SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant [ ]
Filed by a Party other than the Registrant [X]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[X] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
MAGMA POWER COMPANY
- -------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
CALIFORNIA ENERGY COMPANY, INC.
CE ACQUISITION COMPANY, INC.
- -------------------------------------------------------------------------------
(Name of Person Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
[ ] $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-
6(i)(2).
[ ] $500 per each party to the controversy pursuant to Exchange Act
Rule 14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11.
(1) Title of each class of securities to which transaction
applies:
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(2) Aggregate number of securities to which transaction applies:
--------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11:
--------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration number, or the form or schedule and the
date of its filing.
(1) Amount previously paid:
--------------------------------------------------------------------
(2) Form, schedule or registration statement no.:
--------------------------------------------------------------------
(3) Filing party:
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(4) Date filed:
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CONTACTS:
James Protos
MacKenzie Partners, Inc.
(212) 929-5397
or
Evan Collins
MacKenzie Partners, Inc.
(212) 929-5500
FOR IMMEDIATE RELEASE
CALIFORNIA ENERGY ANNOUNCES SCHEDULE OF MEETING FOR
THE WEEK OF OCTOBER 24
OMAHA, NE., October 24, 1994 -- California Energy Company,
Inc. (NYSE: CE; PSE and LSE) today announced its schedule of
meetings with securities analysts, shareholders and bondholders
of Magma Power Company (NASDAQ: MGMA) for the week of October 24.
The schedule is as follows:
Tuesday, October 25, 4:30 p.m. -- Boston, Massachusetts
Four Seasons Hotel
200 Boylston Street
Wendell Phillips Room
Wednesday, October 26, 4:30 p.m., New York, New York
Helmsley Palace Hotel
455 Madison Avenue
Renaissance A Room
Friday, October 28, 12:00 noon, Los Angeles, California
Sheraton Grande Hotel
333 South Figueroa Street
Conference Room Suite 310
Shareholders, bondholders and securities analysts who wish to
attend should contact James Protos (212) 929-5397 or Evan Collins
(212) 929-5500 at MacKenzie Partners, Inc. to confirm interest
and receive an invitation.
# # #
1
[CE logo appears here]
CALIFORNIA ENERGY COMPANY, INC.
October 1994
2
[CE logo appears here]
OBJECTIVE: SECURE YOUR APPROVAL FOR THE PROPOSED TRANSACTION
3
[CE logo appears here]
FIVE REASONS TO ACCEPT THE OFFER
- - $38.50/Share Represents Fair Value (40% premium)
- - CE and Magma Combination Benefits All Shareholders
- - CE Management is Best Able to Meet Future Challenges
- - Offer Contains No Significant Contingencies
- - Magma's Share Price is Expected to Plummet if California Energy
Retracts its Offer
4
[CE logo appears here]
REASONS TO ACCEPT CALIFORNIA ENERGY'S OFFER
WHAT SHOULD WE CONCLUDE FROM THE
OWNERSHIP TREND OF CE'S AND MAGMA'S LARGEST SHAREHOLDERS?
[A bar graph is presented depicting the following information.]
Month/Year Ownership(a)
- ---------- ------------
Apr-90 Dow 39.0%
Kiewit 0.0%
Apr-91 Dow 24.0%
Kiewit 29.0%
Apr-92 Dow 24.0%
Kiewit 35.0%
Apr-93 Dow 24.0%
Kiewit 37.0%
Apr-94 Dow 5.0%
Kiewit 38.0%
Sep-93 Dow 5.0%
Kiewit 44.0%
<FN>
____________________
(a) Data from Proxy Statements and 13D Filings. Dow beneficial ownership
net of 4,000,005 shares placed in escrow under Subordinated
Exchangeable Note Offering dated April 11, 1991.
5
[CE logo appears here]
REASONS TO ACCEPT CALIFORNIA ENERGY'S OFFER
WHICH MANAGEMENT TEAM CAN BEST CREATE
LONG-TERM SHAREHOLDER VALUE?
Magma Executive Experience Beneficial
Officers(a) Age Dow IPP Ownership
- --------------- --- --- --- ----------
Paul M. Pankratz 62 35 2 66,100
Ralph W. Boeker 60 34 1 15,000
John R. Peele 50 5 6 19,500
Wallace C. Diokmann 51 2 6 17,159
Trond Aschehoug 51 25 2 12,450
Kenneth J. Kerr 50 28 1 16,000
Average per
Executive Officer 54 22 3 24,368
CE Executive IPP Beneficial
Officers(a) Age Experience Ownership
- ------------ --- ---------- ----------
David L. Sokol 38 16 394,431
Thomas R. Mason 51 16 55,420
Steven A. McArthur 36 4 68,416
Donald O'Shei Sr. 61 8 38,545
John G. Sylvia 36 9 60,270
Average Per
Executive Officer 44 10 123,416
CE management: 10 years younger, 3X the IPP experience, and 3X the personal
stake
<FN>
____________________
(a) Statistics are based on the Magma 1994 Proxy Statement and the CE
Proxy Statement.
6
[CE logo appears here]
REASONS TO ACCEPT CALIFORNIA ENERGY'S OFFER
DOW AND MAGMA MANAGEMENT - NET SELLERS
[Graphic Representing Certain Sales of Magma Common Stock
by Dow and by Certain Members of Magma Management.]
Magma Power
Date Share Price
-------- -----------
10/21/93 $37.75
12/21/93 34.00
2/02/94 33.75
3/25/94 34.25
5/18/94 31.25
7/08/94 29.50
8/30/94 29.00
10/21/94 37.00
7
[CE logo appears here]
REASONS TO ACCEPT CALIFORNIA ENERGY'S OFFER
WHAT MAGMA SHAREHOLDERS MISSED
[Graphic Representing Market Price of Magma Common Stock
Relative to Market Price of California Energy's Offered
Consideration in October 1991(a)]
Price Per Share
----------------------------------
1991 Proposed Magma Power
Date CE Consideration Share Price
-------- ---------------- -----------
10/01/91 $29 $26
3/27/92 24 22
9/18/92 26 22
3/19/93 42 39
9/10/93 37 39
3/04/94 36 31
8/31/94 35 29
<FN>
____________________
(a) Exchange Ratio = 2.0168
8
[CE logo appears here]
OVERVIEW
DISCUSSION TOPICS
- - Transaction Rationale
- - California Energy Offer and Magma Response
- - Profile of California Energy
- - Comparison of California Energy and Magma
- - Correcting the Misstatements and Omissions - What Magma
Didn't Tell You
- - Five Reasons to Accept the Offer
- - Questions
9
[CE logo appears here]
TRANSACTION RATIONALE
10
[CE logo appears here]
TRANSACTION RATIONALE
INDUSTRY TRENDS
- - International Markets Provide Most Attractive Investment Opportunities
- - IPP Industry is Highly Competitive - Critical Mass and Name
Recognition are Important
- Competition not limited to renewables
- Increased project size with more complex development and
financing process
- Enhanced access to public capital markets - "Brand Names"
- Credibility with foreign governments
- - Future Global Leaders Will Need to be "Full Service Providers"
11
[CE logo appears here]
TRANSACTION RATIONALE
OVERVIEW
- - Creates One of the Largest Global IPPs
1993 SUMMARY FINANCIAL STATISTICS ($MM)
CE Magma
---- -----
Sales $149 $167
EBITDA 102 106
PROJECT PORTFOLIO (MWs)
Operation 325 244
Construction 300 0
Development 930 [1,132](a)
<FN>
- ---------------
(a) Pursuant to October 21, 1994 Magma Press Release.
12
[CE logo appears here]
TRANSACTION RATIONALE
SYNERGIES
- - Critical Mass
- - Greater Access to Capital and Financial Flexibility
- - Enhanced Name Recognition
- - Broaden International Development Resources
- - Corporate/Operating Efficiencies and Cost Reductions
- - Increased Equity Base
13
[CE logo appears here]
CALIFORNIA ENERGY OFFER AND MAGMA RESPONSE
14
[CE logo appears here]
CALIFORNIA ENERGY OFFER AND MAGMA RESPONSE
CALIFORNIA ENERGY OFFER
- - Price
- $38.50 per share: Cash $28.50
Stock 10.00
- 40% premium
- Offer price fully values new project opportunities and expected
synergies
- - History of Discussions
- Long history of contacts over past 3 1/2 years - no progress
- $30.25 per Magma share stock transaction proposed in 1991
- - Rationale for CE Offer
- Magma unwillingness to negotiate
- Merger makes economic sense for CE and Magma shareholders
- Allows Magma shareholders to decide
15
[CE logo appears here]
CALIFORNIA ENERGY OFFER AND MAGMA RESPONSE
MAGMA RESPONSE
- - Magma Has Made Numerous Efforts to Thwart CE and Deprive Shareholders
the Opportunity to Maximize Value
- Refusal to negotiate
- Stalling for time
- Implementation of Anti-Takeover impediments
Date Event
__________________ _________________________________________________
September 19, 1994 - CE Offers to Acquire Magma for $35 per Share
September 25, 1994 - Magma Requests that CE Delay Tender Offer
until October 4 - CE Agrees
October 3, 1994 - Magma Board Adopts Poison Pill and Golden
Parachutes
- Magma Commences Litigation Against CE
October 4, 1994 - CE Announces Cash Tender Offer to Purchase
51% of Magma for $35 per Share
October 10, 1994 - Magma Board Recommends that Shareholders
Reject CE Proposal
October 21, 1994 - CE Offers to Acquire Magma for $38.50 per
Share
16
[CE logo appears here]
CALIFORNIA ENERGY OFFER AND MAGMA RESPONSE
COST TO SHAREHOLDERS OF MAGMA'S RECENT ACTIONS
ESTIMATED COSTS
------------------------------
MAGMA CE
------------- -----------
Golden Parachutes/Option Acceleration(a) $ 7,364,338
Legal/Litigation 4,000,000 $4,000,000
P.R./Advertising 250,000 250,000
Printing 250,000 250,000
Proxy Solicitation 225,000 225,000
Goldman, Sachs 5,750,016
Roadshow 25,000 25,000
Total $17,864,354 $4,750,000
Combined Total Cost $22,614,354
CONCLUSION: IS THIS REALLY IN THE BEST INTERESTS OF MAGMA SHAREHOLDERS?
(a) Based on 1994 Proxy Statement.
17
[CE logo appears here]
CALIFORNIA ENERGY OFFER AND MAGMA RESPONSE
MAGMA CLAIM CE RESPONSE
Conditional upon Financing - Binding Bank Commitment for
$500 million
"It is not David Sokol's God-given - "It is not Ralph Boeker's
right to acquire Magma" - Ralph God-given right to deny
Boeker in Dow Jones interview his shareholders maximum value
and entrench himself" - David
Sokol
High Leverage of Combined Company - Proper utilization of balance
sheet
- Leverage indicates non-
recourse project financing
success
- Combined companies have
enhanced access to new capital
in future
- Kiewit remains an important
shareholder
Too Many Other Conditions
CE Shareholder Vote - Kiewit supports transaction
(38% vote)
Merger Agreement - Poison pill necessitates
approach
Coercive: 51% Offer - Offer strategy determined by
Magma Board's refusal to
negotiate
18
[CE logo appears here]
PROFILE OF CALIFORNIA ENERGY
19
[CE logo appears here]
PROFILE OF CALIFORNIA ENERGY
MISSION STATEMENT
"TO BE THE LEADING GLOBAL PROVIDER OF INDEPENDENTLY
DEVELOPED, OWNED AND OPERATED ELECTRICAL ENERGY
FACILITIES UTILIZING ENVIRONMENTALLY RESPONSIBLE TECHNOLOGY"
20
[CE logo appears here]
PROFILE OF CALIFORNIA ENERGY
OVERVIEW
- - Clearly Defined Long-Term Strategy with a Focus and Strong Reputation:
- Operational excellence
- Recognized leader in development
- Engineering and construction control
- Financial innovation and strict adherence to internal rate of
return and risk minimization standards
- Strong management team with a proven successful track record
CALIFORNIA ENERGY WAS AWARDED THE "STRATEGIC
CONTINUITY AWARD" FOR PURSUING A SUCCESSFUL
BUSINESS STRATEGY BY INDEPENDENT ENERGY MAGAZINE
SEPTEMBER, 1994
21
[CE logo appears here]
PROFILE OF CALIFORNIA ENERGY
[Two adjacent bar graphs are presented depicting
the following information.]
REVENUE (millions)
- ------------------------------------------
Year 1989-1993 Growth Rate: 33%
- ---- ---------------------------
1989 $48
1990 97
1991 116
1992 128
1993 149
EARNINGS (millions)(a)
Year 1989-1993 Growth Rate: 43%
1989 $10
1990 12
1991 27
1992 39
1993 43
<FN>
____________________
(a) Before extraordinary items, change in accounting principle, and
preferred dividends.
22
[CE logo appears here]
PROFILE OF CALIFORNIA ENERGY
EARNINGS PER SHARE(a)
[A bar graph is presented depicting the following information.]
1989-1993 Growth Rate: 27%
Year Earnings Per Share
- ---- ------------------
1989 $0.38
1990 0.44
1991 0.75
1992 0.92
1993 1.00
<FN>
____________________
(a) Before extraordinary items and change in accounting principle.
23
[CE logo appears here]
PROFILE OF CALIFORNIA ENERGY
FIRST NINE MONTHS REVENUE AND EARNINGS(a)
[Two adjacent bar graphs are presented depicting
the following information.]
REVENUE
- ----------------------------
Year $ in Millions
- ---- -------------
1993 $113.3
1994 139.2
EARNINGS
- ----------------------------
Year $ in Millions
- ---- -------------
1993 $34.8
1994 38.3(b)
<FN>
____________________
(a) Before extraordinary items, change in accounting principle and
preferred dividends.
(b) Before effect of Senior Discount Notes.
24
[CE logo appears here]
PROFILE OF CALIFORNIA ENERGY
CE HAS CONSISTENTLY OUTPERFORMED MAGMA(a)
[Three adjacent bar graphs are presented depicting
the following information.]
REVENUE GROWTH
- -----------------------------
Company Revenue Growth
- ------- --------------
CE 33%
Magma 28%
EARNINGS GROWTH(b)
- ------------------------------
Company Earnings Growth
- ------- ---------------
CE 43%
Magma 24%
EPS GROWTH(b)
- -------------------------
Company EPS Growth
- ------- ----------
CE 27%
Magma 21%
<FN>
____________________
(a) Based on 1989-1993 Compound Annual Growth Rates.
(b) Before extraordinary items, change in accounting principle, and
preferred dividends.
25
[CE logo appears here]
PROFILE OF CALIFORNIA ENERGY
STRENGTHS
DEVELOPMENT x David Sokol developed 16 projects for Ogden in 6
years
x Kiewit 50/50 JV
- Sharing of development expenses
- Investment diversification
x Proven ability to complete projects in a timely
manner
x Strict adherence to internal standards
ENGINEERING x Global geothermal facility design experience
(including Salton Sea)
x Experience in other technologies
FINANCING x First investment grade IPP - $560 mm Coso Funding
Notes
x Largest corporate debt offering by IPP - $400 mm
Discount Notes Offering
x Full use of balance sheet to minimize equity
issuance
CONSTRUCTION x CE and Kiewit Relationship
- Arm's length
- CE flexibility to match best contractor with
project
- Foreign construction risk management
- Proven success in power construction
- Readily financeable
- Quality reputation
- Must competitively bid for projects
OPERATIONS x Coso Performance
- Demonstrated history of cost management
- Demonstrated consistent high reliability and
performance
- One of, if not the best, safety records in the
industry
- Geotechnical systems such as 3D reservoir modeling
CALIFORNIA ENERGY IS AN INTERNATIONAL FULL SERVICE PROVIDER
26
[CE logo appears here]
PROFILE OF CALIFORNIA ENERGY
PETER KIEWIT & SONS OVERVIEW
- - Kiewit is a Global Infrastructure, Construction, Mining,
Communications and Energy Company with $2.2 billion in Revenue and
$261 million in Earnings in 1993
- - Recognized by Forbes and Warren Buffett as One of the Best Run
Companies in America (Forbes feature article, October 24, 1994)
- - Reputation for Successfully Managing and Completing Large Complex
Projects Worldwide
- - Involved in 5 Main Businesses:
Market Percent
Company Capitalization Ownership Industry
- ------- -------------- --------- --------
MFS Communications $2,316 Million 71% Communications
California Energy $546 Million 43 IPP
C-TEC $409 Million 57 Cable TV/
Telecommunications
Kiewit Mining Private 100 Mining
Kiewit Construction Private 100 Construction
27
[CE logo appears here]
COMPARISON OF CALIFORNIA ENERGY AND MAGMA
28
[CE logo appears here]
COMPARISON OF CALIFORNIA ENERGY AND MAGMA
CE SETS THE STANDARD FOR OPERATING EXCELLENCE
OPERATING EXPENSES PER KWH EMPLOYEES PER MW
- -------------------------- -------------------------
California Energy
Coso 1993 2.38cents California Energy 0.569
California Energy
Coso 1994 2.28cents Magma 1.360
Magma 1993 4.2cents
Magma Stated
Goal for 1998 2.5cents
[A bar graph is presented depicting the following information.]
Year % of Contract Capacity
- ---- ----------------------
1991 Magma 105.0%
CE 102.8%
1992 Magma 107.7%
CE 108.6%
1993 Magma 110.0%
CE 118.9%
1994 (YTD) Magma 113.0%
CE 120.6%
Avg. Magma 109.0%
CE 113.0%
29
[CE logo appears here]
COMPARISON OF CALIFORNIA ENERGY AND MAGMA
PERFORMANCE SCORECARD
CE MAGMA
------------ --------------
1994 PROJECT DEVELOPMENT
Capital Raised $802 million $135 million
(Refinancing)
New Projects Financed Upper Mahiao None
Mahanagdong
Projects Completed Yuma None
1993 COSO OPERATING PERFORMANCE
Operating Expenses/KWH 2.38cents 4.2cents
Plant Operations 118.9% 110.0%
(% of Contract Capacity)
1989-1993 CAGR
Revenue 33% 28%
Earnings 43% 24%
EPS 27% 21%
CONCLUSION: WHICH COMPANY IS DRIVING THE BUSINESS?
30
[CE logo appears here]
COMPARISON OF CALIFORNIA ENERGY AND MAGMA
RELATIVE PROJECT DEVELOPMENT SUCCESS
CONTRACT FINANCIAL
AWARD CLOSE CE MAGMA
-------- --------- ---- -----
IN OPERATION, CONSTRUCTION
OR FINANCED
MWs currently owned
in operation 197 154
MWs financed and
under construction
Upper Mahiao 9/93 4/94 120
Mahanagdong(a) 9/93 8/94 90
Subtotal 407 154
UNDER DEVELOPMENT
MWs under contract,
no financing
Newberry, Oregon 9/94 30
Malitbog 9/93 231
Fish Lake 3/92 36
Subtotal 30 267
MWs under development,
in contract negotiations
Indonesia: Dieng Patuha 800
Philippines: Casecnan 100
Philippines: Alto Peak 72
Nevada: Sheep Mountain 200
Indonesia: Wayang Windu 280
Indonesia: Karaha [150](b)
California: BRPU (currently stayed by CPUC) 163
Subtotal 900 [865](b)
Total Operation, Construction, Financed &
Development 1,337 [1,286](b)
CONCLUSION: WHO HAS MADE "REAL" MWs?
<FN>
____________________
(a) Mahanagdong is a 180MW plant that was fully financed by CE.
(b) Pursuant to October 21, 1994 Magma Press Release.
31
[CE logo appears here]
CORRECTING THE MISSTATEMENTS AND OMISSIONS --
WHAT MAGMA DIDN'T TELL YOU
32
[CE logo appears here]
CORRECTING THE MISSTATEMENTS AND OMISSIONS
WHAT MAGMA DIDN'T TELL YOU
#1 CONSTRUCTION:
- - Magma Misstatements and Omissions
- Magma uses multiple E&C contractors and CE uses single-source
(Kiewit)
- - The Facts
- Kiewit competes for all construction opportunities on an arm's
length basis
- Since Kiewit investment, CE has used multiple contractors:
- Raytheon built Yuma (50 MW)
- Ormat building Upper Mahiao (120 MW)
- Kiewit building Mahanagdong (180 MW)
- Casecnan E&C - not selected
- Magma claim of multiple contractors not verifiable due to limited
construction activity
#2 OWNERSHIP:
- - Magma Misstatements and Omissions
- Magma retains 50% or greater ownership and CE retains 50% or less
- - The Facts
- California Energy (All operated by CE):
Navy I 46%
Navy II 50%
BLM 48%
Desert Peak 100%
Roosevelt Hot Springs 70%
Yuma 100%
Upper Mahiao 100%
Mahanagdong 50%
- Magma Power (4 of 7 projects):
Vulcan 50%
Hoch 50%
Elmore 50%
Leathers 50%
33
[CE logo appears here]
#3 OPERATING PERFORMANCE:
- - Magma Misstatements and Omissions
- Magma has operated at 109% of contracted capacity in the last 4
years and CE has operated at 96% of contracted capacity 1991-1993
- - The Facts
- Since 1991, Coso has averaged 113% of contracted capacity
- Coso currently operates at 128% of contracted capacity
#4 PLANT DEPRECIATION:
- - Magma Misstatements and Omissions
- Magma depreciates plants over a 20 year period and CE over a 37.5
year period
- - The Facts
- Weighted average depreciation for ALL CE geothermal depreciable
assets is 24.6 years vs. 20 years for Magma
#5 HIGHLY LEVERAGED:
- - Magma Misstatements and Omissions
- Magma's Debt/Total Capital ratio is 24.9% and CE's is 76.1%
- - The Facts
- Net Debt/Total Capitalization: 35.3%
- Net Debt (excluding non-recourse project financing)/Total
Capitalization: 13.0%
- Magma balance sheet is unleveraged due to absence of new project
financings
#6 RESOURCE MANAGEMENT:
- - Magma Misstatements and Omissions
- Magma wells experience little if any decline while new Coso wells
decline 35% to 45% in first year
34
[CE logo appears here]
- - The Facts
- Average decline for Coso is currently about 11% which is in line
with original projections
- As Magma expands their use of the resource their declines will
naturally increase. Additionally, Salton Sea is a different type
of reservoir
#7 ROYALTY PAYMENTS:
- - Magma Misstatements and Omissions
- Magma's royalties are levelized, while CE's are back-end loaded
- - The Facts
- Back-end loaded royalty payments provide NPV benefits to
shareholders and are evidence of superior negotiating
#8 COST REDUCTION:
- - Magma Misstatements and Omissions
- Magma has a public plan to reduce cost to 2.5cents by 1998, while CE
has no publicly announced plan
- - The Facts
- Beginning in 1991, CE implemented cost reduction programs leading
to a current cost of 2.28cents per Kwh compared to Magma's current
cost of 4.2cents
CONCLUSION: THE FACTS SPEAK FOR THEMSELVES
35
[CE logo appears here]
FIVE REASONS TO ACCEPT CALIFORNIA ENERGY'S OFFER
36
[CE logo appears here]
FIVE REASONS TO ACCEPT THE OFFER
REASON #1 - $38.50/SHARE REPRESENTS FAIR VALUE
- - Proof:
- 40% premium to market price prior to CE offer
- Substantial premium to Magma's discounted cash flow value
which reflects real and potential development opportunities
- DLJ indicates $35.00/share is a fair price.
- Wall Street Transcript quotes Ralph Boeker, Magma CEO: "I
don't think we're totally undervalued" on August 1, 1994
when stock price was $28.75
- Obviously, two of your top executives agree, Mr. Boeker.
They sold 10,000 shares at an average price of $34.25 in
1994.
- On October 10, 1994, Mr. Boeker said, "In making its offer
at this time, California Energy is trying to buy Magma at a
bargain price that does not remotely reflect Magma's
intrinsic value and long-term strategic promise."
WHICH WAY IS IT, MR. BOEKER?
37
[CE logo appears here]
FIVE REASONS TO ACCEPT THE OFFER
REASON #2 - CE AND MAGMA COMBINATION BENEFITS ALL SHAREHOLDERS
- - Benefits include:
- Strong combined annual cash flow
- Anticipated cost reductions
- Operational efficiencies
- Increased size, stability and diversification of asset base
and geothermal resources
- Increased global development opportunities
38
[CE logo appears here]
FIVE REASONS TO ACCEPT THE OFFER
REASON #3 - CE MANAGEMENT IS BEST ABLE TO MEET FUTURE CHALLENGES
- - International IPP Development Requires More than Just Caretaker
Management
- David Sokol, CEO, and his team at Ogden Projects, successfully
developed, financed and constructed 16 power projects in 6 years
- CE's management team has completed the most innovative financings
in the industry ($560mm Coso Funding, $400 million zero coupon
Senior Notes)
- CE's management team averages 10 years experience in the IPP
industry while Magma's management team averages only 3 years
- - Kiewit Beneficially Owns 43.3% of CE Stock and has been Extremely
Supportive
39
[CE logo appears here]
FIVE REASONS TO ACCEPT THE OFFER
REASON #4 - OFFER CONTAINS NO SIGNIFICANT CONTINGENCIES
- - Merger Agreement
- - Financing in Place
- CE has $300mm Cash
- Binding Bank Commitments for $500mm
- - Kiewit Votes 38% of CE Stock and Has Approved the Deal
CE PREFERS TO OFFER THE SAME CONSIDERATION TO ALL SHAREHOLDERS
40
[CE logo appears here]
FIVE REASONS TO ACCEPT THE OFFER
REASON #5 - MAGMA'S SHARE PRICE IS EXPECTED TO PLUMMET
IF CALIFORNIA ENERGY RETRACTS ITS OFFER
- - No Other Offers have been Announced
- - Magma's Share Price has Declined Steadily Throughout 1994
- - Offer Price Exceeds Magma's LTM Trading Level
- - Dow Sales of Magma Stock have been at Prices Below CE's Offer
- - JP Morgan Research Analyst warns, "If the CE deal were to fall
through, Magma shares could fall significantly (possibly as low as the
pre-bid level of $27.50)"
- - CE will not Overpay for an Acquisition and is Willing to Walk Away if
the Price is Not Right (e.g., Westmoreland Energy)
41
[CE logo appears here]
CONCLUSION
OUR OFFER MAXIMIZES THE VALUE OF YOUR MAGMA INVESTMENT
WE URGE YOUR ACCEPTANCE
42
GRAPHICS APPENDIX
(Pursuant Rule 304(a) of Regulation S-T)
Description of Graphical Elements
Page 5
See description on Page 5.
Page 7
Graphical depiction of certain sales of Magma common stock by Dow and
by certain members of Magma management. Graphical element is a line
graph, the vertical axis of which is marked in $1 dollar increments
from $25 to $40 and the horizontal axis of which is marked with
certain dates from January 13, 1994 through October 21, 1994. The
graph contains a wavering horizontal line representing the market
price of Magma's common stock during the periods indicated and is
marked to indicate the date of certain sales by Dow and by certain
members of Magma management.
Page 8
Graphical depiction of market price of Magma common stock relative to
market price of California Energy's offered consideration in October
1991. Graphical element is a line graph, the vertical axis of which
is marked in $5 dollar increments from $10 to $50 and the horizontal
axis of which is marked with certain dates from October 1, 1991
through August 31, 1994. The graph contains two wavering horizontal
lines, one of which represents the market price of Magma's common
stock during the periods indicated and the other of which represents
the market price of California Energy's offered consideration in
October 1991 during the periods indicated. [California Energy's
offered consideration is based on an exchange ratio of 2.0168.]
Page 22
See description on Page 22.
Page 23
See description on Page 23.
Page 24
See description on Page 24.
Page 25
See description on Page 25.
Page 29
See description on Page 29.
43
CERTAIN INFORMATION CONCERNING THE PARTICIPANTS
The following information is provided pursuant to Section
14(a) of the Securities Exchange Act of 1934 (the "Exchange Act")
and Rule 14a-12(a)(3) promulgated thereunder.
California Energy Company, Inc. ("CECI"), CE Acquisition
Company, Inc. (the "Purchaser"), Gleacher & Co. Inc.
("Gleacher"), David L. Sokol, Steven A. McArthur, John G. Sylvia,
Dale R. Schuster, Eric Gleacher, Charles G. Phillips and James
Goodwin may be deemed to be "participants" (as defined in
Instruction 3 to Item 4 of Rule 14a-101 of the Exchange Act), and
thereby are required to disclose the following information.
Messrs. Sokol, McArthur, Sylvia and Schuster (the "CECI
Employees") are employees of CECI and Messrs. Gleacher, Phillips
and Goodwin (the "Gleacher Employees") are employees of Gleacher.
The CECI Employees and the Gleacher Employees are collectively
referred to herein as the "Individuals".
The Purchaser was recently incorporated in Delaware and has
not engaged in any business since its incorporation other than
that incident to its organization and in connection with the
Purchasers offer to purchase 12,400,000 shares of Common Stock,
par value $0.10 per share ("Shares"), of Magma Power Company, a
Nevada corporation (the "Company"), pursuant to the Purchaser's
Offer to Purchase, dated October 6, 1994 (the "Offer to
Purchase"), as amended and supplemented by a Supplement, dated
October 26, 1994 (which together with the Offer to Purchase and
certain related Letters of Transmittal constitute the "Offer").
The Purchaser is a direct wholly owned subsidiary of CECI. The
principal executive offices of CECI and the Purchaser are located
at 10831 Old Mill Road, Omaha, Nebraska 68154.
CECI commenced business in 1971 and, together with its
subsidiaries, is primarily engaged in the exploration for and
development of geothermal resources and the development,
ownership and operation of environmentally responsible
independent power production facilities worldwide utilizing
geothermal resources or other energy sources, such as
hydroelectric, natural gas, oil and coal. CECI was an early
participant in the domestic independent power market and is now
one of the largest geothermal power producers in the United
States. CECI is also actively pursuing opportunities in the
international independent power market. For the year ended
December 31, 1993 and the six months ended June 30, 1994, CECI
had revenues of $149.3 million and $80.7 million, respectively,
and net income of $47.2 million and $17.0 million, respectively.
As of June 30, 1994, CECI had cash and short-term investments of
$379.5 million.
As of the date hereof, the Purchaser is the record owner,
and CECI is the beneficial owner, of 200,000 Shares. Except as
set forth above, and other than the record ownership by Mr. Ben
Holt, a director of CECI, of 3,763 Shares, none of CECI, the
Purchaser or any of its directors or officers, Gleacher, the
Individuals or any associate of any of the foregoing persons
or any other person who may be deemed a "participant" is the
beneficial or record owner of any Shares.
Gleacher is acting as financial advisor to the Purchaser and
CECI in connection with the transactions described in the Offer,
as dealer manager for the Offer and as co-arranger of the debt
financing.
CECI has agreed to pay Gleacher a fee of (a) $250,000
payable upon the public announcement of an offer to acquire at
least 50.1% of the Shares; (b) $500,000 payable 45 calendar days
after the commencement of a tender or exchange offer, assuming
the offer is outstanding at such time; and (c) $4,000,000 payable
upon completion of the direct or indirect acquisition by CECI,
whether alone or in partnership with another company, by merger,
acquisition of securities, or otherwise, of 50.1% or more of the
equity securities of the Company. Any fees payable in (a) or (b)
above will be credited against the fee described in (c). CECI
has also agreed to pay Gleacher a fee equal to .25% of the
principal amount of debt financing arranged in connection with
such acquisition. Gleacher will also be reimbursed for its
out-of-pocket expenses in connection with its engagement in
connection with the Offer, including the reasonable fees and
expenses of its counsel. CECI has also agreed to indemnify
Gleacher and certain related persons against certain losses,
claims, damages or liabilities and expenses in connection with
the Offer, including certain liabilities under the federal
securities laws.