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.

Lemons and Lemonade

Today brought with it tears of rage, and then tears of laughter.

First, the lemons.

As reported this morning, Magma Energy is planning on exploring for geothermal activity around Kerlingafjöll. In case you don't know, Kerlingafjöll is considered one of Iceland's natural treasures. If they find geothermal activity in the mountain, they could start drilling bore holes there. Which would sorta mess up the whole natural beauty thing the area has going on.

Of course, Magma Iceland chairman Ásgeir Margeirsson made some vague statement to reporters about how they plan to "play by the rules" or whatever, but you know what? Don't trust these guys. Why? Because they're all liars.

Magma Energy already lied about not wanting more than 50% of HS Orka. CEO Ross Beaty told the Grapevine last fall, "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."

And we all know how that went. If the CEO of Magma Energy told me the sky was blue, I'd look out my window to double-check. More examples of Magma's policy of disingenuousness to come in the next issue of Grapevine, penned by the journalist who brought you the first story, Catherine Fulton.

As for the lemonade, former Kaupthing chairman Sigurður Einarsson was denied his appeal in Icelandic Supreme Court to have charges against him dropped. OK, so that's schaudenfreude on my part, I realize. And the only reason why the court rejected the appeal was because they don't have the power to do make the charges go away. But hey, chalk one up for justice, right?

Weekend Round-Up: True Grit

This weekend was quite the homage to cowboys the world over.

To start things off, former chairman of Kaupthing Sigurður Einarsson hired himself Ian Burton as his attorney, a man who is apparently the go-to lawyer for millionaires being investigated for fraud.

In a brief interview with Vísir, Burton had some choice words for special prosecutor Ólafur Þór Hauksson:

"It seems to me that this prosecutor wants to show the public that he's a tough guy and he can lock people up. This prosecutor isn't interested in discussion. He wants to behave like John Wayne in a cowboy movie."

Comparisons to John Wayne are pretty interesting. It's similar to Sigurður's remark that the prosecutor's recent arrests were "a drama ... being put on to soothe the anger of the nation." In both cases, it's hyperbolic language saying that Ólafur Þór is reckless and not behaving realisitically.

This is despite the fact that the Special Investigative Commission (SIC) report on the economic collapse was pretty damning when it came to Kaupthing, and Ólafur Þór would be negligent not to go after them. And if anything, Kaupthing's actually the safer bet, prosecution wise. A political investigation, which could begin this fall if the parliamentary committee decides to press charges against anyone, is going to be fairly protracted and possibly ugly, as political trials anywhere often are.

To imply that Ólafur Þór is somehow acting recklessly right now is transparently comical. But Burton also told Vísir that he could send Sigurður to Iceland with just one call from Ólafur Þór, and added that the special prosecutor was welcome to question Sigurður in London. Of course, the Minister of Justice contends that Britain and Iceland do have an extradition treaty, so Burton's offers might go unheeded.

My laughter then turned to blind rage when it was announced that Magma Energy - the Canadian company that already owns 46% of Iceland's third largest energy company, HS Orka, is set to buy the 52% stake that another Icelandic company - Geysir Green Energy - already has of HS Orka. This means Magma Energy will own 98% of the company.

It also means that Magma Energy CEO Ross Beaty pretty much lied when he told the Grapevine last fall: "I went to Iceland earlier this year and looked at opportunities and it seemed that HS Orka could benefit from capital infusion, reorganisation of its shareholding to stronger positions and it looked like there was an opportunity to do something that would help us and help HS Orka and, in the big picture, help the country of Iceland."

Because what helps a country more than moving a public utility into the private sector, where 98% of revenues leave the country altogether? That's right - Iceland is pretty much set to make the exact same mistake California made when it comes to privatizing energy, only the owners won't even live in this country.

Right now, the government is reviewing the sale, spurred on by Leftist-Green MP Ögmundur Jónasson, who quite correctly pointed out that selling natural resources is sorta kinda, you know, completely contradictory to the entire Leftist-Green raison d'etre. We'll see how that goes.

The cherry on top of this weekend was to wake up this morning and see the front page of Fréttablaðið, where it was reported that pharmaceutical giant Roche is considering boycotting the sale of medication to Iceland. The reason? Apparently we don't charge people enough money for their medication. Roche CEO Robin Turner said, in part, "It is obvious that if drug prices go below a certain limit, my company will have no other choice but to stop selling medication in Iceland."

Keep in mind that Roche made about $49 billion in 2009 alone, and Iceland's pharmaceutical market is about 300,000 people, so even if Turner's complaint was true, it's not like Iceland is exactly bleeding out Roche. Roche also makes a lot of cancer medication. But hey, you can't let people in a depressed economy have a bit of a break and get well if it means your profits might take a miniscule dip that probably totals the amount of money Turner spends on vacation.

Weekends are supposed to be relaxing. I demand a refund!