will appoint two of the five board members of HS Energy. Strong minority protection, active board participation, and a formal approach to all major decisions on behalf of the company are among the terms of the transaction. This will remain a permanent arrangement, assuming more than 22.5 % of the total shares are held.
The consultant for the pension funds in this transaction has been Arctica Finance. LEX managed the legal due diligence and legal advice during the bargaining process, while PwC was responsible for financial and tax due diligence and Reykjavik Geothermal managed the geological, technical, and operational due diligence.
