Contract on electricity transmission for Nordic Aluminium expansion

20. April 2004

Concluded due to the expansion of Nordic Aluminium, the contract applies to electricity transmission over the next twenty years. Plans are for the construction of transmission structures to have been finished before the enlarged Nordic Aluminium plant becomes operational in 2006.

This contract is signed in the wake of a contract between Suðurnes Regional Heating and Reykjavík Energy on selling power to Nordic Aluminium on account of expansion in the Nordic's Hvalfjörður aluminium plant.

Landsvirkun’s Transmission Division has been administratively and financially separated from other aspects of company operations since 1 July 2003, in accordance with a new Electricity Act. The contract marks a turning point in the sense that this is the first agreement on transmitting electric power which was entered into in the new legal context by Landsvirkjun’s Transmission Division. The new arrangement aims at creating conditions for increased competition in the generation and sale of electric energy and at separating the privatised aspects of selling electricity, i.e. transmission and distribution, from this business.

The measure therefore signifies a major step towards an altered system of electrical matters which will, in the long run, enable all consumers to select their own electricity vendor. The contract is based on a special transmission rate list for large-scale users of electricity, so that these investments will have no impact on the price of delivering electricity to the general public.

Investments in the electricity transmission grid estimated at ISK 6,600 million

In order to be able to transmit electricity for the enlargement of the aluminium plant, Landsvirkjun’s Transmission Division has to invest in structures costing ISK 6,600 million. The principal investment relates to installing Sultartangi Line 3, a power line from the switchgear at Sandafell near Sultartangi to Brennimelur in Hvalfjörður. Sultartangi Line 3 mostly follows the line route of Sultartangi Line 1, although some adjustments have been made so as better to integrate the route with its environment. An environmental impact assessment on the line has already been completed, with the Minister confirming the decision of the National Planning Agency.

It is envisaged that the line will enter use before the new phase of the Nordic Aluminium plant becomes operational, which is planned for February 2006. With the advent of this power line, appropriate alterations will have to be made in switching stations at Brennimelur and Sandafell. A new switchgear will have to be constructed at Kolviðarhóll in Hellisheiði in order to connect the Hellisheiði power plant to the transmission grid.

Construction of Sultartangi Line 3 will signify a tremendous improvement into the future, ensuring the position of Brennimelur and Grundartangi as energy delivery points for electricity to major users and also significantly increasing the secure delivery of electricity to all consumers in Southwest Iceland. It is anticipated that 270 man-years will be required for construction labour.

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