Dec 18 2008

Búðarháls Dam Further Delayed

The construction of Búðarháls Dam (Búðarhálsvirkjun) in Tungnaá river, will probably be further delayed due to the uncertain future of Landsvirkjun´s financial possibilities. Landsvirkjun is Iceland’s national energy company. The construction was originally supposed to start early next year, after being delayed since 2003. The estimated cost is 25 billion Icelandic krónur.

Because of the collapse of the Icelandic banks and the international financial crisis, most possibilities for foreign loans are now frozen. Landsvirkjun’s long time financement is therefore quite uncertain.

“This mostly impacts new constructions, like Búðarhálsvirkjun” says Þorsteinn Hilmarsson, Landsvirkjun’s PR manager. “It is necessary to insure the future financement before the construction starts.  ”

Couple of weeks ago Landsvirkjun’s director, Friðrik Sophusson, announced that the tender offer for Búðarhálsvirkjun would be delayed for three months. The dam is supposed to be built for the expansion of Rio Tinto Alcan’s aluminium smelter in Straumsvík and for Verne Holding’s Internet data center in Keflavík. The dam is supposed to create 85 MW and run R.T. Alcan’s 40 thousand ton increased production
Rio Tinto Alcan is also facing troubles due to the financial crisis, and it’s plans for expansion are now uncertain.