Below is a summary of the business news of relevance in Iceland the week beginning on 5 June 2023. The summary, which is based on publicly available information only, is prepared by the BBA//Fjeldco team for the benefit of clients and contacts of the firm and is subject to the disclaimer noted below.
Wednesday, 14 June 2023
CBI welcomes new government measures against inflation
Financial system on solid footing but CBI urges banks to make adjustments for customers´ increased debt burden
Expansion of Verne data centre for 70 billion ISK
Wage index up 7.3% in Q1 2023
Market value of Icelandic banks now on par with other Nordic banks due to ISK drop
City of Reykjavik sells bonds worth 3.6 billion ISK
Low market value of Kvika bank to halt full merger with Islandsbanki according to Jakobsson Capital
US Skybound Entertainment and Danish 5th Planet Games buy Icelandic Sagafilm
Landeldi to raise 12 billion ISK – first land-based farmed salmon in Iceland to be sold to consumers
Proposed merger of two of Iceland’s largest real estate companies
5 billion ISK investment in harbour facilities for NATO planned
Icelandic AML tech company Lucinity and Bank of International Settlements join forces in tackling global money laundering
Data centre atNorth investing 3 billion ISK in Akureyri, North Iceland
Shares in fishing gear and rope manufacturer Hampidjan keep their value on first day of trading
Straumur payment service provider begins operations
French investment company Ardian partners with operator of Keflavik Airport in measuring emissions
Iceland suspends operations of embassy in Moscow
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Disclaimer
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CBI welcomes new government measures against inflation
Last week the Icelandic government announced new measures to fight inflation, which currently is measured at 9 6% The proposals include speeding up the builds of rental apartments as shortage of housing has been putting pressure on real estate prices and pushing up inflation significantly, and by cutting public spending by 36 2 billion ISK, according to daily newspaper Morgunbladid. The government also proposed some measures to financially assist groups that are significantly worse off due to inflation such as e.g. pensioners and disabled people . The government also decided to cut the planned controversial increase of salaries of high-level civil service officers and politicians from 6% to 2.5%. CBI governor Asgeir Jonsson welcomed the government´s proposal as important initial steps He also added that a 2 5% pay increase was a good parameter for the general wage negotiations that will begin this winter, which the union leaders have already rejected
Financial system on solid footing but CBI urges banks to make adjustments for customers´ increased debt burden
The Icelandic financial system is on a solid footing at a time when the monetary stance has tightened, according to a statement from the CBI´s Financial Stability Committee (FSC) Capital and liquidity of the systemically important banks are strong, arrears are still limited and the operating results of the commercial banks are good, the statement reads Recent bond issues in foreign markets have mitigated the banks’ refinancing risk, although cost of funding has increased. As the FSC considers the financial system resilient, last week it decided to keep the countercyclical capital buffer rate unchanged at 2.5%. The committee argues that inflation and sharply rising interest rates increase debt service burdens for those who have loans with variable nominal interest rates and a rising real rate will increase the debt service burden. The committee urges banks to consider this increased debt service in a timely manner to prevent financial distress among borrowers and, where necessary, consider lengthening loan maturities, adopting an annuity format, capping nominal interest rate payments, and offering a range of loan types that offer differing debt service.
Expansion of Verne data centre for 70 billion ISK
Vidskiptabladid reports of planned investment into Verne Global data centre in Iceland in 2023-2027 worth 391 million GBP, thereof 95 million GBP this year, twice as much as previously planned As part of that plan, Verne Global is fully utilising a 100 million USD credit facility at 7 14% interest, as announced to the London Stock Exchange,
according to Vidskiptabladid. Verne Global was acquired by Digital 9 Infrastructure in September 2021 for 231 million GBP.
Wage index up 7.3% in Q1 2023
The 12-month total wage index increased by 7.3% by the end of Q1 2023, compared to 8 5% rise at the same time last year and an increase of 12% in the full year of 2022, according to a statement from Statistics Iceland.
Market value of Icelandic banks now on par with other Nordic banks due to ISK drop
The sharp drop in ISK in recent months has lowered the market value of the Icelandic banks, which is now close to the book value of equity. The price of Icelandic banks is now closer to the price of other Nordic banks, according to a report on business website Innherji. The Icelandic banks are still above the average price of European banks “The price/earnings ratio of Icelandic banks are higher than the median of comparable banks” says Sveinn Hedinsson of IFS Analysis in an interview with Innherji and added that the “banks are not fully comparable and market conditions may differ so it cannot be asserted that Icelandic banks are expensive in international comparison”
City of Reykjavik sells bonds worth 3.6 billion ISK
The City of Reykjavik completed a CPI indexed bond offering last week, raising a total of 3 6 billion ISK Offers in class RVK 321 were in total 6 9 billion ISK, requesting a yield of 3.84% - 4.04%. The city accepted offers of 2.7 billion ISK with a yield of 3.9%. Offers in class RVK 481 amounted to 1 3 billion ISK, asking for a yield of 3 33%-3 4% The city accepted offers of 950 million ISK with a yield of 3.35%.
Low market value of Kvika bank to halt full merger with Islandsbanki according to Jakobsson Capital
Analysts at Jakobsson Capital argue that the merger talks between Kvika bank and Islandsbanki may lead to a sale of Kvika´s most valuable assets to Islandsbanki rather than a full merger. The reason for this, according to a Jakobsson Capital report, is the low market valuation of Kvika The current valuation is 84 billion ISK, and the price-tobook ratio is 1.05. The analysts argue that the market overlooks the insurance arm of Kvika and values the group “just as a bank” By selling its insurance company TM
and its asset management unit, which Jakobsson Capital values at 57 billion ISK, Kvika would hold on to a very profitable banking operation. Jakobsson Capital argues therefore that the sale of assets could be preferable to the shareholders of Kvika rather than a merger with Islandsbanki.
US Skybound Entertainment and Danish 5th Planet Games buy Icelandic Sagafilm
Reported by daily newspaper Morgunbladid, US Skybound Entertainment and Danish financing and publishing company 5th Planet Games have announced their intention to buy Sagafilm, one of the oldest serving film and TV production company in Iceland. According to a statement from Sagafilm, the acquisition will give Skybound a stronger foothold in Europe. The leading owners of Sagafilm, Ragnar Bjorn Agnarsson and Kjartan Thor Thordarson, and CEO Tjorvi Thorsson will all become shareholders in Skybound and 5th Planet Games, and Thorsson will serve as the CEO of an independent Icelandic subsidiary that will retain the name Sagafilm
Landeldi to raise 12 billion ISK – first land-based farmed salmon in Iceland to be sold to consumers
The land-based fish farming company Landeldi is raising 80 million EUR for continuing construction of its facilities. CEO of Landeldi Eggert Thor Kristofersson said in an interview with business gazette Vidskiptabladid that the plan is to complete the funding by the end of this month and existing shareholders are expected to participate in the funding The largest shareholder, private investment firm Stodir, which holds 40% of all shares, will invest 25 million EUR, or 4 billion ISK. New investors, which include private investors, investment funds and pension funds, will invest 7 billion ISK in total According to Kristofersson, the fundraising began last March, and he admits that it has not been easy as investors have moved slowly under the current circumstances where interest rates have increased by 300 points since the beginning of the year Last week Landeldi began the slaughter of its harvest, the first slaughtering of salmon farmed on land in Iceland 110 tons were slaughtered, processed, and packaged and sold to costumers on both sides of the Atlantic. According to Vidskiptabladid, all procedures were correctly in place and the product was well received by customers
Proposed merger of two of Iceland’s largest real estate companies
Last week Reginn, the second largest real estate company in Iceland, announced a take-over bid of Eik, which is Iceland´s third largest real estate company. Both
companies are listed on Nasdaq Iceland According to a statement from Reginn, the offer will be fully financed by issuing new shares in Reginn and the shareholders in Eik will receive 46% of all shares in the merged company The price reflects last week´s share prices in the two companies where the market cap of Eik was 35.5 billion ISK and the valuation of Reginn was 41 6 billion ISK Prior to the announcement, Reginn approached shareholders of Eik with the idea of a merger and received positive reactions, according to the statement Icelandic pension funds are the leading owners of Reginn whereas leading shareholders in Eik are private investment companies.
5 billion ISK investment in harbour facilities for NATO planned
Plans are to raise harbour facilities for NATO vessels in Helguvik near Keflavik international airport in the South-West of Iceland, which will include 25 thousand cubic meters fuel tanks. The project will call for investment worth 5 billion ISK, according to daily newspaper Morgunbladid The project is a co-operation between NATO, Ministry of Foreign Affairs in Iceland, The Icelandic Coast Guard, and the municipality of Reykjanesbaer
Icelandic AML tech company Lucinity and Bank of International Settlements join forces in tackling global money laundering
Reported by business gazette Vidskiptabladid, the Bank of International Settlements (BIS) Innovation Hub has joined forces with Icelandic AML tech company Lucinity in a project called Aurora in order to tackle global challenges of money laundering in crossborder transactions. The project demonstrates the impact that data, technology, and collaboration can have on countering illicit financial activities across borders and institutions Project Aurora has successfully pinpointed patterns emphasizing the superiority of AI models over conventional rule-based systems, according to a statement from Lucinity
Data centre atNorth investing 3 billion ISK in Akureyri, North Iceland
A new data centre operated by atNorth, which is owned by the international investment firm Partners Group, was recently launched in Akureyri in North Iceland The total investment in the 5000 square meter computer and data centre will be 3 billion ISK atNorth is a leading Nordic data centre services company offering environmentally responsible, power-efficient, cost-optimized data centre hosting facilities and highperformance computing services The new data centre is the third one that atNorth
opens in Iceland and the first one in Akureyri. The company also operates data centres in Sweden and Finland.
Shares in fishing gear and rope manufacturer Hampidjan keep their value on first day of trading
Shares in fishing gear and rope manufacturer Hampidjan Group kept their value on the first day of trading on the main market of Nasdaq Iceland last Friday after a successful public offering of shares that were oversubscribed three times and sold for 10 9 billion ISK. In order book A, 17 million shares were sold for a fixed price of 120 ISK and 68 million shares were sold in order book B for the final price of 130 ISK per share Last Friday, shares worth 219 million ISK were traded for the price of 130 ISK per share.
Straumur payment service provider begins operations
Straumur payment service provider, a subsidiary of Kvika bank, has begun operations
Following the merger of payment solution companies Rapyd and Valitor, Kvika acquired a collection of costumers from Valitor that it will now service through Straumur. According to a statement from Kvika, Straumur will hold a 25% market share in payment services in Iceland
French investment company Ardian partners with operator of Keflavik Airport in measuring emissions
Ardian, a private investment house based in France, has partnered with Isavia, the operator of Keflavik International Airport, in measuring the airport’s Scope 3 emissions using the proprietary platform Ardian Air Carbon, according to daily newspaper
Morgunbladid The Ardian solution has been developed to measure indirect emissions, such as those generated by aircraft landings, take-offs, taxiing and ground vehicles. The tool uses real time granular operational data to monitor and project emissions
Ardian Air Carbon is complying with the methodology published by the Airport Carbon
Accreditation, the global carbon management certification programme for airports
Ardian Air Carbon has already been rolled out across four Italian airports (Turin, Milan Malpensa, Milan Linate, and Naples) Keflavik is Iceland’s primary international airport and welcomed 6.1 million passengers in 2022.
Iceland suspends operations of embassy in Moscow
Last week the Minister of Foreign Affairs in Iceland, Thordis Kolbrun Gylfadottir
Reykfjord, decided to suspend operations of the Embassy of Iceland in Moscow as of 1 August this year and in return requested that Russia limit the operations of its embassy in Reykjavik, in line with article 11 of the Vienna Convention on Diplomatic Relations, and that the level of diplomatic representation be lowered. “This is not an easy decision as Iceland has enjoyed rich relations with the people of Russia since our independence in 1944. However, the current situation simply does not make it viable for the small foreign service of Iceland to operate an embassy in Russia I hope that conditions will someday allow for us to have normal and fruitful relations with Russia, but that depends on decisions taken by the Kremlin,” a statement from the Ministry reads. Iceland has been operating an embassy in Moscow since 1944, excluding the period 1951-1953 when there was no trade between the countries The Soviet Union did not have an ambassador in Reykjavik from 1948 to 1954. A decision to suspend the operations of the Embassy of Iceland in Moscow does not constitute a severance of diplomatic relations between the countries.
