When a story combines sizzling-hot steam generated from deep inside the earth’s core and Bjork, the iconic Icelandic singer, you’ve got something special.
Last year Vancouver, BC.,-based Magma Energy, the ambitious geothermal developer, established a Swedish subsidiary, Magma Sweden, which then quickly turned-around and purchased HS Orka, an Icelandic geothermal power company, that generates about 9 percent of the country’s power needs. At the time, the sale of this strategic asset, (Iceland depends on geothermal for all of its power needs), was approved by a parliamentary commission. The sale was actually compliant with Icelandic law, which prevents companies from outside the European Economic Area to own majority stakes in local energy companies.
But Fast forward a year and Magma ‘s push into one of the world’s largest geothermal market is rattled by a Bjork-led popular uprising, (so far some 14,000 Icelanders have signed a petition), calling on the government to cancel the purchase. They claim that Magma’s Swedish subsidiary was created with the sole purpose of circumventing Icelandic law in order to buy HS Orka. They also argue, that if the deal goes through, Magma could potentially control some of the country’s largest geothermal reserves for the next 130 years.
Iceland’s center-left government is not turning a deaf hear. Yesterday, the economy ministry announced it was opening an investigation into the legality of the sale of HS Orka to Magma. And Icelandic Finance Minister Steingrimur Sigfusson, did not rule out, depending on the investigation’s findings, a government takeover of HS Orka, eihter via a share purchase or an outright seizure, Bloomberg News reports. Investigators are scheduled to deliver their findings next month.
Magma is not letting the government investigation or the uprising derail its acquisition. On Tuesday the company closed a C$45 million ($43.6 million) share issuance to fund its purchase of HS Orka from owner Geysir Energy. A Magma spokeswoman tells Bloomberg that the company is confident that its deal will close. We are investing in Iceland at a time when it is most needed, the spokeswoman writes.
Indeed, Iceland was probably one of the hardest hit countries by the global financial meltdown in 2008. It&’s banking sector collapsed, forcing the government to rush to the International Monetary Fund (IMF) for an emergency loan. The country is still groggy from the beating it took in 2008 and needs all of the investments it can get to prop-up its economy.
Photo: Kero-Chan, Flickr