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Potential sale of 66 percent stake in HS Orka valued at $220 million

Reykjanes geothermal power plant of HS Orka, Iceland (source: flickr/ ThinkGeoEnergy, creative commons)
Alexander Richter 30 Jun 2012

A group around former CEO of Geysir Green Energy has made an offer to Alterra Power to buy the company's 66% stake in Icelandic power generation company HS Orka, with an expected valuation of around $220 million.

Reported yesterday, details emerge about the offer of an Icelandic group wanting to buy a 66% share in Icelandic geothermal power company HS Orka.

Icelandic bank Arion Banki supported Modum Energy, a company founded by Alexander Gudmundsson, the former CEO of Geysir Green Energy, and Eldur Ólafsson, on the Board of Directors of Orka Energy. Eldur Olafsson was also previously with Geysir Green Energy as a Geologist. Part of the offer is also a company called Stefnir, a large Icelandic fund management company.

As a little background, Geysir Green Energy was a company founded to participate in the privatization of Hitaveita Sudurnesja (later HS Orka and HS Veita) and bought the company in 2007. After the collapse Geysir Green Energy has been selling its assets and Magma Energy Sweden (now part of Alterra Power) bought HS Orka of Geysir Green Energy in 2009. Assets that were sold by Geysir Green Energy since then include stakes in Asian and North American projects/ companies, as well as an Icelandic geothermal drilling company.

Orka Energy was one of the companies buying assets of Geysir Green Energy, from Icelandic bank Islandsbanki that had taken over Geysir Green Energy and has since been selling different assets and participations of Geysir Green. Orka Energy bought a minority stake in a Chinese geothermal heating company called Shaanxi Green Energy (a JV with Sinopec) and a project in the Philippines, held by various Icelandic companies over the last couple of years.

The group behind the offer to buy HS Orka now has been working on an offer for the stake since January this year and based on the sale of a 33% stake in the company to an group of Icelandic pension funds, the value is estimated to be around ISK28 billion ($221 million)

The goal is to open the offer to other interested parties and to eventually initiate a listing of HS Orka on the Stock Exchange here in Iceland. The other shareholders, the pension funds, have been informed and are positive towards the offer as it would mean the company could be listed in the near future.

Alterra Power and the group have signed a memorandum of understanding.

Regarding the sale of assets in Iceland one has to state that there are currency restrictions in place in Iceland to support the Icelandic currency. This limits the opportunities for companies investing outside of Iceland, making operations such as HS Orka and other operating assets within Iceland interesting investment targets. In many cases it is reported that the sales happen at a price level beyond actual valuation of the company, simply based on the lack of availability of other investment opportunities within Iceland for Icelandic companies.

Good background can be found here: Morgunbladid, Visir (all in Icelandic).