OR's solid finances used to upgrade infrastructure

30. sep 2019


The Financial Forecast of Orkuveita Reykjavíkur for 2020 through 2025 shows expected total investments – new investments and maintenance – of ISK 102 billion for the Group. The Forecast was approved by the Board of Directors today and will now be integrated into the consolidated budget of the city of Reykjavík.

OR consolidated forecast 2020 and long-term plan 2021-2025

OR Group finances are solid, and no major changes are foreseen in income or expenses. The group comprises Veitur Utilities, ON Power and Reykjavík Fibre Network, in addition to parent company OR. A comprehensive upgrade of Veitur’s energy meters is the single largest investment project in the forecast period, and a new electric substation will be built that will serve, among others, cruise ships in Reykjavík harbour.

Bjarni Bjarnason, CEO:

The services provided by OR and subsidiaries are extensive. As an illustration, the total length of utility pipes and wires is almost 14 thousand kilometres, or ten times the ring-road around Iceland. All these systems – and our power plants – have to be maintained and technologically upgraded so they pass the test of time.

National economic forecasts show we may expect some cooling of the economy. Therefore, the next few years can be well suited for investments. Good and prudent operations are the basis for our meeting the reasonable expectations that we provide our services at a fair price.

Real tariff reductions for licensed services

Veitur Utilities, which operates a suite of utilities in the capital region and most densely populated part of Iceland, is the largest company within the OR Group. It serves three out of every four Icelanders in one way or another. Veitur’s solid position allows the company to support the extensive general wage agreement reached in Iceland this spring by holding back increments in tariffs. Should inflation (CPI) forecasts materialise, a real reduction in tariffs may be expected in 2020. Prices in competitive sectors is determined by the market, subject to OR owner policy, which provides for services granted at reasonable prices.

Changes at ON Power

ON Power owns and operates CHP plants, selling electricity and hot water for heating. When Reykjavík Energy was compelled to unbundle, at the beginning of 2014, the majority of ON Power’s revenues – mainly electricity sales to power intensive industries – were in USD. Consequently and in accordance with law, the operating currency of ON Power has been USD. Since then, the composition of ON’s revenues has changed – because of lower aluminium prices and increased production of hot water for domestic heating. As a result, in 2019, the majority of revenues will be in ISK, and the basis for USD as the operating currency has therefore expired.

It has been important for ON Power and OR’s risk management to have the assets listed in USD. Fluctuations in exchange rates have influenced both assets and liabilities. Because of this, OR’s Board of Directors has resolved to establish a new public limited company so a part of its assets will continue to be valued in USD. The Board of Directors resolution is to be confirmed by a meeting of OR owners as stipulated in the OR Owners Agreement.