Geysir Green Energy closes majority acquisition in HS Orka

Alexander Richter 18 Nov 2009

Geysir Green Energy announces closure of transaction to acquire most of the shares of Reykjanes in HS Orka, while at the same time closing a transaction which provides Magma Energy a share of 10.8% in HS Orka.

In a release of the company, Geysir Green Energy announces it has “acquired a majority share in HS Orka.

In the transaction Geysir acquired a 34% percent share in HS Orka from the Municipality of Reykjanesbaer to complete its acquisition of a majority share in HS Orka. In the same transaction, Geysir sold an 8.6% share in HS Orka to Magma Energy Corp. After the transaction Geysir holds a 57.4% share in HS Orka.

According to local news, the acquisition of the 34% stake in HS Orka, closes the early part of the two steps sale of up to 10.8% stake in HS Orka to Magma Energy for about ISK 3 billion (US$ 24.4 million).

After the sale of the share of yesterday, Geysir Green Energy now holds 57.4% of the share capital in HS Orka hf, and the later part of the transaction will be the sale of a 2.2% additional share to Magma at the beginning of next year. After that transaction Geysir Green will own 55.2% in HS Orka.

The acquisition of the shares in HS Orka by Magma Energy is the result of the agreement between the municipality of Reykjanes and Geysir Green Energy about the changed ownership positions in HS Orka (generation) and HS Veitum (distribution). The utility Hitaveita Sudurnesja was split in 2008 in these two companies to comply with the legal requirements set forth in Icelandic legislation on the privatization of the energy market. With the agreement (between the municipality and Geysir), Geysir acquired nearly the complete stake of Reykjanes in HS Orka and sold its shares in HS Veita. Now, Reykjanes owns a 66.75% share in HS Veitum and 0.75% in HS Orka.

Before that Reykjanes bought all resource rights of HS Orka and now leases the utilization rights to the company, thereby guaranteeing the ownership in the resource and the general public can continue to gain dividends from the utilization.

“This transaction is the basis for HS Orka to acquire the necessary financing for planned extensions and construction of geothermal power plants on the Sudurnes peninsula” says Ásgeir Margeirsson, the CEO of Geysir Green Energy.

“Through the weakening of the Icelandic krona (ISK), the debt position of HS Orka have increased extensively and thereby decreasing the equity ratio below allowed levels of the loan agreements of the company. With this transaction the company now has reached an agreement with two of the three creditors and an agreement with the third creditor to be expected soon.”

Source: Release by Geysir Green Energy (partly in Icelandic), Visir (in Icelandic)