Reykjavik Energy’s future was secured yesterday; but the embattled company’s future depends largely on a taxpayer-funded loan, big cutbacks and price rises.
The City of Reykjavik, the biggest shareholder in Reykjavik Energy, confirmed yesterday that it will loan the semi-private company ISK 11.3 billion (EUR 69.5 million) to save it from the dried up well of foreign funding that could otherwise have seen the business collapse by the summer. The loan will come in two chunks: ISK 7 billion this April and the rest in early 2013, Visir.is reported.
The loan comes on the condition that the company cut back and sell off all but its core business sectors. Its core business remains to provide electricity, hot and cold water and sewage services to residents and businesses in Reykjavik and surrounding areas. The loan contract also stipulates that the City of Reykjavik will take ownership of Reykjavik Energy headquarters and rent the office space back to the company.
Despite this lifeline, Reykjavik Energy still has to streamline in order to live up to its responsibilities. It will therefore freeze investment in new projects and maintenance of its distribution system, cut back further on operating costs, sell assets, and increase the cost of its sewerage service and hot water provision.
This latest move follows another round of job cuts and price hikes last August.