All agreed loans

Iceland. Landsvirkjun

Date of agreement: 16 Mar 2011
Country: Iceland
Customer: Landsvirkjun
Amount in USD: USD 70 million
Amount in EUR: EUR 50.2 million
Maturity: 16 years
NACE sector / loan type: Electricity, gas, steam and hot water supply


The loan has been provided for the financing of Landsvirkjun's new hydropower project in Búðarháls in southern Iceland. The intake reservoir of the power station will be formed with a 2.1 km-long dam over the Köldukvísl river.

The Búðarháls hydropower plant, which is planned to be finalised in 2014, will have the capacity to produce 585 GWh of electric power annually.

The total number of man-years created in Iceland as a result of the construction of the Búðarháls Power Plant is estimated to be between 600 and 700 over the entire construction period.

Landsvirkjun is the biggest power generator in Iceland, producing the larger part of the island's electricity. The electricity is sold on long-term contracts to power intensive industrial companies and Icelandic utilities. The State of Iceland is the sole owner of the power company, which owns 13 hydro power plants and two geothermal power plants with a total installed capacity of 1,860 MW.

Fulfilment of NIB's mandate

Renewable energy is one of the cornerstones for the Icelandic economy. The country has a lot of unutilised potential in terms of renewable energy, and this potential can be realised by the implementation of capital-intensive, long-term projects. With this loan, NIB will help Iceland to produce more sustainable energy in the form of hydropower.  

Sustainability summary

This is a project with a potentially extensive environmental and/or social impact (category A, read more)

A total of 2 km² of vegetated land will be inundated by the reservoir. No protected areas will be affected by the project. The Búðarháls power plant is in the middle of a cascade of power plants. Most of the sedimentation in the glacial rivers ends up in the reservoirs upstream from the Búðarháls power plant. The impact on fishery will be insignificant. Bird habitats within the reservoir site will be lost, but no birds listed on the nature conservation register nest within the area.

Power lines and other structures will cause a visual impact. The impact on archaeological remains will be insignificant. The social impacts are mainly related to the impact during construction. Around 500 jobs will be created during construction, but only 5-10 jobs during operation. The Enviromental Impact Assessment process for the up to 120 MW Búðarháls power plant and 220 kV Búðarháls power line was carried out in 2000-2001 in accordance with law no. 106/2000 on EIA.

On 4 May 2001, the Planning Agency issued a ruling on the Environmental Impact Assessment of the Búðarháls Hydroelectric Project. The conclusion of the Planning Agency was to accept the proposed project with a condition on replacing lost vegetation resulting from the project.