Partnership agreement

The undersigned parties, Reykjavik City, ID no. 530269-7609, Reykjavik City Hall, Reykjavik, Akranes Town, ID no. 410169-4449, Stillholt 16-18, Akranes, and Borgarbyggd Municipality, ID no. 510694-2289, Borgarbraut 14, Borgarnes, jointly own a partnership entity that was established on grounds of a Document of Understanding (DOU) between the Reykjavik City Council and the Town Council of Akranes, dated 10 December 2001, a Document of Understanding between the Reykjavik City Council and the Municipal Council of Borgarbyggd, dated 10 December 2001, and on Act no. 139/2001, for this reason enter into the following

Article 1

1.1 The name of the company is Orkuveita Reykjavikur (Reykjavik Energy). Its domicile and venue are in Reykjavik. The shares of ownership in the company are as follows::

Reykjavík City owns 93,539 %

Akranes Town owns 5,528 %

Borgarbyggð Municipality owns 0,933 %

1.2 The company operates branches in Akranes and in Borgarbyggd, and is authorized to operate branches at other locations.

1.3 The company is an independent tax entity and is registered with the Office of the Commissioner in Reykjavik.

Article 2

2.1 Reykjavik Energy and its subsidiaries engage in harnessing, production and sale of electricity, and hot water and steam, the operation of basic systems, including the transmission system of electricity, hot water utility, water utilities, sewerage system and data utilities, as well as other activities of a comparable nature. Also, other activities that may utilize the company's research, knowledge and equipment, as well as industrial development and innovation as decided at any time by the board of directors, provided such projects relate to the company's core activities. Reykjavik Energy is authorized to own subsidiaries and shares in other entities.

2.2 The owners shall formulate a policy for the company and its subsidiaries regarding the purpose and objectives of the operation, the operating format, work procedures and payment of dividend, cf. Article 8. A policy shall be formulated for the subsidiaries in accordance with the policy of Reykjavik Energy.

Article 3

The owners' responsibilities, the internal division of responsibilities and the payment of the guarantee fee are as provided for by existing law at any given time.

Article 4

4.1 The holders of the owners' authority are as follows unless the municipal councils decide otherwise:

  • The mayor of Reykjavik is the holder of Reykjavik City's owner's authority in Reykjavik Energy.
  • The mayor of Akranes is the holder of the township's owner's authority.
  • The mayor of Borgarbyggd is the holder of the municipality's owner's authority.

4.2 The mandate of the holders of the owners' authority applies to conventional duties at the annual meetings and the owners meetings. If an unusual, major or policy­-formulating decision is to be made at a meeting of the owners, the holder of an owner's authority shall seek a mandate by the municipal council for entering into such a decision.

Article 5

5.1 Reykjavik Energy's annual meetings and other owners meetings hold the supreme power in the affairs of the company. The annual meeting is open to elected representatives of the owners' municipal councils and the news media, and shall be called by notification to the holders of the owners' authority and the news media at least 7 days in advance. An annual general meeting that is open to the general public shall be held in connection with the annual meeting.

5.2 The annual meeting shall be held during the period April to June every year. The annual meeting shall address the following matters:

  1. The report by the board of directors on the operations of Reykjavik Energy in the previous year.
  2. The environmental report on the operations of Reykjavik Energy in the previous year.
  3. The annual accounts of Reykjavik Energy for the past accounting year, together with the report by the company's external accountants, which shall be submitted for confirmation.
  4. Decision on the payment of dividend to the owners of Reykjavik Energy and on other disposition of the profit or deficit of Reykjavik Energy in the accounting year.
  5. Decide the remuneration for the members of the board of directors in the past year of operation.
  6. Announce the election of the board of directors.
  7. Election of a chartered accountant or an accounting firm.
  8. Discussions on other matters, lawfully submitted.

5.3 The annual meeting, or as appropriate an owners meeting called between annual meetings, may also enter into decisions on matters that are major, policy-formulating or unusual, as referred to the owners by the board of directors of Reykjavik Energy.

5.4 The right to present proposals and to vote at annual meetings and owners meetings is held by the holders of the owners' authority in Reykjavik Energy.

The freedom of speech at the annual meeting is held by representatives of the owners' municipal councils, the board of directors of Reykjavik Energy, the CEO, the accountants of Reykjavik Energy and its owners, and the chairman of the Staff Society of Reykjavik Energy. The board of directors is authorized to grant a freedom of speech to others attending the annual meeting. The same applies to regular owners meetings.

5.5 A regular owners meeting shall be held in November every year for presentation of Reykjavik Energy's budget and long-term plans.

Preparations and calls to the annual meetings and the regular owners meetings are the responsibility of the board of directors.

5.6 Extraordinary meetings of the owners ( owners meeting) shall be held as decided by the board of directors or if demanded by the partners. Such demands shall be in writing to the board of directors, stating the agenda of the meeting, in which instance the meeting shall be called 7 days in advance, unless all owners agree to a shorter deadline for calling the meeting. The board of directors shall call an extraordinary meeting with a notification to all partners by means of registered mail or in another equally provable manner. The call to the meeting shall state the agenda of the meeting. Voting, the weight of votes etc. are subject to the same rules as prevailing at the annual meetings.

Article 6

6.1 The board of directors of Reykjavik Energy shall consist of six members, five elected by the Reykjavik City Council and one elected by the Town Council of Akranes. The Reykjavik City Council elects the chairman and the vice-chairman of the board of directors from amongst the group of the representatives of Reykjavik City. The Municipal Council of Borgarbyggd shall be authorized to appoint to the board one representative with an observatory status and freedom of speech and proposal.

6.2 An equal number of alternates shall be elected in the same manner as the principal members of the board of directors. The board's term is one year at a time, effective from the annual meeting of Reykjavik Energy in the relevant year until the annual meeting in the following year.

6.3 The company's board of directors supervises all affairs between owners meetings and safeguards its interests. The board meetings are competent if attended by a majority of its members. The weight of votes determines the outcome of matters and the vote of the chairman weighs double. A record of minutes shall be maintained at board meetings. The minutes of Reykjavik Energy's board of directors shall be public, published on the company's website and sent to the owners.

6.4 The chairman of the board of directors shall not undertake other duties for the company than those that are deemed as constituting a normal part of his duties as the chairman of the board, except for specific projects which the board requests him to undertake for the board.

6.5 The election of board members shall be transparent and the premises for the election of board members shall be public. The board members shall be:

  • Independent in respect of connection to other enterprises that compete with or have considerable business interests with Reykjavik Energy;
  • Possess the knowledge and experience that coincides with the responsibilities entailed in holding a seat on the board of directors;
  • Have sufficient time for the tasks entailed in the board membership.

6.6 The municipal councils elect representatives on the board of directors of Reykjavik Energy. The holders of the owners' authority cannot be elected on the board of directors.

Article 7

7.1 The board of directors is authorized to establish subsidiaries on certain specific tasks, provided this is required by law or this being economical, and provided that an owners meeting has consented to this.

7.2 The CEO of Reykjavik Energy represents the company's shares in the subsidiaries and the affiliates.

7.3 Prior to appointing a board of directors for a subsidiary, the CEO shall introduce a proposal such appointment to the board to Reykjavik Energy's board of directors. By the same token, the CEO of Reykjavik Energy shall present a proposal to the board of directors of Reykjavik Energy on the representatives of the company on the boards of affiliates. Board members of Reykjavik Energy shall not hold seats on the board of directors of subsidiaries or affiliates, however, shall have the freedom of speech at the annual meetings of the subsidiaries.

The subsidiaries' articles of association shall stipulate the requirements of competence and the composition of the individual boards of directors.

Article 8

8.1 The board of directors of Reykjavik Energy is responsible for the company's affairs between the owners meetings and monitors that the company's policy, its organization and operations are always correct and in good condition, and conforming to the owners' policy.

The board of directors accepts the annual financial and operating plans, which the CEO is responsible for preparing and proposing. The board maintains regular monitoring of the CEO carrying out the financial and operating plans.

8.2 The board of Reykjavik Energy sees to sufficient supervision of the accounting and the disposition of the company's funds, and shall for this purpose ensure efficient processes regarding internal monitoring and internal audit.

The board shall ensure that the internal audit of Reykjavik City always has clear access to the company's data.

8.3 The board of directors enters into decisions on major issues within the authorizations of the owners' policy. The board may authorize the CEO to decide on such matters in critical instances. By the same token the CEO may decide on such matters if the decision by the board cannot be awaited in the instance of operations facing risks resulting from delays in decision-making. In such instances the CEO shall immediately notify the board on the disposition of the matter. Such dispositions shall be entered into the minutes at the next meeting of the board of directors.

8.4 The board of directors of Reykjavik Energy shall refer unusual, major or policy-­formulating decisions to the owners. Such decisions by subsidiaries shall be submitted by the same token to the owners of Reykjavik Energy and the board of Directors of Reykjavik Energy shall be informed of them.

8.5 The board of directors shall set an overall policy and future vision for the company in conformity with the owners' policy, and shall specify in the policy criterion for rating the operation of the company. The policy for Reykjavik Energy shall be reflected in the articles of association and the policies of the subsidiaries. Regular reporting to the owners takes place at the annual meeting every year where the annual accounts, the report by the board of directors and the environmental report are presented, and at the regular owners meeting in November where the budget and the long-term plan are presented, together with the report to the owners on the implementation of the owners policy.

8.6 The regular reporting to the board of directors of Reykjavik Energy to the owners is as follows:

  • The minutes of the board.
  • The annual report, the annual accounts, and the environmental report that are presented at the annual meeting.
  • The budget and the operating plans that are presented at the owners meeting in November every year.
  • The quarterly accounts and the operating status based on the financial goals that are sent to the owners.
  • The company's performance with respect to the rate-of-return criterion shall be presented to the owners together with the annual and quarterly accounts.

Submitting this information to the owners' municipal councils is the responsibility of the holders of the owners' authority.

8.7 The board of directors shall inform the owners about unusual or major factors in the operation even though they do not require decisions by the owners. The members of the municipal councils and the general public have clear rights to information about the operation of Reykjavik Energy. If the owners' municipal development councils BYGGDARA.D or individual members of them request extensive information from Reykjavik Energy, such a request shall be submitted at the venue of the municipal development councils and sent to the board of directors or, as appropriate, to the CEO of Reykjavik Energy. The municipal development councils should exercise confidentiality if an argued request is made for this or if law stipulates this being confidential information.

Other disclosure of information shall be as provided for by law and other executive instructions and rules on the disclosure of financial information.

8.8 The board of directors of Reykjavik Energy shall ensure that the company's policy is introduced to the owners, the customers and personnel, among other things, through its publication on the company's website. The board of directors of Reykjavik Energy should set a code of ethics for the employees.

8.9 The board of directors of Reykjavik Energy should set a code of ethics which shall be confirmed at an owners' meeting.

8.10 The board of directors hires the company's CEO, prepares his job description and determines the terms of the end of his employment. The CEO is responsible for the execution of the board's decisions and policies. He is supervises all daily operations of the company, all projects and their preparation, capital management and accounting, and the recruitment of personnel.

8.11 The board of directors grants the CEO and others, and as appropriate, the power of procuration.

8.12 The CEO sees to it that the company's accounts are kept in conformity with law and prevailing practices, and that the disposition of the company's assets is secure.

8.13 The code of ethics of the board of directors of Reykjavik Energy shall further stipulate the boundaries of authority and the division of roles of the board and the CEO. A similar provision shall be contained in the articles of association of the subsidiaries, taking into account the activities of the said subsidiaries. The board of directors of Reykjavik Energy shall set a job description for the CEO.

Article 9

9.1 Reykjavik Energy is deemed as being a unit within the consolidated group of Reykjavik City in the interpretation of Article 108 of Act no. 3/2006 on Annual Accounts. The City Council appoints an audit committee of the consolidated group of Reykjavik City and one representative of the audit committee shall be appointed according to a nomination by the board of directors of Reykjavik Energy.

9.2 The role of the audit committee is addressed in the Act on Annual Accounts.

9.3 The competence of the committee members shall be as stipulated in provisions on audit committees in the Act on Annual Accounts.

Article 10

10.1 The board of directors of Reykjavik Energy and, as appropriate, the boards of the subsidiaries, set tariffs stating the prices of goods and services.

10.2 Reykjavik Energy has independent accounting and receives payments for sold energy and other revenues. The revenues shall be used to cover all payment commitments, including instalments on debts, interest and other operating costs, including satisfactory maintenance and the modernization of structures and equipment. The emphasis shall be on Reykjavik Energy yielding normal return based on the capital that is invested in the company at any given time. The annual meeting shall determine the disposition of profits.

10.3 Reykjavik Energy is authorized to transfer to subsidiaries an exclusive license for operating a heating utility, a special license for the transmission of electricity and an exclusive right to operate water utilities and sewerage utilities, provided the subsidiaries meet the conditions of law for having such licenses.

10.4 Separation of operations by Reykjavik Energy from operations by the subsidiaries shall be in conformity with the provisions of law at any time. Emphasis shall be placed in the operation of Reykjavik Energy and its subsidiaries that competitive activities are not subsidized by exclusive-license activities or protected activities.

Article 11

Reykjavik Energy pays its owners dividend in accordance with the share of ownership of each municipality in the partnership, i.e. cf. Article 1 of this Partnership Agreement. The amount of dividend shall be determined on grounds of the performance of the partnership and the owners' policy.

Article 12

The year of operation and the accounting year is the calendar year. The board of directors shall have completed the annual accounts and submitted them to the auditors in accordance with the provisions of the Act on Municipalities and the owners' requirements.

Article 13

13.1 This Partnership Agreement may be amended at a lawfully held annual meeting or an extraordinary meeting with the consent of owners controlling at least ¾ of the ownership in the company. No special rights are attached to the shares in the company except for that stated in this Partnership Agreement. The owners shall not be subject to the redemption of their shares unless otherwise provided for by law. Pledging or other disposition of shares in the partnership is not permitted.

13.2 An owner is not authorized to leave the company without the consent of the other partners.

13.3 The following decisions are subject to the consent by all partners:

  • Sale of shares in the partnership outside of the group of owners.
  • Merger with activities under the municipalities or other public parties or public enterprises, cf. the provisions of Article 2, paragraph 5, of Act no. 136/2013 on Reykjavik Energy.
  • Sale, transfer or other separation of core activities as defined in the owners' policy at any time, from the partnership or its subsidiaries.
  • Amending the number of board members or the composition of the board of directors.

Article 14

This Partnership Agreement is entered into on grounds of Article 5 of Act no. 136/2013 on Reykjavik Energy.