State aid: Commission approves €5 billion German scheme to support energy and trade intensive companies in context of Russia's invasion of Ukraine

The European Commission has approved a €5 billion German scheme to support energy and trade intensive companies across industrial sectors in the context of Russia's invasion of Ukraine.

The scheme was approved under the State aid Temporary Crisis Framework, adopted by the Commission on 23 March 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: “Energy and trade intensive companies have been hit particularly hard by the current geopolitical crisis and the consequent increase of energy prices. This €5 billion scheme will enable Germany to mitigate the impact of the rising input costs on these companies and support the continuation of their activities in this difficult context. 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 German measure

Germany notified to the Commission under the Temporary Crisis Framework a €5 billion scheme to support energy and trade intensive companies across industrial sectors in the context of Russia's invasion of Ukraine.

Under this measure, which will be administered by the Federal Office for Economic Affairs and Export Control  (“Bundesamt für Wirtschaft und Ausfuhrkontrolle”), the aid will take the form of direct grants for additional costs due to severe increases in natural gas and electricity prices.

The measure will be open to energy and trade intensive companies across industrial sectors that are at risk of carbon leakage and that are listed in Annex I of the Guidelines on State aid for climate, environmental protection and energy.

The eligible period in respect of which applications for aid may be submitted runs from February to September 2022. The aid will be granted in the form of advance payments. The final amount will be then verified and corrected by 30 June 2023.

The Commission found that the German scheme is in line with the conditions set out in the Temporary Crisis Framework. In particular, the overall aid per beneficiary cannot exceed 30% of the eligible costs, up to a maximum of €2 million. Energy-intensive users that incur operating losses may receive further aid up to €25 million and, if they are active in particularly affected sectors and sub-sectors, up to €50 million.

Furthermore, the overall aid for energy intensive users that incur operating losses cannot exceed 50% of the eligible costs and 70% for those active in particularly affected sectors or sub-sectors. The overall aid can cover a maximum of 80% of the losses incurred. Finally, the public support will be granted no later than 31 December 2022.

The Commission found that the German 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

On 23 March 2022, the Commission adopted the State aid Temporary Crisis Framework to enable Member States to use the flexibility foreseen under State aid rules to support the economy in the context of Russia's invasion of Ukraine.

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, of up to €35,000 for companies affected by the crisis active in the agriculture, fisheries and aquaculture sectors and of up to €400,000 per company affected by the crisis active in all other sectors;
• Liquidity support in form of State guarantees and subsidised loans; and
• 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, 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.

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. With a view to ensuring legal certainty, the Commission will assess before that date if it needs to be extended. Moreover, during its period of application, the Commission will keep the content and scope of the Framework under review in the light of developments regarding the energy markets, other input markets and the general economic situation.

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, as already provided for under the existing rules. 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 the decision will be made available under the case number SA.103348 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 invasion of Ukraine can be found here.