From Iceland — City Discusses Reykjavík Energy Today

City Discusses Reykjavík Energy Today

Published March 29, 2011

Capital city officials are meeting today to discuss the future of the power company Reykjavík Energy (OR), which faces massive financial difficulties and is pushing the city towards a crisis.
At the time of this writing, city officials are in talks about how to deal with OR. According to RÚV, the city – which is the largest shareholder of the power company – has discussed financially supporting the company through a special fund created in the wake of the economic collapse. The fund was estimated to be at around 10 to 12 billion ISK.
However, an annual report showed that in September 2010, OR was in debt to the tune of some 230 billion ISK. This prompted the company’s largest investors to decide not to lend to OR anymore, although the Nordic Investment Bank has offered to alter the interest rates on an older loan. This, however, would be under the condition that the owners of OR put up 8 billion ISK of their own money, which puts the burden squarely upon the city.
Mayor Jón Gnarr was blamed in part for investor skittishness, as he stated on his Facebook that OR was “bankrupt”. Apparently a translation of these remarks reached foreign investors in OR.
Numerous ideas have come up as to how OR could redeem itself financially, among them to sell assets, delay any construction plans, and to raise the cost of power. The last raise on power rates, five months previously, drew a lot of public anger when the cost of electricity and hot water for a 100 square metre apartment in the capital area went from 8,800 ISK per month to 11,200 ISK.
What conclusions city officials will reach with regards to the fate of OR should be announced later today.

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