Magma Energy Corp. U.S., a geothermal development company headquartered in Reno, followed up a successful initial public offering by its parent company on the Toronto Stock Exchange this month by purchasing 17 leases in Churchill and Pershing counties during last week's Bureau of Land Management geothermal lease auction.
Last year's geothermal auction garnered $28 million for the BLM.
Though this year's $9.09 million auction total didn't reach that figure, the BLM's third Nevada geothermal auction drew the highest per-acre bid in the auction's history $3,800 per acre for a 400-acre parcel in Churchill County. Bill Sherman, land department manager for Ormat Technologies Inc., was the successful bidder.
The $3,800-an-acre bid netted $1.52 million for the BLM, but it didn't result in the biggest check of the day. A 5,045-acre parcel, also in Churchill County, netted $2.65 million at $525 an acre. Another 2,798-acre Churchill County parcel netted $1.01 million at $360 an acre. Both parcels were purchased by TGP Development Co. LLC of Reno, which was the rival bidder for the costly parcel eventually won by Ormat.
Ormat company executives would not disclose how high they were prepared to go for the parcel, but it was clear they weren't going to be outbid.
"Based on our analysis, this was a valuable parcel," says Ormat President Yoram Bronicki.
Bidding at the BLM auction was slightly more subdued than expected, given the national push toward renewable energy and large number of bidders who packed a conference room at the BLM offices in Reno. However, only 15 companies or individuals bid on the 108 Nevada parcels totaling 323,222 acres that were put up for auction. A total of 82 parcels totaling 243,727 acres sold, many at the minimum bid of $2 an acre.
"It is always very interesting to see the different ranges; it ranged from no bids to $3,800," says Atanda Clark, branch chief of minerals adjudication for the BLM. "But the sale makes a great deal of acreage available for geothermal exploration and production."
The Nevada parcels generated $8.9 million, while 15 parcels in California sold for $131,126 and one in Utah sold for $57,250.
The BLM currently manages 560 geothermal leases in the state, with fifty-eight leases producing roughly 1,275 megawatts of geothermal energy.
The leases generate more than $12 million a year in federal royalties under a revenue-sharing plan. Fifty percent of revenues from the lease sale go to the state, 25 percent goes to the counties where the land is located, and the BLM receives the remaining 25 percent.
Magma Energy U.S. was the most active bidder, followed by Standard Steam Trust LLC of Denver, which picked up 13 leases totaling 22,031 acres.
Magma Energy U.S., which operates the eight-megawatt Soda Lake geothermal plant near Fallon, purchased leases for 67,943 acres. Magma already had a portfolio of seven Nevada properties and rights to explore geothermal potential on 90,000 privately held acres in the state, President Frank Monastero says.
Much of the acreage purchased by Magma represented in-fill properties near its existing leases. The new tracts give the company additional properties in early and advanced exploration stages due to previous exploration activity on nearby parcels.
"There has been a lot of work done that enables us to be farther along in bringing them to actual production. It is very valuable to be in that position," Monastero says."
With the additional acreage, Magma Energy U.S. has 700,000 acres under management in the United States, Chile, Peru and Argentina. It manages more than 200,000 acres in Nevada, including private holdings.
Magma raised more than $88 million through sale of 66.6 million shares in its initial public offering on the Toronto Stock Exchange. Although Magma's facilities currently produce a small amount of geothermal power, which is sold to NV Energy, the company's target over the next five years is to have a minimum of 400 to 500 megawatts in production.
Magma expects to announce a substantial acquisition in the third quarter that will help it meet that goal.
"We will get there by organic growth as well as by acquisition," Monastero says.
Magma Energy U.S. Corp is the United States operation of Magma Energy Corporation of Toronto.
