European Fee approves €40 million German assist for onshore LNG terminal

Germany notified the Fee of its plans to assist the development and operation of a brand new LNG terminal positioned in Brunsbüttel, with an annual capability of 10 billion m³. The terminal includes import, storage and distribution amenities, and it’s deliberate to start out working by the top of 2026.

The beneficiaries of the measure are the German power operator, RWE, and the Dutch power community operator, Gasunie. The corporate German LNG Terminal GmbH (GLNG) will construct and function the LNG terminal. GLNG could have three shareholders:

1. The German authorities by means of the funding and improvement financial institution KfW with a 50% stake.
2. Gasunie with a 40% stake.
3. RWE with a ten% stake.

Beneath the measure, the help will take the type of a preferential dividend distribution mechanism: KfW will give to its co-investors a share of the dividends paid by GLNG if the undertaking’s annual return is under a hard and fast proportion of the whole capital invested by all shareholders, together with KfW. If the annual return is above a hard and fast proportion of the whole invested capital, KfW won’t share the dividends and thus no support might be paid below the measure. The quantity of support disbursed below the measure will rely upon the annual returns however is predicted to quantity to €40 million. KfW plans to exit the undertaking after 15 years of operation of the LNG terminal, when the preferential dividend distribution mechanism will cease.

The LNG terminal might be constructed taking into consideration the technical specs needed to permit its conversion right into a terminal for the import of renewable power carriers (e.g. renewable hydrogen or renewable hydrogen derivates), thereby keep away from a lock-in of fuel. The terminal might be transformed after 15 years of operation, on the newest by 2043.

The terminal will profit from a partial exemption from Third Social gathering Entry and from Tariff Regulation, already permitted by the German regulatory authority (Bundesnetzagentur) and which the European Fee has discovered in step with inner market guidelines.

The Fee assessed the measure below EU State support guidelines, specifically Article 107 (3)(c) of the Treaty on the Functioning of the European Union, which allows Member States to assist the event of sure financial actions topic to sure circumstances, and the 2022 Tips on State support for local weather, environmental safety and power (CEEAG).

The Fee discovered that:

• The measure facilitates the event of an financial exercise, specifically the import of fuel. On the identical time, it helps the targets of key EU coverage initiatives, such because the European Inexperienced Deal and the REPowerEU Plan.
• The measure is critical and applicable to enhance the safety of fuel provide of Germany and neighbouring international locations.
• The help has an ‘incentive impact’, because the personal buyers wouldn’t have supported GLNG in finishing up the undertaking with out the general public assist.
• The measure is proportional, because the anticipated support ensuing from the preferential dividend distribution mechanism is under the anticipated funding hole. Furthermore, there are safeguards towards overcompensation. If the undertaking seems to generate larger worth than projected, the beneficiaries will return a part of the help acquired to KfW when it exits the undertaking (claw-back mechanism).
• The constructive results of the measure on safety of fuel provide outweigh the adverse results on competitors. Specifically, the exemption from Third Social gathering Entry is proscribed and the measure doesn’t end in a lock-in impact of pure fuel. It contributes to the EU’s 2030 and 2050 local weather targets, by serving to to switch Russian fuel and by having the circumstances in place for the conversion of the terminal for the commerce of inexperienced power carriers.

On this foundation, the Fee permitted the German measure below EU State support guidelines.

Learn the article on-line at: https://www.lngindustry.com/liquid-natural-gas/31072023/european-commission-approves-40-million-german-support-for-onshore-lng-terminal/