State aid: Commission approves €1.5 billion Belgian scheme to support energy suppliers in the context of Russia's war against Ukraine

The European Commission has approved a €1.5 billion Belgian guarantee scheme to support gas and electricity suppliers in the context of Russia's war against Ukraine. The scheme was approved under the State aid Temporary Crisis Framework, adopted by the Commission on 23 March 2022, and amended on 20 July 2022, 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.

Executive Vice-President Margrethe Vestager, in charge of competition policy, said: “In the context of economic uncertainty caused by the current geopolitical crisis, this €1.5 billion guarantee scheme will enable Belgium to provide liquidity support to natural gas and electricity suppliers and to their intermediaries, allowing them to continue their activities. We continue to stand with Ukraine and its people. At the same time, we continue working closely with Member States to ensure that national support measures can be put in place in a timely, coordinated and effective way, while protecting the level playing field in the Single Market.”

The Belgian liquidity support measure

Belgium notified to the Commission, under the Temporary Crisis Framework, a €1.5 billion guarantee scheme to provide last-resort liquidity support to electricity and gas suppliers and their intermediaries in the context of Russia's war against Ukraine.

The measure will be open to natural gas and electricity suppliers as well as to their intermediaries holding a license for the supply of electricity and/or natural gas to end-users in Belgium. In order to be eligible, these companies should not be in financial difficulties at the moment they apply for aid.

The gas and electricity price increase caused by the current geopolitical crisis as well as the lack of liquidity, linked among others to payment delays by the end-consumers, result inevitably in an increased demand for working capital by energy suppliers.

In addition, banks, credit institutions and insurers are confronted with large requests for additional credit lines and are less willing to take on risk in this sector.

A default of a supplier or an intermediary could have a serious cascade effect on the wider energy market and on the security of supply. Intervening in this crisis situation, through the granting of a state guarantee enabling the beneficiaries to access the required liquidity, is therefore necessary for the stability of the energy markets and for the security of supply.

Under the scheme, the guarantees will be granted by the Ministry of Energy and will cover new working capital loans for a maximum of two years.

The Commission found that the Belgian scheme is in line with the conditions set out in the Temporary Crisis Framework. In particular, (i) loans granted under the measure relate only to working capital needs; (ii) the flat rate guarantee premiums respect the minimum levels set out in the Temporary Crisis Framework and will cover maximum 70% of the loan principal; (iii) the maximum loan amount per beneficiary for which a guarantee can be granted respects the conditions set out in the Temporary Crisis Framework; (iv) the losses will be sustained proportionally and under the same conditions by the credit institution and the State; and (v) the aid will be granted by 31 December 2022 at the latest.

The Commission therefore concluded that the Belgian guarantee scheme 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 conditions set out in the Temporary Crisis Framework.

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 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 62,000€ and 75,000€ in the agriculture, and fisheries and aquaculture sectors respectively, and up to 500,000€ in all other sectors;
• Liquidity support in form of State guarantees and subsidised loans;
• 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 exceptional gas and electricity price increases. The overall aid per beneficiary cannot exceed 30% of the eligible costs and – in order to incentivise energy saving – should relate to no more than 70% of its gas and electricity consumption during the same period of the previous year, up to a maximum of €2 million at any given point in time. When the company incurs operating losses, further aid may be necessary to ensure the continuation of an economic activity. Therefore, for energy-intensive users, the aid intensities are higher and Member States may grant aid exceeding these ceilings, up to €25 million, and for companies active in particularly affected sectors and sub-sectors up to €50 million;
• 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; and
• 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.

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, and (iv) support the provision of insurance or reinsurance to companies transporting goods to and from Ukraine.

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 defining energy intensive users as businesses for which the purchase of energy products amount to at least 3% of their production value; 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.

The Temporary Crisis Framework will be in place until 31 December 2022 for the liquidity support measures and measures covering increased energy costs. Aid supporting the roll-out of renewables and the decarbonisation of the industry may be granted until end June 2023.

The Commission is continuously monitoring the application of the State aid Temporary Crisis Framework to take account of the evolving situation. This is why the Commission recently sent to Member States for consultation a draft proposal to prolong and adjust the State aid Temporary Crisis Framework, including in the light of  the Commission's proposal on an emergency market intervention 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. Member States now have the possibility to comment on the Commission's draft proposal.

The Temporary Crisis Framework 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 2022 and 31 December 2023 respectively. 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.

The non-confidential version of today's decision will be made available under the case number SA.104585 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.