The city of Reykjavík will help rescue the debt-ridden power company Reykjavík Energy (OR), but only on certain conditions.
As the Grapevine reported, OR is billions in debt, and many of the private energy company’s foreign investors are nervous. The largest shareholder of OR is the city of Reykjavík, however, owning 94% of the company – so the fate of the city and the company are, for better or worse, closely intertwined.
Numerous solutions for how to rescue the company from utter failure have been proposed, among them to raise power rates again. Vísir now reports that a proposal from the mayor has been approved by city council.
The proposal is to lend OR 11.3 billion ISK of city money. However, this money will only be lent on the condition that OR sell all of their assets that do not pertain to their “core work”; i.e., providing electricity and hot water. Part of these assets to be sold will probably include their fiberoptic cable service, which has been one of the few profitable projects the company has had.
Alfreð Þorsteinsson, the former director of OR who oversaw the company in its boom years, told Pressan that he believes the business practices of OR have always been sound, in particular under his watch. He chalks up the latest set of difficulties to “a lack of trust between the top managers [of OR]”.
The first payment from the city to OR, 7.4 billion ISK, will be on 1 April. The rest will be paid in 2013.