Secondly, the good news is that 90% of its sizable borrowings are at low rates of interest - but the bad news is that 20% is in Swiss francs; 10% in Yen; 37% in Euro and 23% in dollars.
I'm wondering what the audit is all about. It can't be flogging off the company because they've ruled that out....
Repudiating the foreign debt? By laying out pros and cons we risk inducing people to join the debate, and losing control of a process that only we fully understand. - Alan Greenspan
Can the city council do that? Or is it just to provide evidence to pressure the government to do that?
This is the wrong question. The contentious issue of (repudiation) affirmation of "foreign debt" concerns obligations of corporate banks assumed by the federal government. Whether or not the federal government, or legislature, decides to default indirectly effects Reykjavik Energy capital strategy as an ongoing concern, particularly cost of capital in open market issues.
Note that (hedged) losses attributable to currency value fluctuation over the period were relatively insignificant as compared to charges taken on --it seems to me-- accelerated depreciation and amortization... which is troubling, considering...
The pertinent question of an audit addresses Reykjavik Energy capital structure, particularly extraordinary claims recorded on the balance sheet about the "fair value" --not notional value-- of the corporation's derivatives exposure and especially "Embedded derivatives in electricity sales contracts," non-current (long-term) and current (< 12 mo). Reykjavik Energy is sitting on $23.6B worth of long-term sales contract "protection." See fn. 10, p 21. If the smelter's market fails, Reykjavik Energy is fornicated.
You might want to refer to the report. The format is extremely readable and notes are detailed. Diversity is the key to economic and political evolution.
Two cases were connected to the ruling involving car loans taken from the companies Lýsingu hf. and SP-fjármögnun that were pinned to foreign currency. With the collapse of the Icelandic crown in 2008, many people who took out such loans - at a time when the crown was strong - saw their debts double almost overnight. Consumer spokesperson Gísli Tryggvason told Vísir that he was "very pleased" with the ruling. He added that many people who had taken these loans had probably paid more than they even took out in their initial loans, so he expects these people to get money back. Gísli believes the next step will be to examine real estate loans that were structured similarly. In the meantime, he says, "Consumers have been acquitted."
Consumer spokesperson Gísli Tryggvason told Vísir that he was "very pleased" with the ruling. He added that many people who had taken these loans had probably paid more than they even took out in their initial loans, so he expects these people to get money back.
Gísli believes the next step will be to examine real estate loans that were structured similarly. In the meantime, he says, "Consumers have been acquitted."
See p17, forward currency swaps and foreign exchange difference Diversity is the key to economic and political evolution.
How is consumer credit market regulation relevant to Reykjavik Energy's actual debt load...
Terms of interest-bearing loans and borrowings, 1.1 - 3.31, 2010 (p23)
10% of Reykjavik Energy debt is denominated in ISK, of which 94% is FX-adjustable rate. I'd be guessing, that 22 super-size paid for island CRE craters, say, 2004-2008. Or vig, depending. In any event, it would be difficult even for the best comedian to squeeze a bathos from this pimple on corporate privileges which the city manager and shareholder-ratepayers (cf "guarantee fee to owners") have enjoyed. Depends. I'd want to know how much retail rates fluctuated 2008 to the present and what proportion was attributed to uh capital expenses. Diversity is the key to economic and political evolution.
At that time, the ICB modified currency custody controls but not FX controls. Something like 70% corporate borrowing was and remains issued and settled in foreign currency. Let us note here, the infrastructure Reykjavik Energy is constructing will supply an Alcoa plant. Trade will be denominated in USD not EUR. Some pertinent if dated consideration, apart from Reykjavik Energy's book: Rules on foreign exchange - Central Bank of Iceland - 15 Dec 2008
Article 4 Borrowing and lending between domestic and foreign parties for purposes other than cross-border transactions with goods and services shall meet the following requirements: Each party's loan shall not exceed 10,000,000 kr., or the equivalent of that amount in foreign currency, per calendar year. The loan period shall be at least one year. Capital transfers for the loan shall be in accordance with the provisions of Article 9 of these Rules [Article 9. Obligation to submit foreign currency]. Loan agreements, including all appendices and accompanying documents, shall be sent to the financial undertaking that carries out the movement of capital within one week of signing. The provisions of this Article do not apply to borrowing and lending between undertakings within a conglomerate [transfer pricing between units anywhere in the world].... Article 6 It is prohibited to transact derivatives contracts involving the Icelandic króna against a foreign currency, whether these are contracts involving currencies, securities, or a combination of currencies and securities, or other comparable financial instruments. Derivatives transactions related solely to trade with goods and services do not fall under this provision. Article 8 Interest, indexation, dividends, capital gains, and contractual instalment payments are not considered movement of capital in the sense of these Rules. Wages are not considered movement of capital in the sense of these Rules. Cross-border prepayment of financial instruments is prohibited, however. Article 14 The provisions of these Rules do not apply to movement of capital or foreign exchange transactions undertaken by the Central Bank of Iceland. The Rules do not apply to: 1. The Treasury and companies in which the Treasury owns a majority holding, and which operate according to special legislation. 2. Municipalities and companies in which municipalities own a majority holding, and which operate according to special legislation. Companies that are parties to investment agreements with the Government of Iceland, which agreements have been assigned legal validity or are concluded on the basis of special statutory authorisations. Companies that have been granted permission by the Minister of Industry to search for oil according to Act no. 13/2001. Resolution committees that have been appointed on the basis of Article 100a of the Act on Financial Undertakings. Undertakings with over 80% of their revenues and expenses abroad may apply for an exemption from Articles 1, 4 - 6, and 9 of the Rules. Those undertakings that believe they meet the requirements set forth in the first sentence shall send an application to the Central Bank of Iceland and demonstrate that they fulfil the conditions. The application shall be accompanied by a confirmation from a chartered auditor. A list of parties that have been granted such exemptions will be published on the website of the Central Bank of Iceland. Commercial banks, savings banks, and credit institutions are authorised to engage in spot, forward, and swap transactions with foreign currency. Furthermore, commercial banks, savings banks, and credit institutions are authorised to take foreigndenominated loans to finance their activities or to refinance previous debt. Commercial banks and savings banks are authorised to receive money market deposits in Icelandic krónur from foreign parties.
Article 6 It is prohibited to transact derivatives contracts involving the Icelandic króna against a foreign currency, whether these are contracts involving currencies, securities, or a combination of currencies and securities, or other comparable financial instruments. Derivatives transactions related solely to trade with goods and services do not fall under this provision.
Article 8 Interest, indexation, dividends, capital gains, and contractual instalment payments are not considered movement of capital in the sense of these Rules. Wages are not considered movement of capital in the sense of these Rules. Cross-border prepayment of financial instruments is prohibited, however.
Article 14 The provisions of these Rules do not apply to movement of capital or foreign exchange transactions undertaken by the Central Bank of Iceland. The Rules do not apply to:
1. The Treasury and companies in which the Treasury owns a majority holding, and which operate according to special legislation. 2. Municipalities and companies in which municipalities own a majority holding, and which operate according to special legislation.
Commercial banks, savings banks, and credit institutions are authorised to engage in spot, forward, and swap transactions with foreign currency. Furthermore, commercial banks, savings banks, and credit institutions are authorised to take foreigndenominated loans to finance their activities or to refinance previous debt. Commercial banks and savings banks are authorised to receive money market deposits in Icelandic krónur from foreign parties.
Sure was HOT today. phew. Diversity is the key to economic and political evolution.
Smelters will shut this quarter because about 70 percent are unprofitable after aluminum fell as much as 27 percent in two months, said Deripaska, chief executive officer of United Co. Rusal, the largest producer. Ghosn, CEO of Renault SA and Nissan Motor Corp., expects car production to gain about 11 percent this year. Transportation is the biggest use for aluminum. The executives are more bullish than Wall Street, where the median in a Bloomberg survey of 19 analysts is for the metal to average $2,100 a metric ton in the fourth quarter, 8 percent more than now. Harbor Intelligence, the researcher which correctly predicted a 2009 closing price above $2,200, forecasts prices as high as $2,500 before the end of this year.... The U.S. will grow the most in six years in 2010 and China, the biggest aluminum consumer, will expand at three times that pace, according to as many as 67 economists surveyed by Bloomberg. Manufacturing is leading the rebound in the world's largest economy, rising for a 10th month in May, while construction spending in April added the most since 2000. One in every five tons of aluminum is used in building.... LME-monitored reserves are little changed from a year ago and about 80 percent is tied to transactions, making it behave as a "financial asset rather than an industrial feedstock," said Daniel Brebner, an analyst at Deutsche Bank AG in London. Projections for interest rates to remain near record lows in the next 12 months mean the metal may not return to the market any time soon, he said.... New smelters in Abu Dhabi and Qatar and Chinese plants will add capacity this year, Barclays said in a report this month. That will be partly offset by Europe, where about two-thirds of plants "are in danger of closure" before the end of 2013, the European Aluminium Association says. Energy may stunt the growth of output in China, where the government is raising power surcharges by as much as 100 percent for some energy-intensive companies starting this month. Supply could also be kept off the market by exchange-traded funds backed by the metal. Rusal said in April it was in talks to supply metal to banks for possible ETFs. Read more...
The executives are more bullish than Wall Street, where the median in a Bloomberg survey of 19 analysts is for the metal to average $2,100 a metric ton in the fourth quarter, 8 percent more than now. Harbor Intelligence, the researcher which correctly predicted a 2009 closing price above $2,200, forecasts prices as high as $2,500 before the end of this year....
The U.S. will grow the most in six years in 2010 and China, the biggest aluminum consumer, will expand at three times that pace, according to as many as 67 economists surveyed by Bloomberg. Manufacturing is leading the rebound in the world's largest economy, rising for a 10th month in May, while construction spending in April added the most since 2000. One in every five tons of aluminum is used in building....
LME-monitored reserves are little changed from a year ago and about 80 percent is tied to transactions, making it behave as a "financial asset rather than an industrial feedstock," said Daniel Brebner, an analyst at Deutsche Bank AG in London. Projections for interest rates to remain near record lows in the next 12 months mean the metal may not return to the market any time soon, he said....
New smelters in Abu Dhabi and Qatar and Chinese plants will add capacity this year, Barclays said in a report this month. That will be partly offset by Europe, where about two-thirds of plants "are in danger of closure" before the end of 2013, the European Aluminium Association says.
Energy may stunt the growth of output in China, where the government is raising power surcharges by as much as 100 percent for some energy-intensive companies starting this month.
Supply could also be kept off the market by exchange-traded funds backed by the metal. Rusal said in April it was in talks to supply metal to banks for possible ETFs.
Read more...
federal government
The icelandic government is not federal, as Iceland is not a federation. The national government, the government of the republic or simply the government all works to describe the highest level of icelandic politics. A vote for PES is a vote for EPP! A vote for EPP is a vote for PES! Support the coalition, vote EPP-PES in 2009!
