Agreement reached between Landsvirkjun and Rio Tinto
Iceland’s national power company Landsvirkjun and Rio Tinto in Iceland have approved an annex to the companies’ electricity agreement since 2010. The agreement strengthens the competitiveness of the smelter in Straumsvík with its continued operations.
Landvirkjun and Rio Tinto are celebrating this milestone, which will strengthen the plant’s operating base in the coming years. The agreement also ensures Landsvirkjun’s predictable revenue stream and increased business flexibility for both parties. As before, the agreement stipulates sales of 390 MW or 3,415 GWh per year and is valid until the year 2036.
The amendment of the agreement is to the benefit of both parties. The electricity price base has changed, but remains tied to the US dollar and linked to the US Consumer Price Index (CPI). To a small extent, the agreement is also linked to aluminum prices, which means adjusting prices to international markets to some extent.
In parallel with the agreement, Rio Tinto has decided to withdraw its complaint to the Competition Authority from July 2020 regarding energy sales to the smelter in Straumsvík.
The agreement is an annex to the current agreement from 2010. The confidentiality provisions of that agreement are still in force and the agreement will therefore not be disclosed at this time.
Hörður Arnarson, CEO of Landsvirkjun : “We are delighted that an agreement has been reached on changes to the energy sales agreement, at Rio Tinto’s request. The result is to the benefit of both parties and at the same time it increases the efficiency of the electricity system in Iceland. Landsvirkjun’s goal is, as before, to ensure predictable income while taking into account changes in international markets and the needs of our customers.
We at Landsvirkjun have focused on supporting our customers in these challenging times. We are determined to continue to offer competitive energy prices while fulfilling our role of maximizing the value of the renewable energy resources we have been entrusted with, for the benefit of the whole nation. ”
Rannveig Rist, CEO of Rio Tinto in Iceland : “This is good news that removes uncertainty about the operations in Straumsvík, while improving our competitiveness. We at Straumsvík can all be extremely proud of the results that ISAL’s staff have achieved in recent years. Despite many years of uncertainty, all operations have been characterized by professionalism and serenity, and staff have not lost sight of what matters most. Safety and environmental issues have been very good, production has been successful and its quality is very stable and high. Although this stage has been reached, we are not out of the wind. Demanding conditions remain in the aluminum industry and ISAL will continue to be under pressure to succeed. With this agreement on electricity, however, we can focus on producing high quality aluminum with the needs of our customers in mind.