WIREDGOV

The European Commission has approved a €5 billion Finnish subsidised loan umbrella scheme to support municipal electricity producers and 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, recently said:

“In the difficult context of Russia's unjustified war against Ukraine, this €5 billion umbrella scheme will enable Finland to provide liquidity support to municipal electricity producers and suppliers, ensuring the continuation of their activities and the security of supply. 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 Finnish liquidity support measure

Finland notified to the Commission, under the Temporary Crisis Framework, a €5 billion subsidised loan umbrella scheme to provide liquidity support to municipal electricity producers and suppliers in the context of Russia's war against Ukraine.

The measure will be open to municipal electricity companies that: (i) produce or supply electricity; (ii) engage in hedging operations; and (iii) are affected by the current crisis.

Finnish municipal energy producing and supplying companies hedge most of their production on the electricity derivatives exchange against future price drops. The adverse price movements caused by the current geopolitical crisis require these companies to provide significant amounts of additional cash collateral. The measure aims at providing municipal electricity producers and suppliers a last-resort financing option, to ensure that sufficient liquidity remains available to them for the continuation of their activities.

Under the scheme, the aid will take the form of subsidised loans to be granted by either the Municipality Finance Plc or the Finnish municipalities. The eligible loans, with a maximum maturity of three years, must relate to working capital needs.

In order to be eligible, electricity producers and suppliers need to demonstrate, through self-certification, that: (i) high collateral requirements on the electricity derivatives markets have created liquidity needs; and (ii) public support is necessary to ensure the security of supply. Under this measure, aid to cover collateral requirements for proprietary trading is excluded.

The maximum loan amount per beneficiary cannot exceed either (i) 15% of the beneficiary's average total annual turnover over the last three closed accounting periods; or (ii) the liquidity needs derived from the additional collateral requirements for the coming 12 months.

The Commission found that the Finnish scheme is in line with the conditions set out in the Temporary Crisis Framework. In particular: (i) the maturity of the loans does not exceed six years; (ii) the annual reduced interest rates respect the minimum levels set out in the Temporary Crisis Framework; (iii) loans granted under the measure relate only to working capital needs; (iv) the maximum loan amount per beneficiary respects the conditions set out in the Temporary Crisis Framework; and (v) the loan contracts will be signed by 31 December 2022 at the latest.

The Commission therefore concluded that the Finnish subsidised loan umbrella 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.

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