Sierra Geothermal Power Corp.

Sierra Geothermal Power Corp.

January 21, 2010 09:00 ET

Sierra Geothermal Warns of Risk of Fire Sale If Dissident Nominees Are Elected, Says It Benefits From US Incentives

VANCOUVER, BRITISH COLUMBIA--(Marketwire - Jan. 21, 2010) - Sierra Geothermal Power Corp. (TSX VENTURE:SRA) today warned shareholders of a risk of a fire sale takeover by Ram Power, Corp. if seven nominees put forward by a dissident shareholder are elected to the board, and told shareholders that it is in a strong position to benefit from US incentives as Sierra develops its geothermal projects.

Sierra urged shareholders to protect their investment against a fire sale takeover by voting the GREEN Proxy in support of Sierra's board and management. To count, Computershare Investor Services must receive the GREEN Proxy prior to 10:00 am (Vancouver Time) tomorrow (January 22, 2010).

Sierra's management and board are exploring the full range of strategic alternatives to unlock value for Sierra's shareholders. Further to our January 11, 2010 news release, Sierra continues to receive inquiries from a number of different parties. Sierra is currently engaged in discussions with several parties, including two geothermal power companies, two large-scale utilities and a major oil and gas producer, about the possibility of a joint venture, or a merger or out-right sale that could maximize shareholder value.

"The dissident's only strategy is to put Sierra up for sale," said Gary Thompson, Sierra's President and Chief Executive Officer. "Because the dissident has no operating plan, even as a fallback, it is clear that the dissident's nominees will take whatever price is offered. This means that there is virtually no prospect of a fair price. There is however a big risk of a fire sale, especially if the preferred buyer is Ram Power, given the dissident's strong connections to Ram Power."

"While the incumbent board will consider any and all reasonable buyout offers, and has formed a special committee to encourage such offers from interested parties, we see no reason for a fire sale. If there is no fair price available, we believe our exploration and development strategy is the way to unlock value in geothermal projects, especially when combined with the US government incentives. Sierra believes this strategy will deliver value to shareholders in the long term."

How Sierra's strategy is benefiting from US government policy

Sierra's development strategy continues to benefit from major US government incentives that favour geothermal projects. Sierra disputes the dissident's position that Sierra will miss out on these benefits.

The US government is offering billions of dollars in grants, tax incentives and loan guarantees for renewable energy projects, including geothermal projects. Sierra believes it is in a strong position to obtain in the range of US$50 million to US$60 million in possible US grants if, as targeted, management brings projects to bankable feasibility by the end of this year.

This would be in addition to the US$10 million of matching government grants that Sierra was awarded in October 2009. Sierra's award in October was the second largest amount received by any of the 19 awardees and twice the amount received by Ram Power.

Sierra's management anticipated this success and has raised more than $12 million in equity financings since 2009. As a result, Sierra now has the funds to utilize the matching grants immediately for additional exploratory drilling. Sierra, which yesterday commenced drilling at its Silver Peak property in Nevada utilizing its US government matching grants, does not intend to miss out on additional available incentives.

The positive impact of US government incentives, which also include low-cost loan guarantees for up to 80% of the capital expenditures for a geothermal project, can be especially significant to fund development. The Board and management have moved fast to take advantage of available incentives and have earned the right to continued shareholder support.

Dissident's defense of the July 2009 discount takeover proposal

The dissident's principal, Arthur Richards Rule, called the July 2009 discount price takeover proposal at $0.186 per share a "value creating" alternative in a recent letter to shareholders. Mr. Rule has continued to defend the $0.186 proposal even though Sierra shareholders would not have benefited from it.

"Our shareholders have benefited because our board questioned the discount takeover proposal in July 2009," said Mr. Thompson. "Our shares have risen by 28.3% since then, and our shareholders would have forgone virtually all of this gain if the board had accepted the discount price."

By questioning the discount price, Sierra's board believed at the time that it was acting in the best interests of Sierra and its shareholders. Based on Sierra's outperformance of Ram Power in the stock market since then, shareholders now have incontrovertible evidence that Sierra's board made the right call.

Because Sierra's board questioned the discount price valuation, all of Sierra's shareholders have benefited by 27.8% from Sierra's outperformance of Ram Power. The table below shows the calculation using the closing prices of Sierra and Ram Power yesterday (January 20, 2010).

  July 2009 Jan. 20, 2010 Gain
Sierra's real market gain $0.226 $0.29 28.3%
Ram Power's gain $3.00 (1) $3.66 22.0%
Equivalent increase from discount proposal $0.186 (2) $0.227 22.0%
What Sierra holders would have actually gained with Ram Power (3) $0.226 $0.227 0.41%
Extra value because Sierra questioned the Ram Power proposal $0.227 (4) $0.29 27.8%
  1. Ram Power's deemed value for the July proposal was $3.00
  2. Ram Power's proposal for Sierra was an 18% discount to July market value
  3. Comparing Sierra's market price in July 2009 to the deemed value of Sierra yesterday, had it participated in the Ram Power proposal
  4. Except for $0.227, which is the Jan. 20, 2010 deemed value of Sierra if it had participated in the Ram Power proposal.

Since the dissident cannot deny Sierra's outperformance of Ram Power, the dissident has instead chosen to take the credit for it. The dissident would have shareholders believe that the hard work of the current board and management through successful exploration and financing activities, including obtaining US$10 million in government grants in October 2009, was insignificant. The dissident's claim is simply not credible.

Mr. Rule's continuing criticism of Sierra fails to address the fundamental truth that the discount price was unattractive at the time and is even more unattractive with hindsight. Moreover, Sierra believes Mr. Rule's continuing defense of the discount price provides a clear insight into his plans for Sierra if the dissidents are elected.

A conflict of loyalties is the real issue

Sierra believes Mr. Rule's loyalties and those of the dissident nominees, all of whom helped create Ram Power, are conflicted, and that this is the real issue of the proxy contest. Companies associated with Mr. Rule are Ram Power's largest shareholder and would have benefited from the "value creating" alternative while Sierra shareholders would have lost out. Given this situation, Sierra believes shareholders should not take at face value Mr. Rule's statement that the dissident does not intend to sell Sierra at a discount.

The independent proxy advisor RiskMetrics Group has carefully considered management's plans and has endorsed management and the current board in this proxy contest. RiskMetrics is objective and sophisticated and after conducting its own diligence it said the incumbent board and management's actions appear reasonable and "the intricate business relationships among the dissident nominees appear to be worrisome."

Said Mr. Thompson, "Considering the dissident's ties to Ram Power, and considering that the dissident nominees include two Ram Power directors, there can be no question that Ram Power is aware of the dissident's strategy. In such circumstances there is no incentive for Ram Power to offer a fair price for Sierra. We believe shareholders should NOT hand Mr. Rule yet another opportunity to sell Sierra at a discount."

How to cast your vote

A special meeting of Sierra shareholders has been scheduled for January 26, 2010. The Management Circular and related proxy materials, including the GREEN proxy, have been mailed to persons who were shareholders of record as of the close of business on December 15, 2009. Investors and security holders may obtain a free copy of these documents on our website at, at the Canadian securities regulators web site, and by mail.

You can request the materials by contacting Anthony Srdanovic, Sierra Geothermal Power Corp., Suite 500 – 666 Burrard Street, Vancouver, B.C., Canada, V6C 3P6, or by telephone: 604-642-6179, or by email, or follow the web link

Sierra and its directors, executive officers and other members of its management and employees may be deemed to be participants in the solicitation of proxies from Sierra's shareholders in connection with the proposed acquisition. Information concerning the interests of Sierra's management who are participating in the solicitation is set forth in the Management Circular. 

If you have any questions or need assistance in completing your GREEN proxy, please call Laurel Hill Advisory Group at toll free 1-888-534-1149 or email at and they will be happy to help.

About Sierra Geothermal Power Corp.

Sierra Geothermal Power Corp. is a renewable energy company focused on the exploration and development of clean, sustainable geothermal power. It is based in Vancouver, British Columbia and listed on the TSX Venture Exchange under the symbol SRA. Its portfolio of geothermal projects located in Nevada and California exceeds 365 square kilometres (90,000 acres) and has a combined total estimated capacity of greater than 500 MW. Sierra intends to finance development by utilizing a combination of corporate equity, joint venture partnerships and project debt, with the support of US government grants and loan guarantees. To find out more about Sierra Geothermal Power Corp. (TSX VENTURE:SRA) visit our website at

On behalf of the Board of Directors


Gary Thompson
Chief Executive Officer, President and Director


This news release may contain forward-looking statements. All statements, other than statements of historical fact, included or incorporated by reference in this news release are forward-looking statements, including, without limitation, statements regarding activities, events or developments that Sierra expects or anticipates may occur in the future. Forward-looking statements can be identified by the use of forward-looking words such as "may", "would", "could", "expect", "intend", "plan", "estimate", "anticipate", "believe" or "continue" or similar words or the negative thereof. Forward-looking statements in this news release include statements that the dissident's objective is to sell Sierra at a fire sale price; that Ram Power would make such an offer; that, if elected, the dissident's nominees would support such a transaction; that Sierra will be in a strong position to benefit from US government incentives; that Sierra's strategy will deliver shareholder value; that Sierra will bring projects to bankable feasibility by the end of the year, and that discussions with interested parties could lead to a joint venture or a transaction that maximizes shareholder value.

There can be no assurance that the plans, intentions or expectations upon which these forward-looking statements are based will occur. Readers are cautioned not to place undue reliance on these forward-looking statements, which are not a guarantee of performance and are subject to a number of uncertainties and other factors that could cause actual results to differ materially from those expressed or implied by such forward-looking statements. These factors include the election of the dissident nominees, the possibility that Sierra does not qualify for additional US government incentives, or that Sierra cannot otherwise finance its operations, as well as the risks and uncertainties detailed in Sierra's filings with the applicable Canadian securities commissions, copies of which are available at We urge you to carefully consider these factors.

All of the forward-looking statements contained in this news release are expressly qualified in their entirety by this cautionary statement. The forward-looking statements included in this news release are made as of the date of this news release and Sierra undertakes no obligation to publicly update such forward-looking statements to reflect new information, subsequent events or otherwise, except as required by law.

Neither the TSX Venture Exchange nor its Regulation Services Provider accepts responsibility for the adequacy or accuracy of this release.

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