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The Icelandic Submarine Cable

In January 2001, after several years of deliberation and debate, the Icelandic government had finally decided to pursue the Icelandic Submarine Cable Project (ISCP). This project proposed to export 25% of the country’s electricity generation potential to the European continent. In order to undertake this €6.3 billion project - which represented over 80% of the annual GDP of the entire nation - the prime minister of Iceland and the president of the state-owned energy company, Landsvirkjun, first needed to arrange the project’s financing.

The Icelandic government put together a financial plan so that they could pitch the idea to an investment bank that could help identify potential investors in the project. Their greatest concern involved identifying a lead equity investor who could lure additional equity capital while improving the possibility of issuing an investment-grade bond for the debt on this monumental construction endeavor. The magnitude of the project was such that it would take at least five years to complete the initial stages of construction. Arranging a financial structure that was attractive to each investor involved was necessary if the Icelanders were to realize their dream.

The Republic of Iceland

ICELAND IS A VOLCANIC ISLAND LOCATED IN THE NORTH ATLANTIC OCEAN, LYING APPROXIMATELY 2,600 MILES NORTHEAST OF NEW YORK AND 500 MILES NORTHWEST OF SCOTLAND, JUST SOUTH OF THE ARCTIC CIRCLE. MOST OF ICELAND’S LAND IS UNINHABITED (NEARLY 99%) AS IT CONSISTS LARGELY OF LAKES, RIVERS, GLACIERS AND A MOUNTAINOUS LAVA DESERT.

Although the country is a member of the North Atlantic Treaty Organization (NATO), it was the only member without its own military. Since 1951, Iceland had been protected by the Icelandic Defense Force, which was controlled by the United States Military.

Iceland’s population of 285,000 was growing at an annual rate of 1.1%, with a 99.9% literacy rate and...