In These New Times

A new paradigm for a post-imperial world

Lowest Energy Prices!! – Or how to sell yourself, Icelandic style

Posted by seumasach on September 13, 2009

Iceland Weather Report

11th September, 2009

Ok, so it’s been a while since I’ve written a really depressing post, right? So it’s about time, right?

Fortunately the majority in the Reykjavík City Council is making it real easy for me.  Because they’ve gone ahead and approved that appalling sale of nearly 50 percent in HS Orka to Magma Energy of Canada [oh, excuse me – of Sweden]. Need I mention that the Independence Party holds a majority in the Reykjavík City Council, in coalition with the Progressive Party? I thought not.

[If you’ve just arrived and don’t know what the frick I’m talking about you might want to check out this post.]

Everything about this sale is atrocious. To start with, the majority on the city council presented the sale agreement between Reykjavík Energy and Magma Energy to the minority without giving them any time to read through it. The agreement, however, had been signed a few days earlier and could easily have been distributed among the elected officials well before. When the minority protested and asked for at least 24 hours to read through the agreement and all its associated documents, the majority refused, but did agree to take a break for, oh, one hour, before the debate began.

It is interesting to note that Magma Energy, which is a Canadian company, is registered as a shelf company in Sweden. Why? Because Icelandic laws prevent parties from outside Iceland or the European Economic Area from investing in Icelandic energy companies. That’s because the stakes are just too high – the citizens of this country cannot afford to lose control over their resources. Because a country that gives away its resources will soon become enslaved. Colonized. No longer free.

So the company that is now buying that big share in HS Orka [and will no doubt merge with the other owner – Geysir Green Energy – in due course, giving it full control over the company and the geothermal energy fields for the next 130 years] is a shelf company, set up for no other reason than to circumvent Icelandic law. Interesting that a company in public ownership – Reykjavík Energy – should enter into such an agreement, don’t you think?

As if that were not insulting enough, the agreement between HS Orka and Magma is tailor-made to pander to the buyer. First of all, Reykjavík Energy IS LENDING Magma a full 70 percent of the purchase price, and the loan is A BULLET LOAN, meaning Magma makes no payments until the end of the loan term – seven years hence [apart from the down payment of 30 percent, of course]. Secondly, Reykjavík Energy has no guarantee for the loan except the shares in HS Orka itself – i.e. Magma Energy puts up no collateral. Thirdly, the loan bears interest of 1.5 percent. ONE POINT FIVE PERCENT! Jeezus – wouldn’t you just love for, say, your mortgage to bear interest of 1.5 percent? Fourth, the loan is in US dollars, so all exchange rate risk is taken by Reykjavík Energy. Since the krona is presently very low against the dollar and can well be expected to rise again within the next seven years, the amount of money that will eventually be paid back will be substantially lower than the amount that was lent.

Moreover, the interest on the loan in case of default is somewhere around 5 percent – which is a pretty damn good interest rate all on its own. So, you know, at the end of that seven years, it might even be worthwhile for Magma Energy just to default. They probably couldn’t get a much better loan deal than that anywhere else.

People: the Mayor of Reykjavík, Hanna Birna Kristjánsdóttir [IP], had the gall to appear on state television, look the nation in its collective eye, and declare that this deal was a very good one for the City of Reykjavík. How can people be so deluded? Assuming she really believes it, that is. Which is questionable. I mean, the evidence is not exactly stacked in favour of that conclusion and, well, she can’t be THAT stupid.

Anyway. It’s demoralizing and sad. These are the same sorts of deals that we saw when the banks were privatized [and look what happened] and when theKárahnjúkavirkjun dam was built. [Prior to that latter instance, Icelandic authorities sent out a brochure titled “Lowest Energy Prices!!” and the recipients included some of the most morally corrupt corporations in the world. How sad can you get?] In both cases, this country was run by a coalition of the Independence Party and the Progressive Party, who over the last few decades have seemed to base their policies solely on the dollar signs in their own eyes. Fortunately we no longer have those parties in the national government – but they are now running the City of Reykjavík and – well – some things apparently never change

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