LANDSNET POWER TRANSMISSION

Promoter – Financial Intermediary

LANDSNET HF

Location

• Iceland

Description

The operation is an investment programme of two projects to extend the 220 kV power transmission grid in the north-eastern part of Iceland, in order to strengthen the transmission system between eastern, northern and south-western parts of Iceland to increase transmission capacity, stability and reliability of the system.

Additionality and Impact

The Project includes two new transmission lines that improve interconnection of the north-eastern and eastern regions of Iceland. This provides greater security and quality of supply, including a greater degree or network redundancy, network loss reduction which have public good attributes, and the resolution of constraints that limit the increase in both generation and consumption, which in the country is based on renewables. It will thereby allow for better integration of renewable energy, which reduces negative climate and environmental externalities.

The Project develops a critical infrastructure for a decarbonised economy, consistently with the EIB Energy Lending Policy and the policy goal of "Sustainable Energy & Natural Resources". It also contributes to Climate Action. The project is expected to deliver a positive economic benefit as well as a broader social benefit. The promoter is the transmission system operator in Iceland, highly experienced in implementing works of this nature, with a sound, project management structure.

The Bank's loans will be a cornerstone of the financing for the borrower's investment programme.

The loan will offer key benefits such as a very long loan maturity and flexibility with respect to availability period, interest rate arrangements and grace periods as well as to drawdowns.  

Objectives

The project includes two new transmission lines that improve interconnection of the north-eastern and eastern regions of Iceland. This provides greater security and quality of supply, including a greater degree or network redundancy, network loss reduction, and the resolution of constraints that limit the increase in both generation and consumption, which is based on renewable sources of energy. The project further improves reliability of electricity supply for all users.

Sector(s)

• Energy - Electricity, gas, steam and air conditioning supply

Proposed EIB finance (Approximate amount)

EUR 60 million

Total cost (Approximate amount)

EUR 128 million

Environmental aspects

The Promoter is experienced in conducting works of this nature, with an in-house team responsible for environmental and social aspects of projects. Based on the information available, the project is acceptable in environmental and social terms for the Bank's financing.

Procurement

Iceland has, in the context of Article 65 (1) of the European Economic Area (EEA) Agreement, transposed EU procurement directives into law. The EU Directive 2014/25/EC is implemented by Icelandic regulation no. 340/2017. The promoter is considered a public undertaking in the meaning of said Directive and thereby required to follow public procurement procedures. For the project, major works are tendered internationally with publication in the Official Journal of the EU. The procurement procedure is mostly a negotiated procedure, which is appropriate given the need to coordinate multiple contracts. Under these conditions, the procurement procedures followed by the promoter are suitable for the project and satisfactory to the EIB.

Status

Signed - 28/02/2023