February 15, 2011 / 9:27 PM / 7 years ago

UPDATE 1-Magma says geothermal industry growth limited

* Magma CEO says geothermal industry returns have been poor

* Geothermal stocks in Canada down 20-30 pct in past year

* Magma in advanced talks on sale of HS Orka stake

* Posts deeper quarterly loss (Adds comments from CEO, context, background. In U.S. dollars unless stated)

By Nicole Mordant

VANCOUVER, Feb 15 (Reuters) - Magma Energy Corp MXY.TO is looking for investments outside the geothermal energy sector, the company’s chief executive said on Tuesday, lamenting the geothermal’s limited scope for growth.

Ross Beaty, CEO of Magma, one of the world’s biggest developers of geothermal energy resources, also said he is disappointed by the lack of “real return” to investors in the sector over the past few years.

“We have also been looking for accretive growth opportunities and have reviewed a number of these, including some opportunities beyond the geothermal industry that we think could marry well with our geothermal focus,” Beaty said.

“The geothermal industry is small and the scope for growth quite limited, even internationally,” he said on a conference call to discuss Vancouver-based Magma’s quarterly results.

Beaty made his name and fortune in the mining industry founding companies such as Pan American Silver PAA.TO before switching gears to clean energy development in 2008, when he founded Magma.

Geothermal energy is a renewable source of energy that comes from hot water and steam produced deep inside the earth. These are piped up to the surface and used to drive turbines to produce electricity.

The industry got a boost in 2009 as interest in clean and alternative energies rose globally on global warming concerns. But a dearth of news from developers, some project hiccups and the high upfront cost of development have reduced interest since then.

Geothermal companies listed on the Toronto Stock Exchange, which is home to a large contingent of the world’s publicly listed geothermal businesses, have lost 20 to 30 percent of their market value in the last year.

Magma rival Ram Power Corp RPG.TO, once regarded as a key industry consolidator, is down a steep 65 percent in the past year, most recently hurt by a big cost over-run at a project in Nicaragua and the departure of its CEO this week.

Magma too has run into difficulties. In Iceland, it has faced high-profile public opposition, notably from singer Bjork, to its purchase last year of geothermal producer HS Orka. Opponents of the purchase argue that Iceland’s natural resources should not be owned by foreigners.

Beaty said Magma was in “well advanced” talks with Icelandic pension funds on selling them a 20-25 percent stake in HS Orka. That will net Magma between $55 million and $68 million, depending on how much is sold, he said.

Magma has looked at at “a ton” of geothermal opportunities and only invested in one, namely HS Orka, Beaty said.

The company posted a loss of $9.1 million for the three months to end-December on Tuesday, down from a $3.5 million loss in the same period in 2009.

Magma’s stock closed 3 Canadian cents, or 2.2 percent, lower at C$1.32 on the Toronto Stock Exchange on Tuesday.

$1=$0.99 Canadian Editing by Peter Galloway

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