Lest you think the entire HS Orka debacle started with the entrance of Magma Energy stage left, think again.
The sale of Iceland’s resources actually began in 2007, when the Icelandic government – headed by the Independence Party – decided to sell its share in the geothermal power company HS Orka. Curiously, one of the conditions of that sale was that only private parties could purchase the share. As you will know if you’ve been paying attention, the IP is all about privatization – and preferably to their own personal friends.
The buyer of that share was a company named Geysir Green Energy, which had been set up expressly to invest in power companies and was headed by a handful of ultra-slick Icelandic investors [the names Bjarni Ármansson, Jón Ásgeir Jóhannesson and Hannes Smárason may ring a bell for some of you]. They knew, of course, that energy companies – and particularly green energy companies – were [and are] the investments of the future.
Earlier this year a big scandal arose when it was revealed that a company named FL Group, which owns Geysir Green Energy, paid a bribe grant of ISK 30 million to the Independence Party at the end of December 2006. Two days later, on 1 January 2007, laws took effect that prohibited grants of that size to political parties. In other words, FL Group [which incidentally is renowned for the greatest financial mismanagement of any Icelandic company in history] snuggled up to the IP just in time.*
Two months later, the coalition government of the IP and the Progressive Party sold its 32% share in HS Orka to Geysir Green Energy, right in the middle of an election campaign, i.e. while most people were busy looking the other way.
Fast-forward to this summer when the town of Reykjanesbær – right near the Keflavík airport – decides to sell its share in HS Orka to Geysir Green Energy. The town’s intention to sell was not announced publicly nor was the share advertised – i.e. Geysir Green was hand-picked as a buyer. I probably don’t have to tell you that Reykjanesbær is an IP stronghold and its mayor, Árni Sigfússon, is the model of a good IP-er. The terms of that sale are pretty much impenetrable for a regular person like our YT – it is that complicated. Suffice it to say that it was sold at a price ISK 1.2 billion lower than the actual value of the share, as it was assessed in December 2008. Reykjanesbær received ISK 2.5 billion in its pocket as a down payment, the rest is – what else? – a bullet loan, payable seven years hence.
One of the components of the deal is that Reykjanesbær sold valuable land [energy fields] to HS Orka – land that the nearby town of Grindavík holds the planning rights to. Grindavík protested and tried to buy the land – but couldn’t even get close to the table.
And now Reykjavík Energy has been ordered to sell its share in HS Orka, and the IP in Reykjavík City Council has approved the sale to Magma Energy, as I blogged about here and here. People have argued that it is essential for the sale to go through immediately because RE is in a horribly tight spot [this is true] and there are not exactly buyers waiting in the wings.
When Magma Energy made its offer, apparently there was another bidder for the share. However, due to a lack of transparency, it has not been revealed who that bidder is – or was.
Also, just before the weekend, there was an interesting report in the news. It concerned a group of Japanese investors who apparently approached the Icelandic Ministry of Finance last December, expressing an interest in buying Glitnir bank and possibly making a few other choice investments. The Japanese investors had between ISK 100-200 billion to invest with. And what happened? THEIR BUSINESS PROPOSAL GOT LOST AT THE MINISTRY. It was never followed up. Squandered. Just found last week, when reporters started snooping around.
How f*cking incompetent can people be??! ARGH!!!
Oh, need I mention that the Minister of Finance at the time was one Árni Mathiesen of the Independence Party, he who had that edifying conversation with British Chancellor of the Exchequer Alistair Darling last year?
So clearly the “we have to rush into a sale right this moment because there are no other potential buyers anywhere” just doesn’t compute. After all, there are few things certain in these uncertain times – but one thing that IS certain is that green energy will only get more valuable in the future. And that corruption and ineptitude and plain stupidity will probably prevail.
BLUSTERY. AUTUMN IS HERE.
There is a storm warning for the central highlands today [everyone in Landmannalaugar – bolt down your tents!] and it’s pretty windy here in the capital, too. We’re in for showers today but with mild temps. Currently 12°C [54F]. The sun came up at 6.46 and will set at 7.58.
* It was also revealed that Landsbanki paid a large grant to the IP at exactly the same time – and it is speculated that this was the reason the Icesave accounts were not regulated properly. But that’s another story.