According to the European Commission press release on November 12, 2022, the European Commission has approved a €225.6 million German aid measure to support SEFE Securing Energy for Europe GmbH (‘SEFE GmbH'), previously Gazprom Germania GmbH, currently placed under the trusteeship of Germany. The measure will allow the German State to take the 100% ownership of SEFE GmbH replacing Gazprom Export LCC, in order to safeguard the security of gas supply to the German economy.
The measure was approved under 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, by following the principles set out in the State aid Temporary Crisis Framework, adopted by the Commission on 23 March 2022 and amended on 20 July 2022 and on 28 October 2022, and the principles of the 2014 Rescue and Restructuring Guidelines.
The German measure
Germany notified to the Commission under Article 107(3)(b) TFEU a €225.6 million measure to support SEFE GmbH. The measure will allow the German State to take the 100% ownership of SEFE GmbH replacing Gazprom Export LCC, a majority State-owned Russian company.
The measure follows the principles set out in the State aid Temporary Crisis Framework, according to which companies severely affected by the current crisis, in particular energy companies, may receive solvency support when private sources alone are not sufficient. It also follows the principles of the 2014 Rescue and Restructuring Guidelines.
SEFE GmbH, a systemic energy company in Germany, previously named Gazprom Germania GmbH, has a 14% share in the gas supplies market in Germany and is active also in other Member States. In addition, it owns and operates 28% of the gas storage serving the German market and owns gas pipelines in Germany and other Member States.
Following Russia's aggression against Ukraine and the subsequent disruption of gas deliveries by Gazprom, SEFE GmbH has incurred serious losses.
On 4 April 2022, due to the attempted transfer of shares and liquidation by its Russian shareholder, SEFE GmbH was placed under the trusteeship of the Federal Republic of Germany in order to be able to continue doing business and ensure security of supply. With the establishment of the trusteeship, the company came under the control of the Federal Republic of Germany until 15 December 2022. To continue business relations with market participants and thus to be able to keep serving its customers, Germany intends to assume full ownership of the company.
Under the planned measure, the existing registered capital of €225.6 million will be set to zero, which will de facto end the ownership of the present Russian shareholder. SEFE GmbH will then issue new ordinary shares to the same nominal amount. The present measure will therefore not change the equity of SEFE GmbH. The new shares will be subscribed by Germany.
The Commission's assessment
The Commission found that the German measure 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.
In its assessment, the Commission has also followed the principles set out in the State aid Temporary Crisis Framework and in the 2014 Rescue and Restructuring Guidelines.
The approval is subject to Germany's compliance to conditions to limit potential distortions of competition, namely an acquisition ban and a bonus ban.
Germany has further committed to notify to the Commission a long-term viability assessment for SEFE GmbH and its subsidiaries covering the notified measure and, if relevant, any future planned recapitalisation measure.
On this basis, the Commission approved the aid measure under EU State aid rules.
Background
According to the State aid Temporary Crisis Framework, companies severely affected by the current crisis may receive solvency support when private sources alone are not sufficient. Where companies would cease or downsize operations without such solvency support and when ceasing or downsizing operations would threaten energy markets or other markets which are of systemic importance for the economy, such solvency support might be considered compatible based on Article 107(3)(b) TFEU.
The Commission considers the following general principles as particularly relevant in the assessment:
- The aid must be necessary, appropriate and proportionate and must in any case not exceed the minimum needed to ensure the viability of the company.
- A company belonging to or being taken over by a larger business group is not eligible for aid, except where it can be demonstrated that the company's difficulties are not the result of an arbitrary allocation of costs within the group, and that the difficulties are too serious to be dealt with by the group itself. In such cases, a substantial contribution by the group to the costs of the solvency measure will normally be required.
- State aid must be granted on terms that afford the State a reasonable remuneration, such as an appropriate share of future gains in value of the beneficiary. The latter must be proportional to the amount of State equity injected, compared to the equity remaining after losses, including those foreseeable in the absence of the aid measure, have been accounted for.
- Where the aid takes the form of subordinated debt or other hybrid capital instruments, the overall remuneration of such instruments must adequately factor in the characteristics of the instrument chosen, including its level of subordination and all modalities of payment.
- The set-up of appropriate safeguard measures to limit potential competition distortions, in line with the principles set out in the 2014 Rescue and Restructuring Guidelines.
- For each beneficiary, Member States must undertake a long-term viability assessment and, where considered appropriate by the Commission, notify a restructuring plan in accordance with the Rescue and Restructuring Guidelines within a specified period of time.
- Under the Commission's Guidelines on rescue and restructuring aid, Member States may support companies in difficulty, under certain strict conditions. In particular, for restructuring aid to be approved, the restructuring plan must ensure that the viability of the company can be restored without continued State support, that the company contributes sufficiently to the costs of its restructuring and that distortions of competition created by the aid are addressed through compensatory measures, including in particular structural measures.
More information on the Temporary Crisis Framework and other actions taken by the Commission to address the economic impact of Russia's invasion of Ukraine can be found here.
The non-confidential version of the decision will be made available under the case number SA.104353 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.
“Gazprom’s disruption of gas deliveries is showing Russia’s unreliability as a supplier. Many importers of Russian natural gas, with fixed delivery contracts concluded with customers before the crisis, are currently not being served. Any disorderly failure to fulfil these fixed contracts can have severe consequences for customers and for the German economy. So, we welcome the change of ownership of SEFE, which will enable Germany to search for new gas suppliers while ensuring security of supply.” Margrethe Vestager, Executive Vice-President in charge of competition policy - 12/11/2022
