A commission appointed to investigate the affairs of Reykjavík Energy (OR) presented its report yesterday. The 600-page report concludes that the company’s difficult financial position was caused by poor management, excessive investments, high dividends funded with loans, loss in currency and reluctance in raising energy prices.

 
Geothermal power facilities operated by Reykjavík Energy. Photo by Páll Stefánsson.

The accumulated loss in currency is currently at ISK 100.9 billion (USD 820 million, EUR 640 million) and loss due to investments in stock ISK 8.3 billion (USD 68 million, EUR 53 million). OR’s debt increased from ISK 17.7 to 224.4 billion (USD 144 million to 1.8 billion, EUR 112 million to 1.4 billion) between 2002 and 2010, Fréttablaðið reports.

The debts and losses of OR are the responsibilities of the company’s owners: the residents of the municipalities Reykjavík, Akranes and Borgarbyggð.

The commission suggests that the board of OR should no longer be appointed by the representatives of its owners, councilors, that is, but rather people who have “experience and/or knowledge of the company’s affairs and operations.”

The report states that the tradition of political discussions on the board weakened the its position towards the CEO, which gave him too much flexibility for independent decisions.

Mayor Jón Gnarr agrees with the commission’s suggestion. “Since this is such an extensive and complicated operation I find it absolutely necessary that people who have the knowledge, experience or at least take an interest in it are chosen for the board.”

Chairman of Reykjavík City Council Dagur B. Eggertsson, who used to be on the board of OR, also agrees. “I believe we must all take responsibility for the political culture which is described in the report and is characterized by significant struggle.”

Hanna Birna Kristjánsdóttir, councilor of the Independence Party, hopes that the City Council will now cut down the extent of OR’s operations and limit it to basic services to the public.

However, she is not convinced that barring politicians from being on the company’s board is the right solution. “It is something that must be discussed. What I find most important at the moment is to guarantee that it can never happen again that the company’s executives don’t work according to the wishes of elected representatives.”

“The report is not just criticism of politicians but also of the company’s executives,” Hanna Birna concluded.

Click here to read more about the affairs of OR.

ESA