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Iceland: Norsk Hydro Ices Aluminum Smelter

Environment News Service
April 4th, 2002

OSLO, Norway -- Norsk Hydro has decided to postpone indefinitely its plans to build a enormous aluminium smelter in Iceland. Conservationists are declaring victory against the facility which they say would destroy a highland wilderness area.

Norsk Hydro, a Norwegian multinational company, said the only reason behind the decision not to move ahead with the 700 megawatt Karahnukar Hydro power plant is that "more time is needed to re-evaluate mid to long-term investment plans after the recent acquisition of the German company VAW."

But the conservation organization WWF says the project should be put on the shelf forever. The power plant "would significantly impact the largest remaining wilderness area in Western Europe through the construction of dams, reservoirs, ditches, channels, and roads," WWF said today.

The area impacted covers some 1,000 square kilometers (386 square miles) in the highlands north of the Vatnajoekull Glacier. "If it goes ahead," the WWF warns, "the project will destroy a rare highland ecosystem."

Norsk Hydro says the project "has progressed towards a goal" of concluding all preparations for a final decision by September 1, 2002 that now will not be met. "Preparations have so far underpinned the feasibility of the project while profitability assessments send encouraging signals," the company said.

The deal was formalized on May 24, 2000, in the form of a declaration between the Ministry of Industry and Commerce on the behalf of the government of Iceland; Landsvirkjun, Iceland's National Power Company; Hydro Aluminium; Reydaral, a special purpose company owned 50/50 by Haefi and Hydro Aluminium; and Haefi, a special purpose company owned by a group of Icelandic investors.

The project consists of a primary aluminium plant with capacity for up to 400,000 metric tons per year, hydro-electric power plants and related infrastructure investments.

The decision will mean a second controversial project -- the building of Iceland's largest ever hydropower plant to power the smelter -- is unlikely to go ahead. There is currently no new partner in sight to replace Norsk Hydro.

Samantha Smith, director of WWF's Arctic Program, said, "One project cannot exist without the other: Norsk Hydro's decision means the hydropower project will now once again come under scrutiny and rightly so. Both projects are ill conceived and will have irreparable consequences for the Icelandic environment."

The Icelandic Planning Agency had decided to turn down the project because it would have serious consequences for the environment, but this was recently overruled by Iceland's Environment Minister Siv Fridleifsdottir. The Iceland Nature Conservation Association has filed a lawsuit against the minister in order to have the matter resolved in a court of law.

Arni Finnsson of the Iceland Nature Conservation Association said, "The delay is great news for conservationists everywhere. But Norsk Hydro should do the right thing and now commit to stay out of this unique wilderness area for good."

Norsk Hydro says a meeting will be held in early June to reassess the situation and consider defining a revised timetable and bringing in a new project partner, thereby reducing the Icelandic ownership share.





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