Aluminum Plant
in Helguvik

In May 2005, representatives of Nordural ehf., Reykjanesbaer and Hitaveita Sudurnesja hf. signed an agreement to explore the feasibility of operating a primary aluminum plant near Helguvik in Reykjanesbaer. In support of the agreement, an analysis was undertaken of energy acquisition, environmental conditions and facilities for an aluminum plant in this area. Since then systematic preparations have been made.

Collaboration Between Municipalities

With the departure of the NATO defense force in 2006, new opportunities were opened and in January 2007 the municipalities, Reykjanesbaer and Gardur, agreed on the location of a building site for the prospective aluminum
plant on the boundary of the municipalities. Thus, the two municipalities collaborated in the industrial development of the area which recently endured one of the biggest employment losses in the history of Iceland with the departure of the NATO defense base. According to the agreement, the pot rooms of the aluminum plant will be within Gardur municipality, on a new industrial site at Bergholar, and the alumina containers, reception buildings and other structures will be in the industrial area at Helguvik in Reykjanesbaer.

Convenient Location

The industrial and harbor area at Helguvik is well suited to an aluminum plant. The harbor facilities are excellent. Environmentally sound energy, services, construction and knowledge-based companies are located in the vicinity. Importantly, this area provides access to a well educated and capable workforce in the southwest region. There is strong support for the prospective aluminum plant within the community. The local residents will benefit greatly from the project as it will provide diverse and competitive jobs to replace the 700 jobs which were lost with the departure of the defense force.

The construction of the prospective aluminum plant is estimated to need 1,800 man years over a 6-8 year construction period. The aluminum plant will be constructed in phases, first metal is expected by 2010 and the aim is to reach 250,000 mtpy by 2013. According to plans, the staged construction period will allow for energy acquisition for the aluminum plant, in addition to other key services.

Encouraging Impact

When aluminum production begins, 300-400 new jobs are expected to be created in the aluminum plant and 600-700 derivative jobs in the local area; all together 1,000 new jobs. An aluminum plant in Helguvik will create job security and pay considerably higher wages than comparable industries. The phased approach reduces the impact on the economy and labor market. The area is well suited for a phased construction project such as this one due to its diverse industrial base, offering various trade and services and proximity to the capital area. The direct and indirect benefit of the plant will be considerable. The tax revenues generated by the plant will enable the municipalities to develop services and improve local living conditions.

Impact on Local Area

The proposed Helguvik aluminum facility will benefit the southwest peninsula and, to some extent, the capital area. During the construction of the plant, the impact will be most apparent in the municipalities where the employees live. This impact will also be apparent in the company’s acquisitionof goods and services during the construction period. This impact will be distributed over the local area, although it can be expected to be most apparent in Reykjanesbaer and other municipalities in the southwest peninsula. The construction project should increase employment in the immediate area as well as strengthen the general economy and trade. Thus, it can be expected that the total impact will be positive for the municipalities in the impact area. It is expected that about 65% of the impact will be in Reykjanesbaer, about 20% in other municipalities in the southwest peninsula and about 15% in the capital area, which is consistent with the company’s experience at Grundartangi.