The Commission has closed an in-depth investigation under EC Treaty state aid rules, concluding that a guarantee of the French Government insuring a loan granted to the Finnish electricity producer TVO does not constitute state aid. The guaranteed loan finances the purchase by TVO of a part of a nuclear power plant from the French company AREVA NP (formerly Framatome). The Commission found that the guarantee would confer no advantage to TVO. First, the Commission found that TVO had sufficient access to financial markets to finance the whole project without any state intervention. The financing of the project is therefore not dependant on the state guarantee. Second, the guarantee premium paid by TVO to the French Government is not below the market price.
Competition Commissioner Neelie Kroes said: "Neither Areva nor TVO have derived an unfair advantage from the state guarantee, which does not constitute state aid."
TVO is a Finnish producer of electricity, which already operates two nuclear reactors. In December 2003, it concluded an agreement with a consortium comprising AREVA NP and Siemens for the construction of a third nuclear plant in Finland. The global amount of the turnkey project, which is called Olkiluoto 3, was estimated at €3 billion. In order to finance this project, TVO raised fresh equity capital from its shareholders and concluded loans. One of the latter, of an amount of €570 million, is guaranteed by Coface, the company that manages the export-credit insurance on behalf of the French government. For this guarantee, TVO pays a fee to the French Government the "guarantee premium".
In October 2006, the Commission opened, on the basis of two complaints, a formal investigation procedure to verify whether the guarantee had been granted on market terms and did not include state aid elements.
According to EU state aid rules, a state loan guarantee would constitute an aid when it confers an advantage to the borrower. First, it may enable the borrower to obtain funds it would not have been able to raise otherwise. Second, it may lower the borrower's financing costs below what it would have had to pay on the market.
On the basis of additional information received during the investigation, the Commission concluded that the Coface guarantee confers no advantage to TVO. First, the Commission found that TVO would have been able to finance the whole project without state intervention. TVO had a good rating from an international rating agency and was not a company in difficulty. Moreover, some banks had already committed to provide loans of a sufficient size before the state granted its guarantee. Finally, the guaranteed loan finances only a limited part of the project and does not represent the most risky part of the financing, which is provided by TVO's shareholders.
The Commission also analysed whether the state guarantee had the effect of reducing TVO's financing costs below the level corresponding to market conditions. It found that the cost of the guaranteed loan, including the premium paid to the State, was not lower than the costs of loans concluded at the same period by TVO without state guarantee.
The Commission also verified whether the French state guarantee constituted an advantage to AREVA NP, by rendering its offer more attractive for TVO. The Commission found that this was not the case, as the state intervention did not allow TVO to obtain cheaper financing conditions. In addition, TVO had selected the AREVA NP/Siemens consortium before the Coface guarantee was granted. [26 September 07]