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The cities of Reykjavík and Akureyri sell their shares in Landsvirkjun to the Icelandic state

November 2, 2006

The following press release was issued yesterday:

"The Minister of Finance, Árni Mathiesen; the Minister of Industry and Commerce, Jón Sigurðsson; the Mayor of the city of Reykjavík, Vilhjálmur Þ. Vilhjálmsson; and the Mayor of the town of Akureyri, Kristján Þ. Júlíusson, signed an agreement today on the purchase by the Icelandic state of the shares held by the city of Reykjavík and the town of Akureyri in Landsvirkjun.

The city of Reykjavík and the town of Akureyri own a total of 50% of the enterprise, with Reykjavík holding a 44.525% share and Akureyri 5.475%. The total purchase price of these shares amounts to ISK 30.25 billion, and ISK 3.4 billion are to be paid when the agreement takes effect on 1 January, 2007.

The remainder of the purchase price is to be paid in bonds with a term of 28 years. The payments will be made to the municipalities' pension funds, i.e. the City of Reykjavík Municipal Employees' Pension Fund and the Town of Akureyri Municipal Employees' Pension Fund, for the funds to cover pension obligations to municipal employees.

The agreement is subject to ratification by the Althing, the Reykjavík City Council and the Akureyri Town Council."

The agreement is based on a declaration of intent concluded on 17 February 2005. In the very near future, the agreement will be presented to the Reykjavík City Council and the Akureyri Town Council, and the Icelandic Government will soon submit a bill authorising the purchase to the Althing, with the intention of passage before the end of the year. The company's future status will therefore be clarified over the next several weeks.

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