The Prime Minister‘s Office and Landsvirkjun have reached an agreement on remuneration for Landsvirkjun‘s utilisation of water- and ground rights in an area at the river Þjórsá, within the public land.
The catalyst for this agreement is EFTA Surveillance Authority’s Decision from April 20, 2016, which states that the use of publicly owned land and natural resources without remuneration constitutes state aid, which goes against the EEA Agreement. At that time the government agreed to the Decision and since then negotiations have been underway.
According to the agreement, Landsvirkjun pays annual remuneration to the Icelandic State for the duration of 65 years (backdated to January 1, 2017). Furthermore, it is anticipated that the remuneration amount will be reviewed at the end of that period. Landsvirkjun will also pay for the utilisation rights from the date when the Act of Public Lands came into force, to year end 2016. Later this year Landsvirkjun will pay ISK 1.5 billion in charges now due, but future annual payments will amount to ISK 90 billion, plus indexation.
The remuneration is not expected to affect Landsvirkjun’s future dividend payments. Over the last four years, Landsvirkjun’s dividend payments to the Icelandic State have amounted to ISK 22 billion.
The decision for renumeration for water rights is based on the value of similar rights and the antecedent of the power plants in question. The Supreme Court ruling no. 233/2011, where the value of rights in connection to the Fljótsdalur Power Station was in question, weighed heavily in the decision making. Consideration is given to the efficiency of power plants, resulting in increased charge when the initial capital expenditure/power-generating capacity is lower. Remuneration for usage of land resources is based on rulings of the Assessment Committee, regarding eminent domain compensation and equivalent agreements.
It is anticipated that other energy producers in a similar position as Landsvirkjun, i.e., where agreements for existing power plants have not been reached with the Icelandic State, will be offered comparable agreements.
Katrín Jakobsdóttir, Prime Minister of Iceland:
“I am pleased that an agreement has finally been reached. Landsvirkjun is an important publicly owned company, and this agreement reinforces its position, as well as concluding this matter. Furthermore, the principle of reasonable remuneration for the utilisation of the country´s natural resources is emphasised.”
Hörður Arnarson, CEO Landsvirkjun:
“We welcome this agreement. Even though Landsvirkjun has, in accordance with sectoral law, a protected right for the utilisation of resources in this area, an agreement for remuneration for the utilisation had not been in place before. This agreement validates the right of utilisation for the national power company, providing an important predictability. Landsvirkjun’s energy production from Iceland’s renewable natural resources, is paramount for our contribution to climate issues, in addition to being economically profitable. Landsvirkjun’s dividend payments to the Treasury will continue to increase and are anticipated between ISK 10 to 20 billion annually, in the coming years.”