Reykjavik Energy's Ownership Strategy

Ownership strategy

A clear ownership strategy, a well-defined role of the company, a clear mandate of the holders of the owners’ authority, the board of directors and the CEO, the description of RE’s management requirements, together with the company’s effective monitoring system, create the premises for municipal undertakings to shoulder specific operations in the interests of the general public.

The clear ownership strategy endeavours to explain the role and responsibility of the owners, ensuring their participation in deciding important matters and policy formulation.

The ownership strategy is thus intended to facilitate democratic, transparent, professional and effective management of the company. The ownership strategy is a collaboration pact of the owners and will not be amended except subject to an agreement between and consented to by the municipal councils and confirmed at an owners meeting.

The ownership strategy shall be accessible to the general public and the media, for example, on the websites of RE and its owners.

1. Guiding vision

In the operations of RE emphasis shall be placed on respecting the environment, responsible utilization of the natural resources and responsible utilization of capital. RE operates in a solid and reliable manner, exercising social responsibility in its activities. The company focuses on the interests of the community and deals respectfully with nature, the natural resources and the customers. The owners want the company to be regarded as a solid partner that is desirable to work for and with, and that it holds an important role in the community.

2. Role

RE is a power and utility enterprise that lays the foundations of the quality of life in the municipalities it serves. The company utilizes the natural resources in a responsible, sustainable and efficient manner, exercising respect for nature without jeopardizing the rights of future generations.

RE carries out statutory utility projects and other tasks in the owners’ communities and in other municipalities in accordance with this policy.

RE serves households in its utility area, as well as undertakings and institutions in conformity with its statutory duties, and ensures the agreed quality and delivery reliability of the company’s goods and services.

RE shall ensure service to its customers at reasonable and competitive prices.

3. Core activities

RE’s core activities are entailed in the operation of a water utility, heating utility, electricity utility and sewerage, sale and production of electricity, and hot and cold water. RE may utilize the company’s know-how through participation in other utility operations, for example the operation of data centers, provided this serves the objectives of the owners and that such involvement is accepted by them.

4. Area of operation

The principal area of RE’s operations is Southwest Iceland. Opportunities in other areas are examined on grounds of the company’s role, profitability and risk, and shall be confirmed by its owners prior to making commitments in respect of such opportunities.

5. Management

RE’s board of directors shall submit for confirmation a proposal on the company’s policy formulation, including the criterion and an explanatory report, at a meeting of the owners. The proposed overall policy shall address the following policy factors:

  • Dividends
  • Risks
  • Environment and natural resources
  • Quality
  • Strategy regarding workplace safety and health
  • Acquisitions
  • IT safety
  • Human resources
  • Employment terms
  • Equality
  • Code of ethics

When preparing the policy the board of directors shall take into account the owners’ focal points in respect of financial objectives and profitability (6.1), risks (6.2), the environment and natural-resource utilization (6.3), and the terms of employment (6.4). The policy formulation for the subsidiaries shall conform to the current policies at any given time as stated above.

6.1 Financial objectives

The company’s board of directors and management shall exercise prudence in operations and investments.

RE’s dividends policy shall yield the owners return on the capital that is invested in the company in accordance with the risk entailed in the operation and financing of the company. The return on capital shall as a minimum exceed the company’s capital costs, amounting to normal risk premium in accordance with the operating environment of RE.

RE shall adopt criteria for illustrating how the owners’ yield requirement is met with respect to their risks from guarantees for the company. The yield requirement shall be defined according to the operating factors, the risks entailed in each factor and its financing. A proposal by the board of directors and a report on the criteria of dividends and financing shall be submitted for confirmation at owners meetings.

RE’s board of directors shall present a proposal at an owners meeting on a dividends policy entailing that dividends shall generally be paid the owners after the financial commitments have been met, including that the company’s financial strength is sufficient and that there is sufficient available capital for the operation and investments of the company.

6.2 Operation risks

RE should set a risk policy in order to reduce to the extent possible the impact of external financial risk factors on the company’s revenues, service, assets and debts. Prior to decisions being entered into on investments and financial commitments RE should assess the risks they may entail.

RE should generally finance projects in the same currency as their expected revenues. Commitments include, among other things, new loans, debt changes where the terms of credit are different than previous agreements thereon, energy-sale contracts, and purchase of farmlands or equipment.

Commitments which the board of directors refers to the owners shall be accompanied by a detailed risk assessment.

RE sets action plans for ensuring, to the extent possible, reliability regarding the company’s operations, service and assets in instances of threatening circumstances, for example, natural disasters, accidents or for other reasons. The action plans shall normally conform to the civildefense action plans of the state and the municipalities in RE’s area of operations, and to other public safety plans.

6.3 Environment and utilisation of natural resources

RE shall endeavour to improve its utilisation of the natural resources and acquisitions in accordance with sustainable development criteria.

RE shall annually calculate and prepare a public assessment of the value of its natural resource utilisation on grounds of the type of natural resources, irrespective of whether they are owned by the company or others.

6.4 Terms of employment

RE’s board of directors shall set a human-resource policy for the company, entailing moderation regarding the terms of salaries and employment of its personnel. Management’s salaries shall be similar to comparable jobs, however, taking into account that the company is owned by public parties. The wage terms of management and other RE personnel shall not be leading on the labour market.

7. Communications and reporting

The owners of RE wish to create an environment for its board of directors that enables the board to carry out its duties at any given time on grounds of the company’s interests and within the policy set by the owners. Bearing this in mind the interaction between the owners and the company shall be through formal channels with an effort being made to direct them along the paths of general annual meetings and regular owners' meetings.

This places strong information duty upon RE towards its owners, as addressed in the Partnership Agreement.

RE shall be exemplary in terms of information disclosure to the general public. Information about the activities shall be set forth in a manner that provides general readers with a clear image of them.

The holders of the owners’ mandate shall seek to strengthen informed and democratic dialogue about the affairs of RE at the arena of the municipalities and at meetings of the owners.

8. Decisions subject to owners’ consent

Decisions by the board of directors regarding the following factors shall be subject to consent by the owners:

New commitments: if the amount of individual new debt commitments by RE exceeds 5% of the booked equity capital as per the latest annual account or quarterly accounts, the relevant commitment shall be presented to the owners for consent prior to being entered into.

The board of directors shall present unusual and policy-formulating decisions, together with risk assessment, to the owners in order to facilitate evaluation in accordance with their role as the parties responsible.

Plans on harnessing or other utilization of natural resources at untouched areas, as well as development that requires environmental-impact assessment, irrespective of whether the areas are owned by RE or others, are deemed as being major and policy-formulating decisions; hence must be addressed by the owners.

Reykjavík, 25 April 2014
ON behalf of Akranes Town ON behalf of Reykjavík City ON behalf of Borgarbyggð Municipality
Regína Ásvaldsdóttir Jón Gnarr Páll S. Brynjarsson