1. The price is too low, and foreigners are stealing Iceland’s resources.
- I agree, although not much can be done about this. However they are one of the few companies that is actually investing in Iceland, as unfortunate as this sounds, it’s a positive, not a negative. More on this later.

2. The price of electricity will increase.
-Not likely. See my post about, 4% of the total market share of Iceland’s electricity means exactly nothing – they couldn’t change the price in a million years. And doesn’t HS Orka sell just to Alcoa anyway?

3. 130 years is too long
-a long rent means the company will take care of the property. Helga, your logic makes sense but in your example, wouldn’t the company want to sell at a profit at the end of your 10 years? You can only sell plants if they’re worth something to the next owner. In other words, why would Magma buy 130 years of property rights, drain the property dry and ditch a valueless project in 10 years, when they could just buy a much cheaper 10 year deed and ditch the property for quite a lower price? So clearly they intend on either keeping the property themselves for the duration, or at least taking care of it until they eventually sell it to someone else for a profit.

4. Iceland is privatising its energy resources
No it isn’t, HS Orka is privately run and so is GGE. Both seem quite inefficiently run, typical of local operations around the world. Both also seem quite bankrupt, and it’s not like the state can buy them out in its present state. So who cares if one private company buys out another?

Guys seriously I understand your fears, but you need to chill out. This company’s not going to take over your lives, it’s absolutely impossible for it to do anything to your electricity bill (as I said, 4% won’t be able to shift the price), and it’s a good sign of faith in a country which has been stigmatised by the entire world as a financial basket case. I hate bringing Thatcher into this, but England really turned around when she privatised the country – sure lots of things became expensive, but before her England was barely ahead of Soviet Russia in terms of economic prosperity.

I wish you the best, and hope Iceland will come out of her troubles stronger than before. I don’t, however, think this particular deal is the harbinger of another apocalypse like some of the comments here seem to think it’ll be.

Cheers,

I want to quote Mahatma Gandhi “Be the change you want to see in the world!” If you project pessimism and negativity unfortunately that is what you will receive in return. Lets move on and move forward with a positive energy and sense of optimism. That is the strength of Iceland and that is what attracted me to move to Iceland and live in Iceland…

And Alda, all your “Excellent Points” comment are given to people who agree with you which I think is not very objective. If you just want everyone to agree with you to read this blog then you should not have it open to all people.

Jai Ho
Bala

Yes, compared with many other electricity privatization deal the sale of a share in HS Energy is very small, but for a country with 320.000 inhabitants it is pretty big and very important. First of all, it is a matter of principle whether we want to sell the usage rights of our energy resources. Second of all, the deal is big for the area and the energy resources in question. Apparently geothermal power is not sustainable if it is exploited too fast.

And then we come to the argument of the long term contract. Is a company that has a right to use the resource for 130 yrs more likely or not to use it wisely than a company that uses the resource for 10 yrs? First of all, none of us is going to be alive in 130 years, and certainly not the shareholders of Magma Energy, so why should they protect it? Hypothetically, ME could buy 48% of HS and get hold of GGE’s share, exploit the geothermal power more than they are allowed to (there are some laws concerning how much energy may be used per year, but HS orka already bypassed them and tapped out more energy than it was allowed, but to my knowledge, it has not been asked for any compensation other than to write an explanatory letter to Orkustofnun), raise the price to consumers and then the owners can sell their share of the company in 10 years time after maximizing profits for themselves. Why would they care about the future of the company or the energy resource? They can then buy another company or a resource for the profit and continue the same game.
I know that I sound very pessimistic, but unfortunately this is only based on similar deals elsewhere, as well as with our recent experience of bank privatization.

Iceland produces around 1,700 MW of electricity, 25% of that from geothermal power (~400MW). (found it from from this site: http://www.os.is/solofile/20644)

This deal is supposed to give Magma 48% of HS Orka’s 150MW of power generation. so, around 75MW, from the Magma website.

A mid sized coal plant makes 500MW in comparison – 75MW is nothing. Even without looking at international sizes, 75MW is only 4% of 1700MW of power generation, for a population of 300,000 people! How could they possibly raise prices if they only controlled 4%. This is silly guys – what about all those banks that indebited you larger than your GDP!?

I’ve never found that private/public makes a difference. Private companies try to squeeze every penny out of you, whereas public companies are lazy, corrupt and milk the system for all they get. Seems like they were in this case. People are people and take advantage of each other any way they can.

And Bali, above is right – isn’t a long term ownership a GOOD thing? Who takes better care of a house – a long term private owner who lives in it, or a bunch of students living there for a semester or two? I’d be much more warey of a private company that buys for 5 or 10 years – clearly then it opens the door to exploit the resource and move on.