EUROPEAN COMMISSIONec.europa.eu/competition/state_aid/cases/244509/... · profile of the...

CRISTIAN DIACONESCU Ministrul Afacerilor Externe Aleea Alexandru 31 Sector 1 RO-011822-BUCUREŞTI Commission européenne, B-1049 Bruxelles/Europese Commissie, B-1049 Brussel – Belgium Telephone: 00- 32 (0) 2 299.11.11.

EUROPEAN COMMISSION

Brussels, 25.04.2012 C(2012) 2542 final

In the published version of this decision, some information has been omitted, pursuant to articles 24 and 25 of Council Regulation (EC) No 659/1999 of 22 March 1999 laying down detailed rules for the application of Article 93 of the EC Treaty, concerning non-disclosure of information covered by professional secrecy. The omissions are shown thus […].

PUBLIC VERSION

WORKING LANGUAGE

This document is made available for information purposes only.

Subject: State aid No. SA 33451 (2012/C)– Romania

Alleged preferential tariffs in contracts between Hidroelectrica S.A. and electricity traders

Sir/Madam, The Commission wishes to inform Romania that, having examined the information supplied by your authorities on the measures referred to above, it has decided to initiate the formal investigation procedure laid down in Article 108(2) of the Treaty on the Functioning of the European Union.

1. PROCEDURE

1. On 2 August 2011 the Commission received a complaint by Fondul Proprietatea, an investment fund with a minority equity stake of 20% in S.C. Hidroelectrica S.A. (hereinafter "Hidroelectrica") and registered it on the same day.

2. The Commission requested information on the measures that are the subject of this Decision by letter of 22 September 2011. Romania replied by letters of 16 November 2011 and 18 November 2011. The Commission also held a meeting with the

* Business secrets

complainant on 16 November 2011 and received comments from three of the potential aid beneficiaries, Alpiq RomIndustries S.R.L. and Alpiq RomEnergie S.R.L (hereinafter "Alpiq"), by letter of 17 January 2012, registered on the same day, and Energy Holding S.R.L. (hereinafter "Energy Holding"), by letter of 27 February 2012, registered on the same day. Meetings with Energy Holding and Alpiq were respectively held on 21 and 22 March 2012.

2. DESCRIPTION OF THE CONTRACTING PARTIES AND OF THE ALLEGED AID MEASURES

3. The complainant alleges that the contracts between Hidroelectrica and the eight electricity traders listed below were concluded at prices lower than the average market price, as expressed by the average price on the Romanian open exchange market for bilateral transactions, which was calculated as being RON 166.4 RON per MWh.1 Given that Hidroelectrica is controlled by the Romania State, the complainant alleges that these contracts de facto translated into the provision of State aid to the eight electricity traders.

4. This Section describes the factual circumstances surrounding the bilateral contracts between Hidroelectrica S.A. and eight electricity traders. It also describes, by way of background, the functioning of the Romanian electricity wholesale market and the profile of the contracting parties.

2.1. The contracting parties

5. Hidroelectrica2 is Romania's largest electricity producer, with an average output of 17.46 TWh in an average hydrological year – which, according to the company's own estimates, represents approximately 30% of Romania's overall annual electricity production – and an overall power generation capacity of 6,438 MWh installed. It also is the second cheapest electricity producer in Romania (after nuclear power producer Nuclearelectrica, which has a more reduced output). Since 2005, Hidroelectrica was rated every year among the first five most valuable Romanian companies.

6. The company is headquartered in Bucharest, and has 12 territorial subsidiaries. At present, the Romanian state (through the Ministry of Economy, Trade and Business Environment) owns an 80.06% stake in Hidroelectrica, the remaining 19.94% being held by the investment fund Fondul Proprietatea (in which the Romanian state retains a participation of 38%).

7. Fondul Proprietatea focused its complaint on eight traders of electricity in Romania. They are S.C. Alpiq RomEnergie S.R.L. (hereinafter "Alpiq RomEnergie") and S.C. Alpiq RomIndustries S.R.L. (hereinafter "Alpiq RomIndustries"), both owned by

1 More specifically, the average price was calculated by the complainant as a weighted average of all

transactions which took place on the open exchange market for bilateral contracts in 2010, excluding the transaction between Hidroelectrica and ArcelorMittal Galaţi.

2 Further information about this company is available on www.hidroelectrica.ro.

http://www.hidroelectrica.ro/

http://www.hidroelectrica.ro/

* Business secrets

private Swiss operator Alpiq, which was created from the merger of Aare-Tessin Ltd. for Electricity and EnergieOuest Suisse in 2008 and mainly active in South-East Europe; S.C. Energy Financing Team Romania S.R.L. (hereinafter "EFT"), a subsidiary of Cyprus-based EFT Group, which bought approximately 25% of energy in, and supplied 11% to, Romania in 2008 and is mainly active in the Balkan region; S.C. Electrica S.A. (hereinafter "Electrica"), a provider of electricity services to both eligible retail clients and its own subsidiary companies, active in Romania; S.C. Electromagnetica S.A. (hereinafter "Electromagnetica"), a provider of lighting products and services and electricity trader based in Romania; S.C. Energy Holding S.A. (hereinafter "Energy Holding"), a privately owned energy supplier which occupies a significant position in the Romania market and is also active internationally, in particular in South-East Europe; S.C. EURO-PEC S.A. (hereinafter "EURO-PEC"), a trader in iron and steel products for civil, industrial and naval constructions and an electricity trader active in South-East Europe; and S.C. Luxten Lighting Group S.A. (hereinafter "Luxten"), a producer of lighting products and electricity trader. In the remainder of this Decision these companies will collectively be referred to as "the electricity traders."

2.2. The contracts between Hidroelectrica and the electricity traders

8. The Romanian authorities provided information on the contracts between Hidroelectrica and the eight electricity traders listed above, in particular on the main contractual frameworks and their successive modifications. The contracts were not all signed in the same period: in particular, six of them date from 2004, of which five were signed for a ten-year period and one appears to be a modification of a contract originally signed in 2004; one was signed on 2008 but appears to be a modification of a previous contract; and one was signed in 2010.

9. All of the contracts allow the parties to modify the key parameters of the contract each year, and in particular price and quantities. In the following paragraphs, each modification to contracts between Hidroelectrica and each electricity trader will be briefly described.

Contract between Hidroelectrica and Alpiq RomEnergie

10. In this contract, which was signed in 2008, S.C. EHOL Distribution S.R.L. acquires part of the capacity previously contracted by Energy Holding and enters into direct contractual relationship with Hidroelectrica. EHOL was acquired by the Alpiq group in 2009 and renamed into Alpiq RomEnergie.

11. Table 1 below provides the main features of each contractual modification.

Table 1 – Contract between Hidroelectrica and Alpiq RomEnergie

Contractual modifications Signed on Main elements

* Business secrets

2008 contract […]

Additional Act 1 […] • […]



Additional Act 3' […] • […]



Source: Romanian authorities

Contract between Hidroelectrica and Alpiq RomIndustries

12. The original contract was signed between Hidroelectrica and S.C. Buzmann Industries S.R.L., which was subsequently bought by the Swiss company Aare-tessin Ltd. in 2007. Aare-Tessin Ltd. for Electricity Alpiq then merged with EnergieOuestSuisse, thereby creating the Alpiq group, and Buzmann Industries Ltd. subsequently changes its name to Alpiq RomIndustries in 2010.

13. Table 2 below provides the main features of each contractual modification.

Table 2 – Contract between Hidroelectrica and Alpiq RomIndustrie


2004 contract […] • […]











* Business secrets

Contract between Hidroelectrica and EFT

14. The original contract was signed in 2004. Table 3 below provides the main features of each contractual modification.

Table 3 – Contract between Hidroelectrica and EFT


2004 contract […] • […]

Convention No. 18511 […] • […]







Contract between Hidroelectrica and Electrica

15. Hidroelectrica signed two contracts with Electrica, both in 2010. Table 4 below provides the main features of each contract and the contractual modification of the first contract.

Table 4 – Contract between Hidroelectrica and Electrica


2010 contract no. 111 […] • […]


2010 contract no. 112 […] • […]


Contract between Hidroelectrica and Electromagnetica

* Business secrets

16. The contract was signed in 2004. Table 5 below provides the main features of each contractual modification.

Table 5 – Contract between Hidroelectrica and Electromagnetica


2004 contract […] • […]
















Contract between Hidroelectrica and Energy Holding

17. The contract was signed in 2004. Hidroelectrica initially committed to take over Energy Holding's obligation to supply electricity to S.C. ALRO S.A. Table 6 below provides the main features of each contractual modification.

Table 6 – Contract between Hidroelectrica and Energy Holding


* Business secrets

2004 contract […] • […]





Additional Act 4 bis […] • […]

















Contract between Hidroelectrica and EURO-PEC


Table 7 – Contract between Hidroelectrica and EURO-PEC

* Business secrets


2004 contract […] • […]














Contract between Hidroelectrica and Luxten Lighting


Table 8 – Contract between Hidroelectrica and Luxten Lighting


2004 contract […] • […]








* Business secrets






2.3. The Romanian wholesale electricity market

20. As of September 2000, the Romanian wholesale electricity market is administered by OPCOM S.A.3 on the basis of Romanian secondary legislation adopted by the Romanian energy regulator ANRE4 in application of European Directive 96/92/EC. OPCOM is a public company established on 15 August 2000 on the basis of Government Decision 526/2000.

21. According to OPCOM's own description of its scope of activity, it administrates three main types of electricity transactions:

- "day ahead" transactions;

- intra-day transactions (auctioned at intervals of one hour);5 and

- auctioned bilateral contracts - which in turn may be of two types: public auction mechanisms (PCCB) and continuum negotiation mechanisms (PCCB-CN).

Ministerial Order No. 445/2009

22. In Romania, industrial consumers have the possibility of purchasing electricity on the OPCOM market or through directly-negotiated contracts. Since most electricity producers are state-owned, Romania seeks to increase the volume of electricity auctioned on OPCOM, which is a more transparent and competition-enhancing trading modality than directly-negotiated bilateral contracts.

23. To this end, in March 2009 the Romanian Ministry of Economy, Trade and Business Environment issued the Ministerial Order No. 445/2009, which mandates its own representatives on the administration boards and general assembly of the shareholders of the state-owned electricity companies to ensure that the part of the electricity production destined to the wholesale market should be traded exclusively on OPCOM.

3 Further information on the organization and functioning of OPCOM is available on www.opcom.ro. 4 Further information regarding the Romanian electricity regulator ANRE is available on www.anre.ro. 5 According to information available on the OPCOM website www.opcom.ro, at this stage it is unclear if

this type of transactions are indeed different in substance from the day-ahead transactions in the form in which they are currently carried out.

http://www.opcom.ro/

http://www.anre.ro/

http://www.opcom.ro/

* Business secrets

24. Article 1(1) of Ministerial Order 445/2009 stipulates that the general assembly and administration boards of the state-owned electricity companies should take decisions in this sense by the 31 March 2009. According to Article 1(2) of the same order, ongoing bilateral contracts are exempted from this rule. Article 2(1) of the same Order further stipulates that offers to be made on OPCOM in the PCCB modality must be approved by the administration boards of the state-owned electricity companies. Articles 4(2) of the Order establishes sanctions applicable to the representatives of the Ministry of Economy who fail to fulfil the obligations stemming from this Order.

25. Following the issuing of Ministerial Order No. 445/2009, Hidroelectrica S.A. concluded only two transactions on OPCOM, based on PCCB "buy" offers with maximum prices. Hidroelectrica never placed a PCCB "sell" offer with minimum price on OPCOM. At present, a large part of its electricity production destined to the wholesale market is sold on the basis of directly-negotiated long-term bilateral contracts.

3. COMMENTS FROM ROMANIA

26. Romania considers that the contracts concluded by Hidroelectrica with the electricity traders which are the object of this Decision do not necessarily involve State aid within the meaning of Art. 107(1) TFEU. Its argumentation relies on three main arguments: first, that Hidroelectrica operated according to market principles in its decision to conclude the contracts; second, that the OPCOM-PCCB price of 166.4 RON per MWh, which the complainant takes as a reference for the comparison with the price negotiated in the contracts with electricity traders, is not the correct reference for the market price; and third, that the role of the Romanian authorities in the management of Hidroelectrica is constrained and that Hidroelectrica's decisions cannot be imputed to the Romanian State.

Hidroelectrica acting according to market principles

27. Romania maintains that Hidroelectrica does not operate by following a pre-determined price list, because it is active on both the regulated and the competitive markets. In the regulated market prices are set by the National Energy Regulatory Authority (hereinafter "ANRE") and Hidroelectrica needs to implement them. On the competitive market Hidroelectrica negotiates contracts bilaterally with both buyers and sellers, and generally renegotiates the contracts once a year, adapting them to changing market and own performance conditions.

28. Romania explained that in its relationship with electricity traders Hidroelectrica acts a licensed supplier, and not a producer. This implies that it draws a portfolio of volumes to be sold, using own resources and resources gathered on the market to meet the negotiated demand according to its commercial policy.

29. Romanian authorities also point out that it is necessary to examine the actual circumstances under which Hidroelectrica negotiated and concluded the contracts. In

* Business secrets

particular, they mention that a large part of the contracts was concluded when the Romania electricity market was not yet open to competition, and ANRE was encouraging a system of long-term commercial arrangements to allow for the development of the managerial skills needed in a thriving electricity market. Romania states that the commercial contracts concluded bilaterally by Hidroelectrica were all sealed at a price which was higher than the regulated price at the time of signing them.

30. Romanian authorities also explained that Hidroelectrica's behaviour was in line with Romania's official roadmap in the field of energy, which was part of the legal framework set up in the accession to the EU.6 The roadmap allowed for the co-existence of a regulated market and a competitive market. It is in the latter that bilateral contracts could be negotiated, together with contracts concluded on the Day Ahead Market.

31. According to Romania, Hidroelectrica's 2010 contracts were negotiated taking into account several aspects, in particular the contract price for the previous year, the regulated price for 2010, the average delivery price on the regulated market for captive consumers for 2010, the average delivery cost for one MWh, including own production and external purchases, and the minimum delivery price of electricity on the competitive market.

32. The Romanian authorities stated that Hidroelectrica does not use the OPCOM-PCCB market for three reasons. First, the centralised market prevents changes to the contracts after their conclusion, including the use of indexed price which could take account of changes in general price levels, costs or any other event which may influence company operations. Hence establishing contracts for a duration longer than a year involves taking on a substantial risk on the part of the company, while using longer-term contracts which can be freely negotiated but also adjusted periodically provides Hidroelectrica with a higher degree of flexibility. Second, concluding one-year contracts would, on the other hand, have repercussions on Hidroelectrica's ability to access specialised credit instruments, since many of them require collateral, such as supply contracts according to the Romanian authorities. Third, longer-term contracts provide Hidroelectrica with the ability to more easily forecast future performance, for example for budgetary needs.

No comparable benchmark

33. Romania considers that the average OPCOM-PCCB price provided by the complainant does not represent the correct benchmark for assessing whether the price in the contracts between Hidroelectrica and the electricity traders was unduly low.

34. First, the Romanian authorities suggest that there is really no market price on the Romanian electricity market. Prices can merely be used as a reference when negotiating. Also, the prices used by the complainant to calculate the average OPCOM price are taken from the 'continuous negotiation' section of the OPCOM-PCCB, where

6 Decision No. 890 of 29 July 2003 of the Government of Romania, Official Gazette No. 581 of 14

August 2003.

* Business secrets

a relatively limited number of transactions take place, hence they cannot be considered to be representative of the market.

35. Second, Romania states that each transaction is in a category of its own, hence it is not correct to compare them. The weighted average of the 21 transactions taking place on the OPCOM-PCCB exchange was RON 149.96 per MWh when including the transmission component, and RON 140.00 per MWh when excluding it, according to the Romanian authorities. The total volume traded in 2010 was 3,874,480 MWh, which includes a relatively large transaction between Hidroelectrica and ArcelorMittal Galaţi, which accounted for 1,752,000 MWh.

No State imputability

36. Romania argues that the contracts between Hidroelectrica and the electricity traders are not imputable to the State. According to the Romanian authorities, the Ministry of Economy, Commerce and Business Environment, who is the holder of a 80.06% stake in the company, has no involvement in Hidroelectrica's decision-making. The role of the Romanian State is limited to attending shareholders meetings, as a shareholder, according to Art. 13 of Hidroelectrica's Articles of Association.

4. COMMENTS FROM THIRD PARTIES

37. The Commission received two unsolicited submissions from representative of three of the electricity traders, Alpiq RomIndustries, Alpiq RomEnergie and Energy Holding.

38. Alpiq RomIndustries and Alpiq RomEnergie comment on the unusual nature of the case, given that the complainant is a shareholder of the company which it alleges was used as a vehicle to provide State aid, and that in principle EU law should not be used to protect the financial interest of minority shareholders. They also submit that their contracts with Hidroelectrica were the result of management decisions taken in light of commercial considerations, and that in any event such contracts do not confer an unfair advantage to the two companies, the relevant test being whether Hidroelectrica acted like a private market vendor in concluding them.7 The two traders also state that if the contracts were indeed to involve State aid, the aid would largely qualify as existing aid and not be subject to the standstill obligation under Art. 108(3) TFEU.

39. Energy Holding submits that its contract with Hidroelectrica does not constitute State aid for two main reasons. First, the Romanian authorities were never involved in, nor exercised influence over, Hidroelectrica's decisions on those contracts. Second, Hidroelectrica acted at all times in its own commercial interest as a private investor. In particular, it both expected to be profitable when entering into the contractual relationship and ensured a higher return and a lower risk compared to the next-best alternatives.

7 See Case C 482/99, Stardust Marine, 16 May 2002.

* Business secrets

40. Energy Holding submitted a report prepared by consultancy firm […] to assess whether the OPCOM-PCCB average price used by the complainant is a reasonable benchmark for assessing the existence of State aid, and to carry out what it describes as being the necessary complex valuation of both the contract and the conditions surrounding it, which would be needed to correctly apply the market investor principle.

41. Energy Holding also suggests that there are no relevant precedents under which to assess the existence of State aid, given that in the previous cases where the Commission analysed long-term electricity contracts there existed a clearly identifiable State aid element which was enshrined in the contract.

42. In relation to the application of the market investor principle, Energy Holding carries out a two-stage analysis. First, it seeks to demonstrate that Hidroelectrica could expect the contract to show a normal return in a reasonable period of time at the time when it was signed. Second, it assesses the features of the contractual arrangement on their own, with a view to establishing whether they could be deemed to be sensible from a business point of view.

43. Under the first leg of the analysis, […] calculated the net present value (hereinafter "NPV") of the contract according to two different methodologies, marginal profitability analysis, and fully allocate cost profitability analysis. For both methodologies, the analysis takes account of the costs, price and volumes which were known at the time of signing the contract. Under marginal profitability analysis, only a proportion of Hidroelectrica's marginal generation costs are considered and all other investments are considered sunk. Under fully allocated cost analysis, a proportion of the company's full generation costs are considered, assuming that investments in assets are sunk but that a certain degree of investment is still necessary to keep the company in operational state. The discount rate used in the NPV calculation is Hidroelectrica's cost of capital, in particular its weighted average cost of capital (hereinafter "WACC"), which was calculated to be […] for the period 2003 to 2013 and […] for the period 2010 to 2018.

44. […] estimates that the expected NPVs of the contract between Hidroelectrica and Energy Holding are as those described in Table 9 below.

Table 9 – Estimated NPV of the contracts between Hidroelectrica and Energy Holding (RON millions)

Methodology 2004-2013 2010-2018

Marginal Profitability Analysis […] […]

Fully Allocated Cost Profitability Analysis […] […]

Source: Energy Holding's submission to the Commission

* Business secrets

45. […] also estimated the contract profitability in terms of its internal return of return (hereinafter "IRR"), and in particular the truncated IRR. This methodology takes account of the asset values at different points in time and calculates the rate of return in the specified time interval. […] estimates that the truncated IRR of the contractual agreement between Hidroelectrica and Energy Holding is […].

46. Under the second leg of the analysis, Energy Holding submits that the longer-term nature of the contract with Hidroelectrica was instrumental in ensuring that business risk could be reduced and made it easier for the company to finance its operations. The contract was also providing a price floor for Hidroelectrica's services, which translated into the certainty of cash flow streams. Finally, the pre-payment terms included in the contract meant that Hidroelectrica actually made savings in working capital costs and in relation to potential collection costs.

47. […] estimated that the additional benefits described in the paragraph above were worth the revenue volumes highlighted in Table 10 below.

Table 10 – Estimated additional benefits stemming from the contract between Hidroelectrica and Energy Holding (RON thousands)

Methodology 2004-2013 2010-2018

Reduced business risk […] […]

Downside price protection […] […]

Pre-payment terms […] […]

Source: Energy Holding's submission to the Commission

48. Energy Holding also believes that the cost of renouncing the pursuit of alternative market opportunities was low. This judgment is based on the features of the options available to Hidroelectrica at the time of concluding the contract with Energy Holding. On the regulated market, Hidroelectrica would not have been able to sell the quantities it sold to Energy Holding, and the price would have been lower. The OPCOM-PCCB market, on the other hand, was not yet available when Hidroelectrica signed the contract, and when it became available, starting from December 2005, it would have had to sell lower quantities at a discounted price and facing a higher risk, due to the relative inflexible nature of the contracts on that market. In particular, as noted by the Romanian authorities, offers made on the OPCOM-PCCB market cannot be amended and have to include fixed terms, including delivery terms and firm quantities, which cannot be negotiated at a later stage.

49. Energy Holding submits that the day ahead market, a trading platform to negotiate the sale and purchase of standardised services for the next calendar day, did not represent an adequate alternative to concluding long-term bilateral contracts, since it is mainly

* Business secrets

used to trade spare capacity on a short-term basis, hence it normally presents sellers with a high degree of volatility. Also, exporting the same volumes of electricity was not considered to be feasible based on the limited interconnection capacity of Romania's energy infrastructure.

50. By comparing the estimated overall contract value, based on the NPV calculations and the additional benefits described above, with the estimated value of alternative market opportunities under a range of three potential market mixes, in particular between sales on the regulated market and sales on the OPCOM-PCCB market, Energy Holding concludes that pursuing alternative market opportunities would have resulted in a loss in overall revenues of between RON […] and RON […] in the period 2004 to 2013 and of between […] and RON […] in the period 2010 to 2018.

51. Based on this analysis, Energy Holding concludes that Hidroelectrica behaved according to the market investor principle when concluding its contract with the electricity trader.

5. ASSESSMENT

52. Having examined the information and arguments provided so far by the Romanian authorities and the potential aid beneficiaries, the Commission cannot dispel the substantial doubts it holds on the fact that the contracts with electricity traders may involve State aid within the meaning of Article 107(1) TFEU. As the aid reduces operating expenses, or acquisition costs, that may have had to be borne entirely by the beneficiaries, without being aimed at achieving any specific objective of common interest, the Commission doubts that it could be found to be compatible with the Treaty.

53. The indications regarding the existence of State aid in the eight contracts, and the doubts regarding the compatibility of such potential aid with the internal market, are spelled out in what follows.

5.1. Competence to review contracts concluded before 1 January 2007 and their successive amendments

54. A preliminary issue to be addressed is whether the Commission has the competence to review aid involved in the contracts concluded before 1 January 2007, the date of Romania's accession to the EU. In the argumentation presented so far, Romania did not contest directly the Commission's review competence, however Alpiq RomEnergie and Alpiq RomIndustries argued that if it was found to exist, the aid should be regarded as existing aid.

* Business secrets

55. The question is therefore whether the contracts concluded before 1 January 2007 (including their successive amendments) should be classified as "existing aid" or "new aid", as defined in Article 108 TFEU and the Procedural Regulation.8

56. Annex V to the 2005 Accession Act of Bulgaria and Romania,9 based on Article 22 of the same Accession Act, contains special provisions which derogate from Article 1 of the Procedural Regulation. In particular, Point 2.1. of Annex V stipulates that (except for the transport sector and for activities linked to the production, processing or marketing of products listed in Annex I to the EC Treaty):

"The following aid schemes and individual aid put into effect in a new Member State before the date of accession and still applicable after that date shall be regarded upon accession as existing aid within the meaning of Article 88(1) of the EC Treaty:

(a) aid measures put into effect before 10 December 1994;

(b) aid measures listed in the Appendix to this Annex;

(c) aid measures which prior to the date of accession were assessed by the State aid monitoring authority of the new Member State and found to be compatible with the acquis, and to which the Commission did not raise any objection on the ground of serious doubts as to the compatibility of the measure with the common market, pursuant to the procedure set out in paragraph 2.

All aid measures still applicable after the date of accession which constitute State aid and which do not fulfil the conditions set out above shall be considered as new aid upon accession for the purposes of the application of Article 88(3) of the EC Treaty."

57. The above-mentioned special provisions thus cover aid measures, irrespective of whether qualifying as aid schemes or as individual aid, which were put into effect before the accession date (1 January 2007) and are still applicable after that date. The scope of application of this provision is thereby determined by a two-leg test: to be caught by this provision, measures put into effect prior to accession must, first, qualify as involving state aid, and second, be applicable after accession. The notion of "applicable after the accession date" is therefore crucial in this two-leg test: to be caught by the provisions of Point 2.1 in Annex V second alinea, the measures must qualify as involving state aid, and they should not only have been put into effect (adopted) before accession date, but should also be "applicable after the accession date".

58. In a series of recent decisions concerning aid granted before accession in the new Member States, the Commission interpreted the notion of "applicable after the accession date" to include both schemes and individual aids which are either not limited in time or do not specify the amount of the liability to which the State is

8 Council Regulation (EC) No 659/1999 of 22 March 1999 laying down detailed rules for the application

of Article 93 of the EC Treaty, OJ L 83 of 27.3.1999, p. 1. 9 OJ L 157 of 21.6.2005, p. 268.

* Business secrets

exposed.10 In particular, formulae indicating the factors to be taken into account in future calculations, which either made the amounts dependent on the beneficiary's behaviour or made the Member State liable to bear all the economic risks, were considered as "applicable after accession".11

59. In view of the fact that the contracts – and its amended versions – continue to apply after Romania's accession to the EU, the Commission is of the view that the measure under assessment meets the "applicability after accession" leg of the test for identifying new aid measures.

60. The other leg of the test requires identifying whether the measure adopted prior to accession involved state aid, since Point 2.1. in Annex V second alinea addresses in particular those measures which qualified as State aid prior to accession but did not fulfil the previously-mentioned criteria for being "existing aid".

61. As explained in Section 4.2 below, the Commission considers that the contracts (and their amended versions) concluded by Hidroelectrica with the electricity traders involve State aid within the meaning of Art. 107(1) TFEU. A related question is whether the contracts and their successive amendments can be seen as part of the same agreement between Hidroelectrica and each electricity trader, or whether any successive modification has to be seen as a separate contract, which would qualify as a substantive alteration of the contract leading to the re-assessment of the said contract under the "new aid" perspective.

62. The original contracts with each trader were similar in nature and in form, and allowed the parties to negotiate periodically and review parts of the arrangement. Hence even the most important components of the contracts, i.e. price and volumes, could be and indeed were reviewed periodically. Also, while volumes may have been agreed on for a specific year and a specific trader, the payment was actually linked to the actual volume delivered to the industrial producer, as indeed should be expected in service contracts. Prices and volumes were set separately in what the parties called "annexes" to the original contract.

63. The Commission is of the preliminary view that each contract with the electricity traders, together with its successive amendments, is a single agreement which did not incur in substantive alterations, given that the original contract can be seen as a "framework contract" based on which several further negotiations took place to set and/or fine-tune the different parameters defined in the contract.

64. In the light of the above, the Commission is of the preliminary view that aid disbursed on the basis of the contracts (including their successive amendments) object of this decision, concluded before 1 January 2007 and not fulfilling the criteria of point 2.1 of Annex V second alinea, should be considered "new aid" as of the date of Romania's accession to the EU, i.e. 1 January 2007. The contracts with Alpiq RomEnergie and

10 See e.g. Commission Decision of 24.04.2007 in Case E 12/2005 Unlimited guarantee to Poczta Polska,

OJ C 284 of 27.11.2007, p. 2, and Commission Decision of 18.7.2007 in Case C 27/2004 Agrobanka, OJ L 67 of 11.3.2008, p. 3.

11 See e.g. Commission Decision of 28.01.2004 in Case CZ 14/2003 Česka Spoŕitelna, a.s., OJ C 195 of 31.7.2004, p. 2, and Commission Decision of 3.3.2004 in Case CZ 58/2003 Evrobanka, a.s,. OJ C 115 of 30.4.2004, p. 40.

* Business secrets

Electrica, having been concluded in 2008 and 2010 respectively, must be regarded as involving potential new aid by definition. It is noted that the new aid was implemented in breach of the notification and stand-still obligations resulting from Article 108(3) TFEU.

65. The soundness of this approach seems to be confirmed by the recent General Court judgment on State aid in Hungarian long term power purchase contracts.12 The Court judgment recalled above indicates that the Commission should carry out two separate but interconnected analyses: first, establish the correct reference behaviour of market operators in the specific context under investigation; and second, look at a time period which for Romania would have to start from its accession, regardless of whether the aid was put in place before.

66. However, it cannot be excluded at this stage that, based on further analysis and evidence, the Commission reaches the conclusion that any amendment to the contracts would qualify as 'substantive alterations' of the contracts and therefore constitute "new aid" as of the date of the amendment or as of 1 January 2007 if the amendment was previous to that date (and triggered the notification requirement) under the Procedural Regulation.13

5.2. Existence of aid

67. In order to determine whether a given measure involves state aid within the meaning of Article 107(1) TFEU, it should be determined whether the four cumulative criteria established by this Treaty provision for identifying the existence of state aid, i.e. transfer of state resources, selective advantage, potential distortion of competition and effects on intra-community trade, are met. These criteria are examined in turn in what follows.

5.2.1. State resources

68. One of the criteria for determining whether a given measure involves aid is that state resources should be put at use. The "State resources" criterion goes beyond the disbursement of resources by the public authorities, to also include revenue that is foregone by the State.

12 Commission Decision of 4.6.2008 in case C 41/2005- Hungary, State aid through power purchase

agreements. The General Court judgment was brought in joined cases T-80/06 and T-182/09 on 13 February 2012.

13 See in this sense the Opinion of AG Jääskinen, delivered on 23 September 2010, in Case C-194/09 P Alcoa Trasformazioni Srl, in particular recitals 48-51. The decisive criterion should be the economic effect of the change in question. By referring to this criterion one can distinguish between changes of substance and changes of form, as well as to distinguish between changes which alter the measure as such and changes which are separable form the initial measure because they do not alter its substance, and therefore constitute separate/additional measures (on this latter distinction see e.g. Joined Cases T-195/01 and T-207/01 Government of Gibraltar v. Commission [2002], ECR II-02309.) From this perspective, changes which affect essential elements of the contract, in particular bearing on the price, should in principle be considered as substantive alterations of a contract as long as conferring an additional advantage to the beneficiary.

* Business secrets

69. Based on the information available so far to the Commission, by engaging in the contracts with electricity traders Hidroelectrica sold electricity to its clients at prices lower than those which could have been obtained on the market.

70. It therefore seems that Hidroelectrica lost a part of the profit which could have been obtained on these contracts. If the profit of an undertaking is a resource for its owners, the loss of an additional and realistic profit is a loss of resources for its owners. As Hidroelectrica is owned up to 80.06% by the Romanian state, through the Ministry of Economy, Trade and Business Environment, the measures at stake seem to involve a loss of revenues for the State.

71. Furthermore, according to an established jurisprudence, the resources of public or private undertakings on which the public authorities can exercise, be it directly or indirectly, a controlling influence, also qualify as "State resources" to the extent that these resources "constantly remain under public control, and therefore available to the competent national authorities".14 In line with this jurisprudence, as the State seems to exercise control over Hidroelectrica S.A., the entirety of the potentially foregone revenue by the Romanian State is to be qualified as state resources.

72. The fact that private minority shareholders of publicly-controlled companies such as Hidroelectrica might also incur losses of revenue through disadvantageous acts or contracts is without bearing on the State aid assessment. Contrary to what the Alpiq Group's companies submitted to the Commission, the purpose of this investigation is not to protect a minority shareholder's interest or dividends.

5.2.2. State imputability

73. A separate issue to be explored in the context of the analysis on the State resources criterion is whether the loss of revenues stemming from a disadvantageous contract is also attributable to the State – that is, if the decisions based on which those losses were produced are imputable to the State. As the Court established in Stardust Marine,15 the imputability of a measure to the State can be established either by "organic" or "structural" indicators or by indications that the State has been involved, or was unlikely to be absent, from the decision that lead to the concrete measure. In the same judgment16 the Court established a non-exhaustive set of possible indicators of state imputability, such as:

− the fact that the undertaking through the intermediary of which the aid has been granted had to take into account directives issued by governmental bodies;

− the integration of the public undertaking into the structures of the public administration;

14 See for example case C-278/00 Greece v. Commission [2004] ECR I-3997 para. 50, C-482/99 France v.

Commission [2002] ECR I-4397, and Joined Cases C-328/99 and C-399/00 Italy and SIM 2 Multimedia v. Commission [2003] ECR I-4035, para. 33.

15 Case C-482/99 France v. Commission [2002] ECR I-4397. 16 Idem, at paragraph 55.

* Business secrets

− the nature of the undertaking's activities and the exercise of the latter on the market in normal conditions of competition with private operators;

− the legal status of the undertaking (public law or ordinary company law);

− the intensity of the supervision exercised by the public authorities over the management of the undertaking; and

− any other indicator showing, in the particular case, an involvement by the public authorities in the adoption of a measure or the unlikelihood of their not being involved, having regard also to the compass of the measure, its content, or the conditions which it contains.

74. The Commission considers that there are indications that the contracts with the electricity traders and their amendments are imputable to the State, and that Hidroelectrica did not engage in these contracts only for profit-maximising considerations.

75. The Romanian State holds, through the Ministry of Economy, Trade and the Business Environment a majority stake of 80.06% at Hidroelectrica. In European law, this large participation is in itself an indication that public authorities exert a dominant influence over the company. According to Article 2 of the Transparency Directive,17 a dominant influence by the public authorities shall be presumed when public authorities hold a major part in the company's subscribed capital, control the majority of the votes attaching to shares issued by the company, or can appoint more than half of the members of the undertaking's administrative, managerial or supervisory board. The criteria laid down by Article 2 of the Transparency Directive are not cumulative. In the case of Hidroelectrica it seems however that at least the first two of these non-cumulative criteria for presuming dominant influence by the State are met, and at this stage it cannot be excluded that even the third one is met, although this aspect needs to be further explored in the course of the formal investigation procedure.

76. Indeed, the State, given its large participation in the company (80.06%), has also a comfortable majority of votes in the General Assembly. According to Article 11(1) of the Constitutive Statute of the company, each nominal share entitles to one vote in the General Assembly of the shareholders. Article 13(1) of the same Statute establishes that the State is represented in the General Assembly by representatives of the Ministry of Economy, Commerce and Business Environment, who are appointed and revoked by Ministerial Order.

77. It is unclear from the Statute of the company how the 7 members of Hidroelectrica's Administration Board are appointed (Article 18(1) of the Statute), but it would correspond to standard business practice that they are appointed to represent proportionally the majority shareholder's and the minority shareholder's participations. This reading is also comforted by the fact that Ministerial Order No. 445/2009 speaks about "representatives of the Ministry of Economy, Trade and Business Environment" on the Administration Boards. Decisions of the Administration Board are taken with

17 Commission Directive 2006/111/EC of 16 November 2006 on the transparency of the financial

relations between Member States and public undertakings as well as on financial transparency within certain undertakings, OJ L 318 of 17.11.2006, p. 17-.

* Business secrets

simple majority of the votes of those present (Article 18(10) of the Statute), and are valid if at least 2/3 of the members of the Board are present. If members of the Administration Board represent proportionally the State's participation in the company, the majority necessary for voting decisions should not be difficult to reunite. In addition, the President of the Administration Board has a decisive vote in case of parity of voting. The President of the Administration Board is appointed by the General Assembly of the Shareholders, in which the Ministry of Economy, Trade and Business Environment holds a comfortable majority of votes.

78. Romania argues that the contracts are not imputable to the State because, according to the Constitutive Statute of the company, the conclusion of contracts is the exclusive attribution of the General Director, and the Administration Board has no attributions in this respect. However, the statutory provisions mentioned above seem to be indicators at least that it is unlikely that the Ministry of Economy could have been excluded from taking part in the company’s internal decision-making on engaging Hidroelectrica in the contracts with the electricity traders and their successive amendments.

79. It should also be added that Ministerial Order No. 445/2009 entrusts the representatives of the Ministry of Economy on the Administration Boards of State-controlled Romanian electricity companies, including Hidroelectrica, to ensure that as of 31 March 2010 the part of the electricity destined to the wholesale market should be traded exclusively on OPCOM. If, according to Ministerial Order No. 445/2009, the representatives of the Ministry of Economy on the Administration Board of Hidroelectrica have the prerogatives of ensuring that this obligation is complied with, it can be deduced that they must indeed have control over the company's contracting practice. This implies that the State must be regarded as having influence on Hidroelectrica's decision-making processes and that the State must be regarded as being involved in the decisions taken by the company.

80. In the light of the above considerations, the Commission is at this stage of the view that Hidroelectrica's decision to conclude contracts with the electricity traders and their successive amendments is imputable to the State.

5.2.3. Selective economic advantage

81. The arguments by Romania, the Alpiq Group and Energy Holding, presented in relation to the economic advantage which Hidroelectrica may have conferred to the electricity traders by concluding contracts the terms of which were more beneficial to them than could have been reasonable expected, are essentially aimed at demonstrating that the contracts and their successive amendments were concluded taking into account the market conditions at the time of signing them and were profitable for Hidroelectrica. Thus, according to these arguments, the electricity traders, and the Alpiq Group and Energy Holding in particular, did not derive any undue advantage from such contracts.

82. As a general preliminary remark, profitability for Hidroelectrica is not the appropriate legal test for determining whether the electricity traders derived an undue advantage

* Business secrets

from the contracts and their successive amendments. According to the jurisprudence, the test for determining whether a given transaction might involve an undue advantage for one of the parties involved is to establish whether the transaction would have been concluded on similar terms on the market from the perspective of the party in question (market operator test).18 In the case at hand, the relevant question is therefore whether a company in the position of Hidroelectrica would have concluded the same contracts on similar terms. The effect that the contracts and their successive amendments have on the profitability of Hidroelectrica is not relevant, as a private company would maximise profits, and not simply ensure a minimum level of profits. At any rate, the mere fact that Hidroelectrica made a profit is not conclusive for determining that the electricity traders did not receive any undue advantage in relation to the same transactions.

83. In relation to Energy Holding's analysis of the overall returns which Hidroelectrica may have derived from concluding the contract with the trader, the Commission notes that, by Energy Holding's own calculations, the result of the comparative evaluation of the contract values based on the NPV of the contract, the estimated value of the additional benefits and the value of alternative sale strategies is relatively highly dependent on the estimate of the additional benefits, at least for the first period of evaluation, which however seems to be the most relevant since the extension was actually agreed for five years and not eight. In particular, the values of the reduced business risk, of the price downside protection and of the pre-payment terms are difficult to translate into monetary terms and are, by definition, based on assumptions. In turn, changing these assumptions may yield relatively large differences in the final result.

84. While the Commission does not intend to question the details of the assumptions at this stage, it notes that some of them may raise doubts. More in particular, the value of reduced business risk has been calculated by reference to a "market WACC", as opposed to a "contract WACC." The […] to […] difference between the two would, in Energy Holding's view, represent the additional risk borne by Hidroelectrica had it not signed the contract with the electricity trader. However the "market WACC" is calculated, among other things, by taking into account one loan offer by a commercial bank in 2005. It is not clear to the Commission that this 2005 operation is relevant in determining the market conditions at the time of signing the contract between Hidroelectrica and Energy Holding in 2004.

85. Also, the methodology utilised to estimate the protection against price downsides assumes that alternative sale opportunities would not have arisen for the same or higher prices. In fact, it would seem reasonable to expect the electricity sale price set by Hidroelectrica to follow market conditions, hence to take as a reference the price of electricity sold by Hidroelectrica's competitors. Such electricity is often produced based on alternative technologies, which in most instances rely on more expensive inputs the price of which can show an upward trend. Hence it is not at all clear that Hidroelectrica ever faced a material risk of falling prices, either under the contract it signed or under alternative scenarios. Consequently, it does not seem logical to

18 See e.g. Case T-296/97 Alitalia – Linee aeree italiane SpA v. Commission [2000] ECR II-3871,

paragraph 81.

* Business secrets

quantify, and taking into consideration, a benefit for contractual features which allegedly protected from a risk which it is not clear it ever existed in the first place.

86. Finally, the estimation of the value of pre-payment terms in the contracts assumes that Hidroelectrica derived a benefit from advance payments from electricity traders. While it is clear that there can be an advantage in being paid in advance rather than at a later stage, it is not entirely clear that this benefit is equivalent to the avoided cost of a short-term loan. Hidroelectrica's financial needs, and its working capital in particular, are determined first and foremost by the profile of its revenues as opposed to that of its costs. It is not evident that Hidroelectrica actually was in need of any short-term loan for any period under the contract duration, which would seem to suggest that the estimated value may be over-representing the true benefit which may have accrued to Hidroelectrica.

87. The Commission notes that, even without looking at the assumptions underlying the NPV calculation, by removing the estimates for the value of the additional benefits of the contract with Hidroelectrica, the overall value of the contract can become lower than the value of alternative market opportunities in one of the market mixes considered, and only marginally larger in another, according to Energy Holding's own calculations for the period 2004 to 2013. This hardly seems to suggest that the contract was beneficial to Hidroelectrica in the stated terms and beyond any reasonable doubt.

88. Besides the information submitted by Energy Holding, the size of the undue economic advantage which the electricity traders may have derived from the contracts with Hidroelectrica is not of easy calculation. The Commission notes, however, that by following the complainant's line of reasoning, there appear to be substantial differences between the prices at which the electricity traders were able to buy electricity from Hidroelectrica, and the (higher) price of electricity prevailing on the OPCOM-PCCB market.

89. On the basis of the information provided by the Romanian authorities, the Commission understands that the differences between the prices set in the contracts between Hidroelectrica and the electricity traders on the one hand, and the prevailing price of electricity on the OPCOM-PCCB market, were as in Table 11 below to the best of the Commission knowledge at the time of writing.

90. The Commission acknowledges that the complex nature of the contract, the incomplete information available on some of the contracts, and the unclear timing of some of the changes in prices included in the modifications to the contracts, make it difficult to ensure the utmost accuracy of the data included in the Table. For example, several of the successive contractual modifications to the contracts appear to lack the dates when they were signed.

91. This may either reflect a problem with the specific contracting parties, or a wider problem related to the business practice in the Romanian electricity market at the onset of its liberalisation. Clearly, however, the inaccurate nature of internal reporting procedures does little to dispel the doubts which the Commission has on the exact motives behind the agreements and on their market-based rationale.

* Business secrets

Table 11 – Differences in prices set in Hidroelectrica's contracts with electricity traders and average OPCOM-PCCB prices, EUR and RON19

Contract with Proportion of OPCOM Price

RON/MWh EUR/MWh RON EUR %

2010 Alpiq RomEnergie […] […] […] […] […] Alpiq RomIndustries […] […] […] […] […]

Average OPCOM-PCCB Price (EUR) EFT […] […] […] […] […] 35.05 Electrica […] […] […] […] […]

Electromagnetica […] […] […] […] […] Average OPCOM-PCCB Price (RON) Energy Holding […] […] […] […] […]

149.88 EURO-PEC […] […] […] […] […] Luxten Lighting […] […] […] […] […]













Price Diff. vs. OPCOM Price

Source: Romanian authorities; OPCOM 2010 Annual Report; ECB.

19 The average OPCOM-PCCB price was calculated as overall value of the contracts signed in each year

divided by overall volumes traded in the same year, based on OPCOM Annual Report figures. Exchange rates have been defined based on the ECB official rates for each period. The exchange rate between RON and EUR is the average of the monthly exchange rates for each of the years considered, which can be found here: http://sdw.ecb.europa.eu/quickview.do?SERIES_KEY=120.EXR.M.RON.EUR.SP00.A.

The exchange rate between EUR and USD is the ECB reference rate, which can be found here: http://sdw.ecb.europa.eu/quickview.do?SERIES_KEY=120.EXR.A.USD.EUR.SP00.A. For each year and for each electricity trader, the official relevant price specified in the contract or in one

of its modifications was used. When the price was not indicated for a specific year, the implicit price from the previous period was used. When a price change took place between the year, a weighted average of the two prices was calculated, using the number of months of each price as weights. Prices are assumed to be paid on a monthly basis and without discounts for early payments.

http://sdw.ecb.europa.eu/quickview.do?SERIES_KEY=120.EXR.M.RON.EUR.SP00.A

http://sdw.ecb.europa.eu/quickview.do?SERIES_KEY=120.EXR.A.USD.EUR.SP00.A

* Business secrets

92. It results from reading Table 11 that the prices on which Hidroelectrica agreed in the contracts with the eight electricity traders and their successive amendments were between about 20% and 60% lower than the prices prevailing on the OPCOM-PCCB exchange.

93. The preferential electricity tariffs under examination are selective in nature, since they applied only to certain undertakings. Indeed, the potential aid stems from the pricing terms of the contractual relationships between Hidroelectrica and the electricity traders, which might have benefited the latter to the extent that they were supplied as of 1 January 2007 onwards with electricity at preferential tariffs.

94. Based on the above considerations, and on the information submitted by the Romanian authorities, the Commission is at pains to understand the rationale for the large differences between the prices set in the contracts between Hidroelectrica and the electricity traders on the one hand, and the prevailing price on the OPCOM-PCCB market in the same periods. The Commission thus feels compelled to take the preliminary view that the electricity traders have derived an advantage in the form of reduced electricity prices in their contracts with Hidroelectrica and their successive amendments.

95. The Commission invites Romania to shed more light on the motives behind the contracts, or the choices made by the parties in the contracts, in the light of the prevailing market context.

5.2.4. Distortion of competition

96. In order for the measure at stake to constitute state aid in the sense of Article 107(1) TFEU, it must distort or threaten to distort competition.

97. As the electricity traders derived an undue selective advantage in the form of a preferential (lower) price for the supply of electricity by Hidroelectrica, the distorting effects on competition should be notable. In particular, the electricity traders may have been able to gain undue benefit from the reduced prices, since they may have been used to either lower their own resale prices, thus to gain market share, or to increase their profits thanks to the lower input costs.

5.2.5. Effects on intra-EU trade

98. The EU courts have consistently held that when the aid strengthens the position of an undertaking compared with other undertakings competing in intra-EU trade, the latter must be regarded as affected by that aid.20 Furthermore, an aid may be of such a kind as to affect trade between Member States and distort competition even if the recipient undertaking, which is in competition with undertakings from other Member States, does not itself participate in cross-border activities. Where a Member State grants aid

20 See for instance cases C-310/99 Italian Republic v Commission [2002] ECR I-2289, para. 84, and T-

55/99 Confederación Española de Transporte de Mercancías (CETM) [2000] ECR II-03207, para. 86.

* Business secrets

to an undertaking, internal supply may be maintained or increased, with the consequence that the opportunities for undertakings established in other Member States to offer their services to the market of that Member State are reduced.21

99. Given the fact that a number of EU companies may have been interested in supplying energy to the electricity traders, the contracts are also likely to have distorted intra-EU trade. Also, given the supra-national nature of the EU electricity market, the distortion of competition caused by the unlawful State aid is likely to have an impact on EU trade.

100. In the light of the above, the Commission comes to the conclusion that the State aid in the meaning of Article 107(1) TFEU with respect to the measures at hand is likely to have affected intra-EU trade.

5.3. The potential beneficiaries of the measure

101. As indicated in the paragraphs above, based on the information available so far, it seems that the potential beneficiaries of the aid granted as of 1 January 2007 onwards on the basis of their contracts with Hidroelectrica and their successive amendments are the electricity traders described in section 2.2 above.

5.4. Unlawful aid

102. In the case at hand, the preferential electricity tariffs under examination were granted in breach of the notification and stand-still obligations established by Article 108(3) TFEU, which are applicable to measures qualifying as "new aid" on the basis of Point 2.1 second alinea of Annex V to the Accession Treaty.

103. Thus, the Commission considers at this stage that the potential state aid granted in the form of preferential electricity tariffs to the electricity traders described in section 2.2 above from 1 January 2007 onwards qualifies as unlawful state aid.

5.5. Compatibility with the internal market

104. The Commission is currently of the view that, insofar as the measures alleviate the beneficiaries of charges that should normally have been borne on their budget, they would constitute operating aid, which cannot be found compatible with the internal market.

105. The potential aid does not seem to be targeted at achieving any specific objective other than alleviating the beneficiaries of charges that should normally have been born on their budget. The Commission is of the view at this stage that none of the objectives sought by the other state aid rules, for instance, the Community guidelines on State aid

21 Case C-303/88 Italian Republic v Commission [1991] ECR I-1433, para. 27.

* Business secrets

for environmental protection22 or the Community framework for state aid for research and development and innovation,23 is applicable either to the measures at stake.

106. Finally, the Commission recalls that according to the case law of the Union courts, operating aid, that is to say, aid intended to relieve an undertaking of the expenses which it would itself normally have had to bear in its day-to-day management or its usual activities, does not in principle fall within the scope of Article 107 (3) TFEU, as the effect of such aid is in principle to distort competition in the sectors in which it is granted, whilst nevertheless being incapable, by its very nature, of achieving any of the objectives of the exceptions foreseen in Article 107 (3) TFEU.24

107. As such, the potential aid is unlikely to be found compatible with the Treaty under any of the set of specific rules applicable to different types of aid in the EU.

6. CONCLUSION

108. Based on the information available at this stage, the Commission has serious doubts on the contracts concluded between Hidroelectrica and the electricity traders discussed in this Decision and must preliminarily conclude that the preferential electricity tariffs granted to such traders after 1 January 2007 constitute unlawful state aid, which does not seem to fulfil any of the conditions for being declared compatible with the internal market.

In the light of the foregoing considerations, the Commission, acting under the procedure laid down in Article 108(2) of the Treaty on the Functioning of the European Union, requests Romania to submit its comments and to provide all such information as may help to assess the measures, within one month of the date of receipt of this letter. It requests your authorities to forward a copy of this letter to the potential recipient of the aid immediately. The Commission wishes to remind Romania that Article 108(3) of the Treaty on the Functioning of the European Union has suspensory effect, and would draw your attention to Article 14 of Council Regulation (EC) No 659/1999, which provides that all unlawful aid may be recovered from the recipient. The Commission warns Romania that it will inform interested parties by publishing this letter and a meaningful summary of it in the Official Journal of the European Union. It will also inform interested parties in the EFTA countries which are signatories to the EEA Agreement, by publication of a notice in the EEA Supplement to the Official Journal of the European Union and will inform the EFTA Surveillance Authority by sending a copy of this letter. All such interested parties will be invited to submit their comments within one month of the date of such publication. 22 OJ C82, 1.4.2008, p.1. 23 OJ C323, 30.12.2006, p.1. 24 Case C-156/98 Germany v Commission [2000] ECR I-6857, paragraph 30; Case T-459/93 Siemens SA

v Commission [1995] ECR II-1675, paragraph 48; Case T-396/08 Freistaat Sachsen und Land Sachsen-Anhalt v Commission [2010] ECR II-0000, paragraph 46 to 48.

* Business secrets

If this letter contains confidential information which should not be published, please inform the Commission within fifteen working days of the date of receipt. If the Commission does not receive a reasoned request by that deadline, you will be deemed to agree to publication of the full text of this letter. Your request specifying the relevant information should be sent by registered letter or fax to:

European Commission Directorate-General for Competition State Aid Greffe B-1049 Brussels Fax No: +32-2-296.1242

Yours faithfully,

For the Commission

Joaquín ALMUNIA

Vice-President of the Commission

EUROPEAN COMMISSIONec.europa.eu/competition/state_aid/cases/244509/... · profile of the...

Documents

Transcript of EUROPEAN COMMISSIONec.europa.eu/competition/state_aid/cases/244509/... · profile of the...