As I mentioned in the last post, Eva Joly has joined ranks with those who oppose the sale of Icelandic energy company HS Orka to Magma Energy of Canada. This afternoon, Mme Joly, along with a group of people who oppose the Magma deal, gave a press conference in which the Magma affair was once again under discussion.
Brief recap for those who have just joined us: A couple of years ago, Reykjavík Energy needed to sell its share in energy company HS Orka, Iceland’s third-largest power company, for reasons to do with competition laws. There were two bidders. One was, for some reason, never named. The other was Magma Energy of Canada.
The problem with Magma of Canada was that, according to Icelandic legislation, non-Icelandic companies cannot own shares in Icelandic power companies. Since Iceland is part of the EEA, however, companies operating within the EEA are exempt from this law. That’s was part of the deal when Iceland joined the EEA and, like it or not, that’s the law today. [And no, I don’t buy the argument that since EEA companies are allowed to own shares in Icelandic companies, any old company from any old corner of the world should be able to follow suit. A deal is a deal, a swap is a swap; Iceland negotiated this agreement with the EEA and, in doing so, opened onto certain benefits for itself. But I digress.]
To get around this pesky little piece of legislation, Magma Energy of Canada established a shelf company in Sweden — a company that has no activity, and whose name cannot even be found on a mailbox at the stated address. According to the strictest interpretation of the law, this is legal [which just goes to show how flawed the law is] — but it certainly does not conform to the spirit of the law. Which was the whole point of the law in the first place.
However, the above is only a small part of the shady dealings surrounding the Magma sale. The whole thing absolutely stinks of corruption. And as if that wasn’t enough, from a business standpoint the Magma sale is a bad, BAD deal for Iceland. From an earlier post I wrote on this same issue:
… 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.
According to Eva Joly [and as many others have pointed out], Magma Energy is a shady outfit, with a very opaque list of shareholders. In the video below, she discusses Magma and the atrocious business deal that was designed to benefit a select few. Apologies for the poor sound quality in the video — this was shot on my little Flip camera without a tripod and quite a distance away [it’s actually a lot better if you use headphones].
In closing, this: as a sovereign nation, Iceland has the right to reneg on the deal and just say no. It is imperative that the Icelandic public have a say about what they would like to see happen with the Magma sale and how they would like to see their resources allocated [and protected] in the future. One way to press for a national referendum is to collect the signatures of 40,000 Icelanders — or, at least, people with an Icelandic kennitala [social insurance number]. A petition has been up since last summer, when the same group of people [minus Mme Joly] held a similar press conference. So far, around 20,000 people have signed. I blame this relatively low number on the mainstream media’s apparent disinterest in the Magma affair — and also I think people have given up, given in, think the whole thing is futile and not worth fighting for.
However, if everyone who signed that list got at least one friend to sign too, we would be up to 40,000. So — if you have an Icelandic kennitala and the least bit of interest in supporting this thing, please go here and sign.