Iceland to Probe Magma's Purchase of HS Orka, Stop Sale of Energy Assets
The Icelandic government said it will investigate Vancouver-based Magma Energy Corp.’s purchase of local geothermal energy producer HS Orka hf and may block the takeover.
The move comes after three lawmakers from the Left Green Movement, the junior partner in the ruling coalition, said they would stop backing the government unless it prevented Magma’s acquisition of HS Orka. The coalition has 34 lawmakers in the 63-seat parliament.
“It’s the intention of the government to wind down the privatization in the energy sector and ensure that energy companies are owned by public entities,” Prime Minister Johanna Sigurdardottir told reporters today in Reykjavik. “Our primary objective is to ensure public ownership in the energy sector.”
Magma in June 2009 established a Swedish subsidiary that created Magma Iceland later that year. Magma Iceland in May completed the purchase of 98.53 percent of HS Orka after the transaction was approved by a parliamentary commission. Icelandic law prevents the sale of majority stakes in energy companies to buyers from outside the European Economic Area.
The government’s investigation will focus on whether Magma circumvented Icelandic and European laws by establishing a company in Sweden for the sole purpose of investing in Iceland, Finance Minister Steingrimur J. Sigfusson said. The findings of the investigation will be delivered by Aug. 15.
‘Comprehensive’ Consultation
Magma said it is still reviewing the government decision but plans to proceed with the HS Orka acquisition, which will create jobs and tax revenue.
“We have confidence that this deal will close as the consultation process was comprehensive,” said Alison Thompson, a Magma spokeswoman in Vancouver, in an e-mailed response to questions. “We are investing in Iceland at a time when it is most needed.”
The government intends to pass laws that will ensure that “the utilization of common natural resources by private parties are only temporary,” Sigurdardottir said.
Sigfusson didn’t rule out the government acquiring Magma’s shares in HS Orka, either by purchasing or seizing them.
More than 14,000 Icelanders, led by singer Bjork Gudmundsdottir, signed a petition calling on the government to prevent Magma from acquiring HS Orka.
To contact the reporter on this story: Omar Valdimarsson in London at valdimarsson@bloomberg.net
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