Landsvirkjun

No state aid in power contract between Landsvirkjun and Norðurál

October 24, 2016

The EFTA Surveillance Authority (ESA) has concluded that the renewal of Norðurál's contract with Landsvirkjun on the purchase of electricity does not involve state aid, as it was concluded on market terms.

 ESA's press release on its decision includes the following comments:

“ESA underlines that the application of the market economy investor principle requires an individual assessment of the terms of each contract. Accordingly, Landsvirkjun has provided ESA with extensive information.

In the amended contract, electricity price will be tied to the market price for power on the Nordpool Elspot power market instead of prices on the aluminium markets as it was under the previous agreement. ESA has found that the power contract is in line with standard commercial practices of competing power companies in the Nordic countries and that the level of risk associated with it, is in line with what a private power producer would consider acceptable in the same situation.”

The amended agreement was signed last 5 September. The contract has a term of four years and provides for 161 MW, which represents almost a third of the power needs of the aluminium plant at Grundartangi. The amended contract will take effect in November 2019 and remain in force through 2023. The current agreement will remain in force through October 2019.

Press release on the extension of a power contract between Landsvirkjun and Norðurál.

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