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PR(98)13: EFTA Surveillance Authority authorises aid to aluminium smelter in Iceland


The EFTA Surveillance Authority has assessed and approved measures taken by the Icelandic authorities with the aim of facilitating investment in a new aluminium smelter at Grundartangi, Iceland.

The project is undertaken by the American company Columbia Ventures Corporation and its Icelandic subsidiary, Norðurál hf (Nordic Aluminium Ltd.).  The smelter has an annual production capacity of 60.000 tonnes, with the possibility of extension at a later stage.  Total investment costs in the project are estimated at around USD 180 million.  Construction work started in the summer of 1997, when agreements with the Icelandic authorities were concluded, and the factory is currently commencing production.  When the factory reaches full output, approximately 130 persons will be directly employed with Norðurál hf., and further jobs are expected to be created in dependent businesses.

The involvement of the Icelandic authorities consists in a Smelter Site Agreement, a Harbour Agreement and an Investment Agreement between the investor and Icelandic central and local authorities, as well as a Power Contract between Norðurál hf. and the National Power Company (‘Landsvirkjun’).

In its decision, the Authority concluded that certain measures taken by the Icelandic authorities with respect to the tax treatment of the company, as well as financing arrangements concerning investments in site preparation and harbour installations, involve elements of State aid.  The lease for the smelter site and the power contract for the supply of electricity to the smelter were, on the other hand, not considered to involve State aid.  In total, the Authority estimated the aid elements to amount to a grant equivalent of USD 6 million, corresponding to 3,6% of eligible investment costs.

The objective of the Icelandic authorities’ involvement in the project is inter alia to enhance regional development in Iceland.  The smelter is located at Grundartangi on the nothern side of ‘Hvalfjörður’, a location belonging to the ‘Vesturland’ region (mid-western part of Iceland), which according to the prevailing map of assisted areas in Iceland qualifies for regional aid, up to a limit of 17% of eligible investment costs.  The measures taken by the Icelandic authorities are therefore justified.

In terms of employment and income generation, the project is considered to make a significant contribution to economic development in the southern part of the Vesturland region and also to make a measurable positive impact on the Icelandic national economy, helping to diversify its export industries.

For further information please contact Mr. Guðlaugur Stefánsson on tel. (32-2) 286.18.52 (Competition and State Aid Directorate).

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