Reykjavík Energy Granted Huge EBRD Loan Skip to content

Reykjavík Energy Granted Huge EBRD Loan

The European Bank for Reconstruction and Development (EBRD) approved on Friday a loan for ISK 6.5 billion to the Reykjavík Energy Company (OR). The loan was originally scheduled for October 2008.

In October, after the collapse of the Icelandic banking system, the EBRD considered it too risky to transfer the loan to Iceland. Now the bank has concluded that the economic situation in Iceland has improved to such an extent that it is safe to disburse the loan to OR, Fréttabladid reports.

Part of a Reykjavík Energy power plant. Photo by Páll Stefánsson.

The loan is denominated in Icelandic krónas, although the EBRD converts it to euros. When OR first took the loan in 2007 it was for EUR 168 million (USD 216 million).

OR had received EUR 85.5 million before the crisis hit and the remaining amount was dispatched on Friday. However, OR only received EUR 46 million instead of 82.5 million as EUR 36.5 million (USD 46.9 million) was lost due of the depreciation of the króna.

Despite the loss, the fact that OR finally received the entire EBRD loan is good news for Iceland, according to Árni Gunnarsson, representative of the minister for foreign affairs on EBRD’s executive committee.

“It is not just a good thing for Reykjavík Energy and other Icelandic companies, it is also to some extent a declaration of trust,” Gunnarsson said. “It is immensely important news for other lending institutions that Iceland trades with.”

Gunnarsson said the economic situation in Iceland had been discussed at a meeting at the EBRD last Friday where attendees considered prospects fairly bleak. “However, the bottom line in the discussion was that Iceland had simply been the first in line. Other nations are expected to experience similar problems.”

The EBRD primarily grants loans for employment-stimulating projects and has financed the operations of many Icelandic institutions and companies in the past.

OR is currently planning to make tenders on two turbines to enlarge the power plant on Hellisheidi heath, between Reykjavík and Hveragerdi, by 90 MW. “If we hadn’t received the loan, we couldn’t have made these bids,” said CEO of OR Hjörleifur Kvaran.

The Sudurnes Power Company (HS) is also hoping for a EUR 20 million (USD 26 million) loan from the EBRD.

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