Icelandic pension fund interested in Magma Energy’s HS Orka offer

Three weeks ago the joint enterprise fund of the Icelandic pension funds declined Magma Energy’s offer to purchase a 25 percent stake in HS Orka – but now the Pension Fund of Commerce is considering buying into the company unilaterally.

Asgeir Magnusson, the CEO of Magma Energy Iceland, told RUV that both the pension funds and the Icelandic state have been offered the chance to buy shares in HS Orka.

In the meantime, no shares will change hands until the ongoing investigation into the legality of Magma’s purchase of HS Orka is completed.

Canada’s Magma Energy believes its purchase of Iceland’s HS Orka geothermal energy company through a specially created subsidiary in Sweden is entirely legal; but domestic pressure has forced the Icelandic government to launch an independent investigation which could possibly cancel the deal. The chief arguments against the sale are that the price is too low, that Iceland’s energy sources should not be sold to overseas companies, that the Icelandic government is financing too much of the deal itself with cheap loans to Magma, and that it is illegal to start a Swedish arm simply to subvert rules prohibiting non-EEA ownership of Icelandic energy resources.

Magma, on the other hand, says it is paying a fair price, it is absolutely not preying on a country with a weak economy, and it does not intend to buy all of Iceland’s energy over time. The company points out that with its purchase it is not buying any Icelandic energy at all; rather just a lease to use the geothermal resource for 60 years. Magma appears to be trying to sweeten the pill by attempting to sell part of HS Orka back into Icelandic hands; but it has yet to find a buyer.