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Icelandic pension funds and British fund buy geothermal firm HS Orka

Reykjanes power plant of HS Orka, Iceland (source: Commons/ Wikimedia)
Alexander Richter Alexander Richter 23 May 2019

The sale of the majority stake in Icelandic energy company HS Orka has been concluded with Icelandic pension funds in cooperation with a British investment fund buying Innergex' share for USD 300m.

As reported this morning in Iceland, Jardvarmur slhf, a company jointly owned by 14 pension funds in Iceland, has decided to exercise its pre-emptive right in the only private power company in Iceland, HS Orka for the 54 per cent stake sold by Canadian energy company Innergex in HS Orka. In the sale process, a fund by Australian investment bank Macquarie put in the winning offer in Magma Energy Sweden A.B, which holds the the 54 stake in HS Orka, but with the step by the pension funds this sale did not go through.

Subsequently, Ancala Partners, a foreign partner of Jardvarmur will subsequently purchase a 50% share in HS Orka versus Jardvarmur, as stated in the company announcement.

In the announcement of Innergex to the Canadian exchange this morning, the purchase price is USD 299.9 million, equivalent to ISK 37.3 billion. The market value of HS Orka, based on the purchase price of Geothermal Energy, is therefore ISK 69 billion (around USD 562m). The acquisition was approved at a shareholder meeting of Jardvarma on April 9, 2019.

The institutional investor fund ORK sold its share of 12.7 per cent in HS Energy at the beginning of April for approximately ISK 8.5 billion. Before the acquisition of ORK’s share in April, Jardvarmur owned just over one-third of the shares HS Orka. The total purchase price of Jardvarmur in shares of ORK and Innergex therefore amounts to approximately ISK 47 billion.

With that, the new company Blávarmi slhf., which is owned by the same pension funds and Jardvarmur, will acquire HS Orka’s 30% share in the Blue Lagoon. The purchase price of the holding is approximately ISK 15 billion (USD 122m).

Innergex consultants in the sales process were the Canadian bank Bank of Montreal and the Icelandic consulting firm Stöplar Advisory. Consultants to Jardvarmur in this business were Arctica Finance, SKR legal services and Advel lawyers. Ancala Partners is a UK fund management company specializing in European infrastructure investments.

As stated in Innergex’s announcement, the sale process of its shares started in October 2018. HS Orka is the third largest electricity producer in Iceland and also the only energy company in Iceland that is owned by private investors. The company’s operating income in 2018 amounted to ISK 8.9 billion (USD 72.5m).

According to Davíd Runólfsson, Chairman of the Board of Jardvarmur and Blávarma, this transaction creates stability over the ownership of HS Orka in the future.

“Ancala’s expertise in the field of renewable energy and our shared vision of the long-term opportunities for HS Orka will make Ancala a preferred partner. There are exciting opportunities ahead for HS Orka’s further development. The Blue Lagoon is also the backbone of an Icelandic tourism industry, which has built a strong international brand. The structure of recent years creates opportunities for further growth that the owners of Blávarma intend to participate fully in, ”says David.

The owners of Jardvarmur slhf are:
Pension Fund of Commerce, Value – pension fund, the Voluntary Pension Fund, Display pension fund, Government Employees Pension Fund A-division, General Pension Fund, Fix – Pension funds, general pension fund, pension fund Westman, Stapi pension fund, pension fund employees Búnaðarbanki life’s work pension fund, Eftirlaunasjóður Pilots and Farmers’ Pension Fund

Source: Visir