Reykjavík Grapevine - 13.08.2010, Blaðsíða 10

10
The Reykjavík Grapevine
Issue 12 — 2010
Want to read more about that Magma affair? Log
on to www.grapevine.is/energy for lots of articles
and stuff.
Energy | Magma Neverending Story
An Army of Us:
Magma Energy vs. Iceland (So Far)
By now most of our readers are prob-
ably familiar with the ongoing saga of
Magma Energy—a Canadian-based
energy company—and their troubles
getting any sort of even footing in Ice-
land. On many occasions, it seems that
Magma Iceland CEO Ásgeir Margeirs-
son and artist Björk Guðmundsdóttir are
debating each other through the media.
Meanwhile, the Icelandic government is
trying to come to terms with the whole
thing, and the mayor of Reykjanesbær
thinks entirely too much about whether
or not Björk files taxes in Iceland. It can
get confusing. Fortunately, your pals
here at the Grapevine are there to make
sense of this debacle so you can judge
for yourself whether Magma Energy is
a voracious capitalist machine or a be-
nevolent job-generating benefactor to
Iceland.
FIRST, A LITTLE BACKGROUNd
Last May, Magma Energy—using a
Swedish puppet company to get around
an Icelandic law preventing non-Euro-
peans from buying up Icelandic com-
panies—bought itself a majority stake in
the Icelandic power company HS Orka.
They already acquired a 46% stake in
2009 but, after buying out Geysir Green
Energy, which had a 52% stake in HS
Orka, their control became near-abso-
lute.
The move came as a surprise to the
Grapevine, as Magma Energy CEO Ross
Beaty told us in September 2009 that
“no, we do not plan on getting a major-
ity [stake of HS Orka]. I have no inter-
est in fighting Icelanders, particularly
the government, over what is proper
energy policy in the country.” This was
a lie. When asked in 2009 if he was tak-
ing advantage of Iceland's depressed
economic situation, he'd denied this was
the case. However, in May of this year
he told Hera Research Monthly “We
would have been farther along had [the
global economic crisis] not happened,
although we may not have had oppor-
tunities that we took advantage of. For
example, going into Iceland was strictly
something that could only have hap-
pened because Iceland had a calami-
tous financial meltdown in 2008.”
AN OUTRAGE ENSUES
The corporate doublespeak caught na-
tional attention, and Icelanders were
summarily outraged. They called upon
the government to do something to stop
this. There was just one problem: the
previous conservative government had
privatised HS Orka (as well as other lo-
cal energy companies) by law years ago.
And so, as Minister of Industry Katrín
Júlíusdóttir pointed out, whether foreign
or domestic, private companies had ac-
cess to buying HS Orka, and the conser-
vatives had paved the way.
In addition, Magma Energy signed a
65-year contract with the town of Reyk-
janesbær to conduct geothermal explo-
ration in the area (with renewal options
for another 65). Reykjanesbær has the
highest unemployment rates of any
area in Iceland, and has been in a job
slump since the NATO base left Keflavík
in 2006. And so the promise of revenue
and jobs was very appealing to mayor
Árni Sigfússon.
Nonetheless, the Leftist-Green Par-
ty—one of the coalition partners in the
parliamentary majority—called for an
immediate review of Magma's purchase
of HS Orka. Minister for the Environment
Svandís Svavarsdóttir went so far as to
say that Magma was "running rough-
shod over the people", which was in re-
sponse to Magma's announcement that
they intended to do geothermal explora-
tion in the area around national treasure
Kerlingafjöll mountain.
It later came to light that Íslands-
banki (formerly Glitnir) had leaked
documents to Magma Energy outlining
other bids that competitors had made
for HS Orka. RÚV reported that Magma
Energy was not only informed of what
the other two companies were bidding
for the shares, but that Magma Energy
didn't offer the highest bid. As it turns
out, Ásgeir Margeirsson's replacement
as head of Geysir Green Energy was
Alexander Guðmundsson, who was pre-
viously supervisor of Glitnir's financial
sector under then-director Lárus Weld-
ing.
ENTER BJöRK GUðMUNdSdóTTIR
While parliament deliberated on what
steps to take next, Björk Guðmundsdót-
tir emerged as one of the most vocal and
relentless critics of the sale of HS Orka,
asking what possible benefit a foreign
company owning 98% of an Icelandic
energy company would have for Iceland.
Ross Beaty responded with a “cheeky
proposal”, as he put it, for Björk: a 25%
stake in HS Orka, at cost prices.
This less-than-serious response only
roused the artist to become more vo-
cal against the corporation. A website,
orkuaudlindir.is, was set up to host an
online petition calling for parliament to
block the sale of HS Orka to Magma
Energy, and furthermore, for a national
referendum to put Iceland's natural re-
sources within public ownership. At
the time of this writing, the petition has
nearly 17.000 signatures since its incep-
tion not even a month ago.
Beaty and Magma Energy were on
the defensive immediately. While the
corporation scrambled to provide reas-
surances that they were only interested
in helping Iceland develop its energy
sector and help its economic recovery,
their previous dishonesty about their in-
tentions left many Icelanders sceptical.
Apparently, some of these sceptics were
in the government: in the last week of
July, the government announced that it
refused to confirm the sale of HS Orka
to Magma Energy, putting a freeze on
the takeover. In the meantime, Prime
Minister Jóhanna Sigurðardóttir created
a special committee with the purpose
of investigating the legality of Magma
Sweden's purchase of HS Orka, as well
as to come up with ideas with regards
to drafting legislation keeping natural
resources in public ownership.
This move—along with Björk's re-
lentless media campaign against the
company, to both foreign and domes-
tic press—has made Magma's investors
skittish, as Ross Beaty himself admitted
to the Financial Times earlier this month,
saying in part, “We do not want to walk
away. But we have shareholders who
are getting pretty frustrated with what’s
happening. We are being made a scape-
goat for all the bad business practices
leading up to the financial meltdown
and the tremendous fear and mistrust it
created.”
Beaty wasn't the only one frustrated.
Reykjanesbær mayor Árni Sigfússon
said, "Propaganda that a foreign com-
pany is using a puppet company to rake
in our resources is unfounded," accus-
ing the Icelandic media of "lapping up
the propaganda" on the subject, and ar-
guing that a private company conduct-
ing this development was better than tax
dollars spent on the same thing. He then
capped his argument with the bizarre
(and possibly untrue but definitely irrel-
evant) statement that Björk doesn't pay
taxes in Iceland.
WHAT NOW, THEN?
So where does this leave us now? Well,
the government has still frozen the HS
Orka sale, and is still investigating Mag-
ma. Minister of Industry Katrín Júlíus-
dóttir has submitted legislation which
would limit the lengths of contracts
municipalities could make with private
energy companies, foreign or domestic.
Björk continues to speak out against
Magma, and Magma continues to of-
fer assurances that they mean no harm.
Whatever the outcome with regards to
Magma Energy, the conservatives—who
created the environment and the leg-
islation for this to happen—have been
noticeably absent from the discussion.
Perhaps because Magma Energy is a
great example of the failure of Iceland's
libertarian right wing policy: privatise it,
and all your problems will be solved.
PAUL NIKOLOv
JULIA STAPLES
“Perhaps because Magma
Energy is a great example
of the failure of Iceland's
libertarian right wing
policy: privatise it, and
all your problems will be
solved.”
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