Why Magma Energy Needs to Leave Iceland

With recent news that the mayor of Reykjanes is considering doing further business with Magma Energy, I feel it necessary to point out that this company is operating in bad faith, and has done so from the beginning. They are a textbook example of a predatory corporation, and have consistently showed they cannot be trusted. As Grapevine journalist Catherine Fulton pointed out in her excellent article, Magma Energy Lied to Us, this is a company that says one thing, and then does something else.

Compare and contrast time!

What they said: “No, we do not plan on getting a majority [in HS Orka]. I have no interest in fighting Icelanders, particularly the government, over what is proper energy policy in the country. The government said they would accept Magma going to a 50.0 % interest so long as Icelandic interests had the other 50 %. So that’s neither minority or majority, it’s a rather awkward business position but certainly something that we feel can be workable and we certainly will be striving to achieve, but not increase beyond that. That’s something that we think should be acceptable to the Icelandic government and, we hope, the people of Iceland.” - Ross Beaty, CEO of Magma Energy, September 2009.

What happened instead: They went ahead and bought themselves Geysir Green Energy's 52% share in HS Orka earlier this month, putting their ownership at 98%.

What they said: “I would suggest that is ignorance and complete nonsense. It’s just because they don’t know what we’re all about and they don’t understand the world that we live in. We’re not in Iceland for any such reason. We’re in Iceland because it has opportunities for long-term benefit where we can deploy capital and we can improve the condition of an Icelandic company for the long term. We would be interested in Iceland under any circumstances, absolutely, even two years ago [in 2007] it would have been unchanged.” - Ross Beaty, again in September 2009, responding to concerns that his company was taking advantage of Iceland's weakened economic state due to the banking crisis.

What happened instead: As Catherine Fulton reports, Ross Beaty told online investment newsletter Hera Research Monthly earlier this month, “We would have been farther along had [the global economic crisis] not happened, although we may not have had opportunities that we took advantage of. For example, going into Iceland was strictly something that could only have happened because Iceland had a calamitous financial meltdown in 2008.”

Let's not forget that these guys are planning on doing some "geothermal exploration" around the mountain Kerlingafjöll, and have given every assurance that they're going to respect "the playing rules" in this country.

Allow me to quote Björk Guðmundsdóttir on this subject, who puts my feelings pretty succintly:

"I hereby challenge the government of Iceland to do everything in its power to revoke the contracts with Magma Energy that entitle the Canadian firm complete ownership of HS Orka. These are abhorrable deals, and they create a dangerous precedent for the future. They directly go against necessary and oft-repeated attempts to create a new policy in the energy- and resource management of this nation."

These are hard times. People are going to approach us with all kinds of offers. Not all of them are going to be honest. We need to be especially vigilant with regards to who we let do business in this country.

Magma Energy needs to leave Iceland. They have proven that they cannot be trusted, and when that happens, it's time to walk away from the table. The government of Iceland needs to send Magma Energy packing.