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    State aid: Commission approves €2 billion Italian guarantee scheme for the reinsurance of natural gas and electricity trade credit risk in context of Russia's war against Ukraine


    October 5, 2022 - Contify Energy News

     

      The European Commission has approved, under EU State aid rules, a €2 billion Italian scheme for the reinsurance of natural gas and electricity trade credit risk in the context of Russia's war against Ukraine. The scheme will be administered by SACE, the Italian Export Credit Agency. In light of the economic impact of the current crisis, the Italian scheme, with an estimated budget of €2 billion, aims at limiting the risks insurers are currently facing by offering trade credit insurance to customers.

      Key Highlights:

      * The European Commission has approved, under EU State aid rules, a €2 billion Italian scheme for the reinsurance of natural gas and electricity trade credit risk in the context of Russia's war against Ukraine.

      * This €2 billion Italian scheme will contribute to ensuring that trade credit insurance remains available to companies for securing their commercial exchanges.

      * In particular, the trade credit insurers have committed to maintain the same level of protection offered on 22 March 2022 and to lower the premiums that customers have to pay for transactions covered by the measure, compared to a situation without the latter; the guarantee is limited to trade credit originated until the end of this year; the scheme is open to all credit insurers in Italy; and the guarantee mechanism ensures risk sharing between the insurers and the State, up to a volume of €2 billion.

      * 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.

      * 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.

      Original Press Release:

      Brussels, Sept. 30 -- European Commission issued the following news release:

      The European Commission has approved, under EU State aid rules, a €2 billion Italian scheme for the reinsurance of natural gas and electricity trade credit risk in the context of Russia's war against Ukraine.

      Executive Vice-President Margrethe Vestager, in charge of competition policy, said: “This €2 billion Italian scheme will contribute to ensuring that trade credit insurance remains available to companies for securing their commercial exchanges. This will help them address their liquidity needs and continue their activities in the context of the current geopolitical crisis and the consequent increase of the costs of electricity and natural gas. 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 Italian support measure

      Italy notified to the Commission a State guarantee scheme for the reinsurance of natural gas and electricity trade credit risks to support companies affected by the current geopolitical crisis and the consequent increase of the costs of electricity and natural gas. The scheme will be administered by SACE, the Italian Export Credit Agency. In particular, SACE will sign reinsurance agreements with insurers covering the natural gas and electricity trade credit risks, while SACE will receive a counter-guarantee from the Italian State to cover its risks.

      In light of the economic impact of the current crisis, the Italian scheme, with an estimated budget of €2 billion, aims at limiting the risks insurers are currently facing by offering trade credit insurance to customers. This measure will also make it easier for these customers to obtain a postponement of payment of their energy bills by up to 24 months, based on an agreement with their energy supplier. At the same time, it will ensure that trade credit insurance continues to be available to companies, avoiding the need for them to pay their energy bills in advance or within a few weeks, thus reducing their immediate liquidity needs.

      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 Italy, is compatible with the principles set out in the EU Treaty and is well targeted to remedy a serious disturbance to the Italian economy. In particular, (i) the trade credit insurers have committed to maintain the same level of protection offered on 22 March 2022 and to lower the premiums that customers have to pay for transactions covered by the measure, compared to a situation without the latter; (ii) the guarantee is limited to trade credit originated until the end of this year; (iii) the scheme is open to all credit insurers in Italy; and (iv) the guarantee mechanism ensures risk sharing between the insurers and the State, up to a volume of €2 billion.

      The Commission concluded that the scheme will contribute to managing the economic impact of the current crisis in Italy. 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 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 Temporary Crisis Framework also indicates how the following types of aid may be approved 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, on 14 September 2022, following the announcements made by the President, the Commission addressed a survey to Member States to seek their views on the prolongation of and possible further amendments to the Temporary Crisis Framework, including in the light of the Commission's proposal on an emergency market intervention, to ensure it remains aligned with the energy policy objectives and mitigates the continued economic impact of Russia's aggression against Ukraine by enabling Member States to provide necessary support to companies and sectors most affected, while preserving the level playing field.

      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.

      For More Information

      The non-confidential version of the decision will be made available under the case number SA.103757 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(https://competition-policy.ec.europa.eu/state-aid/ukraine_en).

      Source: European Commission

      [Category: New Offerings]

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