The European Commission today approved the fourth pillar of the Federal Government’s package of measures for businesses which are particularly badly affected by the repercussions of Russia’s war of aggression against Ukraine. This means that the energy cost reduction programme for energy-intensive industries can start tomorrow.
Russia’s war of aggression against Ukraine is also having tangible impacts on German firms, with many businesses struggling to cope with the high increase in energy prices. The Federal Ministry for Economic Affairs and Climate Action and the Federal Finance Ministry therefore presented a package of measures for the companies particularly affected by the consequences of the war on 8 April 2022.
This package consists of several components which are gradually being implemented. Following the introduction of the KfW loan programme in late April / early May and the expansion of the Federation-Länder guarantee programmes, and since the margining hedging instrument became available on 17 June 2022, the fourth pillar of the package is now commencing: the energy cost reduction programme for energy-intensive industry.
Eligible energy-intensive and trade-intensive companies can receive a grant of up to €50 million towards their increased gas and electricity costs. The assistance programme has been allocated funding of up to €5 billion.
The programme is precisely targeted. It serves to cut the costs of the increased gas and electricity prices for particularly affected energy-intensive and trade-intensive companies. At the same time, the programme is designed to ensure that energy consumption is not boosted, and no price-driving effects are triggered. In addition to the eligibility requirements, the programme also contains a strict rule preventing the payment of bonuses to directors.
The programme is being administered by the Federal Office for Economic Affairs and Export Control. Applications can be made from tomorrow, 15 July 2022.
Further information about the grant programme for energy-intensive industry
The energy cost reduction programme is a programme to reduce the rise in gas and electricity prices in the form of a temporary, narrowly defined grant for companies particularly affected by the rise in gas and electricity prices.
Along with France and Luxembourg, Germany is one of the first Member States of the European Union to design such a programme and to make use of the European Commission’s Temporary Crisis Framework in this way.
1. What is being assisted?
Under this programme, the Federal Government is providing grants towards a share of the additional gas and electricity costs from February to September 2022 where the price has more than doubled compared with the average 2021 price. The share is graduated in three stages, depending on how affected the companies are, and basically calculated as follows:
a) 30% of the price difference (funding rate) and up to €2 million for companies which belong to an energy-intensive and trade-intensive sector under the Climate, Energy and Environmental Aid Guidelines (CEEAG) where the purchases of energy products amount to at least 3% of the production value.
b) 50% of the price difference and up to €25 million for companies which meet the above preconditions and also document an operating loss in the respective month due to the additional energy costs. In line with the rules of the TCF, the earnings before interest, taxes, depreciation and amortisation, excluding one-off impairments, (EBITDA) are used to calculate the operating loss. The assistance may not exceed 80% of the operating loss.
c) 70% of the price difference and up to €50 million for companies in the 26 sectors listed in Annex 1 of the TCF as being particularly badly affected (e.g. chemicals, glass, steel, metals, ceramics) which fulfil all the above-mentioned preconditions.
2. How is the assistance paid out?
The funding rates cited under 1) will be reduced on a one-off basis by 10 percentage points in July for the remaining period of the programme. In the funding months of July to September, only up to 80% of the volume of gas consumed by the company in the same period last year will be eligible for grants, in order to ensure that there is no incentive to consume a higher volume of gas.
In simple cases, a first instalment of 80% can be disbursed just a few weeks after the application is submitted – even for costs that are only expected to accrue in the future. However, the necessary fraud prevention checks may delay the disbursement, although the Federal Office for Economic Affairs and Export Control is required to pay out the money by the end of the year.
A strict ban on bonuses for directors ensures that only those companies which are actually in a genuine emergency situation pass their costs on to the community.
3. Does this mean that individual companies gain an advantage?
The aim is that targeted assistance is to be given where the need is greatest, i.e. where the repercussions of the current crisis are hard to cope with due to particularly high energy costs and the situation in international competition.
A grant programme has been drawn up which is intended to give appropriate support to the worst affected companies without providing support at random and without this stimulating gas consumption or pushing prices up.