Geothermal

Icelandic Backlash Weighing on Magma Energy

When Magma Energy Corp. CEO Ross Beaty first looked into acquiring the mostly-government owned Icelandic geothermal energy company HS Orka, he had no idea how politically volatile that decision would be.

At first, Beaty thought it would be a good deal for both sides: Magma would increase its operating assets by more than 175 MW and get more experience in a mature geothermal market; and the struggling government of Iceland could bring in a healthy investor to maintain and expand the country’s geothermal assets, while other Icelandic investors could improve their balance sheets.

But it didn’t really happen like the company hoped. In 2009, after snagging 32 percent of HS Orka, Magma started facing major backlash.

Lead by the famous Icelandic pop star Björk Gudmundsdottir, a group of citizens and politicians rallied against the aqcuisition, fearing that the loss of government control would lead to predatory activity. More than 18,000 people signed a petition asking parliament look into the legality of the acqusition.

“Because of the stress in Iceland, a lot of people were very fearful of foreign developers,” said Beaty in a recent interview at a geothermal conference in California.

In May of this year, Magma acquired a large stake from Iceland’s Geysir Green Energy, bringing the company’s ownership of HS Orka to 98.53%. That only fueled the opposition, as more Icelanders expressed concerns about losing control of their domestic resources.

The legality of the take-over stood, however. In September, a government committee ruled that Magma’s acqusition was entirely legal.

“It was tedious…What we’re trying to do now is…maintain a good position in the country and good relations with the people,” said Beaty.

But Beaty probably should have said “is tedious,” not “was tedious.” Magma continues to face skepticism and anger over its entrance into Iceland’s geothermal market.

In a conference call this week, Beaty said that Magma is looking into selling up to 25% of HS Orka to an an Icelandic investor to “neutralize” the ongoing uproar over the deal. In order to combat fears that the company was looking for a quick flip, Beaty said that he was looking for a simple transfer of ownership – not a profit.

“I’ve learned a lot of lessons,” said Beaty in the interview last month.

To see the full interview with Beaty on Magma’s geothermal operations in Iceland, South America and the U.S., check out the video below.