Judgments nº T-356/15 of Tribunal General de la Unión Europea, July 12, 2018

• Resolution Date: July 12, 2018
• Issuing Organization: Tribunal General de la Unión Europea
• Decision Number: T-356/15

(State aid - Aid planned by the United Kingdom in favour of Hinkley Point C nuclear power station - Contract for Difference, Secretary of State Agreement and Credit Guarantee - Decision declaring the aid compatible with the internal market - Article 107(3)(c) TFEU - Public interest objective - Promotion of nuclear energy - Need for State intervention - Guarantee Notice - Determination of the aid element - Proportionality - Investment aid - Operating aid - Right to submit observations - Public procurement procedure - Obligation to state reasons)

In Case T-356/15,

Republic of Austria, represented initially by C. Pesendorfer and M. Klamert, and subsequently by G. Hesse and M. Fruhmann, acting as Agents, and by H. Kristoferitsch, lawyer,

applicant,

supported by

Grand Duchy of Luxembourg, represented by D. Holderer, acting as Agent, and by P. Kinsch, lawyer,

intervener,

v

European Commission, represented by É. Gippini Fournier, R. Sauer, T. Maxian Rusche and P. Němečková, acting as Agents,

defendant,

supported by

Czech Republic, represented by M. Smolek, T. Müller and J. Vláčil, acting as Agents,

by

French Republic, represented initially by G. de Bergues, D. Colas and J. Bousin, and subsequently by D. Colas and J. Bousin, acting as Agents,

by

Hungary, represented initially by M. Fehér and M. Bóra, subsequently by B. Sonkodi, then by A. Steiner, acting as Agents, and by P. Nagy, lawyer, and finally by A. Steiner,

by

Republic of Poland, represented by B. Majczyna, acting as Agent,

by

Romania, represented initially by R. Radu and M. Bejenar, and subsequently by M. Bejenar and C.-R. Canţăr, acting as Agents,

by

Slovak Republic, represented by B. Ricziová, acting as Agent,

and by

United Kingdom of Great Britain and Northern Ireland, represented initially by C. Brodie and S. Brandon, subsequently by C. Brodie, S. Simmons and M. Holt, then by C. Brodie, S. Simmons and D. Robertson, then by C. Brodie, and finally by C. Brodie and Z. Lavery, acting as Agents, and by T. Johnston, Barrister, and A. Robertson QC,

interveners,

APPLICATION under Article 263 TFEU for annulment of Commission Decision (EU) 2015/658 of 8 October 2014 on the aid measure SA.34947 (2013/C) (ex 2013/N) which the United Kingdom is planning to implement for support to the Hinkley Point C nuclear power station (OJ 2015 L 109, p. 44), in which the Commission found that that State aid measure was compatible with the internal market within the meaning of Article 107(3)(c) TFEU and authorised its implementation,

THE GENERAL COURT (Fifth Chamber),

composed of D. Gratsias, President, A. Dittrich (Rapporteur) and P.G. Xuereb, Judges,

Registrar: N. Schall, Administrator,

having regard to the written part of the procedure and further to the hearing on 5 October 2017,

gives the following

Judgment

1. Background to the dispute

   1 On 22 October 2013, the United Kingdom of Great Britain and Northern Ireland notified measures in support of the Hinkley Point C nuclear power station (‘Hinkley Point C’). The beneficiary of the notified measures is NNB Generation Company Limited (‘NNBG’), a subsidiary of EDF Energy plc (‘EDF’).

   2 On 18 December 2013, the European Commission decided to initiate a formal investigation procedure in respect of the measures notified. That decision was published in the Official Journal of the European Union on 7 March 2014 (OJ 2014 C 69, p. 60).

   3 On 8 October 2014, the Commission adopted Decision (EU) 2015/658 on the aid measure SA.34947 (2013/C) (ex 2013/N) which the United Kingdom is planning to implement for support to the Hinkley Point C nuclear power station (OJ 2015 L 109, p. 44; ‘the contested decision’).

   4 The measures notified by the United Kingdom are described in Section 2 of the contested decision.

   5 The first notified measure, which is described in Section 2.1 of the contested decision, is a contract for difference (‘the Contract for Difference’). This is an instrument that is intended to ensure price stability for electricity sales by NNBG during the operational phase of Hinkley Point C. It is envisaged that NNBG will sell the electricity produced in that reactor on the market. However, the amount of NNBG’s revenues will be stabilised by the Contract for Difference. To that end, the strike price, which has been calculated on the basis of NNBG’s projected construction and operating costs, including a reasonable profit, will be compared to the reference price, which corresponds to the weighted average of wholesale prices which the United Kingdom sets for all operators supported by a contract for difference and which reflects market prices. In the case of NNBG, the relevant reference price is the baseload market reference price, which applies to all baseload generation operators. When the reference price is lower than the strike price, NNBG will receive a difference payment corresponding to the difference between those two prices. That right to a difference payment will be limited by a maximum output cap. By contrast, when the reference price is higher than the strike price, NNBG will be obliged to pay the difference between those two prices to the other party to the Contract for Difference (‘NNBG’s contracting partner’). That contracting partner will be Low Carbon Contracts Company Ltd, an entity that is to be funded through a statutory obligation on all the licensed electricity suppliers collectively. There will be two ‘gain-share’ mechanisms, the first of which concerns the costs of production, and the second, the rate of return on equity. There will be two operating costs reopener dates, the first of which will be 15 years after, and the second, 25 years after, the date on which the first reactor is brought into service.

   6 The Contract for Difference provides, under certain conditions, for compensation for NNBG for certain legislative changes. It will, moreover, under certain conditions, receive compensation in the event of the early shutdown of Hinkley Point nuclear power station on political grounds and in the event of problems related to nuclear third party liability insurance. In those circumstances, both NNBG’s investors and the United Kingdom will be able to call for the transfer of NNBG to the United Kingdom (‘UK’) Government and compensation will be payable to those investors.

   7 The second notified measure, which is described in Section 2.3 of the contested decision, is an agreement between the United Kingdom’s Secretary of State for Energy and Climate Change and NNBG’s investors (‘the Secretary of State Agreement’). That agreement supplements the Contract for Difference. It provides that if, following an early shutdown of Hinkley Point nuclear power station on political grounds, NNBG’s contracting partner were to default on compensatory payments to NNBG’s investors, the Secretary of State in question will pay the agreed compensation to the investors. It also provides for gain-share mechanisms.

   8 The third notified measure, which is described in Section 2.2 of the contested decision, is a credit guarantee by the United Kingdom on bonds to be issued by NNBG, guaranteeing the timely payment of principal and interest of qualifying debt, which may reach up to 17 billion pounds sterling (GBP). The level of the guarantee fee authorised by the Commission in that decision is 295 basis points.

   9 In Section 7 of the contested decision, the Commission stated that the three notified measures referred to above (‘the measures at issue’) constituted State aid within the meaning of Article 107(1) TFEU.

   10 In Sections 9 and 10 of the contested decision, the Commission considered whether the measures at issue could be declared compatible with the internal market pursuant to Article 107(3)(c) TFEU. In that context, in Section 9.1 of that decision, it stated that those measures were compatible with existing market regulation. In Section 9.2 of that decision, it found that the public interest objective which the United Kingdom was pursuing through those measures was the promotion of nuclear energy and, more specifically, the creation of new nuclear energy generating capacity. According to the considerations which the Commission set out in Section 9.3 of that decision, UK intervention was necessary in order to achieve that objective in sufficient time. In Section 9.4 of the decision in question, the Commission assessed whether the measures at issue were appropriate instruments for achieving that objective and whether they had an incentive effect. In Sections 9.5 and 9.6 of the decision, it examined the proportionality of the measures at issue and found that, subject to an adjustment of the credit guarantee fee rate to 295 basis points and amendment of the gain-share mechanism, the measures at issue had to be regarded as being necessary and that, overall, the potential for distortion of competition was limited and that the negative effects of the measures at issue were offset by their positive effects. On the basis of those considerations, the Commission concluded, in Section 10 of the contested decision, that the measures at issue were compatible with the internal market pursuant to Article 107(3)(c) TFEU.

   11 The first paragraph of Article 1 of the contested decision is worded as follows:

   ‘Aid to Hinkley Point C in the form of a Contract for Difference, the Secretary of State Agreement and a Credit Guarantee, as well as all related elements, which the UK is planning to implement, is compatible with the internal market within the meaning of Article 107(3)(c) [TFEU].’

2. Procedure before the General Court and forms of order sought

   12 The Republic of Austria brought the present action by application lodged at the General Court Registry on 6 July 2015.

   13 On 18 September 2015, the Commission lodged its defence.

   14 On 5 November 2015, the Republic of Austria lodged its reply.

   15 On 15 January 2016, the Commission lodged its rejoinder.

   16 By document lodged at the Court Registry on 9 November 2015, the Slovak Republic applied for...