INTERNATIONAL BUSINESS-CANADA/ICELAND:
MAGMA ENERGY WANTS STAKE IN ICELAND GEOTHERMAL ENERGY:
One has to say that Magma Holdings have hardly been slowed down by our present recession. One acquisition after another, some of them bargain hunting amongst the corporate terminal ward and others financed by what are actually some rather unstable financial arrangements. Some might call these acquisition tactics the "business of buzzards".
It now seems that one of Magma's branches, Magma Energy' is looking to acquire a major stake in geothermal energy development in the country of Iceland. Now most of us here in Canada when we think of geothermal energy envision the rather decentralized forms being built into many news homes and some business enterprises. This is the sort of small scale and highly competitive situation where prices move towards what might be termed fair and no one player is likely to acquire a monopoly position. Iceland, as a land of volcanoes and hotsprings, however, offers opportunity for development of this energy form on an industrial scale. In such a case large government-backed contracts take away the correcting hand of the market, and pricing (as well as sources of financing) become mere administrative fiats governed only by how much the players think they can get away with. It wouldn't take much to supply the home heating needs of Iceland, and the excess power generated by proposed large scale projects begs for the government to subsidized other large industry that might be potential customers for the energy excess.
Here from the Saving Iceland website is the down and dirty details about magma's proposal.
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Iceland’s Geothermal Energy to be Privatized? - Canadian Company Wants to Take Over H.S. Orka:
Magma Energy, a Canadian company, wants to buy a majority share in H.S. Orka, a geothermal energy company based on the Reykjanes peninsula. In July this year Magma Energy bought a 11% share in H.S. Orka from Geysir Green Energy (GGE) and therefor became the first foreign shareholder in an Icelandic energy company. The purchase was a part of a bigger agreement between Reykjanesbær and GGE, which resulted in GGE owning a little more than 50% of H.S. Orka. Around the purchase, Ross Beaty, Magma’s director stated that the company did not plan to become predominant in H.S. Orka or meddle with the management of the company’s power plants.
Magma Energy, a Canadian company, wants to buy a majority share in H.S. Orka, a geothermal energy company based on the Reykjanes peninsula. In July this year Magma Energy bought a 11% share in H.S. Orka from Geysir Green Energy (GGE) and therefor became the first foreign shareholder in an Icelandic energy company. The purchase was a part of a bigger agreement between Reykjanesbær and GGE, which resulted in GGE owning a little more than 50% of H.S. Orka. Around the purchase, Ross Beaty, Magma’s director stated that the company did not plan to become predominant in H.S. Orka or meddle with the management of the company’s power plants.
In the middle of August, Orkuveita Reykjavíkur (O.R. - e. Reykjavík Energy) decided to start discussion with Magma Energy about the latter’s purchase of O.R.’s share in H.S. Orka, which is 32% and would therefor give Magma 43% share in the company and the possibility of increasing it 5%. Magma has bought the very small shares of the communities of Sandgerði and Hafnarfjörður, amd has been discussing with communities like Vogar and Grindavík about buying their shares as well. If everything goes like planned, H.S. Orka, which e.g. is the biggest energy provider for the Century Aluminium’s planned smelter in Helguvík, will mostly be owned by to private companies; Magma and GGE, which will own c.a. half of the shares each.
Magma Energy was established in 2008 by Ross Beaty, an geologist and businessman. For decades, Beaty has been building up and operating mining companies, e.g. Pan American Silver Corp, a silver mining company that owns eight silver mines in Central and South America. Magma Energy has since its foundation bought 21 geothermal energy projects and over 200 hectares of lands in the U.S. and in Latin America, and officially plans to be the biggest and the best geothermal energy companies world wide.
Critique and opposition - No unity in government
Many critical voices have been raised in consideration of this issue. More then 100 people showed up to a public meeting in Grindavík last Tuesday evening, where the possible purchase was discussed. An unanimous assumption was sent out after the meeting, encouraging the state and municipalities to prevent the purchase from taking place. The government is adjured to mount guard around the country’s common resources, bearing in mind the long term benefits of people living here. The assumption also includes worries about GGE’s financial ability to take part in such a big commerce, since the company is heavily indebted and some of its major owners are on the tables of the former privatized banks’ resolution committees.
Steingrímur J. Sigfússon, minister of finance and the head of the Left Green party, agreed on meeting up with the public meeting’s representatives the day after. Sigfússon said that his opinions fit to the meeting’s assumption and that he would do what ever he can to stop the complete privatization of H.S. Orka from taking place. There is a huge opposition amongst Left Greens towards the privatization and members of the party have proposed that the state buys the share of Reykjavík Energy. Magma Energy’s director, Ross Beaty, has been meeting with Sigfússon to try to get him to relinquish that idea.
But there is not a united opinion about this between the two parties of the government; the Left Greens and Samfylkingin, the social democratic alliance. Many members of the latter one believe that the state is not capable of buying O.R.’s share in H.S. Orka, and the same opinion goes in the majority of Reykjavík City Council. According to the newspaper Fréttablaðið, there is a widespread opinion inside Samfylkingin about this impossibility, as well as worries about the International Monetary Fund (IMF) remarking on the idea of the state’s possible purchase
Who will be responsible?
In a commentary on Smugan, a left wing newspaper on the web, Björg Eva Erlendsdóttir, the page’s former editor, criticizes the privatization of Iceland’s natural resources. She says:
"Despite the privatization of the energy company it is pointed out that the resource is still the property of the public. Still, that does not concern the public at all if the right of utilization has been endorsed like was done with the fish in the ocean. Moreover, the fee for the utilization right is so low that revenues from the resource do not concern the public at all. The resource rent will go to the owner of H.S. Orka but not the public. The question about what it changes to keep the resource in the hands of the official has not been answered. Is it possible that the Icelandic nation will have to be responsible for the resource, just like it was for the privatized banks? If the resource will be overused or destroyed, who is then responsible for that? An energy company in public interest can obviously not become broke. It will be the Icelandic states role to take on the slam if things go badly."
And she continues, now comparing the situation to what Naomi Klein talks about in her book, The Shock Doctrine:
"Klein sets out a theory about that when societies come across huge shocks, big corporations and other power blocks use the opportunity to put into practice a systematic strategy where the property of the public is given to private parties on a silver plate for a embarrassing price. Much indicates that just now, the energy companies’ bad position after the economic collapse is being used and outsmarted in the shadow of the attention that has been put on the Icesave-contracts alone, to quickly finish the precess of privatizing H.S. Orka."
IMF’s leash on Iceland
Shortly after the collapse of the Icelandic economy in October/November last year, some people started to announce the death of capitalism; the theory and the practice. Others, e.g. local anarchists, pointed out the opposite: Now capitalism is developing and the best possible position for unchecked capitalism is being created. On a flier distributed by anarchists in one of the big weekly demonstrations against the government, the 1. of November 2008, this was e.g. stated:
"Iceland is a paradise for the International Monetary Fund. Here are unharnessed natural resources and a weak and impotent government on crutches - a puppet government for other governments. In addition to that, Icelandic resistance has always been little and attended by few. IMF’s menu for Iceland includes ungovernable destruction of glacial rivers and geothermal areas, and the privatization of social service and natural resources, including energy and drinking water."
Incorporation and PR stunt
The most recent news are that the incorporation of Magma and GGE is likely to take place, which means that one foreign private company would own H.S. Orka completely. The companies’ representatives say that this idea has been lying on the table since the beginning of the two companies’ discussion. Riss Beaty says that he does not rule out the possibility of Magma owning a minority share in H.S. Orka if official parties would own the majority. But he says that it is far from being a preferable outcome; if Magma is not a majority owner, there would be a lack of interest and energy inside the company.
Beaty was interviewed in Kastljós, a news report show on the national TV station, yesterday night. He talked about how much of an “environmentalist” he is, how clean and renewable Iceland’s energy is, how he admired the Icelandic nation and that he would even want to learn Icelandic. What a stunt! When asked if he understood the public's mistrustfulness towards privatization after the collapse of the banks, he said he did but mentioned that the Icelandic people would have to understand what kind of company Magma is.
He repeated himself in an interview with Fréttablaðið, where he said: “We are not a scary company, we want to work with H.S. Orka in building up a stronger company, for the good of Icelanders, ourselves, and actually the whole world.” And he denied that Magma is getting itself into a group of companies who see an opportunity for an easy and shortly gotten growth by buying the ruins of Icelandic companies after the collapse.
Well, we have heard this kind of nonsense before, especially when it comes to the energy and aluminium industries. One can only hope that after the bank collapse and the parallel political, economical and media scandals that were discovered, people do not believe a single word from a rotten CEO like Ross Beaty.
More information about the issue later.
