A Year of Extensive Investments

12. mar 2020

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Orkuveita Reykjavíkur's (OR; Reykjavík Energy) Consolidated Financial Statements 2019 indicate that there were considerable activities in the construction of housing in the company's main operating area during the year. Investments were higher than in previous years, especially in utilities. Aluminium prices were low during the year and this had an impact on revenues from electricity sales to power-intensive industries. The result for the year was a profit of ISK 6.9 billion in 2019, compared to ISK 6.0 billion in 2018.

The financial statements were approved by the Board of Directors today. The Board also agreed to propose to OR's Annual General Meeting that the owners of the company – The City of Reykjavík, The Municipality of Akranes and The Municipality of Borgarbyggd - receive a dividend of ISK 1,750 million for the operating year.

OR's Annual Report is also published today. It systematically and transparently describes the environmental aspects of the business in 2019, climate impact, social aspects, governance and finances during the year. The OR Group comprises, besides the parent company, Veitur Utilities, ON Power, Reykjavík Fibre Network and, now, the recently established CarbFix, an R&D company in the field of climate solutions.

Click here to see the OR Annual Report 2019

Many houses had to be connected

After an implosion in Iceland’s construction market following the financial collapse of 2008, recent years have seen extensive construction of new housing in the capital metropolitan, Reykjavik Energy's largest operating area. This has required significant investments by the Group, both in connecting the new buildings and new neighbourhoods, but also in the maintenance and upgrading of existing grids to older quarters where densification is taking place. Investments of the Group in 2019 amounted to ISK 19.4 billion, increasing by ISK 3 billion or 18% from the previous year. The company’s solid finances enabled it to meet this growth and finance it in a favourable manner.

In 2019, Reykjavik Energy began issuing green bonds to partially finance these large investments following an independent rating agency's assessment of the issuance. The bonds received the highest grade, dark green, both for the relevant projects’ sustainability and governance of the issuance. OR's bonds, first green bonds from Icelandic companies, were offered in open tendering and subsequently listed on the Nasdaq Iceland Sustainable Bonds Market.

Investments are forecast to be reduced this year and the next and, already, staff number is lowering. It had increased in the last few years along with increased business activities since the crash. However, investments will be considerable. In addition to traditional investments in utilities and power plants, ahead are larger projects such as upgrading of metering systems and the rebuilding of a part of OR's headquarters at Bæjarháls. Slowdown in Iceland’s economy may provide for these investments being increasingly viable.

Hedging reduces fluctuations

Aluminium prices were low in 2019 and this affected revenue from electricity sales connected to aluminium pricing. The company has, however, significantly reduced this impact though hedging.

In connection with a general agreement in Iceland’s labour market in the first half of 2019, Veitur Utilities issued a statement that the company's tariffs would not increase in excess of guidelines outlined in this agreement. The Group's revenues increased by 1.4% between 2018 and 2019.

Bjarni Bjarnason, CEO

The Annual Accounts for Reykjavik Energy in the year 2019 show stable and healthy finances and our Annual Report, also published today, shows that our services are equally healthy. The customers of Veitur Utilities, ON Power and Reykjavik Fiber Network, all subsidiaries of Reykjavik Energy, did not experience any serious disturbances in our services during the extreme weathers this winter. This is confirmed in a newly published governmental report on the performance of vital infrastructure in Iceland.

This means that we have maintained our systems in a responsible way, although we can never state they will not fail under extreme conditions. Increased automation combined with enhanced efficiency, higher reliability and less consequences for the environment and the global atmosphere, all count among our targets.

Our customers are rewarded when finances and operations are in a good shape. Tariffs for some of our regulated services have been lowered over the last few years. In a responsible way we take our part in the recent labor market agreement and we have promised to raise tariffs as little as possible.

Our Annual Accounts are not only in monetary terms. We put everything on the table with respect to our corporate social responsibility and the environment in our Annual Report OR 2020. The purpose of the report is among other things to create a sound platform to evaluate and discuss openly where Reykjavik Energy can improve its operations. In 2019 we sat a new ambitious target to become carbon neutral before the end of 2030. We are focused to reach the target.

Managers’ Overview
2014 2015 2016 2017 2018 2019
Amounts in ISK million
Revenues 38,526 40,357 41,423 43,666 45,916 46,570
Expenses (13,681) (15,183) (16,062) (17,285) (17,299) -18,398
EBITDA 24,845 25,174 25,361 26,380 28,617 28,172
Depreciation (9,152) (10,747) (10,392) (9,063) (10,271) -12,121
EBIT 15,693 14,428 14,968 17,318 18,346 16,051
Income tax (2,004) 587 (4,702) (5,328) 1,380 -337
Result of the period 8,871 4,176 13,352 16,072 5,978 6,916
Other metrics
Direct release of CO2-equivalent
– Scope 1 (tonnes)
55,982 52,045 43,903 40,386 43,509 43,500
Sequestration of H2S
at Hellisheiði Plant (%)*
13% 26% 47% 68% 75% 55%
Electricity generation (GWh) 3,443 3,249 3,411 3,473 3,507 3,538
Hot water production
(Million m3)
90 95 91 94 102 101
Potable water production
(Million m3)
29 29 30 29 28 29
Gender pay-gap** 3.7% 2.3% 2.1% (0.3%) (0.0%) (0,06%)
Women among managers 44% 47% 49% 51% 54% 50%

*During the installation of new heating production unit at Hellisheiði in 2019, the gas abatement unit at the plant was off-line for a while.

**Numbers in parenthesis stand for pay-gap in favour of women.