There are alraedy numerous foreign investments in industrials and energy-related services in Iceland. So far the majority of such investments has been in power-intensive industrial production, mainly focusing on metals. However, there is a growing investment in mid-size industries and foreign companies have been investing in data centers and dynamic high-tech companies.
The reasons behind such a foreign investment can be very different. Low electricity cost is the most important factor for energy-intensive industries such as aluminum smelting. Skilled labor and highly qualified technical people in the well-educated society of Iceland is also an important factor. Besides, Iceland has a very modern and efficient infrastructure, and the Icelandic corporate tax rate of 20% is one of the lowest in the OECD. Some local authorities have flexible development strategies and incentive schemes, which can be advantageous for new investors. Government offices in Iceland are in general very accessible, allowing businesses and individuals to deal directly with national officials with very little red tape.
Examples of well-known international firms with a strong presence in Iceland are the aluminum producers Alcoa, Century Aluminum and Rio Tinto Alcan, and the Chinese chemical company China National Bluestar (owner of the Norwegian ferrosilicon producer Elkem). Following is a short description of some of the foreign investors using Icelandic energy:
Iceland’s largest aluminum plant so far is the Fjarðaál smelter in Reyðarfjörður in east Iceland. The smelter has a capacity of 346,000 tons and started production in 2007. It is 100% owned by Alcoa. Iceland’s largest hydropower plant, the 690 MW Kárahnjúkavirkjun, was constructed to supply the smelter with the necessary electricity..
The Canadian firm Alterra Power is the major shareholder (66.6%) in the Icelandic elctricity firm HS Orka. HS Orka operates two geothermal power stations with a total capacity of 175 MW. HS Orka is also a large provider of hot water and owns a few subsidiaries, including almost 1/3 of the well-known Blue Lagoon.
In Akureyri, the Italian company Becromal built a factory producing high voltage foils with a 60% share in the plant. In 2009 the German company EPCOS acquired Becromal. Icelandic investment firm Strokkur Energy owns 40% of the Icelandic plant, which started operating in 2009.
In 1998, a new aluminum smelter located near Reykjavik started production. The smelter had a capacity of 60,000 tons and was owned by Columbia Ventures, through its Icelandic company Nordurál. In 2004 the smelter was bought by Century Aluminum, a firm whose largest shareholder is Glencore International.
The current annual capacity of the Norðurál Smelter is 260,000 tons. Century Aluminum has for some years been preparing a new aluminum smelter in Iceland, the completion of which would add a substantial capacity.
In 1975 by the Icelandic government established Icelandic Alloys in cooperation with the American company Union Carbide. Construction of a ferrosilicon plant northwest of Reykjavík started in 1977, and by 1999 the plant had three furnaces. The Norwegian company Elkem overtook the shares of Union Carbide in 1976 and by 2003 Elkem had become the only shareholder. In 2011 China National Bluestar Group Co. Ltd bought Elkem, including the plant in Iceland.
The plant produces ferrosilicon of different grades (FeSi is a material used in the steel industry). In addition, production of MgFeSi (nodularisers for the iron foundry industry) started in 2008.
Rio Tinto Alcan
The Icelandic Aluminuim Company (ISAL) was founded in 1966. Originally, it was owned by a Swiss firm, Alusuisse. ISAL constructed Iceland’s first aluminum smelter at Straumsvik, near Reykjavik. Operations started in 1969 with an original annual capacity of 60,000 tons.
Since then the smelter has gone through several enlargements and today the annual capacity is about 185,000 tons. The smelter is now owned by Rio Tinto Alcan.
Verne Global is a company that owns and operates a data center campus in Keflavik, close to Iceland’s main international airport. The largest investor in Verne is the UK investment foundation Wellcome Trust.
These are a few examples of foreign investnment in energy related industries in Iceland. Currently, there are number of new investments being considered by foreign companies. For more information, readers are welcome to contact us with inquiries about the Icelandic energy sector and/or business environment.