In response to concerns raised in Parliament on the market position of Dutch large industry, the Dutch minister of economic affairs, agriculture and innovation has indicated that he will not allow exemptions, comparable to those in Germany, from transmission tariffs for large industrial consumers. The minister announced that he has brought the German exemption to the attention of the European Commission, to investigate whether Germany is violating state aid rules.

In 2011 Germany adopted rules giving large power consumers - under certain conditions - a remission from electricity transport tariffs to compensate for higher power prices as a result of the closure of German nuclear power plants. The German exemptions have allegedly had an effect on the market position of Dutch competitors.

Concerns regarding the market position of Dutch industry have deepened after the recent bankruptcy of aluminium smelter Zeeland Aluminium Company NV (Zalco) in December 2011. Zalco's financial problems were caused to a large extent by the high costs of the aluminium production process, which is highly dependent on electricity. Energy prices substantially influence the competitiveness of aluminium businesses, as they represent (on average) 45% of the costs and are determined locally, as opposed to the prices of aluminium and its base material, alum, which are determined on the world market.

Aluminium smelter Aluminium Delfzijl BV (Aldel), in the northern province of Groningen, is a further point of concern. Aldel is facing financial problems caused, among other things, by the high costs of electricity and transport. The Provincial Executive of Groningen and the municipal authorities of Delfzijl asked the Dutch government to intervene and prevent the possible bankruptcy of Aldel, as they consider the German exemption an unacceptable infringement of competition.

The minister agreed that the situation for large-volume users of energy is undesirable, as it is difficult for Dutch companies to compete with German industry. Therefore, the minister brought the matter to the attention of the commissioner for energy and the German minister of economic affairs. However, for the moment it is uncertain on what terms the commissioner will give his response to the matter.

Meanwhile, the minister is not prepared to exempt large-volume energy consumers from transmission rates, as he believes that it would further increase unfair competition. He indicated that support to one party would likely result in similar requests from other industrial parties such as Tata Steel, which from a non-discrimination point of view would be virtually impossible to deny. He also indicated that the government does not have the funds to finance such an exemption, and that such measures would jeopardise the budget cuts scheduled for the coming months.

For further information please contact Roland de Vlam or Max WF Oosterhuis at Loyens & Loeff NV by telephone (+31 20 578 5785), fax (+31 20 578 5800) or email ([email protected] or [email protected]).