State aid: Commission approves €2 billion French guarantee scheme to support energy-consuming companies in the context of Russia’s war against Ukraine

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The European Commission has approved a €2 billion French guarantee scheme to support energy-consuming companies in the context of Russia’s war against Ukraine. The scheme was approved under EU State aid rules, based on Article 107(3)(b) of the Treaty on the Functioning of the European Union (‘TFEU’), recognising that the EU economy is experiencing a serious disturbance.

The French measure

France notified to the Commission a €2 billion scheme to support energy-consuming companies in the context of Russia’s war against Ukraine.

These companies are currently facing an increasing level of collateral requirements in light of the rise of the costs of electricity and natural gas. The scheme will be administered by the Caisse Centrale de Réassurance, the state-owned French public reinsurer.

Under this measure, the aid will take form of public counter-guarantees. The latter aim at covering unfunded guarantees issued by financial intermediaries on behalf of companies for the collateral requirements stemming from their energy supply contracts.

The measure will be open to energy-consuming companies active in France (i) whose consumption in electricity has been greater than 1 GWh in 2022, for guarantees granted in the context of electricity supply contracts; or (ii) whose consumption in gas has been greater than 2 GWh in 2022, for guarantees granted in the context of gas supply contracts. Credit or other financial institutions are excluded from the final beneficiaries of the scheme.

The public guarantees will cover up to 90% of the eligible guarantees, which will be equal to or less than the equivalent of three months of invoices. The measure will cover new guarantees granted for energy supply contracts (i) concluded between 1 September 2022 and 31 December 2023; (ii) related to energy supply for all or part of 2023; and (iii) ending no later than 31 December 2024.

The Commission assessed the measure under EU State aid rules, and in particular Article 107(3)(b) of the Treaty on the Functioning of the European Union (TFEU), recognising that the EU economy is experiencing a serious disturbance.

The Commission found that the scheme notified by France is compatible with the principles set out in the EU Treaty and is well targeted to remedy a serious disturbance to the French economy. In particular, (i) the measure will relieve its final beneficiaries from the obligation to provide in advance collateral in cash, which would have placed additional stress on their liquidity positions; (ii) the energy suppliers and the financial intermediaries will not be able to request any other form of collateral from the final beneficiary; and (iii) the financial intermediaries will charge premiums that reflect the level of the ones charged by the State.

Furthermore, the public support will come subject to conditions to limit undue distortions of competition, including safeguards to ensure that the advantages of the measure are passed on to the largest extent possible to the final beneficiaries via the financial intermediaries.

The Commission concluded that the scheme will contribute to managing the economic impact of the current crisis in France. It is necessary, appropriate and proportionate to remedy a serious disturbance in the economy of a Member State, in line with Article 107(3)(b) TFEU and the general principles set out in the Temporary Crisis Framework, which the Commission has applied by analogy.

On this basis, the Commission approved the aid measure under EU State aid rules.

Background

The State aid Temporary Crisis Framework, adopted on 23 March 2022, enables Member States to use the flexibility foreseen under State aid rules to support the economy in the context of Russia’s war against Ukraine.

The Temporary Crisis Framework has been amended on 20 July 2022, to complement the Winter Preparedness Package and in line with the REPowerEU Plan objectives.

The Temporary Crisis Framework has been further amended on 28 October 2022 in line with the recent Regulation on an emergency intervention to address high energy prices (‘Regulation (EU) 2022/1854‘) and the Commission’s proposal on a new emergency regulation to address high gas prices in the EU and ensure security of supply this winter.

The Temporary Crisis Framework provides for the following types of aid, which can be granted by Member States:

• Limited amounts of aid, in any form, for companies affected by the current crisis or by the subsequent sanctions and countersanctions up to the increased amount of €250,000 and €300,000 in the agriculture, and fisheries and aquaculture sectors respectively, and up to €2 million in all other sectors;
• Liquidity support in form of State guarantees and subsidised loans. In exceptional cases and subject to strict safeguards, Member States may provide to energy utilities for their trading activities public guarantees exceeding 90% coverage, where they are provided as unfunded financial collateral to central counterparties or clearing members.
• Aid to compensate for high energy prices. The aid, which can be granted in any form, will partially compensate companies, in particular intensive energy users, for additional costs due to exceptionalgas and electricityprice increases. The individual aid amount may be calculated based on either past or present consumption, taking into account the need to keep market incentives to reduce energy consumption and to ensure the continuity of economic activities. In addition, Member States may provide support more flexibly, including to particularly affected energy-intensive sectors, subject to safeguards to avoid overcompensation. Further details on the support possibilities for high energy prices, including on the methodology to calculate individual aid amounts, are available here;
• Measures accelerating the rollout of renewable energy. Member States can set up schemes for investments in renewable energy, including renewable hydrogen, biogas and biomethane, storage and renewable heat, including through heat pumps, with simplified tender procedures that can be quickly implemented, while including sufficient safeguards to protect the level playing field. In particular, Member States can devise schemes for a specific technology, requiring support in view of the particular national energy mix;
• Measures facilitating the decarbonisation of industrial processes. To further accelerate the diversification of energy supplies, Member States can support investments to phase out from fossil fuels, in particular through electrification, energy efficiency and the switch to the use of renewable and electricity-based hydrogen which complies with certain conditions. Member States can either (i) set up new tender based schemes, or (ii) directly support projects, without tenders, with certain limits on the share of public support per investment. Specific top-up bonuses would be foreseen for small and medium-sized enterprises as well as for particularly energy efficient solutions; and
• Measures aimed at supporting electricity demand reduction, in line with Regulation (EU) 2022/1854.

The following types of aid are also possible on a case-by-case basis, subject to conditions: (i) support for companies affected by mandatory or voluntary gas curtailment, (ii) support for the filling of gas storages, (iii) transitory and time-limited support for fuel switching to more polluting fossil fuels subject to energy efficiency efforts and to avoiding lock-in effects, (iv) support the provision of insurance or reinsurance to companies transporting goods to and from Ukraine, and (v) support for recapitalisation measures where such solvency support is necessary, appropriate and proportionate.

Sanctioned Russian-controlled entities will be excluded from the scope of these measures.

The Temporary Crisis Framework includes a number of safeguards:

• Proportional methodology, requiring a link between the amount of aid that can be granted to businesses and the scale of their economic activity and exposure to the economic effects of the crisis;
• Eligibility conditions, for example definingenergy intensive users as businesses for which the purchase of energy products amounts to either (i) at least 3% of their production value or turnover in 2021; or (ii) at least 6% of their production value or turnover in the first semester of 2022; and
• Sustainability requirements. Member States are invited to consider, in a non-discriminatory way, setting up requirements related to environmental protection or security of supply when granting aid for additional costs due to exceptionally high gas and electricity prices. Furthermore, beneficiaries of aid for additional energy costs above €50 million are required to submit to the granting authority a plan specifying how they will reduce the carbon footprint of their energy consumption or implement other measures to ensure environmental protection or security of energy supply.

The Temporary Crisis Framework, currently in place until 31 December 2023 for all measures, complements the ample possibilities for Member States to design measures in line with existing EU State aid rules. For example, EU State aid rules enable Member States to help companies cope with liquidity shortages and needing urgent rescue aid. Furthermore, Article 107(2)(b) of the Treaty on the Functioning of the European Union enables Member States to compensate companies for the damage directly caused by an exceptional occurrence, such as those caused by the current crisis.

Furthermore, on 19 March 2020, the Commission adopted a Temporary Framework in the context of the coronavirus outbreak. The COVID Temporary Framework was amended on 3 April, 8 May, 29 June, 13 October 2020, 28 January and 18 November 2021. As announced in May 2022, the COVID Temporary Framework has not been extended beyond the set expiry date of 30 June 2022, with some exceptions. In particular, investment and solvency support measures may still be put in place until 31 December 2023. In addition, the COVID Temporary Framework already provides for a flexible transition, under clear safeguards, in particular for the conversion and restructuring options of debt instruments, such as loans and guarantees, into other forms of aid, such as direct grants, until 30 June 2023.

On 1 February 2023, the Commission sent to Member States for consultation a draft proposal, part of the Green Deal Industrial Plan, to transform the State aid Temporary Crisis Framework into a Temporary Crisis and Transition Framework with the aim to facilitate and accelerate Europe’s green transition. Member States have had the possibility to comment on the Commission’s draft proposal, which the Commission is now assessing. The Commission intends to adopt the Temporary Crisis and Transition Framework in the coming weeks, taking into account the feedback received from the Member States.

The non-confidential version of the decision will be made available under the case number SA.106197 in the State aid register on the Commission’s competition website once any confidentiality issues have been resolved. New publications of State aid decisions on the internet and in the Official Journal are listed in the Competition Weekly e-News.

More information on the Temporary Crisis Framework and other actions taken by the Commission to address the economic impact of Russia’s war against Ukraine can be found here.