Faroese electricity authority Orka has approved an offer from a special purpose vehicle (“SPV”), established by P/F Magn, the Faroese subsidiary of Skeljungur hf, to have license to build and operate a windmill park in Flatnahagi, Faroe Islands, and to purchase the energy that will be produced there.
Skeljungur hf notes that the offer is subject to number of conditions, including final financing and final board approval.
In the event of the investment, it will be in collaboration with Faroese pension fund Lív, writes Skeljungur hf, adding that Lív will own 60% of the equity in the SPV but Magn 40%.
P/F Magn’s investment will be a maximum of ISK 300m. The total project investment is estimated to be approximately ISK 2,200m, with debt financing available for 70 to 80% of the amount.
The SPV has won the rights to produce an allowance of 64 GWh of electricity annually. As the current Faroese electricity laws prevents private entities from selling the electricity directly to the end-users, the annual allowance will be sold to the public electricity company SEV at a fixed price. In the event of a change to the electricity laws, Magn will have the right to purchase electricity from the SPV at the same price as SEV and to sell it to end-users for market prices.
Árni Pétur Jónsson, CEO of Skeljungur:
“Following Magn’s purchase, in 2018, of a majority stake in Demich, leading service company in clean energy for house heating, the Flatnahagi project represents yet another significant step to obtain a key position in the emerging green energy sector in the Faroe Islands. This is in line with our long-term strategy in the Faroe Islands and Skeljungur’s goals of being an all-round energy supplier, operating in harmony with the environment. It is optimal for us to be a minority investor with a strong partner and still be in a position to exploit operational opportunities when they arise. We are diversifying our product offering and positioning our-selves to take part in the energy change ahead.”