Reykjavík Energy and Nordic Investment Bank enter Green Financing Agreement

15. dec 2023


Reykjavík Energy (Orkuveita Reykjavíkur; OR) and the Nordic Investment Bank (NIB) have agreed on a green loan financing of energy and utility projects in the amount of USD 100 million, corresponding to about ISK 13.8 billion. The financing will solidify ON Power‘s electricity generation in the Hengill area and enhance Veitur Utilities‘ district heating system in Iceland‘s capital area. The loan agreement is for 10 years and can be drawn on for 18 months from signing.

Increased demand for heat and power

The use of hot water has significantly increased in line with the construction of new housing in recent years. Also, the demand for thermal energy from various industries is also growing, resulting in Veitur Utilities revising plans for obtaining geothermal water. In recent years, the increased demand has been entirely met by upgrading capacity in the power plants of the sister company, ON Power, in the Hengill high-temperature area. Increased geothermal exploration is now also planned in low-temperature areas in the vicinity of Reykjavík. The use has also called for diverse measures to increase the transmission capacity of the district heating system to certain parts of the capital area.

ON Power operates geothermal power plants at Nesjavellir and Hellisheidi. Their combined electrical capacity is 423 megawatts. Additionally, the hot water production in the power plants currently covers more than half of the heating needs in the capital area. In order to maintain responsible utilisation, more steam must be obtained from the Hengill geothermal area, which is one of Iceland‘s largest. Drilling is planned and the doubling of a steam pipeline from the utilisation area at Hverahlíð.

Sævar Freyr Þráinsson, CEO:

"I welcome this agreement with the Nordic Investment Bank regarding financing our important renewable energy projects, but the bank has previously financed many of our most extensive investments in renewable energy generation and environmentally friendly utilities.

„The demand for renewable energy and reliable services of the respective utility systems is growing rapidly. We at OR Group have ambitions for people's quality of life and to be enablers of a robust green economy. After the recent events on the Reykjanes Peninsula, we also need to consider long-term energy security in a new light.

It is good to have diverse financing options. The working capital from our operations to cover investments is solid. OR has also been successful in issuing green bonds, and this direct green debt financing of NIB is important. All the while, financing the groundbreaking climate project of Carbfix in Straumsvík is underway through selling new shares. It is crucial to have such choices when projects are large and urgent."