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RARIK (Iceland State Electricity), Westfjord Power Company, and Landsvirkjun to establish joint sales enterprise for the electricity market

January 17, 2006

The aim achieved through the new firm will be to draw clear lines between the concessioned and competitive operations now within both Westfjord Power Company and RARIK, since these companies are distribution system operators as well as electricity producers.

The company to be created will control its own production capabilities, in addition to buying wholesale electricity from other producers. In the opinion of RARIK, Westfjord Power Company and Landsvirkjun, forming this company will offer a stronger option on the retail electricity market, thereby bringing benefits to consumers. RARIK and Westfjord Power Company will each own 36% in the new company, while the remaining 28% will belong to Landsvirkjun.

  • At the beginning of last year, RARIK and Westfjord Power Company, as 100% state-owned enterprises, entered into negotiations on founding a joint power-sales company which would take over their production units. This was considered to be an appropriate step to take in the light of competition being introduced in electricity production and sales, since such an enterprise would be better adapted to a competitive environment.
  • It was clear that the creation of an independent, joint power sales company would accomplish a distinct business division between concessioned and competitive branches.
  • On 17 February 2005, the Minister of Industry and Commerce announced government intentions of merging RARIK, Westfjord Power Company and Landsvirkjun, subsequent to the State purchasing the shares that municipalities own in Landsvirkjun. The companies were then requested to prepare for a potential merger into one conglomerate. Part of the vision was to establish a joint energy sales company, led by RARIK and Westfjord Power Company.
  • Preparations towards creating the sales company have proceeded under the aim of launching the company at the beginning of this year, upon retail electricity sales becoming fully deregulated.
  • Even though discussions among the owners of Landsvirkjun on the State purchasing the municipal shares in Landsvirkjun have been delayed, the companies' Boards of Directors have now decided to found such an energy sales enterprise, with the assistance of Landsvirkjun.
  • This joint power sales company is expected to begin operations at the earliest opportunity, taking over the management of electricity sales from RARIK and West Fjord Power Company.
  • The company being born will become owner of the following power stations:
    • From RARIK: the power stations at Rjúkandi, Skeiðfoss, Grímsá, Lagarfoss and Smyrlabjörg
    • From Westfjord Power Company: the power stations at Mjólká, Þverá, Fossar and Reiðhjalli
    • From Landsvirkjun: the power stations at Laxá.

The overall capacity of these stations is about 53 MW, with an energy output exceeding 300 GWh per annum.

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