MAGMA ENERGY CORP ANNOUNCES 2011 THIRD QUARTER RESULTS

(All amounts in US dollars unless otherwise stated and all MW according to the Geothermal Reporting Code.)

VANCOUVER, May 12 /PRNewswire-FirstCall/ - Magma Energy Corp. (TSX: MXY) today reported its financial and operating results for the third quarter of fiscal 2011 ending March 31, 2011.  Highlights of the quarter were:

• Quarterly revenue of $18.7 million, EBITDA of $5.2 million and net income of $9.0 million ($0.03 per share).
• Merger announced with Plutonic Power Corp. and name changed to Alterra Power Corp. Transaction is effective May 13 and adds hydro, wind and potentially solar power production to Magma's geothermal portfolio, taking total power capacity to 366 megawatts generating 1,800 gigawatt hours of electricity annually.
• Awards of the Mensano and Roccastrada geothermal concessions in Italy, located in a renowned geothermal power production area in Tuscany. Subsequent to the quarter Magma was also awarded two geothermal concessions, Loriscota and Crucero, in a promising region of southern Peru.
• Subsequent to the quarter an agreement was reached to sell a 25% interest in Magma's 98.5%-owned HS Orka subsidiary to a group of Icelandic pension funds for ISK 8.06 billion (approximately $71.5 million). This transaction is expected to close in late May.

Ross Beaty, Chairman and CEO, commented, "In this third quarter of fiscal 2011 we continued our rapid growth by agreeing to combine with Plutonic Power to create Alterra Power Corp. This will build us into a larger, stronger, more diversified clean energy company. Geothermal power will remain a core focus of Alterra, but we will also have hydro, wind and possibly solar power assets and a broader mix of growth opportunities. And equally important - we have an outstanding team of clean energy operators and developers to deliver greater value creation for all shareholders."

Financial Results
(expressed in thousands of dollars, except for GWh and per share amounts)

Financial highlights of Q3 2011 are summarized below. Results for the three and nine months ended March 31, 2011 include the consolidation of results of HS Orka since August 17, 2010 when Magma acquired control and are therefore not comparable with prior periods.

¹ EBITDA is defined by the Company as earnings before interest and other financing costs, taxes, depreciation and amortization, as well as before deductions for non-cash charges related to employee compensation, equity earnings/losses, loss on re-measurement of equity interest,  gain on bargain purchase and changes to the balance sheet carrying value of long-term debt. The Company discloses EBITDA as it is a measure used by analysts and by management to evaluate the Company's performance. As EBITDA is a non-GAAP measure, it may not be comparable to EBITDA calculated by others. In addition, as EBITDA is not a substitute for net earnings, readers should consider net earnings in evaluating the Company's performance.

For the third quarter of fiscal 2011 revenue from energy sales was $18.7 million and total costs of production were $13.6 million, for a gross profit of $5.2 million. Approximately 46% of HS Orka's revenue is generated from sales under power purchase agreements with prices indexed to the price of aluminum, resulting in higher revenue as aluminum prices increase. The average London Metal Exchange aluminum price for the three months ended March 31, 2011 was $2,524 per tonne versus $2,368 per tonne for the second quarter of this fiscal year. HS Orka contributed $17.3 million of revenue and accounted for $11.8 million of production costs. The increase in revenue due to higher aluminum prices was slightly offset by a weaker US dollar. Our Soda Lake operation contributed revenue of $1.4 million and accounted for $1.8 million of production costs, $0.7 million higher than in Q2 2011 primarily due to non-recurring maintenance work completed in the quarter.

EBITDA for the quarter was $5.2 million compared to an EBITDA loss for the same period last year of $0.2 million. The net income for the quarter was $9.0 million or $0.03 per share, against net income of $0.1 million ($0.00/share) for the same period last year. The year-on-year increase in net income for the quarter of $8.9 million was primarily related to increased gross profit of $5.0 million and net gains from changes to the fair value of debt and derivatives of $18.0 million. These were offset by increased interest and other financing costs of $2.9 million; increased general, administrative and professional fee expenses of $1.9 million due, in part, to one-off costs incurred in the Plutonic transaction and Nordural arbitration case; and increased future income tax expense of $5.4 million.

On a cash basis for the quarter ended March 31, 2011, the Company spent: $5.2 million on investing activities, including net investments of $1.6 million related to acquisitions and exploration activities for the Company's portfolio of exploration projects; $1.6 million on plant and equipment; and $2.0 million for a convertible debenture related to the acquisition of Plutonic. At March 31, 2011, Magma had cash and cash equivalents of $19.8 million, working capital of $3.8 million (including $28.3 million in restricted cash), and long-term non-recourse debt of $293.2 million.

Subsequent to the quarter Magma agreed to sell a 25% interest in its HS Orka subsidiary to a group of Icelandic pension funds for a price of ISK 8.06 billion (approximately $71.5 million).  The pension funds will also hold an option until February 10, 2012 to purchase new shares from HS Orka treasury that, if exercised, would increase their stake in HS Orka to 33.4% at a cost of ISK 4.7 billion (approximately $41.7 million). The transaction is subject to a number of conditions, including further due diligence, and is expected to close in May.

HS Orka Operations

The Svartsengi 75 MW power plant and associated 150 MW district heating system, as well as the 100 MW Reykjanes power plant produced as expected during the quarter.  Production at Svartsengi was 118.3 GWh while the Reykjanes power plant produced 208.4 GWh. A 30 MW higher-priced power purchase agreement was signed with Iceland Silica Company to replace a soon-expiring 30 MW contract.

A two-phase expansion of the Reykjanes plant's output to 180 MW from 100 MW is planned, pending permitting and new agreements with one or more power purchasers.  For the 50 MW Phase I, the Fuji Electric turbine is on site, drilling of well RN-30 is ongoing with the first results expected in June, and a draft permit is being negotiated. $41.7 million out of a budget of $131 million has been spent on the project and the remaining cost for the expansion is expected to be funded mainly from HS Orka's cash on hand and non-recourse debt financing.

Soda Lake Operation

Soda Lake's output for the quarter was 20.6 GWh, slightly above budget and reflecting gains from the Phase 1 productivity improvements. Well 25A-33 was placed in service as an injection well in February and flow testing is underway to determine if could be used as a production well. Two step-out drilling targets were selected for deeper slim hole drilling during the second half of 2011.

During the quarter Magma continued work on the Phase 2 expansion, with an updated resource assessment, further temperature gradient well drilling and seismic data analysis being used to define the development strategy. Should a successful target be recognized, production drilling could commence in late 2011.

Exploration Activities

In Chile, at Magma's Mariposa reservoir, plans for additional slim holes and large diameter exploration drilling are underway and a partner is actively being sought for this next phase of exploration. Additional exploration drilling is planned in November. Preliminary exploration work was completed on the nearby Los Cristales concession and at Tres Puntas in the Atacama region of northern Chile.

Magma acquired new concessions in Italy, Mensano and Roccastrada, covering a total of 48,446 hectares near the historic geothermal field of Lardarello. Based on prior work, high enthalpy geothermal systems are inferred in both concessions. A detailed exploration program will begin on both concessions to confirm the resources and to define the best location and targets for the exploration wells to be drilled in the following phase.

In Peru, Magma has applied for a total of 27 geothermal concessions and subsequent to the quarter was awarded the first two, Loriscota and Crucero. The concessions cover a total of 37,400 hectares located northwest of Candarave, in a promising region of southern Peru characterized by volcanoes and geothermal systems of significant size. Full scale exploration is planned to commence in early July.

Magma continues to evaluate the potential of all of its 12 US exploration and development properties.  All of the currently planned exploration program expenditures are discretionary.

Outlook

Mr. Beaty concluded, "Alterra Power will be one of Canada's leading clean energy companies and the only one with a mix of all of the dominant forms of renewable energy. Our growing financial strength will reduce our cost of capital for our many growth projects. Once the Plutonic transaction is wrapped up in the next few days, I look forward to continuing the very rapid growth we have seen in our short history to date."

About Magma Energy Corp.

Magma Energy Corp. is a geothermal power company which owns and operates 198 MW of geothermal energy projects while actively exploring for and developing new projects. Magma has an extensive portfolio of properties throughout the western United States, Iceland, South America and Italy, including one operating power plant in Nevada and two in Iceland. For more information, visit www.magmaenergycorp.com.

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.

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.

A number of known and unknown risks, uncertainties and other factors, may cause our actual results or performance to materially differ from any future results or performance expressed or implied by the forward-looking information.  The forward-looking information is based upon what management believes to be reasonable assumptions, including, but not limited to, assumptions about: the success and timely completion of planned exploration and expansion programs, the growth rate in net electricity consumption; support and demand for non-hydroelectric renewables; government initiatives to support the development of renewable energy generation; the accuracy of reserve estimation methodology and analysis used to estimate the quantity of potentially recoverable thermal energy; geological, geophysical, geochemical and other conditions at our properties; the reliability of technical data, including extrapolated temperature gradient, geophysical and geochemical surveys and geothermometer calculations; capital expenditure estimates; availability of capital to fund exploration, development and expansion programs; and general economic conditions.     Forward-looking information and statements are also based upon the assumption that none of the identified risk factors that could cause actual results to differ materially from the forward-looking information and statements will occur.

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.

SOURCE Magma Energy Corp.

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