The Surveillance Authority of the European Free Trade Agreement (ESA) has adopted today a positive decision as regards the Norwegian guarantee scheme for purchase of electricity on long term contracts. ESA is of the opinion that the scheme "does not entail any state aid" and is conform to the Guidelines on state guarantees.
Here is an abstract of the press release from ESA (HERE), the publication of the final decision waiting confidentiality clearing:
- The scheme enables certain power intensive industries to benefit from a state guarantee for their payment obligations when entering into long term power contracts. The guarantee can cover up to 80% of the payment obligations of contracts lasting from 7 to 25 years. The scheme will be managed by GIEK (Garanti-instituttet for eksportkreditt).
- The calculation of the guarantee premiums will be made on a case-by-case basis. GIEK will assess the different risk factors, such as the profitability and solidity of the buyers and future development of power markets. GIEK will also require remuneration for the capital and coverage of its administrative costs. In addition, GIEK may require different types of collateral.
- Assessment of the risks involved is challenged due to the absence of corresponding long term guarantees in the financial market today. Nevertheless, the Authority considers that the model proposed by the Norwegian authorities provides for a reaslistic assessment of the risks. The model will in all likelyhood secure that the premiums charged will be in line with market pricing and that the scheme will be self-financing in the long run and, consequently, operate without state aid. The model for calculation of the premiums will be reviewed at least once a year to ensure that the scheme will be self-financing in the long run. This will also be the subject of an annual review by an independent expert.
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