ON Power and Norðurál sign a power purchase agreement

Representatives from Reykjavík Energy, ON Power – a wholly owned subsidiary of Reykjavík Energy – and Norðurál, today signed a new power purchase agreement (PPA)  for 150 megawatts to the Norðurál aluminium plant at Grundartangi. The agreement is for a term of up to five years and replaces previous electricity sales contracts between Reykjavík Energy and Norðurál, set to expire in the coming years. 

As part of the agreement, Reykjavík Energy and Norðurál have also agreed to cease arbitration proceedings initiated due to differing interpretations of provisions in prior contracts. 

The new agreement, which will take effect in Q4 2026, is expected to have a significantly positive impact on profitability of electricity sales – exceeding the projections published in Reykjavík Energy’s 2025–2029 financial forecast, published in a market release in October 2024. The next financial forecast will be published in Q4 2025. 

Sævar Freyr Þráinsson, CEO of Reykjavík Energy, states that this agreement delivers on the goal set out in the aformentioned release: to secure improved pricing for electricity sold to power intensive industries. 

 “At the same time, by extending cooperation with a key customer – and a business that creates substantial value for Icelandic society – we are opening up new opportunities for Reykjavík Energy to be an eneabler for a sustainable future,” says Sævar Freyr. 

The partiestotheagreementhaveissuedthefollowingjointrelease:

ON Power and Norðurál sign a five-year power purchase agreement

ON Power and Norðurál have signed a new power purchase agreement (PPA) for the delivery of 150 megawatts of electricity from ON for up to five years. The agreement replaces a previous contract between the two parties. The new agreement will phase out in stages through March 31, 2032.  

The agreement marks the continued cooperation between two key players in Icelandic industry and is an important milestone in securing electricity for one of the most environmentally friendly aluminum production operations available. Negotiations between ON and Norðurál have been ongoing for some time and were characterized by trust, good communication, and a shared vision of the importance of sustainable utilization and fair electricity pricing.    

Both ON and Norðurál are satisfied with the outcome of the negotiations and view the agreement as an important step in strengthening their on-going cooperation.    

“We are very pleased to have reached this agreement with Norðurál, which has been an important customer of ON for many years,” says Árni Hrannar Haraldsson, CEO of Orka náttúrunnar and ON Power. “The agreement reflects market pricing and ensures that the value of the electricity we produce benefits society in a sustainable manner.”   

“The agreement provides predictability, which is important for our operations,” says Gunnar Guðlaugsson, CEO of Norðurál. “We look forward to working with ON and continuing to create value for the national economy.”  

ON Power is one of two power generation and electricity sales companies owned by Reykjavík Energy. ON Power owns and operates the Hellisheiði Geothermal Power Plant and sells electricity to power intensive industries. Orka náttúrunnar owns and operates the Nesjavellir and Andakílsá Power Plants and sells electricity on the general market.  

Contact:

Sævar Freyr Þráinsson 
CEO 
saevar.freyr.thrainsson@orkuveitan.is