Energy Dividends to the People


Energy Dividends to the People

By Hörður Arnarson, CEO of Landsvirkjun

Energy companies in Iceland are quickly leaving the operational challenges due to the pandemic behind them. Landsvirkjun‘s operating performance for the first half of 2021 is a clear sign thereof. Return before unrealised financial items increased by 36% compared to 2020 and debt was reduced by ISK 10.4 billion. The credit rating agency S&P Global confirmed this turnaround last June by upgrading Landsvirkjun‘s credit rating by one notch.

Landsvirkjun‘s good performance is important for Iceland. Energy production from renewable resources should create profits, which can be put to good use by the people of Iceland.

Reduced Debt Despite Investment

Landsvirkjun has worked hard to increase profitability. Substantial reduction in debt was an important part of that process. The company was leveraged after a large and rapid investment in its energy infrastructure, made to meet the demand for electricity. The people of Iceland took Landsvirkjun‘s capacity development in stride, just as they did during the years when debt was reduced by ISK 155, despite the equivalent and simultaneous investment in energy infrastructure. Now, however, the people of Iceland enjoy dividends from their natural resources directly: Landsvirkjun made dividend payments of ISK 10 billion to the Treasury in 2020, and in 2021 the amount is ISK 6.5 billion, irrespective of tribulation due to the pandemic. It is anticipated that dividend payments will increase in the future.

Fair Price for the Resources

One of the most important factors of Landsvirkjun‘s operations is the pricing of electricity. In that regard Iceland is well positioned, compared to other countries. Landsvirkjun offers competitive energy prices in a country where qualified employees and a solid infrastructure attract new companies, which would otherwise seek prospects elsewhere. Thus, new opportunities and innovation is extended into the Icelandic economy.

Direct Benefit for the People of Iceland

Landsvirkjun‘s function is clear: to maximise the yield from the energy resources for which it is entrusted, with sustainable utilisation, value creation and efficiency as its guiding principles. Landsvirkjun is now ready to pay to the people of Iceland that which is rightfully theirs. In a proposed bill for the establishment of the National Fund of Iceland it is stated that its role is to be a reserve fund in case Iceland runs into severe financial difficulties. The lion‘s share of the contributions to the Fund will come from Landsvirkjun‘s dividends. An interim provision in the proposed bill states that capital is to be allocated to the development of hospital rooms and to promote industrial innovation. Should the National Fund materialise, the benefit to the people from the energy resources will be tangible. And even if the dividends will not be paid to a specific National Fund it is quite clear that they will duly come to good use, e.g., in the educational- and public health care systems.

Embrace the Future

Landsvirkjun has served an important role for more than half a century and will continue to do so. In the coming years and decades the national power company‘s mission will be to lead the energy switch, e.g., by producing electric fuel. Landsvirkjun intends to utilise Iceland‘s green energy to eliminate the use of petrol and diesel, to lay the foundations for food production of the future and diverse green industries that support the company‘s climate goals. Landsvirkjun will achieve carbon neutrality by 2025 and will continue to contribute to the government‘s Energy Policy. Landsvirkjun embraces the future, for the benefit of all.