From the CEO

Bjarni Bjarnason

The year 2019 proved to be a clear reminder of the importance of ensuring basic services to the public. Utilities such as electricity, domestic heating and clean water are vital to sustaining quality of life in the modern world. Ensuring reliable utility services requires long-term planning in operations and can never be taken for granted.

Stormy winter weather is characteristic of Iceland and always will be. Iceland, like many other modern societies, has built an infrastructure that is heavily reliant on utilities, especially electricity. Domestic heating also relies on electricity, as water is often heated by electricity. In fact, nearly all domestic heating utilities rely to some extent, on electric pumping systems.

Businesses can in many cases be more reliant on electricity than the average home. Modern communication methods require electricity, and business would grind to a halt without it. We were reminded of this in December 2019 when we were hit by heavy storms that disrupted operations and caused extensive damage to structures.

The weather did its best to cause havoc in the capital area but didn´t cause any power outages. The distribution system in the capital is powerful and well protected. The Veitur substations are sheltered and most cables have been relocated underground, after years of experiencing damage to overhead lines during winter storms.

However, manmade utilities can never be failure proof. We are currently improving measures to provide our customers with up-to-date information on possible disturbances to the system, as well as identifying new methods for monitoring the 16 thousand kilometres of cables and pipelines that provide our customers with electricity, hot and cold water, access to the fibre network and an efficient sewage system. Disturbances to these systems are inevitable and being well prepared must remain a priority.

Most of West Reykjavík lost its hot water supply for 24 hours in December, due to a fault in the main pipeline. No damage was reported but the incident was an important reminder of what can go wrong. The Reykjavík Group and its directors are responsible for minimizing the risk and frequency of these types of disturbances. The numerical data below shows that the Group is fulfilling these expectations.

One of the most pressing questions is where we can extract the hot water that we need for domestic heating, not just for the next ten years but perhaps the next century. We have experienced water shortages in some of our heating utilities, where the search for geothermal water hasn´t been as successful as we hoped. Technical issues have created problems elsewhere. One of our key values at Reykjavík Energy is foresight because the projects we have been entrusted with require long-term thinking and planning. The sustainability of the powerful natural resources we utilize also requires foresight.

Our most valuable natural resource is clean water, which is essential to life. We were reminded of this in 2019 when the water supply in Borgarfjörður was contaminated. We realized that poor weather conditions could affect both the volume and the quality of the water supply. A prolonged dry period had altered the inflow of water to the water source, which was consequently contaminated by the nearby community. This has never occurred before and could be an indicator of what is to come if climate change continues to affect us in the future. However, basic human contamination still poses the greatest threat and we will take any measures required to protect water sources, should they come under threat.

Climate change will have a particularly negative impact on sensitive drainage and sewage systems. Increased rainfall intensity i.e. torrential downpours, could become more frequent and could cause more ‘quick thaws’. The drainage system is centre stage during these weather events and must be capable of dealing with increased water load. Actually, we are foreseeing increasingly dealing with rainfall with blue-green surface water solutions instead of conducting to sea through the sewerages. This is both more cost-efficient and more environmentally friendly. Rising sea levels, due to mass thawing in the North Pole and Greenland will also affect the drainage system. Various communities in Iceland are located in areas where drainage and sewage systems are in fact below sea level and require a pumping system to get the sewage into the sea. Climate change isn‘t the only thing we need to consider when updating the system. Our promise to keep our beaches clean in Iceland has become even more important as swimming in the sea has become a popular sport in the capital area.

The Earth's climate is only one of the changes we will experience in coming years. The many forces that shape the future can pull us in any direction. As technology is changing rapidly, identifying new ways to integrate devices and solutions is a powerful driving force. The need for increased and more frequent communication worldwide is irrefutable and is evolving in a period when the world’s political landscape is more complex than it has been for some time. International corporations are growing, and their influence is increasingly felt but, also, the new means of communications have empowered the public and increased its influence on various issues.

We cannot predict how future forces will affect us but there are countless possibilities. However, all future scenarios considered by Reykjavík Energy have one central theme; we are responsible for providing the public with their basic needs. Icelanders are just like any other global citizen as they need water, heating, sewage systems and sufficient electricity to power a significant portion of the equipment and systems that make their daily lives possible. Energy production and utilities will always be a necessity, whatever the future brings.

Reykjavik Energy is focused on converting some of these future dreams into reality. The Group has created a clear policy on e-mobility, footprint-free geothermal energy production, water protection, sewage system improvements, responsible resource management and preventing waste. We place great emphasis on creating a work environment that is free from discrimination and on empowering women to join what has historically been a male dominated sector. We also try our best to keep our prices down. In other words, we encourage sustainability in all areas of our operations.

Financial stability has enabled Reykjavík Energy to stand the test of time and to maintain sustainable operations. Ambitious plans and earnestness can go to waste without the necessary financial support needed to fulfil company objectives. The year 2019 was characterized by large investments in Reykjavík Energy‘s operations. We carried out extensive work in 2019, including work on the various utilities. We must now be prudent in the next few years and set enough money aside to finance the upgrade of our metering system and to repair the company's headquarters.

2019 was also a year of financial innovation. We issued green bonds and were the first Icelandic company to list the bonds on the Icelandic stock market and OR's bonds were the first green bonds from Icelandic companies offered in open tendering and subsequently listed on the Nasdaq Iceland Sustainable Bonds Market. We believe that this type of financing is more cost-effective than traditional methods but are also aware of the responsibility that goes with it. We must ensure that projects financed with green bonds meet the strictest requirements with regard to their environmental and social impact. Reykjavík Energy’s role within society and the nature of our operations enables us to almost exclusively choose green projects. Green bonds must be legitimate. An independent audit organisation gave all of our green bond backed projects their highest rating. We are proud of this achievement. The rating indicates that we are on the right track and still focused on our values of foresight, efficiency and integrity.