Reykjavík Grapevine - 05.11.2010, Qupperneq 6

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The Reykjavík Grapevine
Issue 17 — 2010
News | This month in Magma
This Magma Energy/HS Orka issue is hella tricky to think about. Some folks claim that by
actively opposing this particular dealing, you are at the same time opposing all foreign in-
vestment in Iceland, and that this is xenophobic. What do you think? letters@grapevine.is
It has the makings of an unfinished
Agatha Christie novel. After getting
a foot in the door last year, Canadian
company Magma Energy moves in
to acquire 98.5% of HS Orka, the
third largest energy company in Ice-
land. To skirt laws restricting non-
EEA investments in Iceland’s energy
resources, Magma Energy creates
a subsidiary in Sweden, but their
“offices” really only have space
for some letters and perhaps a few
small packages. Nonetheless, an
eager and cash-strapped HS Orka
accepts the deal and Magma Energy
is granted the rights to geothermal
energy in the Reykjanes peninsula
for the next sixty-five years (with a
renewal option).
Due to concerns about the PO Box stunt,
not to mention Iceland’s poor track re-
cord in privatisation, Prime Minister
Jóhanna Sigurðardóttir charges a spe-
cial committee with the task of looking
into the legality of the sale and the pri-
vatisation of geothermal energy in gen-
eral. The special committee concludes
that the HS Orka sale to Magma Energy
Sweden AB is legal in three of four in-
terpretations of the law. So the sale goes
through and the case is closed. But, not
so fast.
ENTER A yOUNGER ANd HIppER
MISS MARpLE (BjöRK)
Perhaps the case was closed for most of
Iceland’s government officials and the
watchful mainstream media, but it cer-
tainly was not for musician Björk Guð-
mundsdóttir. She cannot believe the na-
tion’s representatives want to allow this
sale of the country’s third largest energy
company while 80% of Icelanders are
against Iceland’s energy resources being
privatized.
With no legal background or detec-
tive training, Björk has an uncanny
ability to find signs of wrongdoing.
She teams up with architect Jón Þóris-
son and writer Oddný Eir Ævarsdóttir,
who together work on getting the gov-
ernment to stop this deal, which they
believe will have harmful effects on the
nation.
FINdING: THE MAGMA REpORT IS
MISUNdERSTOOd
After the special committee on Magma
Energy releases its findings, Björk in-
vites committee members and experts
to sit on a panel at a public seminar. It
turns out the committee’s report has
been misrepresented in the media.
“The committee said the laws regard-
ing the sale of access to Iceland’s energy
resources both say that it was forbidden
to sell it to Canadians through Sweden
and that it was allowed. So they recom-
mended the case go to court,” Björk
explains. “The media unfortunately
delivered a lopsided interpretation with
front-page headlines saying the sale to
Magma is OK, suggesting this was the
end of the case.”
Committee member and lawyer
Aagot Óskarsdóttir says in another (not
adequately portrayed) part of the report,
that the committee also detailed several
actions the government could take to
nullify the sale and stop Magma Energy
from owning 98.5% of HS Orka.
As detailed in the report, Aagot says
the most feasible action is to exercise the
right of eminent domain. In non-legal-
ese, this means the government can jus-
tifiably take Magma Energy’s purchase
from them if it is in the interest of the
nation.
FINdING: GEOTHERMAL ENERGy IS
NOT EXACTLy RENEWABLE
It’s true. Iceland is not selling any of
its geothermal energy. It is leasing the
rights to harness it for the next sixty-five
years, with the option of an additional
sixty-five years. However, panellist
and geologist Stefán Arnórsson points
out that this is one and the same if the
geothermal energy source is used inef-
ficiently.
In this case, Stefán explains the
geothermal energy in question is essen-
tially not renewable because it is being
used up faster than it is being renewed.
He says the size of the energy resource
available has been estimated at 3.600 –
4.200 MW and if, for example, this is
converted to electric power, the resource
will be depleted in 50 years. Although
nobody knows for certain how long it
will take to renew, Stefán thinks it could
be thousands of years. If this is the case,
the deal is akin to borrowing Iceland’s
geothermal energy indefinitely.
ENTER A FEMALE HERCULE pOIROT
(EvA jOLy)
A few weeks after the seminar, experi-
enced prosecutor and special adviser
to Iceland’s prosecutor, Eva Joly, joins
team Björk, Jón and Oddný to speak
out against the sale. At a joint press
conference, Eva says if she were a state
prosecutor in Iceland, she would start
a criminal investigation into this deal.
“For a country in need of foreign cur-
rency, it should ensure a better deal and
work with someone financially capable.
I think this should be looked into.”
She also draws parallels to the deals
made when Iceland’s infamous banks
were privatized, where the buyer financ-
es the seller. “It’s a kind of bullet loan,”
she explains. “And I can tell you I have
seen a lot of these bullet loans. It’s the
way Glitnir [post-crash Íslandsbanki]
did business.”
FINdING: ICELANd IS SELLING ITS
ENERGy FOR pENNIES ANd BONdS
Eva suggests that Iceland is giving away
its resources for nothing and to a man
who has not proven anything. She points
out that Magma Energy had losses in
2008, and that its experience is lim-
ited to harnessing a small amount of
geothermal energy in Nevada, which is
nothing compared to the current opera-
tion in Iceland.
Furthermore, she says they are not
very well capitalised. “They are not even
able to pay for the acquisition,” she says.
“If the figures I read are right, they
bought the whole Magma participation
for 11.5 billion Icelandic krónur, but only
3.6 was paid in cash. And it was not paid
in US dollars. It was paid in Icelandic
krónur. And, 8.4 billion is to be paid in
bonds – bonds from a company that has
no existence yet.”
FINdING: ROSS BEATy’S FACTS
dON’T Add Up
At the press conference, Jón Þórisson
draws attention to some numbers that
don’t add up. Jón points out that Magma
says they have access to some 400 MW
in Iceland, which is nowhere near the
correct figure. [Magma website: “Expan-
sions are planned that will increase HS
Orka's geothermal power production to
405 MW by 2016”]. “With lenience, they
could go for another 100 MW and that’s
it.” Jón speculates that either Ross has
no idea what he is talking about or he is
deceiving his investors.
Checking up on these numbers, we
requested copies of their current licens-
es from the Ministry of Industry, En-
ergy and Tourism, which confirm that
Magma Energy does not have access to
anywhere near 405 MW. Thus, it’s likely
that the planned geothermal power pro-
duction they speak of includes areas that
they do not have the rights to, unless
they make those purchase agreements
and acquire new licenses.
FINdING: THE GOvERNMENT IS
NON-RESpONSIvE
Jón says the government has been
largely non-responsive to their requests
for information on the HS Orka sale to
Magma Energy. In particular, the Min-
istry of Foreign Affairs and the Minis-
try of Finance have not replied to their
letters, surpassing their legally allotted
time to do so. Now he plans to send an
appeal to the Information Committee,
which will look into the matter.
Although he says he’s not against
Canada or Ross Beaty or foreign direct
investment, Jón wonders why Magma
Energy got the bid, and why the public
company Orkuveita Reykjavíkur sold its
shares in HS Orka to Magma Energy at
what looks like a 9 billion krónur loss.
He also wonders whether the deal is not
part of the IMF’s master plan for Ice-
land to move all its non-tradable assets
to tradable form, adding that it's no joke
that the head of the IMF in Iceland is
called, ‘The Governor’.
He likens foreign direct invest-
ment to the Icelandic saying, “að pissa í
skóinn,” (to piss in one’s shoes). It works
in the moment (makes you warm), but
it’s not any good in the long-term (you
quickly become cold). Then he shows
us an IMF working paper, “Tax Conces-
sions and Foreign Direct Investment
in the Eastern Caribbean Currency
Union,” which essentially says the same
thing. However, if foreign direct invest-
ment is the government’s policy, then he
would just like them to come out and say
it.
CASE CLOSEd?
While waiting for the special commit-
tee’s next report, Björk urges people to
sign her petition at orkuaudlindir.is,
which calls for a national referendum
on whether Iceland's Iceland’s energy
sources should be private or public
property. Björk says: “We need 35.000
people to sign it," adding that she heard
rumours about a karaoke marathon un-
til that number has been reached. “Vol-
unteers are needed,” her e-mail ends.
So is the case closed? Not in Björk’s
books.
Team Björk Tries To Freeze Magma Energy
The epic saga continues...
Words
Anna Anderson
photo
Hvalreki