From Iceland — An Army of Us: Magma Energy vs. Iceland (So Far)

An Army of Us: Magma Energy vs. Iceland (So Far)

Published August 19, 2010

An Army of Us: Magma Energy vs. Iceland (So Far)

By now most of our readers are probably familiar with the ongoing saga of Magma Energy—a Canadian-based energy company—and their troubles getting any sort of even footing in Iceland. On many occasions, it seems that Magma Iceland CEO Ásgeir Margeirsson 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 benevolent 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-Europeans from buying up Icelandic companies—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-absolute.
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 majority [stake of HS Orka]. I have no interest 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 taking 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 opportunities that we took advantage of. For example, going into Iceland was strictly something that could only have happened because Iceland had a calamitous financial meltdown in 2008.”
An outrage ensues
The corporate doublespeak caught national 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 local energy companies) by law years ago. And so, as Minister of Industry Katrín Júlíusdóttir pointed out, whether foreign or domestic, private companies had access to buying HS Orka, and the conservatives had paved the way.
In addition, Magma Energy signed a 65-year contract with the town of Reykjanesbær to conduct geothermal exploration 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 Party—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 roughshod over the people”, which was in response to Magma’s announcement that they intended to do geothermal exploration in the area around national treasure Kerlingafjöll mountain.
It later came to light that Íslandsbanki (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 previously supervisor of Glitnir’s financial sector under then-director Lárus Welding.
Enter Björk Guðmundsdóttir
While parliament deliberated on what steps to take next, Björk Guðmundsdóttir 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 vocal against the corporation. A website,, 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 resources within public ownership. At the time of this writing, the petition has nearly 17.000 signatures since its inception not even a month ago.
Beaty and Magma Energy were on the defensive immediately. While the corporation scrambled to provide reassurances that they were only interested in helping Iceland develop its energy sector and help its economic recovery, their previous dishonesty about their intentions 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 relentless media campaign against the company, to both foreign and domestic 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 scapegoat 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 company is using a puppet company to rake in our resources is unfounded,” accusing the Icelandic media of “lapping up the propaganda” on the subject, and arguing that a private company conducting 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 irrelevant) 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 Magma. Minister of Industry Katrín Júlíusdóttir 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 offer assurances that they mean no harm. Whatever the outcome with regards to Magma Energy, the conservatives—who created the environment and the legislation 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.

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