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Iceland to Set Up Rainy Day Fund

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Iceland to Set Up Rainy Day Fund

Reykjanes geothermal power plant.

Photo: Páll Stefánsson.

Iceland’s Minister of Finance has decided the State will not sell the Landsvirkjun national energy company, as his predecessor had arranged. Instead, future dividends from shares in the national power company will be put into an emergency back-up fund, which will be set up to help Iceland get over future unexpected setbacks.

Finance minister Benedikt Jóhannesson plans for money to start flowing from Landsvirkjun dividends into the national contingency fund in 2019 or 2020, he said at the AGM of Landsvirkjun this week. It is expected that Landsvirkjun will be able to contribute ISK 15 billion (EUR 128.7/USD140.2 million) in annual dividends in the coming years.

“We would invest overseas and save until any hardship arose for some reason; such as natural disasters, if there was some serious strain on infrastructure, such as an eruption of Katla that swept away roads, or any environmental disaster or disease epidemic. It would be good to have a fund overseas that would not be harmed by any local shock,” says Benedikt. “The fund would not be used in the operation of the State or other domestic projects. I hope we can see it implemented in 2019 or 2020.”

The CEO of Landsvirkjun says the expected level of dividends to the State is indeed realistic, RÚV reports.

This decision marks a split from the policy of the last government, which planned to sell Landsvirkjun into the private sector. The company is classified as a limited company whose shares are all held by the Icelandic State. Other examples of such private/public companies include the Icelandic postal service and Isavia, which runs the country’s airports.

Benedikt told the AGM that the current Government places emphasis on treating Iceland’s natural resources with respect. “The Government is retracting from the tactic that the country’s energy resources should be used first-and-foremost to attract heavy industry and should instead increase diversity in the economy, foster positive conditions for green business activities and development of environmentally friendly technologies, production and green transportation.”

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