€170m EU support for Lithuanian gas-fired power plant does not constitute state aid

The European Commission has concluded that the planned grant of €170 million from the Ignalina International Decommissioning Support Fund (IIDSF) to support the construction of a 400 MW gas-fired power plant in Lithuania does not constitute state aid. First, Lithuania will at no stage acquire control over the resources allocated to the project. Second, the decision to support the project and on the amount of the grant is not taken by Lithuania, but by the governing body of the IIDSF, following a proposal from the European Bank for Reconstruction and Development (EBRD), who manages the IIDSF. The EU is the largest contributor to the IIDSF.

Competition Commissioner Neelie Kroes said: “The grant will remain under full control of the EBRD and the Ignalina International Decommissioning Support Fund. As the representative of the European Union in the IIDSF, the Commission ensures that the operations of the fund are in line with EU objectives and provide efficient support to Lithuania for the necessary restructuring of its electricity sector.'

The project was notified by Lithuania in December 2007 and consists in the construction of a 400 MW cogeneration gas-fired power plant based on up-to-date technology (Combined Cycle Gas Turbine) on an existing power generation site operated by the state-owned company AB Lietuvos elektrinė. The plant will supply electricity to the grid and heat to the nearby agglomeration. The €170 million grant from IIDSF represents approximately 70 % of the expected total costs. The remaining part of the costs will be financed by AB Lietuvos elektrinė.

The IIDSF has been set up in order to pool contributions from international donors to provide support to Lithuania for the decommissioning of the Ignalina nuclear power plant and to set up the new power generation capacities necessary to compensate for that closure. In accordance with the conditions for Lithuania's EU accession, Unit 1 of the Ignalina power plant was closed down in 2005 and the shutdown of Unit 2 is due for 2009.

The IIDSF is managed by the EBRD, which is responsible for submitting project proposals to the governing body of the fund and implementing its decisions. The largest share of the fund's resources comes from the EU budget. In recent years, the European Union has in fact been the only contributor to the fund.

The Commission concluded that the resources allocated from the fund to the construction project cannot be regarded as resources of the Lithuanian State. The money will not transit through the Lithuanian authorities or through AB Lietuvos elektrinė, but will be directly paid by the EBRD to the contractor upon execution of the work.

The fund is not operated in such a way that a global envelope would be provided to Lithuania which could use it with a certain margin of discretion. Instead, each project potentially eligible for support by the fund is assessed in detail by the EBRD. The EBRD then presents a proposal to the governing body of IIDSF, who takes the final decision.

The non-confidential version of the decision will be made available under the case number N 764 / 2007 in the State aid Register on the DG Competition website once any confidentiality issues have been resolved. New publications of state aid decisions on the internet and in the Official Journal are listed in the State Aid Weekly e-News.

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