Icelandic Landsvirkjun pushing construction and lowers prices for off-takers

Landsvirkjun's geothermal power plant at Krafla, Iceland (source: flickr/ thinkgeoenergy, creative commons)

Alexander Richter 11 May 2020

In a release late last month, Icelandic national power company Landsvirkjun announced that intends to allocate approximately ISK 12 billion (around USD 84 million) to completing various new projects, refurbishments and maintenance work in energy production areas over the next three years. The Company will also provide temporary discounts on electricity prices to its energy-intensive customers in the amount of ISK 1.5 billion, cooperate with local stakeholders to prepare research and development projects in the South and North of Iceland and expedite digital development projects.  Landsvirkjun recently announced that it would double its dividend payments to the StateTreasury this year, in the amount of ISK 10 billion.

Landsvirkjun is one of Iceland’s largest companies and we see this move as our contribution to reigniting the economy and employment sector after the negative impact of the COVID19 epidemic. We will continue taking the necessary steps to ensure the ongoing secure generation of energy at our power stations.

Landsvirkjun has already initiated or prepared various measures, in cooperation with numerous stakeholders. The objective of these measures is to create employment opportunities, profitable maintenance projects and investments and to promote energy-related innovation and value creation at the national level.

Landsvirkjun has decided to introduce the following measures:

• Necessary measures to ensure secure electricity generation during the COVID-19 pandemic.
• Working in close collaboration with energy-intensive customer, offering temporary discounts on electricity for both short-term and long-term contracts.
• Expediting various employment opportunity and maintenance projects, to be launched in the next three years, to the tune of ISK 12 billion.
• Launching collaborative projects on energy-related innovation and energy transition. Working with local communities to prepare future energy-related opportunities in food production, sustainable use of resources, start-up projects and in preparing areas for new energy-related investments. We will also support energy exchange projects with the various local authorities.
• Supporting digital development projects, designed to support Landsvirkjun’s energy production, digital systems and services will be expedited.
• Offering 220 young adults summer employment.

Hördur Arnarson CEO: “Iceland will need to release itself from the grip of COVID19 in the coming months and years, to compensate for the economic damage caused by the pandemic. Landsvirkjun intends to do everything in its power to ease the pressure on business owners. Landsvirkjun maintains a strong position and will continue providing secure electricity production from renewable energy sources and working towards achieving carbon neutrality in 2025. We will also implement various measures to support our customers in creating employment opportunities and promoting energy-related, climate-friendly innovation.”

Secure electricity generation and supply

Landsvirkjun’s most important responsibility is the secure production and supply of electricity to its customers, during the COVID19 crisis as well as ensuring the health and safety of its employees. Landsvirkjun produces 70% of Iceland’s electricity. The Company operates 15 hydropower stations, 3 geothermal stations and two wind turbines in five operational areas. Landsvirkjun’s electricity generation has continually fulfilled expectations.

Landsvirkjun has closely followed the Department of Civil Protection and Emergency Management’s recommendations from the onset of the epidemic and has chosen to go above and beyond the recommended precautions. The Company has focused on protecting the core business of the company. Strict safety rules have been implemented in all areas of operation by asking employees to work remotely and organising strict shift schedules for employees required to be on-site. Solid preparation work and clear working procedures have proved helpful.

Improvement and maintenance work has been temporarily delayed until the current situation improves. Power station operations have been protected as far as possible and no disturbances have occurred in the generation and supply of electricity, so far.

Cooperation during challenging times

The demand for electricity has decreased worldwide as a result of the COVID19 pandemic. Many of Landsvirkjun’s customers have been affected by global market constraints and less demand for their products. Production demands have rapidly decreased and many markets have shut down completely.  Consequently, some of our customers have been forced to cut- back on operations. Our data center customers remain positive about the future, despite the temporary reduction in demand and accompanying challenges.

Landsvirkjun will make every effort to work with each one of our customers and offer temporary solutions to support businesses, experiencing difficulties as a result of poor market conditions, during the COVID19 pandemic. We have proposed the following measures to support our customers:

• A temporary six month price reduction/cost price will be offered to energy-intensive customers. Eight out of ten of our customers will be offered a reduction, potentially reducing their electricity bill by 25%. The measures will cost Landsvirkjun an estimated ISK 1.5 billion.
• Customers will also be offered flexible short-term, cost-price contracts.

Expediting new projects, investment and maintenance
Projects will be expedited and various employment opportunity and maintenance projects will be launched in the next three years, to the tune of ISK 12 billion.

Landsvirkjun carries out extensive maintenance and improvement projects every year, throughout its operations. We will provide ISK 2.4 billion to launch over 90 projects this year which will mostly be carried out this summer and the following autumn. Planned projects include the following:

• Improvements to mechanical and electrical equipment at four of our power stations: Búrfell, Sultartangi, Sigalda and Krafla (geothermal).
• Repairs and adjustments to flood channels in the Thjórsá area.
• Construction of a rambling and horse bridge over the Thjórsá River, above the Thjófafoss Waterfall.
• Repairs and improvements to the power house, intake structure and intake basin at the Steingrímsstöð and Sog Hydropower Stations.

We are also considering options to expedite various projects in the next three years. These include potential preparation projects for the Hvammur Project in Thjórsá e.g. road construction, bridge construction and facilities construction. These projects would begin in 2021.

Collaboration on energy-related innovation Landsvirkjun focuses on contributing to the increase of sustainable value creation related to its energy production all over the country:

Projects in the Northeast of Iceland

We have decided to continue our support for the EIMUR Project, which is a collaboration project between Landsvirkjun, Norðurorka, Orkuveita Húsavíkur and the Association of municipalities and business development in the Northeast. Eimur has worked on a diverse range of projects in the last few years, including the mapping of natural resources within the region, research on potential innovative projects to improve energy utilisation, support for start-up businesses, and various university projects. Eimur has also been involved in international research projects.

Projects in the South of Iceland

We are currently launching a new collaborative project with the Association of Southern Local Authorities and the Agricultural University of Iceland. Project aims include support for innovation and development in the food production industry and biotechnology at the national level. Landsvirkjun will advertise for potential projects in the South Iceland business accelerator.

Energy-exchange projects

We are currently in the process of preparing new research and development projects with a particular emphasis on the green transformation of transport, domestic fuel production and the utilisation of by-products. Summer employment opportunities

We will continue to offer university, technical students and young people (16 to 20 years) summer employment. We hired sixty university and technical students this summer after receiving 530 applications. One hundred and sixty young adults, aged between 16 and 20 will begin their summer employment with us in June, all over the country, after the Company received 280 applications.

Source: Landsvirkjun