Financial Position of National Power Company Discussed Skip to content

Financial Position of National Power Company Discussed

By Iceland Review

According to the financial consultancy company GAM Management, the financial position of Iceland’s national power company Landsvirkjun has become difficult in terms of their repayment of debt. Landsvirkjun dismisses all such claims.

A power plant in Iceland. Photo by Páll Stefánsson.

“We have seen that Landsvirkjun has been issuing bonds lately in foreign currency and their interest premium is growing,” Agnar Tómas Möller at GAM Management, who specializes in fund management and consultancy in the bond and FX market, told Morgunbladid.

“This week, for example, we saw bonds maturing after five and 17 years that carried approximately 18 percent interest premium, which is the same as buying the bonds at a 61 percent discount on the one hand and 88 percent on the other, based to the bonds’ principal,” Möller explained.

This indicates that investors consider Landsvirkjun’s situation difficult. The largest influential factor, in Möller’s view, is how difficult the position of the Icelandic state, Landsvirkjun’s owner, is; investors see that the state cannot assist the company in case it is unable to receive a loan this year or next.

In a statement submitted to the media, Landsvirkjun emphasized that its financial position is solid, explaining that the operation of the company delivered USD 185 million (EUR 137 million) in 2008 for investments and to repay debts.

Landsvirkjun also ensured that it has sufficient funds to honor all its current obligations until the end of 2010 as confirmed in its financial statement.

The statement pointed out that because of the global economic crisis companies all around the world are trying to rationalize and limit investments to increase liquidity.

It is considered fortunate if a company’s liquidity is secured six months ahead of time, the statement reasoned, and therefore Landsvirkjun is in a better position than most other companies in that regard, both Icelandic and foreign.

“The current position and reputation of Iceland in international credit markets creates a difficult situation for Landsvirkjun and other Icelandic companies. But there is no reason to worry that the situation will remain that way for years to come,” the statement concluded.

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