Landsvirkjun is nearing its 60th year of operations and is in a stronger position than ever. The Company’s excellent status bears witness to all the employees and Board Directors that have lent their strength and wisdom to its operations for the last 58 years. The financial statements for 2022, published this week, are a testament to this.
Landsvirkjun’s revenues have never been higher, or USD 609 million. A fair division of the benefit of generating renewable energy has always been a priority. However, when Landsvirkjun enters into an agreement with a large new customer, it is often in the mutual interests of the Company and the new customer to start with a lower energy price to lend support to a new investment. When the investment is on firm ground, a new price is negotiated, quite often with an ensuing debate, as these are one of the most valuable agreements made in Iceland. The recent increase in Landsvirkjun’s revenues originates mainly from this source, i.e., renegotiations with the Company’s large customers.
Record Breaking Energy Generation
Energy generation was also at a record high in 2022. Over the years, Landsvirkjun has continually worked on increasing eco-friendly energy generation to meet demands of a growing community. This has amounted to a 15% increase over the last ten years. The Company is ready for new construction projects, as electricity demand will be high in the coming years and decades. The fact is that Iceland has been significantly forward minded in developing renewable energy, and the current situation is rather enviable now that the world clamours for clean energy. Carbon emissions from Landsvirkjun’s operations are proportionally low, and by 2025 operations will be carbon neutral.
Cash on Hand USD 361 Million
With responsible budgeting, the generation of cash on hand from operations was approximately USD 435 million, or USD 361 million, excluding income from the sale of Landsnet, the Icelandic System Operator (TSO), which was sold late last year. This strong cash flow has been used to reduce the Company’s debt. Now Landsvirkjun’s net debt to EBITDA is 1.85, a historic low. In 2010, revenues amounted to only 13% of net debt, which was 72% in 2022.
Furthermore, government guarantees are being removed from the loan portfolio, as for the last decade or so, new loans have not required government guarantees. Therefore, emphasis on lowering debt is not a priority anymore, superseded by dividend payments.
Dividends to a Patient Nation
Historically, the owner of Landsvirkjun has been patient regarding dividend payments. In recent years profits have mainly been used to support the Company’s strong foundation. We are now at a turning point, as the emphasis on lowering the debt is no longer needed, and the owner receives more significant dividends. The dividend payment for 2021 was USD 120 million. At the Annual General Meeting 2023, the Board of Directors will propose a dividend payment of USD 140 million, a record amount. The accrued dividend payment amount, income tax, and taxes on capital gains from the sale of Landsnet ensure that Landsvirkjun will pay to the Treasury this year in the region of USD 335 million for 2022.
Landsvirkjun’s patient and long-term financing are now returning dividends to its owner, the people of Iceland — dividends from generating renewable energy based on respecting the natural resources the Company is entrusted with. The last 60 years have compounded Landsvirkjun’s good financial results, leading to a record breaking 2022. Now, Landsvirkjun’s financial foundation is more solid than ever, and the company’s role in the development of the future of Iceland is bright.