Icelandic state buys land and energy rights in municipal tax debt swap deal

The Icelandic Minister of Finance says that it is not wasteful for the state to pay ISK 300 million of taxpayers’ money to buy two plots of land owned by the Reykjanesbaer municipality.

HS Orka, the Canadian-owned electricity generator, will pay to use geothermal resources on the land and the deal will hopefully lead to peace on all three sides, the minister hopes.

A contract was signed on Friday for the Icelandic state to buy the two plots from Reykjanesbaer, including rights to the hot water thereunder. HS Orka will then pay the state for the right to tap the heat for electricity production, RUV reports. In exchange for the land and energy rights, Reykjanesbaer will be forgiven its outstanding tax bill of ISK 900 million (EUR 5.65 million) and be paid ISK 300 million (EUR 1.9 million) on top. Reykjanesbaer mayor Arni Sigfusson says he is happy with the deal.

“I heard somewhere that this essentially amounts to asset confiscation, but it is absolutely not,” the mayor said. “We took this idea to the government ourselves and it was well-received, as it works well with the idea that energy resources should be the property of the nation.”

Steingrimur J. Sigfusson, Minister of Finance, told RUV that the deal will make it easier for the government to work well with HS Orka, the private company which uses the area’s hot water.

The minister told reporters he believes bringing the area’s energy resources into public ownership is a good thing for the country and that, although expensive, it is not a frivolous act during this period of austerity: it is, instead, a good long-term investment which will bring steady income, he says.