Act on Landsvirkjun

No. 42, 23 March 1983

Landsvirkjun is a partnership company jointly owned by the State Treasury and Eignarhlutir ehf. Its domicile and legal venue are in Reykjavík. The company is an independent legal entity with independent finances and accounts. The State Treasury owns a 99.9% share in the company, while Eignarhlutir ehf. owns 0.1%.

Each of the two owners shall be severally liable as a guarantor of collection for the obligations of the company which are permitted pursuant to Article 9, while the division of liability among the owners shall be in proportion to their respective shares of ownership. The liability of the owners shall not extend to other liabilities of the company.

In the event of a petition for a moratorium on payments, composition with creditors or bankruptcy the provisions of the Bankruptcy Act, as current at any time, shall apply to Landsvirkjun in the same manner as to limited liability companies.

The object of Landsvirkjun is to engage in operations in the energy sector and any other business and financial activities pursuant to the decisions of the board of directors at any time.

Landsvirkjun is the owner of electric power plants, other facilities, water rights and equipment acquired by the company prior to the adoption of this Act or by special laws or by contract.

Landsvirkjun shall pay dividends on its owners’ contributions.

The dividends shall be determined based on the outcome of the company and profits carried forward from previous years.

The Minister shall appoint the board of directors of Landsvirkjun at the annual general meeting of the company, which shall be held before the end of April each year. The board of directors shall be composed of five members and an equal number of alternate members. It shall be ensured that the representation of either gender is not less than 40%.

Members of the board of directors, principals and alternates, shall be legally competent, they shall not have any record of bankruptcy, they shall have an unblemished reputation and in their work they shall be guided exclusively by the interests of Landsvirkjun. They shall not, directly or indirectly, engage in any work, accept any payment or have any interests in other energy companies or undertakings with links to the energy sector which could lead to a conflict with the interests of Landsvirkjun. The chairman of the board of directors shall not undertake duties for the company other than those which constitute a normal part of his or her work as chairman, with the exception of individual tasks entrusted to him or her by the board.

The board of directors of Landsvirkjun shall appoint a managing director to manage the company. The Wage Terms Commission shall determine the managing director’s terms of employment. The managing director shall have a seat at meetings of the board of directors.

The board of directors of Landsvirkjun is responsible for the company’s affairs and shall ensure that the company’s organisation and activities are at all times in correct and proper order. The board of directors and the managing director are entrusted with the administration of the company.

The managing director is responsible for the day-to-day administration of the company and shall, in the course of duties, observe the policy and instructions issued by the board of directors. Day-to-day administration shall not include measures that are extraordinary or of major consequence. Such measures may only be taken by the managing director with special authorization from the board of directors of the company unless it is impossible to wait for the decision of the board without serious disadvantage for the operation of the company. In such cases the board shall be notified immediately of the measures.

The board of directors of Landsvirkjun shall ensure adequate supervision of the company’s accounts and of the management of its assets. The managing director shall ensure that the accounts of the company are kept in accordance with law and custom, and that the management of the company’s property is secure.

Only the board of directors of Landsvirkjun may confer powers of procuration.

The members of the board of directors and permanent employees of Landsvirkjun shall have the rights and obligations of public functionaries.

The powers and functions of the board of directors and managing director shall be further provided for in the rules of procedure of Landsvirkjun’s board of directors.

The annual general meeting of Landsvirkjun shall be held in the month of April each year. The annual general meeting shall address the following items of business:

1. The report of the board of directors on the activities of Landsvirkjun in the preceding year of operation
2. Confirmation of the accounts of Landsvirkjun for the preceding financial year together with the auditor’s report
3. Decisions on dividends and other disposal of the profit or loss of Landsvirkjun over the accounting year
4. Decisions on the remuneration of the members of the board for the preceding election term.
5. Announcement of the election of the board of directors
6. Election of a chartered auditor or auditing firm
7. Any other business.

The owners of the company, the board of directors and the managing director of Landsvirkjun and the chartered auditor of the company have the right to attend annual general meetings.

The board of directors of Landsvirkjun may call extraordinary meetings to discuss the company’s affairs as needed.

The operating and accounting year of Landsvirkjun shall be the calendar year.

The board of directors of Landsvirkjun and the managing director shall prepare annual accounts for each accounting year, which shall be prepared in accordance with statutory law and generally accepted accounting standards; they shall include a profit and loss account, balance sheet, cash flow statement and notes.

The annual general meeting of Landsvirkjun shall elect a chartered auditor or auditing firm on the recommendation of the National Audit Office to audit the annual accounts of the company.

The auditor shall audit the annual accounts of Landsvirkjun in accordance with statutory law and generally accepted accounting standards and to this end examine the accounting records of the company and other factors relevant to its operations and position. The auditor shall, following the work of auditing, endorse the annual accounts, and the endorsement shall be attached to the annual accounts as the auditor’s report.

Landsvirkjun is permitted to undertake financial obligations for the needs of the company and guarantee payments for the same purpose. New financial undertakings which are subject to guarantees by the owners pursuant to the second paragraph of Article 1 are subject to the consent of the Minister.

Transitional provision Guarantees by the owners of financial obligations of Landsvirkjun and obligations pursuant to long-term power contracts entered into by Landsvirkjun with power intensive companies using the electricity for their own purposes, which were undertaken prior to the entry into force of this Act, shall remain in effect as established and until they are fully discharged or individual contracts are terminated. An annual state guarantee tax shall be paid pursuant to Act No. 121/1997 on state guarantees in respect of financial obligations undertaken, and obligations pursuant to long-term power contracts entered into by Landsvirkjun with power intensive companies using the electricity for their own purposes, as of the entry into force of this Act.

February 13, 2012