In These New Times

A new paradigm for a post-imperial world

Iceland-And while we’re looking the other way, our resources are peddled off at bargain prices

Posted by seumasach on August 20, 2009

Iceland Weather Report

20th August, 2009

Tomorrow, a decision will be made as to whether the Suðurnes Power Company [HS orka, in Icelandic] will become fully privatized and owned by a Canadian company called Magma Energy.

This is the horror story of the week.

I have to confess that I have had some trouble understanding this matter and hence not given it my full attention. Today, however, I read a number of articles about this planned privatization and must say that I am profoundly shaken by the whole affair – even if I still don’t fully understand everything that has propelled the issue to its current state.

The story goes something like this. Back in 2007, the Ministry of Finance decided to sell its 15.2% share in HS orka [which supplies geothermal energy and heat to the people of Suðurnes, the peninsula on which the Keflavík International Airport sits – and also the Blue Lagoon]. Apparently it was specifically stated that the two largest power companies in Iceland – The National Power Company [Landsvirkjun] and Reykjavík Energy – were not eligible to bid for the share due to competition regulations.

The highest bidder turned out to be a company called Geysir Green Energy. There was a lot of controversy surrounding that company, all sorts of corruption allegations, so much that it managed to bring down the Reykjavík City Council back in October 2007. Part of the controversy centered on the fact that, for the first time, a public utility company in Iceland was being privatized – at least in part. The deal was signed on behalf of the Icelandic State by then-Finance Minister Árni Mathiesen of the Independence Party [remember him?].

Last July, the town of Reykjanesbær [a stronghold of the Independence Party, which favours privatizing everything to sell to their favoured friends] sold its share in HS orka to Geysir Green Energy.  At the beginning of July, the towns of Grindavík and Hafnarfjörður decided to use their option to buy a preemptive share in HS orka and sell it to Reykjavík Energy, for the purpose of ensuring that the company remained in the public sector. The Competition Authority, however, ruled that Reykjavík Energy was not permitted to own more than a 10 percent share in the company – so Reykjavík Energy pulled out.

Long story short – the Canadian company Magma Energy has now made a bid to become a core investor in HS orka with a 32 percent share. The offer expires at noon tomorrow, and unless something radical happens, it is a very real possibility that the first public utility company in Iceland – which provides the public and- yes – industry with clean, green, cheap geothermal energy – will become fully privatized, and under the control of a foreign investor.

The real scary bit, though, is that through this purchase, Magma Energy gains an exclusive right to utilize Iceland’s geothermal energy fields in the area for the next 65 years, with the option to extend for another 65 years after that. In other words, if the powers that be sign on that dotted line tomorrow, the first instance of Iceland’s natural resource passing into foreign hands will become a reality – for the next 130 years.

To add insult to injury, the price for leasing the energy fields will amount to a piddly ISK 30 million per year, which – as they so succinctly put it over atSmugan – “That amount is ten times lower than was considered justifiable to pay one útrásarvíkingur* to take on a management position in a bank.” Or roughly equivalent to renting an office space in downtown Reykjavík for a year.

130 years, people!

And once that natural resource is in private hands, it can be exploited in any way the new owner sees fit. One thing is sure: the private company will almost certainly concern itself first and foremost with the bottom line. It will likely jack up the prices to the private consumer, and it will siphen off all profits which previously went towards regional development. Consequently the region will suffer and living standards will most probably decrease substantially. The new owner will have the Reykjanes peninsula in its grip.

It’s just as frightening to think that in these times of economic weakness and while the nation is looking the other way [Icesave, EU, etc.] the opportunity is being seized to sell off our precious resources at bargain prices. God help us.

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