Landsvirkjun pays 50mn USD dividends for 2020

Two new executive vice presidents have been appointed to Landsvirkjun, Ásbjörg Kristinsdóttir and Jóna Bjarnadóttir.

Ásbjörg Kristinsdóttir and Jóna Bjarnadóttir join executive board of Landsvirkjun

Ásbjörg will be executive vice president of Project Planning and Construction. She has worked at Landsvirkjun intermittently since 2002, recently as executive director of Project Planning and Construction. Ásbjörg supervised building of the Búrfellsstöð II Hydropower Station, the first woman in Iceland to supervise such a project. She has a PhD in Engineering Management from MIT.

Jóna will be executive vice president of the new Community and Environment Division. Jóna started work at Landsvirkjun in 2014, and since 2017 she has led the Environment and Resources department. She has a Master’s degree in Environmental Management and Policy from Lund University. Jóna has extensive experience of environmental issues and cooperation with stakeholders.

As Ásbjörg and Jóna take up their new positions, there will be other organisational changes at Landsvirkjun. Einar Mathiesen, who used to lead the Energy Division, will take on the new Wind and Geothermal Division.

In addition Gunnar Guðni Tómasson has taken over as executive vice president of the Hydropower Division, having previously headed Project Planning and Construction.

Following these changes, eight executive vice presidents will sit on the Landsvirkjun Executive Board, with gender parity for the first time in the company’s almost 56-year history.

The CEO of Landsvirkjun signed a memorandum of understanding on February 23rd on behalf of the company, launching negotiations for the sale of Landsvirkjun’s shares in Landsnet to the government. A change in ownership of Landsnet has been underway for some time.

The CEO of Landsvirkjun signed a memorandum of understanding on February 23 on behalf of the company, launching negotiations for the sale of Landsvirkjun’s shares in Landsnet to the government. A change in ownership of Landsnet has been underway for some time. 

Landsnet operates the Icelandic transmission system and control of power systems. It is owned by four power companies: Landsvirkjun (64.73%), RARIK (22.51%), Orkuveita Reykjavíkur (6.78%) and Orkubú Vestfjarða (5.98%). All parties signed the memorandum of understanding, as did the Minister of Finance and Economic Affairs and the Minister of Tourism, Industry and Innovation on behalf of the Government.

The Icelandic Government decided in December 2018 to start discussions to ensure the direct state ownership of Landsnet and established a preparatory work group. The memorandum of understanding signed today states that the parties agree on the importance of securing that that the change in ownership will not negatively affect the financial strength of the sellers, the buyer, or the interests of Landsnet. The parties’ goal is to reach an agreement before the end of the year.

“We at Landsvirkjun think it is sensible to fully distinguish between owners of the electricity transmission system on the one hand and power generation on the other hand, even though it is not required by law,” says Hörður Arnarson, CEO of Landsvirkjun. “In the long run, it is not optimal that Landsnet is owned by power generators and distributors. One argument is that the independence of the transmission system will enhance equality between parties in the market. We enter the negotiations optimistic and see the decision as a positive step for the ongoing development of the electrical power system in Iceland.”

Key figures from the consolidated financial statements

Profit before unrealized financial items amounted to USD 138.7 million compared to USD 176.0 million in the previous year and decreases by 21.2% between years.

The profit for the year amounted to USD 78.6 million but was USD 114.9 million in the previous year.

Operating revenues amounted to USD 453.5 million and decrease by USD 56.1 million (11.0%) from the previous year.

Net debt decreases by USD 15.7 between years and was USD 1,675.8 at year end. Interest expenses decrease by USD 11.9 million between years.

Cash flow from operating activities amounted to USD 234.1 million, a decrease of 20.9% from the previous year.

‘’Landsvirkjun’s operations and results were inevitably affected by the pandemic during 2020 which had a substantial effect on the economy in Iceland and the rest of the world. Many of our customers reduced their manufacturing output due to decreasing demand and product prices. There was also a large price decrease in energy markets, although that development saw a reversal late in the year. Some of Landsvirkjun’s energy contracts are linked to aluminium price and electricity price on the Nord Pool market.

The year 2021 starts well as prices on aluminium and Nord Pool markets increase between years. There was a positive development earlier this week when Landsvirkjun signed an amendment to its current power purchase agreement with its oldest customer, Rio Tinto Iceland Ltd., which strengthens the operations of the aluminium smelter over the coming years and ensures the predictability of Landsvirkjun’s revenue stream.

Landsvirkjun is a pillar of the Icelandic economy. We have a great responsibility which is why we have worked hard to improve the company’s debt position over the past decade or so. As a result of this work we can now support our customers by offering them a temporary discount on energy prices and take part in the economic recovery by launching various construction, maintenance and research and development projects nationwide.

Profit before unrealized financial items, which is the measure which best reflects the company’s core operations, decreased by 21% between years. The largest effects of this decrease were due to a reduction in energy sales, special terms for our customers and the connection of aluminium- and Nord Pool prices to our energy prices. Operating revenues decreased by 11% and cash flow from operating activities decreased by 21%. However, it was positive to see that we managed to keep reducing net debt at the same time. The company’s operations went well despite this external turbulence. Power station operations were good. Our customers are increasing productions despite the current economic difficulties and Landsvirkjun sees various future opportunities, for example in green hydrogen production, eco-friendly industrial parks and other green innovation like the Orkídea project in southern Iceland, Blámi on the Westfjords and EIMUR in northern Iceland. The future looks bright despite the current difficulties.“

financial-statements-lv-2020-1.pdf

Landsvirkjun and Rio Tinto Iceland have agreed on amending the power purchase agreement (PPA) between the two companies dating back to 2010, thereby allowing the Straumsvik aluminum smelter to continue operating with a stronger competitive position.

Amended agreement delivers stronger competitiveness for Straumsvik smelter

Landsvirkjun and Rio Tinto welcome this milestone that gives a more secure footing for ongoing operations of the smelter for the coming years, as well as predictable revenue stream for Landsvirkjun and increased flexibility for both parties. As before, the contract specifies the sale of 390 MW or 3.416 GWh pr. year and expires in 2036.

Amending the contract is a positive development for both parties. The base power price has been adjusted and remains in USD and linked to the US Consumer Price Index (CPI). To a small extent, the contract is also linked to aluminum prices which enables price correlation to international markets to some degree.

This agreement is an amendment to the current power contract from 2010. The contract‘s terms of non-disclosure are still in full force and therefore it cannot be made public at this time.

In parallel to the modified agreement, Rio Tinto has decided to withdraw a complaint filed with the Icelandic Competition Authority in July 2020 regarding the energy supply for ISAL.

Hörður Arnarson, CEO of Landsvirkjun: “We welcome the agreement on amending the power purchase contract, as Rio Tinto had requested, and the outcome benefits both parties as well as enhancing the power system ‘s efficiency in Iceland. Our goal remains the same, to guarantee predictable income while considering the changes now taking place in the global markets and customer needs.

At Landsvirkjun, we have emphasized supporting our customers in these challenging times. We are determined to continue offering competitive energy prices, as well as fulfilling our role of maximizing the potential yield and value of the renewable natural resources we have been entrusted with, for the benefit of Icelanders.”

Rannveig Rist, CEO Rio Tinto Iceland: “This is positive news which reduces the uncertainty around the operation in Straumsvík and improves our competitiveness. We can be very proud of our work in Straumsvík during the last few years. Despite uncertainty the operation has been running smoothly and people never lost sight of the most important things. Safety issues were in good order, production went very well, and the quality of our products has been very good. Our environmental performance was also one of the best ever. Although we have reached this milestone, it does not mean ISAL is not faced with challenges. Situation in the aluminum markets will continue to be challenging but with this agreement we can focus on producing high quality aluminum with our customers’ needs in mind.”

Iceland has everything it takes to make the shift from energy dependence to energy independence. Our goal is to be among the first in the world to achieve zero net carbon emissions or at least, by no later than by 2050. 

Petrol and diesel will become a part of history

“Iceland has everything it takes to make the shift from energy dependence to energy independence. Our goal is to be among the first in the world to achieve zero net carbon emissions or at least, by no later than by 2050. Petrol and diesel-powered vehicles must become a part of our history, replaced by alternatives such as electricity and hydrogen. Taking these steps will enable us to fulfil society’s future energy needs in a sustainable manner” said Þórdís Kolbrún Reykfjörð Gylfadóttir, Minister of Tourism, Industry, and Innovation, at Landsvirkjun’s open meeting on new, green energy opportunities.

The Minister referred to Iceland’s new Energy Policy, published last October, which gives a clear picture of Iceland’s sustainable energy future. “The development of the Policy was supported by cross-political consensus and close cooperation with the various stakeholders, as we become increasingly aware of the necessity of creating long-term plans for energy development and the environment. We are pleased to see that Landsvirkjun is exploring many exciting opportunities in line with the new Energy Policy. We already utilise various natural resources such as waterfalls, wind, and geothermal energy to produce green energy, but we need to prepare for a complete energy transition on land, air, and sea.”

Hörður Arnarson, Landsvirkjun’s CEO, stated that Iceland could lead the way to a potentially fossil-free world and that its energy industry should be at the forefront of progress. “We have a strong foundation because 80% of our primary energy is already sustainable. However, we must also remain committed to seeking out innovative ways to utilise green energy. I agree with the Minister when she says that the Energy Policy, developed with broad consensus, is of tremendous importance. The policy promises us the full support of the government throughout the next decades of this energy transition, ensuring a clean, green future.”

Data centers, batteries and food production

Klemenz Hjartar, a partner at McKinsey & Co, stated that Iceland’s advantage in the energy sector could be compromised by the ongoing development of increasingly cheaper renewable energy options such as wind energy. Competing with these options will require innovation, new regulatory frameworks, and job opportunities. Icelanders must decide if they wish to maintain control of their energy matters or become mere puppets, reliant on the decisions of others.

Ríkarður Ríkarðsson, Executive Vice President of Landsvirkjun’s Business Development and Innovation, stated that Iceland had previously undergone an energy transition when geothermal heating was first introduced in the early 20th century and that cross-political consensus has now been reached on achieving zero net carbon emissions in Iceland by 2050. He drew attention to the fact that the current energy system represented Iceland’s largest contribution to this goal and emphasised the numerous possibilities ahead.

Haraldur Hallgrímsson, Director of Sales and Business Development at Landsvirkjun, noted that Iceland purchased 680 thousand tonnes of fossil fuels in 2018 at a cost of ISK 50 billion. He commented that boldness and cooperation at both the national and international level could incentivise Icelandic green programs such as hydrogen production, creating a new export industry.

Vala Valþórsdóttir, Business Development Manager at Landsvirkjun, spoke about the energy-intensive data center industry. She drew attention to the fact that Iceland offers the industry access to 100% renewable energy sources and lower energy use than elsewhere due to the cold Icelandic climate. She stated that the industry is expected to grow by 9% each year and Landsvirkjun could face fierce competition.

Dagný Jónsdóttir, Business Innovation Manager at Landsvirkjun, said that there was a significant increase in the demand for batteries, mostly due to the rapid rate of vehicle electrification worldwide. A tenfold increase in electric vehicles is expected by 2030, which would mean a rapid decrease in carbon emissions. She commented that Landsvirkjun has seen a growing interest in battery production and the industry could become a key market for Iceland, due to its ideal geographical location.

Sigurður H. Markússon, Business Innovation Manager at Landsvirkjun, said that global food production has reached a plateau. The industry utilises 37% of the world’s vegetation and 70% of its freshwater resources and future production will be controlled by a high-tech environment. He commented that sustainable food production could provide Iceland with various opportunities, but the industry would need to focus on export, much like the Icelandic fisheries industry, as it is currently too small-scale to justify the cost of production.

A cooperative project on energy transition and energy-related innovation.

Landsvirkjun, the Westfjords Regional Development Office and the Westfjord Power Company have today signed a cooperative agreement to launch Blámi, an energy transition and innovation project.  

The main goal of the Blámi Project is to inspire the development of innovative energy transition projects. Energy transition is driven by the decarbonisation of energy sources and the Blámi project aims to increase the use of environmentally friendly fuel, hydrogen and e-fuel in transport and industry. The Project will support energy and climate change-related projects, empowering entrepreneurs and promoting innovation in the Westfjords. Landsvirkjun has previously taken part in two cooperative projects; the EIMUR and Orkidea projects. 

One of the purposes of the Blámi Project is to attract partnerships and international funding for experimentation, research, and development on energy- and eco-friendly solutions. New opportunities and increased co-operation between the public and private sector could help the region to move towards a more circular economy, where the increased use of underused raw materials will be used to create value for existing and future businesses and ventures. 

The project will identify and build on regional strengths, existing infrastructure, local businesses, manpower and resources, to create a fertile ground for innovation and increased value creation. The positions of Managing Director and Research and Development Director for the project will be advertised shortly and should be filled by the beginning of next year. 

Ríkarður Ríkarðsson, Executive Vice President of Business Development and Innovation at Landsvirkjun: 

"We Icelanders are committed to fulfilling the climate goals we have set. However, every challenge brings opportunity, and our gradual energy transition could eventually lead to Iceland becoming fully energy independent. Iceland could be among the first countries to fully decarbonize which could greatly increase the competitiveness of our export industries which are based on the sustainable use of marine and terrestrial resources. This could lead to increased innovation and more employment variety.” 

“A project of this magnitude will require the cooperation of many different parties. We look forward to working on energy transition development projects in the Westfjords, where ideal conditions exist for the testing of new technologies such as hydrogen and other energy carriers in production and transport by sea and land. " 

Hafdís Gunnarsdóttir, Chairman of the Board at the Westfjords Regional Development Office - Vestfjarðastofa:  

"We welcome the innovative thinking behind the Blámi Project and believe that it reflects the future vision of the area, detailed in the Westfjords Action Plan 2020-2024. The Westfjords area is an outstanding place to live, work, visit and enjoy the tranquillity of pure nature. It is a vibrant, growing, international knowledge society characterised by dynamic creativity, a strong identity and environmental awareness. We have good infrastructure, great social services and a diverse economy characterised by respect for the environment, society, and natural resources. The Action Plan sets out policies to increase the environmental awareness of our residents, municipalities, and local businesses, improve access to sustainable solutions, reduce waste, increase value creation, promote innovation, and increase the number of high-tech companies in the area. The project also supports the environmental certification initiative in the Westfjords. We believe that the establishment of Bláma enables us to take advantage of the opportunities that exist by encouraging increased collaboration and innovation. " 

Elías Jónatansson, CEO of the Westfjord Power Company: 

"New opportunities have arisen in the Westfjords in recent years and substantial funds have been invested in building up infrastructure to support further development. The Westfjord Power Company believes in the importance of cooperative projects of this kind, e.g., the development of green energy exchange solutions. New technology can pave the way for a fossil fuel phase-out, e.g., in aquaculture, transport and transportation. Effective co-operation with the companies in the Westfjords is a key factor in the success of Blámi's operations." 

The CDP has recognised Landsvirkjun as a leading company in the worldwide battle against climate change, earning a grade of A- on their Climate list. CDP is a non-profit organisation, that runs the global disclosure system, gathering and distributing information and advising on continuous improvement on environmental issues.

CDP Recognises Landsvirkjun as a Leader in Climate Change Action

The CDP has recognised Landsvirkjun as a leading company in the worldwide battle against climate change, earning a grade of A- on their Climate list. CDP is a non-profit organisation, that runs the global disclosure system, gathering and distributing information and advising on continuous improvement on environmental issues. 

Thousands of companies submit information to the CDP every year. This extensive disclosure contributes to the effective management of carbon and climate change risk, promoting environmental transparency and accountability. The average grade for the ‘company category’ in 2020 was C. The average score for renewable energy companies was B but Landsvirkjun was one of 50 energy companies given an A- or A rating. 

Landsvirkjun's vision is a sustainable world powered by renewable energy. Our greatest contribution to sustainable development is acting on climate change because energy matters are climate matters. Landsvirkjun produces only renewable energy but two-thirds of global greenhouse gas emissions can still be traced to energy production.   

Systematic action and improved performance 

Landsvirkjun has been active in the fight against climate change for some time and confirmed its commitment by submitting its first report to the CDP in 2016. 

We have prioritised climate issues, using a holistic approach across company operations, integrating our climate change goals at all levels. We believe that we are on the right track and welcome the CDP's confirmation that we are a leader in climate change action. The actions and changes we have systematically introduced are considered best practice. 

The responsibility of Landsvirkjun's management on this issue is clear. We have developed an ambitious action plan, with clear carbon reduction targets, and have implemented internal carbon prices. The authenticity and scope of our climate accounting is verified by external auditors according to international standards. 

“The CDP's recognition of our achievements is of great value to us because it confirms that the action, we have taken on climate change, in recent years, is on the right track. Climate change affects our core business, and our team deserves credit for their contribution to making such effective change. The fact that the CDP's demands have steadily increased over the years and achieving an A rating now is much more challenging than it was in 2016, makes the achievement even more remarkable.” 

Economic conditions continue to affect operations but net debt continues to decrease

Strong operations despite external turbulence

Profit before unrealised financial items amounted to USD 92.4 million, compared to USD 129.1 million in the same period of the prior year, which is a decrease of 28.4%.

The profit for the period was USD 61.2 million, compared to USD 90.1 million in the same period of the prior year.

Operating revenues amounted to USD 328.0 million, decreasing by USD 44.5 million (11.9%) from the same period of the prior year.

Net debt decreased by USD 56.7 million from the beginning of the year and amounted to USD 1,634.7 million at the end of September.

Cash flow from operations amounted to USD 169.8 million which is a decrease of 23.6% compared to the same period of the prior year. 

"The economic conditions caused by the COVID-19 pandemic continue to affect Landsvirkjun’s operations. These conditions are putting pressure on demand and product prices of the company’s customers. However, after a decade of debt reduction the company is in a strong position to weather the storm and support its customers during these difficult times. As previously mentioned, our industrial customers have received temporary discounts and the company has taken an active role in the effort to support the economy by undertaking various construction-, renovation- and research- and development projects throughout Iceland.

One positive development is that net debt has decreased during the first nine months of the year despite these difficult conditions and is currently around 57 million dollars lower than at the beginning of the year. Profit before unrealised financial items, the measure we use when evaluating the company's core operation, decreases by 28% compared to the same period of last year and amounts to 92.4 million dollars.

The company’s operations were strong during the period despite the economic turbulence. In light of the changing market conditions we decided to split the marketing and business development department into two separate departments, namely energy sales on the one hand and business development and innovation on the other. Despite current economic challenges, there are a number of opportunities for Landsvirkjun going forward, for example in green hydrogen production, eco-industrial parks and other green innovations like the Orkídea- and EIMUR projects in the south and north of Iceland.

The outlook for the company’s operations and the world economy continues to be uncertain. As before, it depends on the containment of the coronavirus. Recent positive news of vaccine developments are promising and if deployed soon the world economy can hopefully start recovering."

press-release-q3-2020.pdf

interim-financial-statements-jan-september-20201.pdf

Optimal utilisation of the resource and increased flexibility in operations

The area offers extensive opportunities for geothermal utilisatio

Section 2020 - 1, Stækkun Búrfellsvirkjunar - Fornleifaskráning vegna deiliskipulags við Búrfellsstöð. Skeiða- og Gnúpverjahreppur.

Búðarhálsstöð is one of seven hydropower stations in the Þjórsá area.

The water drives six powerful turbines in the powerhouse

Lágmarkshæð vatnsborðs og við tekur varaforði

Aðrennslisgöng frá Hálslóni (þvermál: 7,2-7,6 metrar)

Aðrennslisgöng frá Ufsarlóni (þvermál:6,5 metrar)

Þrenn aðgöng vegna aðrennslisganga (þvermál: 7,2-7,6 m)

Tvenn hjáveitugöng og aðkoma við Kárahnjúkastíflu

Bergþéttingargöng undir Kárahnjúkastíflu

Tvenn göng í Hraunaveitu (þvermál: 4,5 metrar)

Tvenn fallgöng að stöðvarhúsi (þvermál: 4,0 metrar)

Aðkomugöng að stöðvarhúsi (þvermál: 7,5 metrar)

Heildarfallhæð frá Hálslóni í stöðvarhús í Fljótsdal

Hönnunarrennsli (mesta mögulega rennsli)

Nýtir rennsli Tungnaár og  Þjórsár en árnar sameinast í Sultartangalóni

Blanda power station is located on the northern edge of the high-lands near the end of the Kjalvegur Mountain Road.

There are six hydropower stations in the catchment area of Rivers Thjórsá and Tungnaá: Búrfell, Sultartangi, Hrauneyjafoss, Vatnsfell, Sigalda and  Búdarháls.

Verkfræðistofa Sigurðar Thoroddsen hf. og Harza Engineering Company International, Bandaríkjunum

Guðmundur Kr. Kristinsson og Gunnlaugur Halldórsson

Frárennslisskurður tengir Sigöldu við Hrauneyjafossstöð.

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Landsvirkjun pays 50mn USD dividends for 2020

Ásbjörg and Jóna join executive board

Sales negotiations for Landsnet

Landsvirkjun pays 50mn USD dividends for 2020

Ásbjörg and Jóna join executive board

Sales negotiations for Landsnet

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