Icelandic Geysir Green Energy buying majority in HS Orka

Reported about this possible transaction before, Icelandic news today confirmed the sale of the remaining parts of shares in HS Orka (the power generation arm of formerly Hitaveita Sudurnesja, the third largest utility in Iceland). This is an add-on to news from Saturday about the possible participation of Canadian Magma Energy Corp. in this transaction.

The article talks about the current proposal that foreign players will own a large stake in HS Orka. If everything goes according to plan, the power plants, sales and experience of the employees of the company will be owned by a majority held by Geysir Green Energy and a foreign renewable energy company.

Hitaveita Sudurnesja was split into two parts in December 2008. HS Veitur is the distribution part of the company, while HS Orka is the power generation and sales part.

In a meeting today the town council of Reykjanesbær, the municipality of the area, agreed on the sale of land and geothermal resource rights at the Svartsengi and Reykjanes geothermal fields, and the lease of the resources.

The municipality is selling its 34.7 percent share in HS Orka to Geysir Green Energy for ISK 13 billion (US$ 100 million), of which ISK 3 billion (US$ 23 million) are paid in cash, ISK 6 billion (US$ 46 million) with 7-year bonds, and Reykjanes in turn will get the share of Geysir Green Energy in HS Veitum (this part is estimated at ISK 4 billion (US$ 31 million).

After this transaction, Geysir Green Energy holds 66.7 percentin HS Orka, while it doesn’t plan to hold this share long.

The transaction has been financed with foreign capital. Sources of the paper reporting (Morgunbladid) say that the player is Magma Energy, whose representatives have been in the country a few times in recent weeks. Sources inside Geysir Green Energy are saying that there are plans of selling parts of the company’s stake in HS Orka to its foreign partner, it is talked about a share of 10.8 percent of its stake in the company. Geysir Green Energy (GGE) didn’t give up the name of its partner. Furthermore a capital increase at HS Orka is planned, which would also provide an opportunity for this foreign players to increase its share.

But there is also another stake in the company up for sale, by Reykjavik Energy (15.6 percent) and the municipality of Hafnafjordur (15.4%). These stakes have been up for tender, with primary interest by foreign players. The not-binding offers were opened on Monday, after a two month process. There are no news on how many offers were given. In the next few weeks, the sales agent and both Reykjavik Energy and the municipality will talk to the bidders and possibly taking those offers. This is expected to last about 4 weeks.

There is though a preemptive right in all business with shares in HS Orka, which includes the right to the other owners in the company to offer the same price.

The ownership position of Geysir Green Energy is somewhat complicated at the moment, mostly due to the current economic difficulties of Iceland. The main owners are Atorka (41%), Glacier Renewable Enerfy Fund (40 percent), which is a fund managed by Íslandsbanki (formerly Glitnir Bank). Atorka is under a moratorium stage at the moment being in financial difficulties and it seems like creditors of the company will own it fully. The largest stakeholders there are the resolution committees of Glitnir and Landsbanki.

Glacier Renewable Energy Fund is owned to 47 percent by Islandsbanki. Stodir (FL Group) owns 37.5 percent, but this company is also under moratorium stage with various creditors likely taking over. The New Landsbanki then also owns a share in the Fund.

Islandsbanki has guarantees on all shares of Geysir Green Energy in both HS Orka and HS Veita, representatives of the bank are also sitting on the board of the company. Therefore Islandsbanki is in a key position regarding any planning for the future of GGE.

Source: Morgunbladid (in Icelandic), other article by the same paper