Draft Bill for Íslandsbanki Stake Sale Published

Minister of Tourism, Industry, and Innovation Þórdís Kolbrún Reykfjörð Gylfadóttir

The Icelandic Ministry of Finance and Economic Affairs has published a draft bill for the sale of the state’s 42.5% stake in Íslandsbanki. The bill, necessitating parliamentary approval, aims to reduce the Treasury’s financial risk and debt ratio.

Íslandsbanki prohibited from direct participation

Yesterday, the Ministry of Finance and Economic Affairs published a draft bill regarding the disposition of the state’s share in the Íslandsbanki Bank through the government’s online consultation portal. The draft authorises the minister, with Parliament’s approval, to dispose of the state’s share in Íslandsbanki. The state owns a 42.5% stake in Íslandsbanki.

The disposal of the share is planned through one or more tranches in a marketed offering, allowing the general public to participate, with sales to individuals given priority. The draft notes that it is important to consider market conditions for timing the offerings. According to the bill, Íslandsbanki is prohibited from directly participating in the sale, in line with recommendations from the National Audit Office.

“During the sales process, care must be taken to adhere to the fundamental principles of equality, transparency, efficiency, and impartiality. This obligation is specifically imposed on the minister … to ensure transparency in connection with the disposal, among other things, by proactively publishing information,” the memorandum notes.

State Financial Investments not involved

The bill proposes eliminating the role of the State Financial Investments in the sale of the shares. The Ministry states in the bill’s explanatory memorandum that the preferred option is to authorise the sale of Íslandsbanki under the control of the Minister of Finance and Economic Affairs through specific legislation. It will be up to the Parliament to decide which sale methods are authorised.

“The sale of the equity stake is considered quite urgent in order to reduce the financial risk of the treasury and to contribute to the main objectives of the public finance policy regarding the reduction of the treasury’s debt ratio.”

As noted by RÚV, nearly eight months have passed since the release of the Financial Supervisory Authority’s critical report on the state treasury’s sale of shares in Íslandsbanki. There were several issues with the sale process, and Íslandsbanki received a hefty fine for its role in the sale. Bjarni Benediktsson stepped down as Minister of Finance and Economic Affairs after the Parliamentary Ombudsman’s opinion was published and switched ministerial roles with Þórdís Kolbrún Reykfjörð Gylfadóttir.

Reykjavík City Council Approves Sale of Iconic Perlan

Perlan Öskjuhlíð haust autumn

The Reykjavík City Council has authorised the sale of the landmark Perlan building and two adjacent water tanks in Öskjuhlíð, with a combined real estate value nearing ISK 4 billion ($30 million / €28 million). Acquired by the city in 2013, Perlan has since transformed from a financial burden into a profitable tourist attraction, according to a press release from the City of Reykjavík.

Property office greenlights sale

In a meeting held yesterday, Reykjavík City Council greenlit the finance and risk management division – also known as the property office – to initiate the sale of the iconic Perlan and two adjacent water tanks in Öskjuhlíð. The properties boast a combined real estate value nearing ISK 4 billion ($30 million / €28 million).

According to an official press release, Perlan was constructed by Hitaveita Reykjavíkur, the city’s district heating company (which later merged with Rafmagnsveita Reykjavíkur to form Reykjavík Energy). The landmark building, inaugurated in 1991, was acquired by the City of Reykjavík in 2013, along with two water tanks from Reykjavík Energy.

At the time of acquisition, Perlan was a financial drain, generating revenue barely covering its real estate taxes and land rent. However, the past decade has witnessed a remarkable operational turnaround, according to the press release, with revenue now significantly exceeding costs. The property is currently leased to Perla norðurins ehf., which has transformed it into a popular Reykjavík tourist attraction.

The press release further highlighted Perlan’s evolution over the years, noting its diverse offerings, including exhibitions, restaurants, and a viewing platform that provides panoramic vistas of the capital and surrounding mountains. “The venue also features an array of attractions such as an ice cave, an observatory, and interactive exhibits on Icelandic nature and culture.”

“The properties present substantial opportunities for future development, and it’s not necessarily in the city’s best interest to spearhead that growth,” the release stated. “The total area of the building and tanks is approximately 5,800 square metres, with a real estate valuation of ISK 3,942,440,000.”

The case will go to the City Council for final approval on September 19.

Access to Mt. Skessuhorn Not to Be Restricted, Despite Sale

Borgarfjörður, mountain

A spokesperson for the Canadian couple who purchased the property Horn in Skorradalur, West Iceland, has told Fréttablaðið that access to Mt. Skessuhorn – which lies within the property – will not be restricted. Anyone who wants to hike on the mountain may continue to do so.

Concerns over possible restrictions

Earlier this week, Fréttablaðið reported that a Canadian businessman (who is said to have made his fortune in tech) had acquired the property Horn in Skorradalur, West Iceland. The estate includes the renowned Mt. Skessuhorn and is home to three fishing rivers: Hornsá, Álfsteinsá, and Andakílsá.

Read More: To the Vote (Municipal Elections in Skorradalur) from IR magazine

Last May, the property was listed for sale. It sold within four days at a price exceeding the initial asking price of ISK 145 million ($1 million / €9720,000). As per Fréttablaðið, construction permits were granted in February for two edifices on the property: a capacious 1,000-square metre private residence, and a 700-square metre guesthouse, inclusive of a gymnasium.

After news of the sale went public, the chair of Samút – an association of outdoor recreation clubs in Iceland – stated that, although the news did not come as a surprise, he harboured concerns that foreign parties who purchased land in Iceland, and who are often seeking seclusion, would restrict access to their properties.

Access not restricted, spokesperson claims

Halldór Kristjánsson – CEO of the destination management company Nordic Luxury, and agent of the Canadian couple who bought Horn – told Fréttablaðið that the buyers did not intend on restricting access to Skessuhorn; the couple simply planned to erect a private residence on the property.

“Anyone who wants to walk on this mountain can continue doing so,” Halldór stated, adding that public rights would be duly honoured. The only thing that the couple would comment on, Halldór observed, was if people arrived in large groups and parked their vehicles outside the couple’s residence. He emphasised that the couple had no intentions of imposing any travel restrictions whatsoever and remarked that the public discussion had been blown out of proportion.

In conclusion, Halldór affirmed that the couple had no intention of utilizing the land for tourism-related activities. “They plan to build a residence for their own private use for a significant portion of the year,” he stated. He further noted that while the possibility of renting out some of the buildings existed, no decisions had been made yet. “At present, there are no proposals for any other form of development apart from private housing on the premises.”

This article was updated at 01:54 PM.

Treasury Lost Out on “Significant Funds” with Íslandsbanki Sale

A professor at the University of Iceland’s School of Business has told RÚV that the state treasury forfeited “significant funds” in its sale of Íslandsbanki shares last March. Minister of Finance Bjarni Benediktsson rejects the idea that a higher share price could have been secured without “sacrificing other interests.”

Losses “obvious” shortly after markets opened

Dr Ásgeir Brynjar Torfason is an assistant professor at the University of Iceland’s School of Business. He focuses on accounting and finance. In an interview with RÚV earlier today, Ásgeir stated that the government had lost out on “significant funds” in its sale of Íslandsbanki shares last March. The losses were obvious shortly after the markets opened on the following morning.

Yesterday, the National Audit Office released a report concerning the sale. The report reviewed, among other things, the dissemination of information prior to the sale, the determination of the share price, the selection process for determining qualified investors, and the reliance on outside consultants.

The report – focusing on the technical execution of the sale and valuation of shares – did not pass judgement on whether any laws had been broken; the opposition has demanded that a parliamentary committee be entrusted with such an investigation.

Concerning such an investigation, Ásgeir Brynjar stated that it was important for independent institutions – such as the parliamentary commissioner, the National Audit Office, and the Financial Council – to supervise such a process:

“These institutions play a hugely important role for parliament, and given that the National Audit Office has brought these facts – which we suspected or feared – to light, it’s clear, after a thorough review, that the execution of the sale wasn’t sufficiently well handled … it’s as if the sellers were trying to get rid of something that they didn’t want to own in the quickest possible way, which isn’t good when you’re handling publicly-owned entities and trying to secure the best possible price.”

Welcomes the publication of the report, constructive criticism

In a separate interview with RÚV, Minister of Finance Bjarni Benediktsson stated that he did not want to place himself on a high horse and mete out responsibility following the National Audit Office’s report. According to Bjarni, there wasn’t much in the report that suggested wrongdoing on behalf of his Ministry.

“There were, however, many things, which were asserted last spring – that buyers had been hand-picked or that the bank had been subject to a fire sale, for example – which have been rejected.”

Bjarni added that it was good that the report had finally been published and that the many considerations detailed in the report were “unsurprising” given that they had been discussed last spring: “Dissemination of information in the run-up to the sale could have been better.” Bjarni also stated that the report made many useful points and that he welcomed any constructive criticism.

Finally, the Minister of Finance rejected the idea that the report was an indictment on the execution of the sale and stated that he “remained focused on the big picture,” namely that they had been successful in selling shares in the bank, securing diverse ownership, and a reasonable share price. “The sale is not above criticism,” Bjarni added, “but I think that it was largely successful.”

As noted in the RÚV article, the authors of the report suggest that a higher share price could have been secured, a suggestion that Bjarni rejects without sacrificing other interests: “We had several aims, among them diverse ownership. We got a pretty good price, and the report indicates that the financial interests of the government were safeguarded.”

Bjarni added that after the sale the government continues to be the majority owner of the bank, which now enjoys a higher valuation: “The fact that we managed to sell of over ISK 100 billion ($693 million / €672 million) with this group of owners, I just say: ‘Well done.’”

Execution “Not Good Enough,” Minister of Business states

Vísir also published an interview with Minister of Culture and Business Affairs Lilja Alfreðsdóttir today. Lilja stated that it was clear that the execution of the sale was “not good enough” and that this was confirmed by the National Audit Office’s excellent report. Lilja added that it was disappointing that the experts had not handled the sale, which shouldn’t be overly complicated, in a better way.

“The execution wasn’t good enough. We can see that the valuation should have been better as well as the execution of the sale, for which the Icelandic State Financial Investments are responsible,” Lilja observed.

PM Katrín Jakobsdóttir has also weighed in on the Audit Office’s report: “First and foremost, I’m disappointed in the execution itself: one of it being the price, and the difference therein. But first and foremost I’m disappointed in how this could affect trust in Iceland.”

Calls on the Banks to “Lighten the Load” of Households

Lilja Alfreðsdóttir

The Minister of Culture and Commerce has called on the banks to “lighten the load” of households faced with rising interest rates. The net profit of Iceland’s three largest commercial banks amounted to approximately 80 billion ISK ($643 million / €564 million) last year, Vísir reports.

“Super profits” and civic duty

In an interview published in Morgunblaðið yesterday, Lilja Dögg Alfreðsdóttir, Minister of Culture and Commerce, called on Iceland’s three largest commercial banks to “lighten the load” of families faced with rising interest rates.

The Central Bank raised key interest rates by 0.75% on Wednesday, which may strain the finances of households who have signed non-indexed mortgages.

The inflation rate in January was 5.7% – the highest since April of 2012 – and the Central Bank predicts an inflation rate of +5% in 2022 (+5.8% in the first quarter), which is double the Bank’s target.

According to Lilja, the three commercial banks have recently reaped “super profits” – a total of ISK 80 billion ($643 million / €564 million) last year – which puts them in a prime position to assist young people and low-income families.

Íslandsbanki announced 2021 profits amounting to ISK 23.7 billion ($190 million / €116 million) this week. Landsbanki, 95% owned by the government, had previously declared profits of ISK 28.9 billion ($232 million / €204 million) for 2021, and Arion Bank announced a profit of ISK 28.6 billion ($230 million / €202 million) for 2021.

Speaking to Morgunblaðið, Lilja invoked the banks’ “civic duty.”

“I think it’s imperative that certain households, especially that of young people and low-income families, are not left holding the bag. It would be better for the banks to intervene immediately and tend to these households. If the banks don’t find a solution, I believe that we should reinstate a levy on banks.”

Lilja followed up her comments by referring to a levy imposed by former British PM Margaret Thatcher, which sought to harvest around £400m from the banks, for they were seen to be “escaping the pain of that recession”: “In 1981, Thatcher instated windfall taxes to deal with precisely such conditions, to level the playing field among the citizenry,” Lilja remarked.

Intervention lowers the selling price

In an article published on Innherji this morning, Guðrún Hafsteinsdóttir, Chair of the Economic and Finance Committee, stated that forcing the banks to spend a portion of their profits to subsidize interest payments would serve to devalue Íslandsbanki shares (the government has yet to sell 65% of its share in the bank).

Asked to respond to Lilja’s comments, Guðrún remarked that they had taken her by surprise. “If the government intends to alter the banks’ operational conditions, such a thing must, one way or another, influence the price of the remaining shares in Íslandsbanki. It’s obvious that if the government, as a shareholder, intervenes in such an encumbering manner, the selling price will be affected.”

As noted by Innherji, the government expects to sell its remaining 65% of shares this year and the next. The treasury received ISK 55 billion ($442 million / €388 million) when it sold its 35% share in a stock offering of Íslandsbanki last year. Since then, stocks have risen considerably. Innherji estimates that, according to the current market valuation, the government stands to receive up to ISK 160 billion ($1.3 billion / €1.1 billion) for its remaining shares.

Island For Sale

island for sale

The whole of the island of Vigur in Ísafjarðardjúp has been placed on sale, mbl.is reports. The island is described as a unique natural pearl and is known as Perlan í Djúpinu (The Pearl in the Deep). Guided tours head daily to Vigur in the summertime, as the island has over 10,000 visitors per year.

If Vigur is sold, all of its housing and belongings will accompany the purchase. The island has cumulative housing space of over 700 square metres (7500 square feet), including a barn, cowshed, smokehouse, garage, and finally, a two-story, 10 bedroom house.

The island has a rich and varied birdlife, as around 30 thousand pairs of puffins lay their eggs on the island as well as being home to black guillemots and the arctic tern. Vigur is around 45 hectares in size (0.45 square kilometres, 0.17 square miles), with 10.9 hectares (0.109 square kilometres, 0.04 square miles) of those devoted to farmland.

The owners are currently open for offers, but it is expected that interest levels are high, as such a unique land rarely goes on sale. Davíð Ólafsson, the estate agent who handles the sale of Vigur, has been on the phone non-stop today “I have never experienced anything like this in terms of interest levels for a property.

Vigur is available for purchase on the property portion of mbl.is, further information can be found in Icelandic here.