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Commission approves €125 million Estonian scheme to support companies in context of Russia’s invasion of Ukraine

The European Commission approved a EUR125million Estonian scheme to help companies in need of liquidity support. This was done in the wake of Russia’s invasion Ukraine. This scheme was approved by the Temporary State Aid Framework. It was adopted by the Commission on March 23rd 2022. The amendments were made on July 2022. They are based on Article 107(3) (b) of the Treaty on the Functioning of the European Union.

Margrethe Vestager (executive vice-president), who is responsible for competition policy, stated that “This EUR125million scheme will enable Estonian companies to support sectors affected by the current Geopolitical Crisis.” We stand by Ukraine and its people. We continue to work closely with the member states in order to ensure that support measures are put in place quickly, efficiently, and effectively, while protecting the Single Market’s level playing field.”


Estonian measure

Estonia has notified the Commission that it is implementing the Temporary Crisis Framework and providing support for companies in all sectors affected by Russia’s invasion, with EUR125m. The scheme will be co-financed through the European Regional Development Fund. It will provide guarantees for loans with different levels subsidised premiums.

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The scheme was created in light of the economic uncertainty caused by current geopolitical conditions. It is designed to ensure that enough liquidity is available for companies in dire need. The scheme will allow eligible beneficiaries to be granted new loans, which will be covered by a guarantee from the State not exceeding 80% of their loan amount. This will help them to meet their working capital and investment needs. Maximum loan amount for eligible beneficiaries is either 15% of beneficiary’s annual average turnover or 50% of company’s energy expenses over a 12-month period.

Eligible beneficiaries will also receive lower guarantee premiums if they are affected by the crisis in Russia, Belarus, and Ukraine. The guarantee premiums for companies that are not in the above categories but were affected by the crisis will be higher. They will be determined individually.

This scheme is open to all companies, but there are some exceptions.


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The Commission determined that Estonia’s guarantee scheme was in compliance with the Temporary Crisis Framework. The conditions include: (i) the loan and guarantee maturity will not exceed six year; (ii); the guarantee premiums will adhere to the Temporary Crisis Framework’s minimum levels; and (iii); the aid will not be granted after 31 December 2022.

The public support will be subject to certain conditions in order to limit undued distortions of competition. These safeguards include safeguards to ensure that (i) there is a direct link between the amount of assistance granted to companies and their economic activity and (ii), the benefits of the measure are passed to the maximum extent possible through financial intermediaries.

The Commission concluded that Estonia’s guarantee scheme was necessary, appropriate, and proportionate to address a serious disruption in an economy of a member state, in accordance with Article 107(3)(b), TFEU, and the conditions in the Temporary Crisis Framework.

The Commission approved the EU State Aid Rules aid measure on this basis.


Background

The state aid Temporary Crisis Framework was adopted 23/03/2022. It allows Member States to utilize the flexibility provided by state aid rules to support their economy in the event of Russia’s invasion.

To complement the Winter Preparedness Package, the Temporary Crisis Framework was amended on 20 Jul 2022. This is in accordance with the REPowerEU Plan goals.

The Temporary Crisis Framework allows for the following types and can be granted by member countries:

  • Limitated amounts of assistance for companies that have been affected by the current crisis and subsequent sanctions and countersanctions, up to an increased amount of 62,000EUR or 75,000EUR in agriculture, fisheries, and aquaculture sectors, respectively, and upto 500,000EUR for all other sectors.
  • Liquidity Support in the form of State Guarantees and Subsidised Loans
  • Assistance to offset high energy prices. This aid can be given in any form and will partially compensate intensive energy users for increased costs due to extraordinarygas price increases. To encourage energy savings, the total aid for each beneficiary must not exceed 30% of eligible costs. It should also not relate to more than 70% of the beneficiary’s gas or electricity consumption in the preceding year. The maximum amount of aid allowed per beneficiary is EUR2 million. Additional aid may be required if the company suffers operating losses. For energy-intensive users, aid intensities may be higher. Member States can grant aid up to EUR25m, while for companies that are active in particular affectedsectors or sub-sectors, aid up to EUR50m.
  • Initiatives to accelerate the deployment of renewable energy. Schemes for investments in renewable energy can be set up by Member States. These schemes can include renewable hydrogen and biogas, as well as storage and heat pumps. They can also use simplified tender procedures that are easy to implement and provide sufficient protections to ensure equal playing fields. A scheme can be developed by a Member State for a particular technology that requires support according to the national energy mix.
  • Initiatives to decarbonize industrial processes. Member States have the ability to support investments in the phase-out of fossil fuels to accelerate diversification of energy sources. This includes energy efficiency, electrification and switching to renewable and electricity-based hydrogen that meets certain conditions. The options for Member States are to either: (i) create new tender-based schemes or (ii), directly support projects without the need for tenders. There are limits on how much public support each investment can receive. For small and medium-sized businesses, as well as those with particularly efficient solutions, specific top-up bonuses are planned.

The Temporary Crisis Framework also outlines how aid can be approved depending on the case: (i.e. support for companies that have been affected by mandatory or voluntary gas curtailment; (ii. support for filling gas storages; (iii. temporary and limited support for fuel switching from more polluting fossil fuels. These support must be energy efficiency efforts and to avoid lock-in effects. (v) Support the provision of insurance and reinsurance for companies that transport goods to and fro Ukraine.

These measures will not apply to Russian-controlled entities.

There are many safeguards in the Temporary Crisis Framework:

  • Proportional method that requires a connection between the amount of assistance that can be granted businesses and their economic activity and exposure the economic effects of crisis.
  • Eligibility Conditions, such as defining energy-intensive users as businesses whose purchase of energy products amounts to at least 3 percent of their production value.
  • Sustainability requirements. member countries are asked to consider non-discriminatory ways to set up environmental protection and security of supply requirements when granting assistance for extra costs due to extremely high gas or electricity prices.

Temporary crisis framework will be in effect until 31 December 2022 to provide liquidity support and cover increased energy costs. Assistance may be granted to support the rollout of renewables or the decarbonization of the industry until the end of June 2023. The Commission will determine if an extension is necessary to ensure legal certainty.

The Temporary Crisis Framework adds to the many options available for member states in order to develop measures that are consistent with EU State Aid rules. EU state aid rules allow member states to assist companies in times of liquidity crisis and urgent rescue assistance. A provision in Article 107(2)(b), of the Treaty on the Functioning of the European Union allows Member States to compensate companies for damage caused directly by an extraordinary occurrence such as the current crisis.

The Commission also adopted a Temporary Framework on 19, March 2020 in response to the coronavirus epidemic. The COVID Temporary Framework has been amended on the following dates: 3 April, 8 May and 29 June, 13 Oct 2020, 28 January, 18 November 2021, and 28 January. May 20,22 announced that the COVID Temporary Frame was not extended past the expiry date of 30 Juni 2022 . However, there are some exceptions. Particularly, solvency and investment support measures could still be in place up to 31 December 2022 and 31 Dec 2023, respectively. The COVID Temporary framework already allows for a flexible transition with clear safeguards. This includes the conversion and restructuring of debt instruments such as loans and guarantees into other forms aid such as grants.

This decision comes after the Commission approved two Estonian schemes to support specific sectors in the context Russia’s invasion Ukraine. (i) A EUR3.9m scheme to help beef, poultry, and horticulture, approved by the Commission on 20 June 2022. (ii) A EUR15m guarantee scheme for primary producers of agricultural products and fish and aquaculture operators, as well as their representatives, approved by the Commission on 14 July 2022.

Once confidentiality issues have been resolved, the non-confidential decision will be made public under case number SA.103788 on the State Aid Registeron Commission’s Competitionwebsite. The Competition Weekly eNews lists new publications of state aid decisions in the Official Journal and on the internet.

has more information about the Temporary Crisis Framework and other actions taken to address the economic consequences of Russia’s invasion in Ukraine.

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