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2018 saw ongoing stability in the operations and performance of the Reykjavik Energy Group. Operating costs and investments have been reliably mastered.

Reykjavik Energy was active in the bond market during the year and prepared the issuance of green bonds. The first auction of these bonds in Iceland on behalf of Reykjavik Energy took place in early 2019. Both the Moody's and Fitch credit ratings agencies upgraded their credit ratings for Reykjavik Energy early in 2018.

Efficiency is one of Reykjavik Energy’s values, and one that is particularly applicable to the company's finances. Financial objectives are pursued to ensure that Reykjavik Energy and its subsidiaries:

  • have sound finances,
  • operate with an acceptable level of risk,
  • offer fair prices for services,
  • pay owners dividends from their assets.

Reykjavík Energy, which is entirely owned by municipalities, considers that sound finances promote the UN's sustainable development goal 11 for sustainable cities and communities.

Revenues, Expenses and Results

Stability characterises main metrics in Reykjavik Energy's finances over the past few years. The rise in revenues is primarily due to an increase in sales, although various tariffs for Veitur Utilities were lowered in 2018.

EBITDA stands for earnings before interest, taxes, depreciation and amortization. EBIT stands for earnings before interest and taxes.

Revenue, Expenses, EBITDA og EBIT


Reykjavik Energy Group's operational margin has been stable and sound over the past years. The operational margin must, among other things, support the investments of the companies in the Group. Operations require substantial investments to be able to maintain the utility systems and power plants, tend to new customers and meet increased demands placed on operations. Here is the margin as a percentage of total revenue.

EBITDA margin

Interest Coverage

This performance indicator demonstrates how capable the company is of honouring its interest expense obligations. The company's owners have put forward conditions to pay out dividend which stipulates that cash from operations plus interest expenses shall be at least 3.5 times higher than interest expenses. Reykjavik Energy fell short of that target in the immediate aftermath of the financial crisis, but exceeded it from 2010 onwards.

Interest coverage

Net Debt

The heaviest debt load was at the end of 2009. At that time, net debt amounted to ISK 226.4 billion, thus net debt has been reduced by ISK 93 billion at the end of 2018.

Net debt is interest-bearing debt excluding interest-bearing assets.

Net debt

Net Debt / Net Cash from Operating Activities

This performance indicator shows the ratio between net debt and cash at the end of the year. The indicator shows how many years it would take for the company to pay net debt with cash if it were only used to pay down debt.

Net debt / Net cash from operating activities


Reykjavik Energy’s Ownership Policy provides for the implementation of a yardstick that shows returns on the capital employed by the owners in operations. It should, at the very least, exceed the company’s financing costs in addition to a reasonable risk premium.

In October 2018, the board of directors of Reykjavik Energy approved a dividend policy and it was endorsed at an owners’ meeting in November 2018.


This is us
Kristinn Rafnsson
Kristinn Rafnsson
Specialist in power plant management

Kristinn obtained that fine status after a long career in this field and completing studies in mechanics and engineering. He is in the right place in life because he prefers to control machines more than people. Kristinn participated in the development of the Nesjavellir and Hellisheidi geothermal power plants and says it was very rewarding and the most exciting thing he has done in his career. In his free time he is fully immersed in community sport-related issues since he is a former handball champion from the Stjarnan team in Gardabær. There he fired the ball between the goal posts but now he fires other kinds of shots because he owns five guns and is on the board of the shooting association.

Current Ratio

The Plan's success and other measures to strengthen the company's cash position have improved the current ratio and the liquidity position is strong. Reykjavik Energy's objective is to have a current ratio that is no lower than 1, which is one of the conditions for paying out dividends to the owners. This means that the company must have a sufficient cash flow to meet obligations for the next 12 months.

Current ratio

Equity Ratio

The equity ratio indicates how much debt a company has compared to its assets. The total assets of Reykjavik Energy were estimated at ISK 340.1 billion at the end of 2018. OR's objective is to ensure that the equity ratio does not go below 35% - 40% in the long-term.

Equity ratio

Cash Flow

In the profit and loss account and balance sheet of each company are many calculated figures that should give a clear picture of operations during a specific period and position at the end of it. However, the cash flow overview provides a clearer view of the real cash flow and which factors have an impact on the company's cash position in the period. Furthest to the left one can see the cash position at the beginning of 2018 and, to the right, cash and cash equivalents, marketable securities and deposits at the end of the year.

Cash flow

Credit Rating

Credit ratings are important for companies that do business with international financial institutions. The purpose of the rating is to give creditors an objective assessment of a company's financial standing and future prospects. The credit ratings of Reykjavik Energy and other Icelandic companies can never surpass the sovereign rating of Iceland. The owners' guarantee on OR's loans have a positive impact on the company's rating. Reykjavik Energy is currently rated by three agencies: Moody's, Fitch Ratings and Reitun Rating Iceland.

Currency Risk

Reykjavik Energy‘s currency risk is mainly due to borrowing in foreign currencies and foreign revenues from Reykjavik Energy‘s subsidiary ON Power due to electric sales in USD. Reykjavik Energy‘s risk policy includes limits on possible currency imbalance in operations and on the balance sheet. Forward contracts are entered into with the aim of reducing the risk of unfavorable exchange rate fluctuations. The graph shows the estimated cash flows of foreign currencies for the next few years.

Estimated currency flow

Interest Rate Risk

Higher interest rates pose a risk for Reykjavik Energy‘s operations and balance sheet. This risk has been mitigated in the past few years by fixing interest rates with interest rate swaps. The columns show to what degree the overall liabilities for each year have fixed rates. Reykjavik Energy‘s risk of higher interest is now insubstantial.

Interest rate risk

This is us
Daniel Ali Kazmi
Daniel Ali Kazmi

Daniel or Thunder Dan from Pakistan is an electrician on the operational team at the Hellisheidi Geothermal Power Plant. His fine nickname was given to him by his foreign team mates in the Snæfell basket ball club in Stykkishólmur, since Daníel’s father is from Pakistan. Daníel is new to his job at the Reykjavik Energy Group and likes it. He was quite surprised to see how evolved the workplace is on safety issues and how much ambition there is at all levels of the job. Daníel dreams of becoming a great running champion and has recently started to train in this field. He's aiming to participate in a 50 km race in the Hengill area in the autumn. He is always competing, no matter what he takes on, even if it’s only inside his head.

Aluminum Price Risk

Reykjavik Energy executes aluminum hedge contracts to hedge aluminum linked revenues against sharp declines in aluminium prices. Hedges are executed for a few years ahead and the graph shows to what extent revenues have been hedged. The board of directors decides the upper and lower limit of the aluminium hedge ratio.

Aluminum price risk

Cash Position

Liquidity stress tests are conducted by Reykjavik Energy. The approved financial budget and forecast are the underlying benchmarks that are stress tested by applying unfavorable developments of external variables. The variables include exchange rates, aluminium prices, domestic inflation and interest rates. The stress test involves very adverse fluctuations in all external variables. The graph shows Reykjavik Energy‘s ability to withstand such developments.

Cash position with and without stress test

Currency Risk on Balance Sheet

Reykjavik Energy‘s foreign assets exceeded the company‘s foreign debt at year end 2018. The reason is that the operational currency of Reykjavik Energy subsidiary, ON Power, is in USD. ON Power assets are greater than all Reykjavik Energy’s liabilities in foreign currency.

Currency risk on balance sheet