Government's role in investments in power plants in Iceland Sigurður Jóhannesson.

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Presentation transcript:

Government's role in investments in power plants in Iceland Sigurður Jóhannesson

Cost benefit analysis of public investments You don’t have to calculate for full wage costs in public investments during economic recessions. The discount rate used in the evaluation of those investments is lower than the one private companies use.

Three kind of government support Investments in power plants backed by taxpayer guarantees. Aluminium smelters excempted from various taxes. Damage to the environment not accounted for.

Kárahnjúkavirkjun The original idea was that it would be privately financed- too risky for the taxpayers. Private investors were not interested. So in the end it was financed by government, and backed by taxpayers’ guarantees.

Kárahnjúkavirkjun-comes out in a plus if energy prices (aluminium prices) are high enough

Aluminium price forecast of CRU and other specialists in 2002 Landsvirkjun’s revised forecast in 2007

The stock price index was influenced by aluminium investments