european commission secretariat general brussels, 16th of

European Commission

SECRETARIAT GENERAL

Office BERL 8/294

B-1049 Brussels

Brussels, 16th of November 2005

Additions and Clarification concerning

Complaint of 14 December 2004

SG (04) A/13162

Concerning the purchase by Teollisuuden Voima Oy (TVO) of the

Framatome ANP 1600 MWh nuclear EPR (European Pressurised

Water) Reactor to a fixed price and under various support schemes

from Member States.

Complaint relating to

• illegal State aid in the energy sector,

• internal market distortion through illicit export guarantees

as illegal state aid,

• predatory pricing,

• violation of EC procurement rules,

• infringement of EEA rules on state aid

PDF compliments of www.earthtrack.net

Dr. Dörte Fouquet Kuhbier law firm 2

against

the Government of Germany

(state aid rules infringement through public loan)

the Government of Finland

(violation of public procurement rules and internal market rules, internal market for

energy rules)

the Government of France

(internal market distortion through illegal state aid export guarantees)

the Government of Sweden (state aid)

The complainant includes in this document the additions and clarifications as well as the text of the original complaint of 14 December 2004.



Index Information regarding the complainant...................................................................................... 4

Introduction into the complaint .............................................................................................. 4 Short summary of how the complaint’s interests are affected ........................................... 6 Level at which alleged unlawful aid has been granted....................................................... 6 Information regarding the alleged aid measures complained of ........................................ 7 Main parties involved in this transaction ......................................................................... 18

Banks involved..................................................................................................................... 18 Corporations involved .......................................................................................................... 21

Purchasers......................................................................................................................... 21 Subcontractors involved....................................................................................................... 23 Buyers involved.................................................................................................................... 23

Overview on the different support schemes related to the transaction ............................ 25 Public Support Schemes as illegal state aid ..................................................................... 25 Assessment of the different aid schemes......................................................................... 27 Evaluation of the presence of aid within the meaning of Article 87(1) ECT................... 28 Advantages Granted To Framatome ANP/ Areva and Siemens as Suppliers.................. 29

Advantages granted by Bayerische Landesbank to TVO within the transaction - aid. 29 Specific character ......................................................................................................... 40 State resources.............................................................................................................. 40 Impact on intra-community trade and competition ...................................................... 41 Conclusion.................................................................................................................... 41

Export guarantee advantages granted by COFACE to AREVA within the transaction .. 42 Factual situation ........................................................................................................... 42 Legal situation .............................................................................................................. 45 Conclusion.................................................................................................................... 52

Swedish State guarantee................................................................................................... 52 Combined influence of the different support schemes..................................................... 53 Fixed Price contract and market distortion according to Article 82 ECT....................... 54

Other financing support to the project.................................................................................. 59 Supplier credits and bilateral loans .................................................................................. 59

Infringement of EC Public Procurement Rules.................................................................... 60 Violation of the Public Procurement Directive 93/38/EC................................................ 60 Obligation to run public procurement procedure for electricity received from Olkiluoto 3........................................................................................................................................ 60 Violation of Public Procurement Rules by TVO for the Purchase of the new Nuclear Power Station ................................................................................................................... 62 Violation of the Public Procurement Directive 93/38/EC by TVO ................................. 64 Violation of procurement rules by TVO due to non enquiry into state aid schemes ....... 66

Infringement of EEA Agreement ......................................................................................... 68 Formal legal demand.................................................................................................... 69



Information regarding the complainant

1. Name and Address:

EREF, European Renewable Energies Federation ,asbl,

Avenue de la Fauconnerie 73, 1170 Brussels, Belgium

President: Peter Danielsson, address: Kungsgårdsvägen

50, 68154 Kristinehamn, Sweden

2. Legal representative for this complaint :

Represented by: Kuhbier law firm sprl, Dr. Dörte Fouquet, Rechtsanwältin

(German lawyer),

Avenue de la Fauconnerie 73, 1170 Brussels, Belgium

Tel. : +32.2.6724367

Fax : +32.2.6727016

[email protected]

Proof of authorisation is submitted.

3. Activities of EREF:

EREF is a non-profit umbrella industry organisation of national associations of small

and medium sized producers of electricity and biofuel from renewable energies sources

(“RES”). EREF represents the RES producers’ interests before the different European

and International organisations.

Introduction into the complaint

This complaint was introduced in December 2004 and aims to formally ask the

European Commission to investigate serious and orchestrated concertations and actions


mailto:[email protected]


to the detriment of competition in the European internal market for energy by Germany,

Finland, France and Sweden in a transaction to sell and purchase the above mentioned

EPR nuclear reactor from FRAMATOME ANP to TVO in Finland. It also suggests

investigating violations of the notification requirements under the Treaty Establishing

the European Atomic Energy Community (“Euratom”) and violations of the Electricity

market directive.

These actions aimed and helped to reduce economic risks related to the projects as on

the side of the purchaser as on the side of the seller to a level which is unheard in any

power plant transaction or any energy supply since liberalisation of the European

energy market in 1996.

Without the numerous non-notified acts of assistance by state authorities which will be

outlined below and which have to be seen in the overall context of discrimination and

distortion of the European energy market this nuclear power plant purchase transaction

could not have happened at the guaranteed purchase price and Teollissuuden Voima y

OY (“TVO”) could not sell the future electricity to the envisaged and already

subscribed low electricity price. The inter linkage and dependency between the

different actions make it necessary that the whole complaint is to be evaluated in a

concise and co-ordinated way by all European Commission’s Directorate Generals

involved.

While the illegal state aid granted by different member states is the main focus of this

complaint, because it negatively affects member state trade and puts the complainant

and all its members and their member companies at a competitive disadvantage. This

does not mean that the other violations of European law should be neglected or could

be handled by the competence of just the Directorate General for Competition. To the

contrary the complainant reiterates its suggestion for a full investigation coordinated by

the Secretariat General of the Commission.

The Complainant expresses concern about the handling of its complaint during the past

eleven months. The Complainant perceives that not all relevant Directorates General

have been involved in the alleged treaty infringement investigation and that the state aid



part of the investigation gives the Complainant the impression that it might not have

been carried out in a completely un-prejudiced way.

Short summary of how the complaint’s interests are affected

EREF represents national associations of small and medium sized producers of

electricity and biofuel from renewable energy sources. EREF represents more than

13.000 MW of installed capacity in the European Union in electricity from RES

sources.

EREF defends the interests of its members for a fair and level playing field in the

liberalised energy market.

Structured energy market distortions by the involvement of state authorities such as in

the case of the Framatome ANP transaction with TVO for the purchase of a new

1600MWh nuclear European Pressurised Water Reactor (“EPR”) undermine any level

playing field and render access to the electricity market on the ground of fair market

conditions for any other electricity supplier impossible, creating respectively

maintaining a distorted market.

Level at which alleged unlawful aid has been granted

1. in the case of Germany: Regional level (Bayerische Landesbank, (“BLB”))

as public bank

2. in the case of France: Central government (via export credit agency

Compagnie Française d’Assurance pour le Commerce Extérieur SA

(“COFACE”))

3. in the case of Finland: Central government, public local and regional

authorities

4. in the case of Sweden: Central government (probably via specific financial

support via State owned credit agency Swedish Export Credit Corporation

(“SEK”))



Information regarding the alleged aid measures complained of

1. This complaint focuses on several ongoing aid schemes, which have not

been notified and violate EC law and

2. Violation of EC procurement law.

3. The aid scheme impairs infra member state trade in the electricity, related

manufacturing and financing sectors.



Introduction

1. Since issuing of the European Commission’s Green Paper on the

Implementation of the Internal Energy Market in Europe in 19881 the major

dogma behind the internal energy market is free and fair competition between

energy companies across the European Community which should lead to large

efficiency gains, lower and more similar prices for consumers across the

Community, increased competitiveness for energy-using industries, economic

growth and increased welfare.

2. But it is likewise obvious and known that direct and indirect financial support

schemes to traditional energy sources have always hindered access of renewable

energies to the market. Globally, subsidies for oil, coal gas and nuclear power

have totalled in the tens of billions of dollars annually.2 It is general knowledge,

that existing fossil fuel and nuclear generators, established with public money

and benefiting from depreciated assets, have lower marginal costs than new

renewable technologies and are better able to manage the downward price

pressures3. Hence the European Commission persistently asks the Member

States to bring down subsidies to the traditional energy sector in the internal

energy market in order to encourage a level playing field. This is especially

valid for subsidies to new installations.

3. Directive 2003/54/EC of the European Parliament and of the Council of 26 June

2003 concerning common rules for the internal market in electricity and

repealing Directive 96/92/EC consistently asks for removal of various barriers

and asks Member States to refrain from discrimination. This Directive

establishes common rules for the generation, transmission and distribution of

electricity. It lays down rules relating to the organisation and functioning of the

1 Commission of the European Communities, The Internal Market for Energy (working paper of the Commission), COM (88) 238, final 2.5.88 2 See Removing Subsidies Levelling the Playing Field for Renewable Energy Technologies , Thematic Background Paper March 2004, Authors: Jonathan Pershing, Jim Mackenzie ,The World Resource Institute, Editing: Secretariat of the International Conference for Renewable Energies, Bonn 2004 3 See Energy subsidies in the European Union: A brief overview, European Environmental Agency Technical Report ,1/2004, page 8


http://europa.eu.int/smartapi/cgi/sga_doc?smartapi!celexplus!prod!DocNumber&lg=en&type_doc=Directive&an_doc=2003&nu_doc=54



electricity sector, access to the market, criteria and procedures applicable to

calls for tenders and the granting of authorisations and the operation of systems.

4. The EC rules for competition and state aid are seen as particularly relevant

tools for dismantling dominant market structures present in many national gas

and electricity markets, seen by the Commission as fundamental barriers to free

and fair competition in a common internal market. Nevertheless, the

Commission underlined in its regular 2003 benchmarking report, that national

electricity and gas market structures still function as a potential impediment to

the realisation of fair competition in the EU.4

5. The Complainant is convinced that in the procedure of organising extreme low

interest rated credits to TVO and in granting export credit from the French

government to the French company AREVA which is the parent company to

Framatome ANP and by substantial support from Swedish public authorities

infringed EC state aid rules and the Member States respectively regional public

banks involved violated the loyalty principle of Article 10 of the Treaty

Establishing the European Community (“ECT”) to refrain from further

discriminatory support and infringed competition and procurement rules of the

ECT and subsequent regulations.

6. State aid was granted on several levels and none has been notified to the

European Commission for approval so far.

7. The Complainant also got the impression that his complaint was not handled by

the Commission according to established procedure whereby all DGs concerned

are asked to intervene. Instead only DG TRANS (and only for four weeks

without consulting with the Complainant) and DG COMP were involved. The

Complainant senses a discriminatory treatment vis-à-vis other complainants and

asks the Secretariat General to investigate a possible deviation from good

administrative practice and thus a possible violation of procedural rights by the

Complainant.

4 see benchmarking report 2003, page 4



Brief description of facts

8. The 18th December 2003, Finnish energy company Teollisuuden Voima Oy

(“TVO”) made an investment decision on the new nuclear power plant unit

Olkiluoto 3 and signed with the Framatome ANP consortium a contract

concerning the construction of a new nuclear power plant unit with a

pressurized water reactor of about 1,600 MW. More than 60 Finnish companies

will participate in the investment and have a share of the electricity to be

produced by the unit starting commercial operation in 2009.

9. According to the Finnish Nuclear Energy Act, companies envisaging nuclear

plant projects must apply for a so-called “Decision-in-Principle” from the

Government on beforehand. The Finnish Government has to decide whether the

project is in accordance with the overall good of the Finnish society. A

positive Governmental decision needs ratification by the Parliament. Before this

Government decision there are hearings with involved parties such as the

municipality of location and public authorities, especially the Radiation and

Nuclear Safety Authority (STUK). The entire process takes 1-2 years. Only

after the ratification of the decision in principle the company can proceed to

apply for the construction permit from the Government.

10. The European Commission was mislead by these non notified supports. The

Commission thus underlined not only in its formal decision based on Article 41

Euratom in June 2004 that no support has been given to the project but also in

the detailed Commission Staff Working paper –“ Inventory of public aid

granted to different energy sources”, from 20025. The working paper explicitly

states – and Finland was at that time the only country asking for authorisation

for a new nuclear power plant – that “projects for investment recently notified to

the Commission under Article 41 of the Euratom Treaty did not receive public

aid. Especially in the area of nuclear energy is precise information crucial. The

apparent misinformation with regards to the precise structure of the investment

should lead the Commission to further investigate if all other supporting

documentation is correct. Especially in a notification under the Euroatom Treaty 5 see page 8 of the working paper



is the highest degree of correctness and precision crucial. The Complainant

expresses grave concern with regards to the other information provided under

Article 41 and urges the Commission to investigate all information provided.

Especially in the trans-European energy market such misinformation can

severely distort the energy market.

11. The following complaint tries to list all support schemes known to him and

further infringement during the whole transaction for the new EPR reactor and

formally asks the European Commission for opening of infringement

procedures in all cases.



Short chronology

12. The following timetable may help to visualise and to understand the major steps

in the development

May 1999: The Finnish organisation responsible for the preparations for spent fuel

disposal, Posiva Ltd, submitted the Environmental Impact Assessment Report

(EIA) to the Finnish Ministry of Trade and Industry (MTI) and a Decision-in-

principle (DiP) application to the Government.

January 2000: The council of the host municipality for disposal site, Eurajoki, gave

its approval to the DiP application (votes 20 for, 7 against), and STUK (Finland’s

regulatory body) concluded that the prerequisites for a DiP are met from the

standpoint of nuclear and radiation safety.

15 November 2000: Finnish company Teollisuuden Voima Oy (TVO) submitted

to the Finnish Council of State (Government) an application for a Decision in

Principle (DiP) concerning the construction of one additional NPP unit, the

Olkiluoto 3 unit.

December 2000: The Finnish Government gave its approval to the spent fuel

disposal.

February 2001: STUK issued to the Ministry of Trade and Industry a preliminary

safety assessment and a statement about the application.

February 2001: Framatome and Siemens in July 2000 finalise their agreement to

merge their nuclear operations into Framatome ANP.

7 January 2002: STUK issued a supplementary of its preliminary safety judgement

on account of terrorist attacks on U.S.A.



January 2002: The Finnish Government made a favourable DiP (Decision in

Principle) on the construction of Olkiluoto 3

24 May 2002: The Finnish Parliament approved plans for the construction of

Olkiluoto 3 by a majority of 107 votes to 92.

March 2003: TVO finalises receipt of tender proposals.

Tenders have been submitted to TVO during 2002/2003 by three vendors and for

four designs:

Framatome ANP: European Pressurised Water Reactor (EPR) of 1600MWe and

SWE-1000 of 1200MWe

General Electrics: European Simplified Boiling Water Reactor (ESBWR) of

1390MWE

Atomstoryexport: VVER-91/99 of 1060MWe

Westinghouse finally did not bid its AP-1000 PWR or its BWR-90+.6

Autumn 2003: AREVA ordered the pressure vessel even before its bid was chosen

and before the Finnish Nuclear Supervisory agency STUK approved the project

October 2003: TVO chose Olkiluoto to be the location site for the new reactor.

18 December 2003: TVO signs the contract with Framatome ANP- Siemens.

8 January 2004: application for construction permit submitted to the Finnish

Council of State.

25 May 2004: AREVA signed a EUR 400 million contract with TVO for the

supply of uranium and transformation services required to manufacture Olkiluoto 3

reactor.7

6 www.iuc.com.au/nip.76.htm 7http://www.areva.com/servlet/ContentServer?pagename=arevagroup_en%2FPressRelease%2FPressReleaseFullTemplate&cid=1085486432327&p=1028798801053


http://www.iuc.com.au/nip.76.htm


10 October,2004: EDF decided to build EPR nuclear reactor in Flamanville, Basse,

Normandie

End of 2004: STUK is expected to submit its statement and safety assessment

Beginning of 2005: the Finnish Government to decide on the TVO’s construction

license

2009: expected connection to grid

1st half of 2009: expected commercial operation according to TVO

13. On 11th of June 2004 the European Commission published its “favourable

opinion” The -then- Commissioner and Vice President of the European

Commission Loyola de Palacio underlined in the respective press declaration

the “attractive economic option” of this project.

14. According to this Commission press release TVO had pointed out that the new

nuclear plant was expected to have lower production costs for the electricity

than those from fossil fuel plants and help to ensure stable and predicable

supply and prices for its customers and that no “financial aid was being

provided by the Finnish State to the project”8.

15. This evaluation of an economic attractive situation does not correspond with

reality. It is apparent that the European Commission was not informed by the

different governments and companies involved about the various subsidies

granted and about the fact, that the fixed price offer is below cost price and thus

price dumping helped by state aid.

16. On 14 December 2004 the Commission formally receives this complaint and is

asked to broadly investigate violations of European law by all Member States

involved. Without consulting the Complainant DG TREN closed the dossier on

8 EC Commission Press declaration IP/04/738 of 11 June 2004



13 January 2005. The information was not shared with the Complainant until

September 2005. DG COMP accepted the dossier on 22 December 2004 and

met with the Complainant on 2 September 2005 and revealed that the

government procurement issues raised by the Complainant were not

investigated during the whole time. This as will be discussed later gives raise to

procedural concerns.

The energy situation in Finland

17. Finland has four nuclear reactors providing 27% of its electricity. The total net

output of these four reactors is 2656 MWe with average capacity factors over

the 1990s of 94%. Two of the reactors are operated by TVO, the other two by

Fortum Heat & Power. TVO’s reactors have been uprated 26% (from 690 MWE

to 870 MWe each) and their lifetime has been extended to 60 years. They are

Swedish boiling reactors. Fortum’s units have been uprated 9,7% from 465

Mwe to 510 Mwe. The electricity consumption is 16 600 kWh per capita per

year.

18. Most of the electricity is imported or is generated from imported fuels. Finland

is a net energy importer; it imports 71% of energy (50% of oil, 40% of crude oil

and 100% of natural gas). In 2001, total electricity imports totalled 11,8GWh

(12 % net, – 7,9 GWh from Russia, 5,4 from Sweden and 0,145 from Norway.9)

Finland, Sweden, Norway and Denmark now form a single electricity market,

with a total consumption of almost 400 TWh. The transmission capacity

available may limit cross-border electricity trade, though it is increasing.

Electricity is transmitted from one country to another over transmission systems

which between Finland and Sweden partly take the form of sea-bed cables. At

the moment, the transmission capacity between Finland and Sweden amounts to

about 2,000 megawatts, and so far this has been sufficient to carry all the

electricity traded between Finland and other Nordic countries.10 Projections

suggest that 7500 MWe additional capacity is needed in Finland in 2030.

9 www.tvo.fi , and http://www.energiamarkkinavirasto.fi/data.asp?articleid=343&pgid=1&languageid=826 10 http://www.vn.fi/vnk/english/publications/vnk20004e/vnk20004en3.htm#3.1



Electricity accounts for about a quarter of the energy end consumption, and

more than a half of it is used by the industry.11

19. Figures published in 2000 showed that nuclear had very much higher capital

costs than the others – EUR 1749/kW including initial fuel load, which is about

three times the cost of a gas plant. But its fuel costs are declared to be much

lower. Such an assumption, however, does not take into account the costs of

decommissioning, waste disposal and high amount of Research and Technology

funds received in the past for the development of the EPR reactor type.

20. According to OECD Nuclear Energy Agency report on Project of Generating

Electricity, nuclear power was not the cheapest option in any of the examined

states (at a 10 percent discount rate) and the least expensive options in only 5

states (at a 5 percent discount rate)12 Other aspect of the cost of nuclear should

involve reliable values of accident, high level waste impacts, nuclear

proliferation and impacts of terrorism.13

21. According to Finnish legislation, the nuclear companies are responsible for the

decommissioning of the power plants and the management of the nuclear waste.

The Finnish operators have reserved approximately 1 billion euros for these

purposes into a special fund. This is supposed to cover the decommissioning of

four reactors and the disposal of their waste. However, comparing this amount

to the cost estimates in other countries and experiences gained on the costs of

decommissioning, it is clear that the costs in Finland are highly underestimated.

A study by Finnish VTT Technical Research Centre estimates that the burying

of nuclear wastes alone will cost more than 1 billion euros (VTT 1999). Finland

has opted for immediate decommissioning of nuclear facilities, which requires

more financial resources than deferred decommissioning. Yet, Finland also

applies external management strategy, i.e. the decommissioning funds are

separate from the accounts of the nuclear operator.14

11 http://www.vn.fi/vnk/english/publications/vnk20004e/vnk20004en3.htm#3.1 12 http://www.nea.fr/html/general/press/1998/1998-8.html 13 http://www.nea.fr/html/general/press/1998/1998-8.html 14 http://www.euractiv.com/Article?tcmuri=tcm:29-131692-16&type=News



22. The sum budgeted for decommissioning the four existing reactors is 390 million

€, meaning 150 000 €/MW (VTT 1999). The sum is half of the sum reserved in

the United States where the government officials estimate the price to be at 353

000 €/ MW. The decommissioning projects already implemented have cost 4

to13 times more than the US estimation above, meaning 1,43 million €/MW –

4,71 million €/MW. If the costs for Finnish reactors were counted according to

these figures, the decommissioning of the four reactors would cost 3,7 billion –

12,1 billion € (Wise 1998).15

23. Finland’s nuclear power reactors:

type MWe net start

Loviisa 1 VVER-440 488 1977

Loviisa 2 VVER-440 488 1981

Olkiluoto 1 BWR 840 1979

Olkiluoto 2 BWR 840 1982

dates are for start of commercial operation.16

24. Electricity consumption is expected to rise by 1.5% a year until the year 2010,

after which the average yearly growth will be around 1.0%. It is expected that 3

800 MW of new power plant capacity will be needed by the year 2015 to secure

the supply of electricity.17 The Ministry of Trade and Industry predicts that

electricity consumption will reach about 96 TWh in 2010 compared with 76

TWh in 1998.18 Finland is reportedly considering construction of a sixth nuclear

power unit.19 The share of nuclear energy was in year 2001 about 27% of

electricity supply in Finland (see the figure below) and about 18% of the total

15 Kosonen, K.: The economics of new nuclear power plants, http://www.greenpeace.se/files/2500-2599/file_2553.pdf 16 http://www.world-nuclear.org/info/inf76.htm 17 http://www.tvo.fi/136.htm 18 http://www.vn.fi/vnk/english/publications/vnk20004e/vnk20004en3.htm#3.1 19 http://www.eia.doe.gov/emeu/cabs/finland.html


http://www.eia.doe.gov/emeu/cabs/finland.html


use of energy (=32.33million

toe).20Oil

1.9%

Wind Power0.1%

Woodbased fuels

11.4%

Peat6.9%

Electricityimports (net)

12%Coal

14.1%

Natural gas10.3%

Nuclear26.8%

Hydro Power16.3%

Main parties involved in this transaction

Banks involved

Bayerische Landesbank (BLB)

25. BLB is a German public bank, governed by the legislation of the Land Bayern.

It is owned 50% by the Free State of Bavaria and 50% by Association of

Bavarian Savings Banks (SVB). SVB comprises presently the 82 autonomous

Savings Banks and their public guarantors. The Savings Banks are public law

institutions established by municipalities, counties, as well as special purpose

municipal associations. SVB is a public law association, supervised by the

Bavarian Ministry of the Interior. Its tasks include the promotion and

representation of the interests of the saving public, the Savings Banks and their

employees. The liabilities of the SVB including the joint and several liabilities

as guarantor of BLB and Versicherungskammer Bayern are covered by its

assets. Any not covered liabilities will be distributed among the Bavarian 20 OECD, NEA/NDC(2002)16, Committee for Technical and Economic Studies on Nuclear Energy Development and the Fuel Cycle [NDC] 47th Session 12-14 June 2002, Reports by Member Countries



Savings Banks.21 BLB acts as the principal bank to the Free State of Bavaria, as

well as central bank to the Bavarian savings banks. The location focus is the

core market of Bavaria and bordering regions. It was created in 1972 by merger

between Landesbodenkreditanstalt and Bayerische Gemeindebank and has legal

status of corporation established under public law. In 2002, the shares of both

shareholders were transferred into BayernLB Holding AG, in exchange for

which the Free State of Bavaria and the Association of Bavarian Savings Banks

each took 50% holding in BayernLB Holding AG. BayernLB Holding AG is

exclusively entrusted with the duties of the sole shareholder of BayernLB as an

institution under public law and is not a bank itself.22 The state-subsidised

lending and Bauspar (home loan savings) business, which have a market-

leading position in Bavaria, are managed by economically independent

subsidiaries, Landesbodenkreditanstalt and LBS.

Nordea

26. Nordea Bank AB Sweden is the parent company of Nordea Bank Finland,

Denmark, Norge and others. The largest shareholder of Nordea Sweden is the

Swedish state with 19,5% of shares and voting rights. The second largest

shareholder is Alecta, a Nordic holding company, with 3,7% of shares. In 2003,

it arranged syndicated loans amounting to a total of 7 billion euro (i.e. 17% of

the total market in Nordic countries). The average interest rate on bank loans,

according to Bank of Finland, was for the first half of 2003 decreasing from

4,43 to 3,77%.23

Swedish Handelsbanken

27. Its biggest shareholder is The Oktogonen Foundation with its 9.6% share of

capital and 10.1% share of votes. The Oktogonen Foundation is

Handelsbanken’s employee profit-sharing system.24 The second largest

shareholder is Industrivärten, a Nordic holding company, with 8.2% of shares.

At the end of 2003, Handelsbanken had around 110 000 shareholders, most of

them private individuals. The majority of shareholders own only a small number 21 http://www.bayernlb.de/p/_en/idx/invest1/invest4/invest4.jsp 22 http://www.bayernlb.de/p/_en/idx/ueber/konstruk/portrait/portrait.jsp 23 http://www.bof.fi/eng/5_tilastot/5.1_Tilastografiikkaa/5.1.2_korot/ 24 http://www.industrivarden.net/templates/Holdings____141.aspx



of shares. Of the major shareholders, there are a number of asset managers

representing foreign private individuals and legal entities. Around 28% of the

shares were owned by investors outside Sweden. Around 50% of the total

number of shares was owned by Swedish institutional holders. These mainly

include insurance companies, investment companies and equity funds

representing a large number of private individuals (for example Alecta – 4.5%,

Robur funds – 3,5%, Nordea Funds – 2.9 % etc) 25 The Swedish state is

involved through the First, Second, Third and Fourth National Swedish Pension

Funds, which are independent and competing entities, yet whose board

members are appointed by the Government. All these pension funds make

together 6,0% for the Swedish state.26

BNP Paribas

28. BNP is a private commercial bank. 72.1% of its shares is owned by institutional

investors, out of which 56.4% European and 15.7% outside Europe. 7,6% of

shares is held by public shareholders.27

JPMorgan Chase & Co.

29. JP Morgan Chase & Co. is a private commercial bank, a result of the merger of

J.P. Morgan Chase and Bank One completed in July 2004. 65% of its shares are

held by Institutional and Mutual Fund owners. The largest Institutional

shareholder is Barclays Bank with 4.7% of shares, the largest mutual fund

owner is Washington Mutual Investors Fund with 1.7% of shares.

25www.handelsbanken.se 26 http://www.ap4.se/Files/356/AP-folder%20Engelska.pdf 27 www.invest.bnpparibas.com, Interim report 2004.


http://www.handelsbanken.se/

http://www.invest.bnpparibas.com/


Corporations involved

Purchasers

30. On the side of the purchasers there is a consortium of AREVA and Siemens -

Framatome ANP involved.

AREVA

31. AREVA is the trade name of the Societé des Participants du Commissariat à

l“Energie Atomique. It was established by a decree no. 83-1116 of December

21, 1983. Its majority shareholder is C.E.A (Commissariat à l“Energie

Atomique), established by French governmental decree 45-2563 of 18 Octobre

1945, which is a French public unit headed by the High Commissioner for

atomic energy and by a board headed by the administrator general.28 At the end

of 2003, CEA holds 79% of capital and 83% of voting rights. The French state

holds, to the same date, 5.2% of capital and 5.2% of voting rights. Thus, either

directly or indirectly through C.E.A. the French state is the majority shareholder

in AREVA. Changes to company bylaws are approved by decree. Capital

increase or the sale or exchange of AREVA shares held by CEA are subject to

joint approval by the Ministry of Industry and Ministry of Economy. The

French government designates four members on the Supervisory Board to serve

as representatives of the French state. The legal form of AREVA is Societé

anonyme à Directoire et Conseil de Surveillance governed by the French

Commercial Code and decree dated March 23, 1967. 29

Framatome ANP S.A.S.

32. AREVA is a parent company of Framatome which merged its nuclear activities

with Siemens into Framatome ANP. Siemens has 34% of the share capital,

AREVA 66%.30

28 http://encyclopedia.thefreedictionary.com/Commissariat+%E0+l“%C9nergie+Atomique 29 www.areva.com, Annual Report 2003 30http://www.framatome-anp.com/servlet/ContentServer?pagename=Framatome-ANP%2Fview&c=rubrique&cid=1016885938159&id=1015078089579&rubid=1015078089579


http://www.areva.com/


33. According to Siemens, this joint venture with majority shareholder AREVA

specialises “in the development, planning and turnkey construction of nuclear

power plants and research reactors”. Framatome’s new European Pressurized

Water Reactor in Finland will be a landmark of future-oriented technology”31 In

the Finland EPR venture Siemens will provide the turbine, Framatome will

deliver the pressurised water reactor with 4.300MW thermal power.32

EDF 34. The French State’s EDF will also participate in the project through its

subsidiary company Sofilo, which is the supplier of the boiler. Sofilo is 100%

owned by EDF (2002 figures) and EDF is 100% owned by the French state.33

Siemens

35. Joint stock company, based in Munich, Siemens is a so-called “global solutions

company”34 with more than 400 manufacturing sites located in 190 countries

and with a focus on electrical engineering and electronics. Siemens is to be seen

in the group of the world’s largest electronics and engineering companies, and is

the biggest company in Germany. Its production covers a big variety of high-

tech electrical engineering endeavour including nuclear generators. Siemens

boasts more than 50,000 product lines, comprising over a million separate

products. The Complainant also learned in the Commission meeting on 2

September that Siemens has given TVO an undisclosed amount of loan as part

of the purchase. This loan further explains the possibility of a fixed price for

such a significant investment project. Given the competitive situation in the

trans-European energy sector, the Commission should include this loan in its

investigation because it makes the export credits grated and the loan by the

public bank even more significant because it means that the signalling function

of such public support schemes, which will be explained further, transmitted

31http://www.siemens.com/Daten/siecom/HQ/CC/Internet/Annual/WORKAREA/gb04_ad/templatedata/English/file/binary/E04_00_GB2004_1230305.PDF p.22 32 http://www.tvo.fi/uploads/OL3-esite%20eng(1).pdf 33 http://amadeus.bvdep.com/amadeus/top20/report_15.htm; It will be the first time when a boiler designed in France will be constructed abroad without being tested in France beforehand. 34 http://www.forbes.com/finance/mktguideapps/compinfo/CompanyTearsheet.jhtml?tkr=SI


http://amadeus.bvdep.com/amadeus/top20/report_15.htm


beyond the banking sector into the private sector to the point where a publicly

traded company could justify granting a significant loan to TVO.

Subcontractors involved

36. The Olkiluoto 3 Consortium of AREVA and Siemens has placed with Japrotek

Oy Ab, a company of the Vaahto Group and headquartered in Pietarsaari, a

contract to supply large pressure vessels for the Olkiluoto 3 nuclear power plant

project. The contract comprises a total of 14 tanks and vessels such as the

accumulator tanks, the pressurizer relief tank, coolant storage tanks, the volume

control tank and the boric acid tanks. The pressure vessels will be delivered

between end of 2005 and summer 2006 to match the project’s time schedule.35

Vaahto Group is a private company owned by the Vaahto family members (77%

of votes).

Buyers involved

TVO- Teollisuuden Voima Oy

37. TVO is an electricity generation company which supplies its shareholders with

electricity at cost. The company already owns and operates 2 nuclear units on

the west coast of Finland at Olkiluoto and has a share in Meri-Pori coal-fired

power plant. Olkiluoto 1 (1978) and Olkiluoto 2 (1980) have been both

upgraded up to 840 MWh output and together they amount to 20% of all

electricity supply in Finland. There were previous two attempts to obtain a

construction permit for nuclear power plant in 1986 and 1991-1993. Kyoto

protocol and national CO2 emission reduction commitments were taken as main

argument favouring the new nuclear power plant in 2000.36 TVO’s shareholders

are dominated by a private company Pohjolan Voima Oy (56.8%), a non-profit

utility owned primarily by a group of Finnish industrial companies, and public

company Fortum Power & Heat AB (26.6%), a subsidiary of Fortum Oy.

35http://www.areva.com/servlet/ContentServer?pagename=arevagroup_en%2FAroundUs%2FAroundUsFullTemplate&cid=1095412337577&p=1028798801061 36 www.tvo.fi


http://www.tvo.fi/


38. Credit ratings of TVO by Standard&Poor’s: short term credit rating is A-2, long

term BBB. As a result of the construction of Olkiluoto 3, TVO will gradually

incur about 2.5 billion EUR in new debt until 2009. The project will also add

construction and operating risks. Standard&Poor’s had revised TVO’s credit

rating outlook from ‘stable” to “negative” after the decision to build the new

reactor was announced. The S&P’s analyst says “it reflects the increased

business and financial risk”.37

39. TVO does not have to worry about getting the electricity sold since its

shareholders will get the electricity for cost price, either to use it or sell it

onwards.38

Fortum Oy

40. Fortum Oy is a public Finnish energy company which was established in 1998,

when the state-owned company IVO merged with the oil company Neste. The

government than sold 20% if its stake.39 The Moody’s credit rating of Fortum is

Baa1, the outlook is ‘stable”. Standars&Poor’s long term credit rating was

restated at BBB+/Stable/A-2 . Fortum will participate in the new power plant

with a share of approximately 25%, thus Fortum’s investment as an equity share

will be EUR 180 million during 2004-2009, entitling it to approx. 400 MW of

the plant’s capacity. During the first quarter, Fortum also provided a

shareholders“ loan of EUR 45 million.40

Pohjolan Voima Oy - Pohjolan Voima is a privately owned group of companies in the energy

sector, which produces electricity and heat for its shareholders in

Finland. The Group also develops and maintains technology and

services in its sector.

37 Nuclear Monitor, June 5, 2002 38 Kosonen, K.: The economics of new nuclear power plants 39 http://www.world-nuclear.org/info/inf76.htm 40 www.fortum.com Finally, Fortum confirmed it is to participate in TVO’s 1,600MW EPR nuclear power plant unit at Olkiluoto with a share of approximately 25%. Fortum´s investment as an equity share will be EUR180m during 2004-2009, entitling it to approximately 400 MW. Fortum is also to give a shareholders“loan of EUR45m. see POWER IN EUROPE / ISSUE 419 / 16 FEBRUARY 2004, page 10


http://www.fortum.com/


- Its largest shareholder (42.0%) is UPM-Kymmene Corporation; the

second largest shareholder (15.7%) is Stora Enso Oy.41 PVO is a

privately owned group of companies in the energy sector, which

produces electricity and heat for its shareholders in Finland. The Group

also develops and maintains technology and services in its sector.42

UPM-Kymmene

- is one of the world’s leading forest industry companies. The company

businesses focus on magazine paper, newsprint, fine and specialty

products etc. Its last year’s turnover was EUR 10 billion.43

Stora Enso

- is an integrated paper, packaging and forest products company. The

largest shareholder is the Finnish state with 11.0% of shares and 24.0%

of votes.44 Wood and paper industry consumes around 30 percent of all

energy in Finland.

Overview on the different support schemes related to the transaction

Public Support Schemes as illegal state aid

41. Various different apparent and known support schemes are involved. The whole

transaction has up to now received large amount of public financial support:

Syndicated bank loan

42. Bayerische Landesbank as a public bank gave low interest rate of to 2.6 % on

substantial loan to TVO as leading partner in a syndicated loan.

41 www.pvo.fi 42 http://www.pvo.fi/page.asp?_item_id=112 43 www.upm-kymmene.com 44 www.storaenso.com



43. Bayerische Landesbank (BLB) gave in 2003 or in the beginning of 2004 a EUR

1,95 billion syndicated credit for an interest of 2,6% to the Finnish company

Teollisuuden Voima Oy (TVO) for the purchase of the Framatome-ANP offer to

supply the 1600 MWh nuclear EPR (European Pressurised Water Reactor).

44. According to TVO, borrowing arrangements with 12 banks were made

amounting to EUR 1,95 billion towards the end of 2003.45 The margin of the

banks is approximately 0,5%. According to our information, the syndicated loan

was apparently shared equally among those five banks, i.e. 390 million EUR per

syndicate bank.

Export Guarantees

45. Siemens hat introduced a demand to Hermes the German export credit agency

in June 2003 and AREVA had submitted application to the French export credit

agency COFACE.

46. Siemens did not succeed: According to Hermes environmental guiding

principles developed in April 2001, “export of nuclear technology designed for

building of a new or conversion of existing power plants are excluded from

support by the Federal Government”. However, after submitting it’s pre-request

in June 2003 and receiving negative response, Siemens argued that they wanted

guarantee only for the turbines which are no specific nuclear technology. The

German Ministry of Foreign Affairs in the relevant inter ministerial Committee

opened towards accepting, giving Siemens a letter of interest. The letter

indicated that a Hermes guarantee might be provided if the company gets the

contract form TVO to build the EPR46 . In December 2003, however, Siemens

had to withdraw its application for Hermes under political pressure within and

from the German Government and Parliament.

47. COFACE, French export credit agency. COFACE is a subsidiary company of

Natexis Banques Populaire and of Group Banque Populaire. It is a private

45 http://www.tvo.fi/uploads/TVO%20Vuosik%20Eng2003(1).pdf 46 WISE/NIRS Nuclear Monitor on September 12, 2003



company rated AA by Fitch and Aa3 by Moody’s. When granting public

guaranties, it acts on the account and behalf of the French state as public

agency. This is governed by a contract concluded with the French state – the

latest version from 2003 sets the remuneration amount at EUR 62 million.

There are four types of guarantees administrated by COFACE on behalf of the

state:

L“assurance prospection

L“assurance-crédit export

L“assurance change

La guarantie d investissements

48. Guarantee for Areva has been granted in the 2nd trimester of 2004 for the

contract signed between Areva and TVO in the amount of 610 million EUR -

such an amount is the second highest ever reported, in form of export credit

insurance47. This “l“assurance-credit export” insures the exporters and banks

against the risk of non payment due to commercial or political reasons under

such contracts, which are not insurable on the private market. It focuses on the

contracts for equipment and infrastructure of developing countries.48

Assessment of the different aid schemes

49. There are several types of advantages received by the suppliers, which have to

be examined by the European Commission:

those granted by a syndicated loan under the leadership of BLB

those granted by the French Export Credit Agency COFACE and

those granted by the Swedish Government (via SEK)

None of those supports can be seen isolated though but underline the importance of

co-ordinated performance.

50. According to Article 87 (1) of the Treaty (ECT), any aid granted by a Member State

or through State resources in any form whatsoever which distorts or threatens to

47 The highest amount of EUR 758 million was granted to Chantiers de l“Atlantique in the second trimestre of 2001. Otherwise, few of the guarantees exceed EUR 200 million. 48 http://www.cofaceCOFACE.fr/dmt/rubc_asscrexp/indexc.htm



distort competition by favouring certain undertakings or the production of certain

goods shall, insofar as it affects trade between Member States, be incompatible with

the common market.” This definition which has been amplified by secondary

legislation and EC Court rulings demands four criteria to be fulfilled in order to

acknowledge the existence of state aid.

Evaluation of the presence of aid within the meaning of Article 87(1) ECT

51. Evaluations will follow the usual examination of the four legal state aid criteria

which are: The measures have to be specific, granted through State resources

and likely to distort competition and intra-Community trade, and could thus be

considered to constitute State aid.

52. According to Article 87(1) of the Treaty any aid granted by a Member State or

through State resources, in any form, is incompatible with the Treaty and the

EEA Agreement insofar as it affects trade between Member States and between

contracting parties and distorts or threatens to distort competition by favouring

certain undertakings or the production of certain goods.

53. • Transfer of State resources: State aid rules cover only measures involving a

transfer of State resources (including those of national, regional or local

authorities, public banks and foundations, etc.) hereby the financial support does

not necessarily need to be granted by the State itself. Art. 87(1) ECT also may

cover a grant by a private or public intermediate body appointed by the State.

Financial transfers that constitute aid can take many forms such as grants or

fund allocations, fiscal rebates, loan guarantees, accelerated depreciation

allowances, capital injections etc.

54. • Economic advantage: The aid will have to constitute an economic advantage

that the undertaking would not have received in the normal course of business.

It has to be remembered in this regard that "any entity engaged in economic

activities of a commercial nature" is considered to be an undertaking under



Community competition law. The economic advantage referred to above is not

limited only to grants or fund allocations

55. • Selectivity: State aid must be selective in favour of an undertaking or category

of undertaking and thus affect the balance between them and their competitors.

Selectivity is what differentiates State aid from "general measures".

56. • Effect on competition and trade between Member States: Aid must have a

potential negative effect on competition and trade between Member States. It is

normally considered sufficient if it can be shown that the beneficiary is involved

in an economic activity and that he operates in a market in which there is trade

between Member States.

Advantages Granted To Framatome ANP/ Areva and Siemens as Suppliers

Advantages granted by Bayerische Landesbank to TVO within the transaction - aid

57. The transaction in question is a syndicated revolving credit of 1.95 billion EUR

with two tranches maturing in 2009 and 2011 respectively given to TVO by

Bayerische Landesbank for purchase of a fixed price turn-key contract is a

syndicated loan. The interest rate on this loan is 2,6%.49 The other banks

involved are Handelsbanken, Nordea, BNP Paribas and JP Morgan,50. It can

also not be excluded that one of the sellers Siemens granted a loan with similar

advantageous conditions to TVO as the Complainant learnt in the meeting with

Commission officials on 2 September 2005. When assessing the impact of the

BLB loan and its signalling function in the syndicated loan, this loan of Siemens

should also be taken into account.

58. Aid in the meaning of article 87 ECT must be understood in the broadest

possible meaning according to practice of Commission and case-law of the

European Court for Justice (ECJ): the form and the purpose of the aid are

irrelevant, only the potential effect is taken into consideration (effet theory) and

it covers beside direct grants loans, reductions in interest rates, State guarantees,

49 The 2,6% interest rate is according to 2 months Euribor,. www.euribor.org 50 www.olkiluoto.info



that means any economic advantage that a firm would not have received in the

normal course of business.

59. One test to find out if aid is involved is the test of the so-called "commercial

investor principle", regularly applied by the European Commission.

60. Syndicated loans were used in the international finance market in recent past in

addition to securitisation. A syndicated loan is similar to an ordinary bank loan,

except that it is granted by a group of several banks. Syndicated loans with

longer maturities have recently been replaced by loans with shorter maturities of

less than 12 months, and banks are expected to lean increasingly toward such

short-term loans after implementation of the new Basel Capital Accord.51

Recently, many banks have withdrawn completely from the syndicated loan

market and are concentrating on investment banking.

61. Even though the loan with its largely reduced interest rate of 2.6 % in question

is a so-called syndicated loan and under participation of two commercial private

banks, the whole transaction under the overall responsibility of the Bayerische

Landesbank violates nevertheless this Market Economy Investor Principle.

62. When assessment has to be done whether a loan is given by a publicly owned

bank the Commission and the European Court use the so-called market

economy investor principle (MEIP). It is used under strict consideration of the

specific circumstances of each case and has no general binding framework but

gives a set of test elements to be followed in order to clarify the case on the

bases of state aid principles.

63. The general idea of the MEIP is, that State aid would not be involved if loans or

other funds are made available on terms which a private investor would find

acceptable in providing funds to a comparable private undertaking when the

51 The new Basel Accord on banks“ capital requirements, known as Basel II, is scheduled to be implemented in 2006. The present Basel Accord was signed in 1988.



private investor is operating under normal market economy conditions52.

According to Commission’s decisions a financial measure is unacceptable to a

market economy investor if the financial position of the company is such that a

normal return (in dividends and capital gains) cannot be expected within a

reasonable period of time.

64. First of all, the question of the interest rate in comparison with average rates or

minimum rates should be observed:

65. BLB and the whole syndicate under its leadership have not acted as a private

investor in a market economy offering a preferential but economically viable

tariff.

- 2,6% interest will never allow a normal, adequate return of investment in

a market where the average rate is much higher. The whole syndicated

loan is an unprofitable transaction, which a normal commercial bank as

investor could not have made alone or without specific guarantees.

Especially not on the ground that the receiving company TVO has poor

credit rating, which would obligatory lead to an increased interest rate

needs, also in view of the Basle obligation. For comparison with this 2.6

% loan to TVO, a two-year loan for the German republic, and Germany

is rated AAA+, amounted for 2,57%. The selected MFI (Monetary

Financial Institutions) interest rate on loans to non-financial corporation

over EUR 1 million with an initial rate fixation over five years has been,

between August 2003 and September 2003, at 4.3%, according to the

European Central Bank.53

66. A further serious evaluation of considerate and adequate minimum interest rate

can be drawn from the OECD based CIRR rules for credits which also clearly

show that the interest rate of 2.6 % is a dumping offer of the syndicated banks.

52 Concerning EC Commission’s decisions using the MEIP in cases concerning financial services, see: Crédits Lyonnais (OJ L 221, 8. 8. 1998, p.28; GAN (OJ L 78, 16.3.1998, p.1); WestLB (OJ L 150/1, 23. 6. 2000, p 23) 53 ECB Press release on January 15, 2004, www.ecb.int



67. Commercial Interest Reference Rates (CIRRs) are the minimum interest rates

which may be applied under the OECD Arrangement on Guidelines for

Officially Supported Export Credits.

68. The Euro CIRR curve is used for the calculation of the base rate of the Euro

CIRR. It reflects the interest rates for different maturities using a selection of

bonds with a very high credit standing and a market value representing at least

half of the actively traded state bonds issued by the Member States in the euro-

zone54. Further information concerning the Euro CIRR can be found on the

Export Credits’ Homepage of the Directorate-General for Trade of the European

Commission55. The CIRR minimum interest rates have been for example in the

first half of 2004 as following:56

Period 5 years or less above 5 years and

up to and including 8.5

years above 8.5 years

15 June 2004-

14 July 2004 3.99 % 4.55 % 4.95 %

69. The Commission has itself developed reference interest rates which is equally

above the 2.6 % scheme. Should a private investor carry out such an operation

under normal market conditions, the revenue sought by this investor would be

likely an interest rate of 6%-7%, taking into consideration all the relevant facts

and figures, i.e. credit ratings of TVO, the safety risk immanent to any nuclear

power plant project, the fact that EPR is a prototype, etc.. In the longstanding

case against German Landesbank WestLB, BLB and other German

Landesbanken on question of illegal state aid in a process of obligatory capital 54 The calculation of Euro CIRR curve is based on the same model of calculation (data source, formula and selection criteria included) as the Euro par Yield Curve. The only difference is that an iterative algorithm is added to the calculation. With the help of this algorithm only the best bonds (representing at least 50% of the market capitalisation of those used for the Euro par yield curve) are kept. The coefficients specific to the Euro CIRR Curve can be used to obtain the daily yield for any maturity. 55 http://europa.eu.int/comm/trade/issues/sectoral/export_cred/index_en.htm 56 see reference above


http://europa.eu.int/comm/trade/issues/sectoral/export_cred/index_en.htm


injection where capital was provided by the German regional governments

(Länder), which partly or fully own the banks, by way of a transfer of public

housing and other assets with uninteresting low return of investment, the

European Commission evaluated that a private investor would expect a normal

return on investment which has been estimated by the European Commission in

its decision published in October 2004 in at that range of 6-7 % interest

equivalent. Due to this decision BLB has to repay € 260 million plus interest,

which is evidently importantly higher than the interest asked from TVO in this

transaction.57

70. As far as solvency and liquidity are concerned, BLB must act in compliance

with the German Banking Act, section 10 and also with Principle I (solvency)

and Principle II (liquidity) issued by the German Financial Supervisory

Authority. These provisions reflect and implement the revised Basel Accord of

2004, the Capital Adequacy Directive (93/6/EEC) and the Banking Directive

(2000/12/EC).58

71. The other banks involved in the syndicated loan could only have been ready and

able to give such a low interest rate if the loans are guaranteed by the respective

states (France, Sweden,) or via a specific transaction with BLB in the syndicate

contracts.

72. Bayerische Landesbank and its partners in the syndicate lose income and thus

the State of Bavaria as owner waived on income which means state aid in form

of loss of state revenues.

73. The Complainant has no insight knowledge of the terms and conditions risk

sharing between the partners of the syndicate.

74. In the meeting with the Complainant the Commission expressed the view that

BLB’s involvement in the syndicated loan was 15 to 20 percent and thus per se

57 For more details see press declaration of European Commission, IP/04/1261, Brussels, 20 October 2004 58 For more details, see http://www.bundesbank.de/bankenaufsicht/bankenaufsicht_eigen.en.php



too low to be considered state aid. The Complainant takes the view that

Commission might not have fully evaluated the impact of BLB’s participation

in the syndicated loan which seems to come close to a considerable underuse of

its own discretion (“Ermessensausfall”).

75. It has long been established that EC law has to be interpreted as much and as far

as possible consistently with WTO law.59 This is particularly true with regard to

EC law that is intended to implement WTO obligations. As the CFI decided

only recently: “It is only where the Community intended to implement a

particular obligation assumed in the context of the WTO, or where the

Community measure refers expressly to the precise provisions of the

agreements included in the annexes to the WTO Agreement, that it is for the

Court of Justice and the Court of First Instance to review the legality of the

Community measure in question in the light of the WTO rules (Portugal v

Council, paragraph 49).”60 State aid rules in European law are intended to

implement the Communities international obligations with regards to the WTO

Agreement on Subsidies and Countervailing Measures (“SCM”).61 As such the

Commission should analyse the BLB participation in the syndicated loan in the

light of Articles 1.1 (a) (iv) and Article 2 SCM. The findings of the panel and

even more importantly the submissions of DG TRADE in the recent WTO

dispute European Communities - Countervailing Measures on Dynamic

Random Access Memory Chips from Korea - (WT/DS299) case62 concerning a

syndicated loan that was granted to the DRAMS producer Hynix are very

instructive. Two public banks and two entrusted banks participated together

with seven large commercial banks in this syndicated loan (not unlike the TVO

loan). Korea had argued that because commercial banks participated the

syndicated loan could not be considered a subsidy. The Commission submitted:

“The participation of other banks does not prove the commercial viability of

participation. The EC argues that the other banks were simply not investigated

59 See P Eeckhout, “Judicial Enforcement of WTO law in the European Union: Some further reflections” (2002) JEIL 91 60 Judgment of the Court of First Instance (Fifth Chamber, extended composition) of 3 February 2005. Chiquita Brands International, Inc., Chiquita Banana Co. BV and Chiquita Italia, SpA v Commission of the European Communities, Case T-19/01, European Court Reports 2005 – 000, para. 115. 61 See Commission letter to the Member States, of 02 Aug 1995, Document number D/20506. 62 Report of the Panel, WTO Document WT/DS299/R, circulated 17 June 2005.



by the EC and, if anything, their participation shows that the "too big to fail"-

policy of intervention in favour of Hynix was successful. It convinced other

banks to participate in the loan as the credit would be a safe bet.63 For these

reasons, participation by the seven non-examined banks in the Syndicated Loan

does not provide a valid benchmark for the commercial reasonability of

participation in the Syndicated Loan. The actions of these seven banks were, in

any case, profoundly influenced both by the actions of the government in

relation to Hynix, and by the actions of the government in relation to the Korean

capital markets as a whole.64”65 The panel followed the EC’s conclusion but

criticised that the EC did not consider fully whether the seven commercial

banks had made their decision solely on commercial grounds.66

76. In other words where the participation of a public bank is crucial for other

commercial banks or like in the case of TVO even manufacturing companies to

participate in a syndicated loan or justify granting a loan vis-à-vis its

shareholders, that particular loan has a signalling function that goes well beyond

the nominal share of such bank in the loan. A good indication in this case is the

particularly low interest rate which was also used in the WTO case as an

indicator.

77. The Complainant urges the Commission that it should interpret its own state aid

rules in line with this recent pronouncement in the WTO Dispute Settlement

Mechanism and not just in its countervailing investigation. Thus the

Commission should properly investigate all commercial banks’ reasons to

participate in a loan which is as described far below usual market conditions.

This is particularly important since the above statement was made due to an

application by the European Community – DG TRADE. The Complainant 63 EC First Written Submission, paras. 286-287. 64 EC response to question 11 of the Panel, para. 64. As the EC stated: "[c]onsider the situation in which a government gives a guarantee that induces a bank to provide a company with risk capital that will certainly be lost. There are essential two ways of viewing this situation, which both lead to essentially the same result. First, the guarantee itself, with no premium, is a financial contribution, the amount of the subsidy being at least equivalent to the capital that it is certain will be lost. Second, the bank has effectively been entrusted or directed to provide a subsidy, the amount of the subsidy being at least equivalent to the capital that it is certain will be lost". (EC response to question 11 of the Panel, para. 62) 65 Panel report, para. 7.35. 66 Panel report, para. 7.183.



alleges that the Commission is in apparent danger of undermining the integrity

and the coherence of the Community legal order in this case.67

78. We formally ask the Commission to investigate in the different conditions and

the related contracts between the partners in the syndicate. It is important to

investigate especially in questions of state guarantees or other supportive

measures given to the individual syndicate members in order to evaluate there

position as “free” investor who is ready to waive revenues, violating thus the

interests of his shareholders. Related insight examination and questioning

should be directed towards the respective members of the syndicate and towards

the respective governments the syndicate banks are located in, meaning

Germany (concerning the question if Germany or Bavaria may have directly or

indirectly given further advantage to the other partner banks in the syndicate),

France, Sweden and Finland ( which should all like Germany be asked if

directly or indirectly advantages or guarantees were given to partners in the

syndicate).

79. The Commission has indicated that it will not look at the specific provisions

under the syndicated loan but rather just at the 15 – 20% participation of BLB

which it considers to be too low to constitute state aid. But as described the

allocation of risk and the important participation by a public bank should be

carefully reviewed in cases where the conditions appear to be below market

conditions. Such thorough investigation is also required under a WTO law

conform interpretation of state aid rules (for the sake of community coherence

and good governance) and in cases where the main risk remains with the public

bank. The concert of public aid schemes involved in this case further requires a

close investigation.

80. The Complainant alleges that such investigation might well reveal that the

commercial banks’ involvement was triggered not by commercial

considerations but rather by a signalling function of public support schemes.

67 See for example ECJ (5th Chamber)Österreichischer Gewerkschaftsbund, Gewerkschaft Öffentlicher Dienst v. Austria [2002] 1 C.M.L.R. 14.



81. We have learnt, that Sweden is involved and substantially supported the whole

transaction, though Sweden hides any details to whom in what form and under

which conditions support was given. Fact is, that the project has asked and

received support by SEK, (AB Svensk Exportkredit), the Swedish Export Credit

Agency and SEK has according to its own publication in its annual report of

2003 made a substantial financial commitment for the new nuclear power plant

to be built in Finland by Teollisuuden Voima Oy (TVO). This project was

approved by the Finnish Parliament and is important for Finland for many

reasons, mainly because it helps to ensure future energy supplies in the Nordic

area. The project has the potential to provide major contracts for Swedish

suppliers and construction firms.”68 Since 2003 the Kingdom of Sweden is 100

% owner of SEK69.

82. We formally ask the European Commission to clarify the details of this support

in 2003 by SEK respectively the Swedish State.

83. Since the NORDIC INVESTMENT BANK, headquartered in Helsinki has its

Swedish premises under the address of SEK in Stockholm, it maybe important

to question Sweden if joint transactions have been concluded to supported the

Finnish project with or via Nordic Investment Bank. The Nordic Investment

Bank is multilateral financial institution owned by the five Nordic countries

(Denmark, Finland, Iceland, Norway, Sweden). One of the directors of SEK is

Chairman of Nordic Investment Bank, Deputy Chairman of the Swedish Export

Credits Guarantee Board. Both organisations could be involved in supporting

the Finnish TVO project and should be questioned accordingly.

84. Coming back to the question whether the presence of private investors in the

syndicate change the evaluation of state aid involvement, this has to be denied

regarding the above objective discrepancy between minimum interest rates and

the actual rate granted to TVO. On the contrary, it is apparent that state

68 See SEK Annual report 2003, page 18, under the chapter heading ‘sek involved in many environment and energy projects” 69 see SEK “Analysis -Swedish Export Credit Corporation SWEDEN, Europe/M.East/Africa ,November 2004”



intervention by at least BLB alongside private capital made it only possible that

the private banks went ahead with this loan.

85. This is a fact that has been obvious in other cases for the European

Commission: “The search for a construction which appears to assure

concomitance, in order to obtain a no-aid finding, seems to have become a key

preoccupation of certain authorities, enterprises and their advisers”70 In this

context the Commission has to look carefully into side-agreements between the

state and the other private investors, as asked for above.71

86. Moreover, a loan which objectively is far below the average minimum interest-

rate and covers 2/3 of the whole purchase price has to be seen as aid scheme

since it is not just accessory but decisive for the whole transaction to proceed.

87. And it is obvious that the aid character has to be acknowledged since further

support measures are related to the transaction as important export credit

guarantees, issued by COFACE and detailed in its consequences below.

88. The Commission will certainly have to investigate into the specific role of BLB

as German Landesbank. There is apparently again the risk, that BLB may again

have used two the specific German system of public guarantees even though

there have to be ended in its application in 2005, this is the Anstaltslast and the

Gewährträgerhaftung.

89. "Anstaltslast" can best be defined as obligation on the owner to maintain the

institution concerned. This means that the public owner, in case of BLB the

Land Bayern, is obliged to protect the economic basis of the institution and

maintain its viability throughout its lifetime. The "Anstaltslast" does not confer

rights on creditors.

90. "Gewährträgerhaftung" gives creditors a direct claim on the guarantor

(Gewährträger), and is therefore an obligatory liability. The guarantor must

70 Ben Slocock, DG Comp, “The Market Economy Investor Principle” in Competition Policy Newsletter, June 2002, p 24 71 This is Commission practice, see Ben Slocock, p. 24



honour all the bank’s liabilities that cannot be met from the bank’s assets.

Neither form of guarantee is limited in terms of time or amount. Credit

institutions do not need to pay a charge for them.

91. The performance of the German Landesbanken is a special case, due mainly to

the fact that, thanks to the system of public guarantees in the form of

Anstaltslast and Gewährträgerhaftung.72 These advantages have become all the

more important over time, the more banks’ interest margin has declined. The

other categories of banks cannot compete with the lower lending rates

subsidised by public guarantees, a situation which has allowed the

Landesbanken to continue an expansionary lending policy. This shows how

legitimate and necessary the state aid complaint filed by the European

Commission was. The agreements between the European Commission and the

German government after lengthy negotiations, under which Anstaltslast and

Gewährträgerhaftung will be phased out by 2005, are important.73

92. In this context and knowing the BLB is obliged to still repay € 260 Million plus

interest it is astonishing that the Bank apparently continues to design financial

transactions in profiting from the above state guarantees even though being

obliged to stop this practice within the coming months.

72 The –then- Commissioner for Competition Monti: "The new legal situation at last creates fair competition on the internal market for financial services. Hitherto, state guarantees enabled public sector banks to expand their banking business at the expense of competitors, since State guarantees reduce refinancing costs on the capital markets, thus giving the banks better conditions when they raise funds for new business opportunities. The competitiveness of the German and the European economy will benefit from the abolition." "There will be no sudden break," Mario Monti emphasised, ‘since we have agreed transitional provisions. The new legal situation will benefit German taxpayers, German and foreign banks and also the German public sector banks themselves, since in the long term it cannot be in their interests to shield themselves from competition." The "Anstaltslast" and the "Gewährträgerhaftung" are very important, for four reasons," declared Mr Monti. It shows that the Commission is acting against all forms of state aid - direct and indirect (e.g. state guarantees) - that are incompatible with EU law, that the Commission is carefully monitoring developments in European banking, that it is resolutely fulfilling its duty as guardian of the Treaty vis-à-vis all Member States (large and small), and that it is perfectly possible to comply with the state aid rules without questioning the public-law nature of undertakings." 73 To the detriment role of the German Landesbanken see JUDGMENT OF THE COURT (Sixth Chamber) 12 December 2002 Case C-209/00 Westdeutsche Landesbank Girozentrale (WestLB) and Commission Decision 2000/392/EC - Obligation to recover the illegal State aid



93. Summarising it is to be concluded, in view of the foregoing, that the advantages

granted by Bayerische Landesbank et alia to TVO are aid advantages within the

meaning of Article 87(1) of the Treaty.

Specific character

94. Article 87(1) of the Treaty requires that a measure, in order to be defined as

State aid, favour “certain undertakings or the production of certain goods”. In

the case at issue, it is evident that the advantages, meaning the loan for an

interest rate of 2.6 % were granted to TVO only.

State resources

95. There must be a financial transaction between State and company which leads

to an economic advantage to the firm from public resources, be it through a

direct grant or a loss of profits. The ‘state" is not only the national or federal

level but all public bodies, or agencies acting on their behalf at national and sub-

national levels, such as public banks, municipalities, regions, Länder. According

to Commission’s and Court practice it can also be a private body if it is

entrusted by the State to distribute public funds and it can also be private funds

if the money is distributed by a public body and the State thus has the final

saying.

96. BLB is a public bank. It is governed by public law and endowed with public

funds. The Free State of Bavaria is 50% shareholder and thus the state resources

were made available in the transaction at issue. According to the details of the

syndicate contracts it is evident that at least the share of BLB’s own financial

commitment in relation to the interest rate constitutes means which are

given/waived from state resources. TVO received an advantage through State

measures by being given an interest rate on a loan granted by German public

institution which would not be awarded to other competitors, such as for

instance to producers of energy from renewable sources. The advantages in this

case were granted indirectly through state resources and are clearly imputable to

the state. Such a low interest rate which TVO has been awarded with is below

normal interest rates for similar transactions for energy utilities and is in this



difference constituting a transfer of public capital to an enterprise by insufficient

remuneration.

97. Since this state aid has not been notified to the European Commission, it is an

unlawful aid also with regards to the provision of Article 88(3) of the

Treaty. It is also contrary to wording of ECJ First Instance (Second Chamber,

extended composition) judgement of 6 March 2003 – Westdeutsche Landesbank

Girozentrale and Land Nordrhein-Westfalen v Commission of the European

Communities, Joint cases T-228/99 and T-233/99, para 36: „The Commission

does not question the right of Member States to create special-purpose funds in

order to fulfill tasks of general economic interest. However, as soon as such

public funds and assets are used for commercial competitive activities, they

must be subject to normal market economy rules.“ At para 181, the Court also

says that „...the (State) resources do not cease to be so simply because the use of

those resources is similar to that by a private investor“.

Impact on intra-community trade and competition

98. It would be sufficient, if a simple threat to distort competition would be apparent. The

distortion is normally assessed in comparing the situation of the benefiting firm on the

market with and without, before and after (forecast) the aid. In practice, as soon as

there is an aid, the Commission presumes that this condition is fulfilled if the

beneficiary undertaking is in competition with another firm in the EC. As can be seen

all selling companies out bid their competitors, which means that the individual aid

schemes had as such an influence on intra-community trade. The Complainant also

feels that the competitive situation of its members has been negatively influenced and

requests the Commission to investigate the combination of the aid schemes.

Conclusion

99. As the criteria for State aid are met in this case, the advantages granted to TVO

by BLB via the syndicated loan are state aid within the meaning of Article 87(1)

of the Treaty. The State aid is incompatible with the common market. And due



to systematic reasons these rules also apply in the ambit of the Euratom Treaty.

The Euratom Treaty does not specifically exclude ECT provisions and as such

is only lex specialis for the areas where it does provide such special rules. The

Commission has long been of the same opinion which is why she investigates

the violation of state aid provisions regarding the restructuring of the UK

nuclear waste management and the envisioned decommissioning authority.74

100. The European Commission is herewith formally asked to pursue non

notified state aid infringement procedure and to demand of Germany to take all

necessary measures to immediately discontinue and recover from the

beneficiary TVO the aid referred and unlawfully made available to the

beneficiary.

Export guarantee advantages granted by COFACE to AREVA within the transaction

101. In the following we come to the conclusion the France has through

COFACE granted illegal state aid to Areva in form of state guarantee.

Factual situation

102. Guarantee has been granted in the 2nd trimester of 2004 for the contract

signed between Areva and TVO in the amount of 610 million EUR - such an

amount is the second highest ever reported 75. This “l“assurance-credit export”

insures the exporters and banks against the risk of non payment due to

commercial or political reasons under such contracts, which are not insurable on

the private market. It focuses on the contracts for equipment and infrastructure

of developing countries.76 This state guarantee for AREVA is the only one

granted for a project located in the EU77.

74 Commission Press Release IP/04/1430, 1 December 2004. 75 The highest amount of EUR 758 million was granted to Chantiers de l“Atlantique in the second trimestre of 2001. Otherwise, few of the guarantees exceed EUR 200 million. 76 http://www.cofaceCOFACE.fr/dmt/rubc_asscrexp/indexc.htm 77 http://www.COFACE.fr/rub01_gr/gc.htm


http://www.coface.fr/rub01_gr/gc.htm


103. COFACE was not entitled to hand out such a big sum for a marketable

transaction within the European Union. The state guarantee of 610 mio Euros

was specific, granted through State resources and is distorting competition and

intra-Community trade, and has be considered to constitute State aid, which was

not notified to the European Commission and therefore is illegal state aid. The

measure is granted by the State or through State resources. The measure favours

AREVA. It affects trade between between Member States. It distorts

competition.

104. COFACE is a subsidiary company of Natexis Banques Populaire and of

Group Banque Populaire. It is a private company rated AA by Fitch and Aa3 by

Moody’s. When granting public guaranties, it acts on the account and behalf of

the French state as public agency. This is governed by a contract concluded with

the French state – the latest version from 2003 sets the remuneration amount at

EUR 62 million. There are four types of guarantees administrated by COFACE

on behalf of the state:

L’assurance prospection

L’assurance-crédit export

L’assurance change

La guarantie de investissements

105. COFACE manages since 1946, “pour le compte de l’État”, a wide range

of credit insurance products on behalf of the State for the purpose of supporting

French exports. Cover with public money under this scheme of credit insurance

is confined to risks that cannot be insured in the private market. The

beneficiaries are companies which market products and services that are, at least

partly, of French origin.

106. Transactions are guaranteed by the State and are recorded in separate

accounts, which are audited and certified by a designated Statutory Auditor.

Similar arrangements exist in most countries and many partners in the

CreditAlliance network fulfil this role on behalf of their respective

governments.



107. The aim is to assure non insurable risks, that means risks non marketable

on the private insurance market for the benefice of companies working on the

export market and whose origins are predominately French.

108. From its budget as “handling agent” or prolonged arm of the French

Government in the field of export guarantees on behalf and for account of the

French State COFACE gave this guarantee of 610 Mio Euro.

109. Finland is rated A1 by COFACE in line with OECD recommendation

and EC legislation, indicating ‘steady political and economic environment“ with

„very weak default probability“. TVO’s short term credit rating is as mentioned

A-2, long term BBB. Finland is not and cannot be marked as an export target

country on the COFACE official map „Politique d’Assurance-Crédit pour

2004“. This is the first time ever that COFACE granted- in violation of EC law -

such guarantee for export to EU country.

110. The partners in this venture on the side of the suppliers had asked for

export credit guarantees. Export credits insure the exporting company against

non-payment for delivered goods; in case of “garantie plafondée“ the insured

asks for a maximum amount of the loss which it wishes to be insured. The

amount guaranteed for AREVA is 610 million Euros.. AREVA asked for this

guarantees in order to facilitate the rating and access for TVO to advantageous

financial credits on the international financial market and thus increased

attractiveness of the whole transaction.

111. The question of receiving important state export guarantees was crucial

for the whole transaction since TVO credit rating has immediately been revised

negatively by Standard & Poor in 2002 after the Finnish Parliament had - in

May 2002- approved the construction of a new nuclear reactor. Standard & Poor

had converted TVO’s credit rating outlook form ‘stable” to “negative”

According to quotation of an Standard & Poor’s credit analyst in 2002, this

move reflects the increased business and financial risk that would likely result if



TVO decides to proceeds.”78 The credit rating company Standard & Poor’s had

published in December 2003, the credit rating for TVO as A-2 for short term

credit rating and BBB for long term rating.79

112. AREVA as public French company received export credit guarantee

from the state via COFACE as in this respect public authority. The above

displayed table is published on the web page of COFACE under the heading

“Assurance-Crédit Export”80

Legal situation

113. Export guarantees are state aid under EC state aid rules. This has been

the state of EC law since 1969. In the ECJ Judgment of the Court of 10

December 1969 Commission of the European Communities v French Republic

(Joined cases 6 and 11-69)81 gave the most compelling reason for this

assessment, which was then supported by the Commission. The Claimant would

like to ask the Commission if it has changed its mind. In its meeting on

2 September 2005 the Commission officials involved alleged that they could not

see any state aid with regard to the two export guarantees because they

78 See quotation in Nuclear Monitor, June 5, 2002 ( North American Edition) 79 see TVO press declaration of 08.01.2004 entitled “Year 2003 the best production year in the history of the Olkiluoto nuclear power plant - Construction licence application for the new plant unit submitted today” 80 www.COFACE.fr/_docs/gc2_04.pdf 81 [1969] ECR 523.


http://www.coface.fr/_docs/gc2_04.pdf


complied allegedly –what the Complainant disputes- with the OECD rules on

export guarantees. The existence of a state aid cannot be doubtful after the

Court’s judgement in 1969 which has been approved several times. Against the

arguments of the French Republic the Court ruled: “A preferential rediscount

rate for exports, granted by a state in favour only of national products exported

and for the purpose of helping them to compete in other Member States with

products originating in the latter, constitutes an aid within the meaning of

Article 92 the observance of which it is the Commission’s task to ensure.”82

The reason for this position is plain. A state export guarantee removes an

element of risk which the undertaking would have to bear – this and not the

costs to the state are relevant.83 There is another reason why these export

guarantees for intra-community trade are potentially violating EC state aid

rules and that is that in those secure markets they usually compete with

commercial export guarantee providers (whereas in the typical export guarantee

for a politically insecure trade, those providers do not compete). As former

Commissioner Van Miert put it: “Whether these agencies are public or private

raises in itself no problem. There is a problem, however, when public agencies

can benefit from state aids (guarantees, free reinsurance, exemption from taxes,

etc.) which private agencies are not able to obtain and therefore suffer from

distorted competition. The Commission's intention is to eliminate the distorted

effects of such aids with the aim of creating market conditions under which

private and public export credit agencies compete with each other on an equal

footing.”84 Unfortunately the current understanding in the Commission seems to

have gravitated away from this earlier opinion.85

114. The Complainant cannot understand why the Commission does not want

to comply with this clear ECJ judgment (besides being on of the first

infringement proceedings initiated by the Commission herself ever). Unlike the

Commission officials in the meeting of there might not be a requirement for

82 Ibid. para. 20. 83 A Evans, European Community Law of State Aid (Claredon: Oxford 1997), 32. 84 OJ 1993 C297/29. 85 See further Jonathan Wood, “Export Credit Insurance” 1994, 9(5) Journal of International Banking Law, 193, 195.



such state aid to be communicated to the Commission but that does not change

the character of the aid.

115. This position has repeatedly been confirmed by the Commission

herself.86 This is particularly the case where ‘poorly ranked’ undertakings are

enabled to obtain loans at market rates.87 This seems to be an enforcing factor

here. The whole financial package for the TVO reactor was influenced by the

provision of export guarantees. The Commission has repeatedly declared that

the state export guarantees are a particular concern where “the guarantee is

necessary for the survival of the company concerned.”88 This also seems to be

the case here – the Commission has thus for not investigated if the fix price, i.e.

the core of the purchase, could have been possible without the state export

guarantee.

116. The Commission seems to think that because an export guarantee

allegedly complies with OECD rules there is no illegal state aid. This view is

not without legal mistakes and the Complainant points out that there might be

the danger for the Commission of severely underusing its discretion to

investigate EC Treaty infringements or even committing a grave legal error. The

Commission alleges that all state export guarantees comply with the OECD

code. The Complainant has reason to believe that his might not be the case due

to the very high amount granted to the undertaking.

117. The Complainant is also of the view that the Commission herself does

not automatically rely on Council decisions implementing OECD Agreements.

In a recent decision the Commission herself explained: “Finally, the

Commission disagrees with the Netherlands that the aid should only be assessed

on the basis of Council decisions based on the OECD export credit rules. State

aid within the meaning of Article 87(1) of the Treaty to the shipbuilding

86 Communication of the Commission to the Member States pursuant to Article 93 (1) of the EC Treaty applying Articles 92 and 93 of the Treaty to short-term export- credit insurance (Text with EEA relevance), [1997] OJ C 281/4. 87 See Commission decision 94/694 ([1994] OJ L279/29) concerning capital increase and credit guarantees in favour of TAP. 88 Commission communication C 26/9 ([1995] OJ C 121/4 concerning Credit Lyonnaise and decision 95/547 ([1995] OJ L308/92 giving conditional approval to Credit Lyonnaise.



industry has necessarily to be assessed on the basis of the applicable rules that

the Commission imposed itself (the framework on State aid to shipbuilding) in

order to apply the derogations to the incompatibility of State aid as foreseen by

the Treaty.”89 In other words the Commission usually does not only blindly

assess the OECD rules but all EC law concerned.

118. This broader perspective is particularly important in the present case.

The OECD rules and the Council decision of 22 December 2000 replacing the

Decision of 4 April 1978 on the application of certain guidelines in the field of

officially supported export credits90 have to be assessed against the broader

framework of EC law. It should be recalled that short-term export insurances

and guarantees are already subject to fair competition between commercial

export guarantee and state export guarantee providers (see Communication of

the Commission to Member States amending the communication pursuant to

Article 93(1) of the EC Treaty applying Articles 92 and 93 of the Treaty to

short-term export-credit insurance (Text with EEA relevance)91). The

commercial provision of export credit products is also subject to EC law

(Council Directive 98/29/EC of 7 May 1998 on harmonisation of the main

provisions concerning export credit insurance for transactions with medium and

long-term cover92). However state export credit providers are not subject to the

rules of this directive. The main reason for these decisions is the possible

distortion of competition between producers of different Member states and of

competition between commercial and state providers.

119. The OECD rules and the corresponding Council decision are only

concerned with exports – indeed the Council decision itself is based on Article

132 ECT which specifically refers to “exports to third countries”. The

Complainant thus alleges that the Council decision is not applicable where, as in

the present case, no exports to third countries occur. Within the common market

there are no exports to third countries – it is questionable if the exchange of 89 2005/122/EC: Commission Decision of 30 June 2004 on the State aid which the Netherlands is planning to implement in favour of four shipyards to support six shipbuilding contracts (notified under document number C(2004) 2213) (Text with EEA relevance), [2005] OJ L 39/48. 90 [2001] OJ L 32/1. 91 Official Journal C 217, 02/08/2001 p. 2. 92 Official Journal L 148, 19/05/1998 p. 22.



goods within the Community can indeed be considered an export at all (see Part

Three – Community Policies – Title I – Free Movement of Goods, Articles 23

pp. ECT). The Complainant alleges that in the present case the Commission

committed a grave legal mistake by applying a Council decision which concerns

exports to state export guarantees which are provided purely within the Union

and its common market.

120. But even if the Council decision were applicable, it would have to be

interpreted in the light of the common market (if not the common market for the

elements of a nuclear facility – the decision should be considered with a view to

the common energy market). The purpose of an export guarantee is to cover

country risks. Per definition there are no country risks between the member

states in a common European market. This understanding is confirmed by an

economic analysis. Within a common market and indeed a European Union of

close political cooperation the risk of one member state versus another cannot

be assessed because with regard to most economic activities both member states

are bound by the same rules. This is even truer in the present field of nuclear

power where a specialised treaty instrument provides for the closest possible

cooperation. It also constitutes a prohibited discrimination on the grounds of

nationality (Article 12 ECT) because only companies from the Member state

who’s authority grants the export credit can enjoy such right. Indeed the

Complainant alleges that were the Commission to interpret the Council decision

otherwise she would violate Article 28 ECT because a state export guarantee

granted exclusively to a company in the territory of one Member state for the

export to another can be considered a measure having equivalent effect to a

quantitive restriction on imports because other companies from other member

states are effectively in economic terms barred from importing to that same

Member state. [CHECK.]

121. But the Council decision in itself poses also questions of legality. It just

annexes the OECD Agreement on export credits. This Agreement contains

special provisions for export credits for nuclear power plants (ANNEX II:

Sector Understanding on Export Credits for Nuclear Power Plant). This Annex

provides undue and unfair treatment for all exports related to nuclear power



plants. It is inconsistent with the fundamental principle of equal treatment which

has long been established in ECJ case law and is contained in Article 19 of the

Declaration on Fundamental Rights in the European Union which were

solemnly declared at the Nice Summit and which the Council in this decision

did not observe.

122. The special treatment of nuclear plants is also an inconsonance with

OECD Recommendation on Common Approaches on Environment and

Officially Supported Export Credits, which are will soon translate into a

Council decision,93 Art.2, to be seen in the fact that the export credit guarantee

in question does not reduce the potential for trade distortion neither does it

promote the level playing field. Also the obligation of prevention and mitigation

of adverse environmental impacts of the projects (Art.3) is not certainly being

achieved by awarding an unprecedented amount to a nuclear power plant

project, which is a priori classified as Category A, i.e. potential to have

significant adverse environmental aspects (Art.6) Objections have been raised in

the National Assembly of France (Yves Cochet) and in the Senate (Marie

Christine Blandin) as to the lack of transparency and publicity of the discussion

precedent to the decision on granting COFACE. The objections concerned also

the fact that Finland is in no way a developing or dangerous country and it

should be only Areva bearing the risk of possible delays and extra costs of the

project.94 It is to be noted that AREVA is the only company to be ever granted

an export credit guarantee for a contract with a buyer from EU Member State.

123. In conclusion it should be noted that export subsidies always and directly

affect competition in the market place between rival potential suppliers of goods

and services. Recognising their pernicious effects, the Commission, as the

guardian of competition under the Treaty, has always strictly condemned export

aid in intra-Community trade.95

93 Commission working document - Integrating environmental considerations into other policy areas- a stocktaking of the Cardiff process, COM/2004/0394 final. 94 Marie Christine Blandin: (www.senat.f/senateurs/blandine_marie_christine/questions/questions_ectites.html#COFACE), Yves Cochet : (www.yvescochet.net) 95 In its seventh report on competition policy (1977), point 242, the Commission stated that export aids in intra-Community trade 'cannot qualify for derogation whatever their intensity, form, grounds or purpose’.


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124. Already in 1977 the Commission made it undoubtedly clear that export

aid in intra-Community trade “cannot qualify for derogation whatever their

intensity, form, grounds or purpose96. This has since been common ruling, as

outlined especially in the 1997 Communication of the Commission to the

Member States pursuant to Article 93 (1) of the EC Treaty applying Articles 92

and 93 of the Treaty to short-term export- credit insurance.97

125. According to the European Commission the purpose of the 1997

communication is to remove distortions of competition due to State aid in the

sector of export-credit insurance, where there is competition between public or

publicly supported export-credit insurers and private export-credit insurers.98

126. In particular, the sector directly concerned by such competition, and

therefore by the 1997 communication, is that of export-credit insurance relating

to short-term export-credit risks on trade within the Community and with

countries outside it. These risks are defined in the 1997 communication as so-

called “marketable risks”. Marketable risks are those risks which may not be

covered by export-credit insurers with the support of the State. Only those risks

which are not marketable can be publicly supported.

127. First of all aid given under this scheme can only be given for risk

assurance which are not marketable.

128. Concluding from these principles the present support to the public

company AREVA by COFACE as “Garantie délivrée pour le compte de l’État”

constitutes state aid.

96 7th Commission report on competition policy (1977), point 242 97 Official Journal C 281 , 17/09/1997 P. 0004 - 0010 98 Communication of the Commission to Member States amending the communication pursuant to Article 93(1) of the EC Treaty applying Articles 92 and 93 of the Treaty to short-term export credit Insurance (2001/C 217/02), Official Journal of the European Communities C 217/2, 2.8.2001,



129. It is from public budget to a public company, having as consequence that

one state company can help itself by way of credit insurance from state budget

and thus being the worst case scenario for non-market behaviour.

130. In the case of TVO and Finland the conditions for non marketable risks

are clearly not fulfilled. COFACE was not allowed to give this guarantee to a

French public company AREVA for its venture with TVO in Finland for

delivery and installation of the specific EPR reactor.

131. The whole transaction was not notified to the European Commission.

Conclusion Again since state aid has been given but not notified we formally ask the European

commission for infringement procedures and to demand the immediate dissolution of the

guarantee transaction.

Swedish State guarantee

132. Again, we also formally ask the European Commission whether SEK,

the Swedish Export Credit Agency gave similar support to one, several or all

partners in this transaction involved. The same considerations that apply to the

French state export guarantee also apply here and should be considered mutatis

mutandis.

133. FRAMATOME ANP Siemens may have together with TVO or in

similar constellations asked for support by SEK, (AB Svensk Exportkredit), the

Swedish Export Credit Agency.

134. As already mentioned it is a fact that Sweden gave via SEK in 2003

‘substantial financial commitment for the new nuclear power plant to be built in



Finland by Teollisuuden Voima Oy (TVO)”.99 Since 2003 the Kingdom of

Sweden is 100 % owner of SEK100.

Combined influence of the different support schemes

135. The Complainant alleges that only the combination of these different

state aids made the offer of a fix price for the EPR possible and thus indirectly

provided one single state aid to TVO. The Commission should carefully

investigate if due to the fix price TVO was the final recipient of the alleged aid.

The Complainant reserves the right to challenge this combination in court

because it will by 2009 result in a significant distortion of the trans-European

energy market.

136. State aid in the Community is beginning to adopt a more market oriented

approach. It would be entirely out of sync with the current discussions if with

regard to this transaction the Commission chose a myopic view on the relevant

market. The market affected by the state aids here is not only the market for the

construction of nuclear power plants (or power plants in general) it is the trans-

European energy market. Only the broadest possible market definition fully

assesses the extent to which the combination of the different aid schemes distort

intra-Community competition with regard to this important sector.

137. The common effect of the individual aid schemes but also and more

significantly of their specific combination lead to a distortion of competition

and had a detriment effect on trade between Member States. Teollisuuden

Voima Oy offers its goods and services in competition with other European

electricity generating corporations outside Finland and inside Finland.

Therefore, any state aid given to TVO will distort the competition and affect

trade between Member States. As in order to construct and operate nuclear

power plant, TVO must be able to find financial resources and obtain

99 See SEK Annual report 2003, page 18, under the chapter heading ‘sek involved in many environment and energy projects” 100 see SEK “Analysis -Swedish Export Credit Corporation SWEDEN, Europe/M.East/Africa ,November 2004”



advantages under the same normal market conditions to which other individuals

on the market are subjected to.

138. The distortion of competition which results from this state aid allows

TVO to reflect the low construction costs into the price of electricity produced

from it. EU common electricity market is already distorted by many subsidies

and incentives for nuclear power such as EURATOM loans, state guarantees,

export credits etc. The aim of the Directives 2001/77/EC and Directive 2003/54

is to reach level playing field for all kinds of energy generators. Continuous

state aids for nuclear power represents a serious obstacle to achieving this aim.

The Community level of the potential distortion is further enhanced by the fact

that the aid is of an international nature, i.e. German government supporting

Finnish developer.

139. The result of the damaging distortion of competition through illegal state

aid can already be felt by the Complainant’s membership. The competitive

situation has already been negatively influenced to the detriment of energy

producers relying on RES. The Complainant expect this situation to become

even more severe once TVO reactor connects to the public grid in 2009. The

Commission is underusing its discretion in infingment procedures if it

completely disregards the influence of the illegal state aid on the energy market.

Fixed Price contract and market distortion according to Article 82 ECT

140. We formally ask the European Commission to investigate if the

transaction does not constitute predatory pricing in the sense of Article 82 ECT,

done by market dominating companies and by means of a “dumping” fixed

price offer. This is particularly important should the Commission come to the

conclusion that no state aid exists. If the state aid granted did not distort

competition, then the only conclusion that the Complainant can draw are illegal

activities of the parties and indeed the Member state authorities involved.



141. TVO concluded a fixed price contract with Framatome-ANP for EUR 3

billion. The cost estimate includes the plant delivery, site construction work,

supporting services, project management and interests during the construction

work for which TVO is responsible.101 Framatome-ANP is likely to have to pay

the exceeding costs which are expected to occur due to ambitious timeline,

necessary additional safety improvements requested by the Finnish authorities,

material costs increase. Significant exceeding of total cost is expected due to

rising price of steel alone.102 When the price was debated at the Finnish

parliament in spring 2002 the figures mentioned for the new atomic plant were

1,7 – 2,5 billion euros.

Standard & Poor´s states already the price of 3.2 billion EUR, according to 2003

figures. Framatome’s CEO, Ralf Guldner admitted, that the situation is troublesome for

his company, given the rising prices of raw materials. The issue of a fixed price is

causing problems within the industry itself. German utilities have told Electricite de

France that its asking price for a share in an EPR to be built in France is too high. They

calculated that the EDF’s asking price represents cost per installed megawatt of about

25% higher than the price charged to TVO for building Olkiluoto3.103 This dispute is

continuing up to date with insistence of EDF that they need 25 % higher prices than in

the TVO deal, even though the German bidders involved in the negotiations around the

new Nuclear Reactor Project in Flamanville/France underline that “ EDF has got to

understand that the first-of-a-series argument doesn't really stand

up anymore since the reactor is going to have a world market."104

142. The IEA in its report from February 2004 urged the Finnish government

to also consider another option for cutting climate change emissions in case the

EPR will not be ready in 2009 as planned. IEA emphasised that Olkiluoto 3

will be the first atomic reactor ever built in a deregulated market which can

cause unforeseen problems. The report also stressed that all over the world

atomic energy projects have exceeded the calculations planned and they have

101 www.tvo.fi 102 Tekniika&Talous magazine, 19.5.2004 103 Platts nuclear news Flashes, May 25, 2004 104 Nucleonics Week, Volume 46 / Number 46 / November 17, 2005 Copyright Platts 2005 A Division of The McGraw-Hill Companies, Inc.,



not been able to keep to the planned building schedules.105 The TVO’s company

officials admit themselves that the construction time schedule „is tight106“.

143. The expected price per MWh for the electricity produced is not available

to the public, but it is estimated by the partners in this transaction to be less than

25 EUR/MWh.107

144. TVO’s estimated cost of the new power unit output was 2.2

eurocents/kWh, which is in serious conflict with OECD assessment made in

1998 estimating the cost up to 3.1eurocents/kWh.108

145. The following facts further increase to the circumstance that the whole

transaction is economically not viable for Framatome ANP but a risky venture,

based on the urgency to have a European show case at all cost for further

expansion of their EPR reactor, in Europe and elsewhere, especially in China

thus greatly distorting the European energy market in hindering other

competitors especially from other energy sources to produce and supply on the

Finnish market.

146. Licensing procedure in Finland is in hands of Radiation and Nuclear

Safety Authority (STUK) and governed by the Nuclear Energy Act and

Decree. The requirements for granting the construction license are prescribed in

the sections 18 and 19 of the Nuclear Energy Act, the requirements for granting

operation license are prescribed in the section 20 of the Act109. The licenses are

granted by the Government and STUK makes a statement on the application for

the licenses and attaches its safety statements. A supporting statement of the

municipality intended to be the site of the planned nuclear facility must is also a

prerequisite for an approving decision in principle.110 The operation license is

granted only for a fixed term, usually for ten years. In its preliminary safety

105 http://library.iea.org/dbtw-wpd/textbase/npsum/finland2003SUM.pdf (downloaded) 106 http://www.tvo.fi/370.htm 107 www.olkiluoto.info108 http://www.antenna.nl/wise/587/5514.html 109 http://www.stuk.fi/saannosto/19870990e.html 110 http://www.stuk.fi/english/npp/licences.html110 Licensing procedure chart and the list of relevant regulation, viz Attachement No.1


http://library.iea.org/dbtw-wpd/textbase/npsum/finland2003SUM.pdf

http://www.olkiluoto.info/


assessment, STUK states that “none of the plants concepts in TVO’s

application do, as such, meet all Finnish safety requirements...the necessary

design alterations could be made during the construction license application

phase....the structural designs of all the plant concepts would require some

modification”. Also, STUK implies that TVO is not capable of running the plant

at its status quo by suggesting that “...TVO must develop its organisation,

working practices and know-how during the possible construction phase to take

responsibility for safety planning for the facilities entire operating life.” The

supplementary safety assessment requires provisions to be made for an

impacting large passenger or military plane. 111

147. The preliminary safety assessment by STUK was concluded as

following: “No such insuperable principal safety technical barriers have been

found that would prevent accepting this reactor type in Finland. However there

are several planning details that need to be further developed in things like the

planning of the reactor core, the emergency boroning of the reactor, wading the

containment building, the performance of the reactor’s emergency cooling

systems, recycling arrangements of the emergency cooling and controlling of a

serious accident. Cooling of a melted core, which relates to controlling a serious

accident, is very complex in the EPR and that’s why it is difficult to prove that

it would work in the case of a serious accident.”112

148. In October 2003 when TVO had announced that the EPR is their main

candidate, the head of the department of nuclear power plant control in STUK,

Mr. Juhani Hyvärinen described the needs for changes as following:

- One of the biggest changes is needed to the system that prevents

significant releases in the „worst case“ accident, meaning the melting of

the reactor core or other serious damages to the core. The system the

EPR now has is a kind of a „catcher“ in the bottom of the containment,

which can stand heat and catches and cools the core in case of melting.

According to Mr Hyvärinen, the basic idea is good but the realisation

http://www.stuk.fi/english/npp/5th_npp.html111 www.stuk.fi112 2 . The full text of the assessment can be found at http://www.stuk.fi/english/npp/5th_npp.html


http://www.stuk.fi/


“clumsy” and it looks like it has to be changed. These changes will

require also changes in the containment.

- There is a water spraying system to cool the fuel in case of a melt down

accident. The capacity of this system must be doubled.

- The cladding tube needs steel „panels“ in addition to the originally

planned ferro - concrete to make the cladding tube dense enough.

- STUK requires bigger systems for stopping the chain reaction and

cooling the reactor in case of an emergency.

- In addition to these, STUK considers that the current safety solutions are

not good enough to stand a terrorist attack with a passenger aircraft.113

149. It is also noteworthy, that after the number of accidents in the existing

Olkiluoto plants has risen unusually in 2003, STUK has ordered TVO to

develop a plan to improve safety culture.

150. As to the process of licensing, the public in Finland has not been given a

chance to participate in the project after the parliament vote. They had to hand

out their statements after it was made clear by STUK that the EPR model as

such would not meet the Finnish safety criteria, but before it was known how

Framatome ANP is going to meet the challenges.114

151. After TVO submitted its construction application on January 8, 2004, the

Finnish Ministry of Trade and Industry received 70 opinions and statements

regarding this application, most of them from abroad. No deadline for STUK

statement and related safety assessment has been set, but it is expected by the

end of this year. The Government is expected to be deciding on the construction

license in the beginning of 2005.115

Conclusion

152. We therefore formally ask the European Commission to investigate in

infringement on the bases of Article 82 ECT and we reserve the right to further

113 http://www.greenpeace.se/files/2500-2599/file_2552.pdf , page 2 114 www.olkiluoto.info115 http://www.valtioneuvosto.fi/vn/liston/base.lsp?r=82993&k=en&old=754


http://www.olkiluoto.info/


submission concerning questions especially related to market dominance and we

ask the European Commission to open the respective infringement procedures.

Other financing support to the project Supplier credits and bilateral loans

153. We also have information on further financial resources in this

transaction where we ask the Commission for investigation in order to see

whether state aid may be involved:

154. In addition to the syndicated loan, TVO will also have access to financial

resources through suppliers’ credit of 587 million EUR maturing between 2009-

2021 and through bilateral loans totalling 550 million EUR maturing between

2009-2013. Funds from the syndicated credit and most bilateral loans may be

used for general corporate purposes.116

155. Fortum Oy will invest EUR 185 million, entitling to approximately 400

MW of the new plant’s capacity.

156. TVO states, that in January 2004, a total of EUR 180 million was taken

out as shareholder loans from corporations which have subscribed the new

series B shares issued in December. Total price of this issue was EUR 16

million and new shares will be issued during 2004-2009 amounting to EUR 712

million to cover internal financing share of Olkiluoto 3.117

157. There are 61 entities taking part in the financing and the companies will

get their shares of the electricity produced. About 40% of the electricity is for

general use, the rest is for the industry.

2.standardandpoors.com, under section “Credit Ratings >> Energy116 www.standardandpoors.com117 http://www.tvo.fi/uploads/TVO%20Vuosik%20Eng2003(1).pdf


http://www.standardandpoors.com/


158. TVO also receives EUR 549 million loans from the State Nuclear Waste

Management Fund in 2003. 118 The Fund is governed by Section 38 of Nuclear

Energy Act 990/87. It is independent from the state budget, controlled by

Ministry of Trade. Loans from the Fund are regulated by Section 52, which also

states that „The interest charged for loans from the Fund, granted under

subsection 1 or 3, shall be a minimum of the base rate of the Bank of Finland

increased by two percentage points.“ So far, TVO has assets of EUR 760

million in this Fund.

Infringement of EC Public Procurement Rules

159. The Complainant notes with dismay that the Commission did not

investigate the public procurement violations. All Commission officials

involved were all taken by surprise when asked about the public procurement

issues in the Meeting on 2 September 2005. This is another violation of good

administrative procedure and the Complainant reserves its right to ask the

Ombudman for an intervention in the current case.

160. In connection with the tendering and purchase of the Nuclear Reactor

from Framatome/ANP-Siemens there are several factors which point towards

infringement of EC procurement rules in Finland on different levels. We

formally ask the European Commission to investigate.

Violation of the Public Procurement Directive 93/38/EC

Obligation to run public procurement procedure for electricity received from Olkiluoto 3

161. According to our knowledge, public authorities such as the city of

Helsinki or other public authorities engaged themselves in this structure to

purchase electricity from Olkiluoto 3 for a specific price. Therefore the question

arises whether the public authorities should have been obliged to organise

public procurement for the supply of electricity before agreeing to receive

electricity from the new nuclear power plant.

118 http://www.tvo.fi/uploads/Vuosikertomus%202003%20Eng(2).pdf, page 12


http://www.tvo.fi/uploads/Vuosikertomus%202003%20Eng(2).pdf


162. As already described above the public shareholders of TVO are: Fortum

Heat and Power (26.6%), Oy Mankala Ab (8.1%), Etelä Pohjanmann (6.5%)

and Kemira Oy (1.9%). But there are further 57 entities taking part in the

financing and will get their shares of the electricity produced. Between them are

public entities.119

163. The A series shares entitle the shareholders to the electricity generated in

existing Olkiluoto 1 and Olkiluoto 2 nuclear power plants, the B series shares

will entitle shareholders to electricity from the new nuclear power plant and the

C series shares entitle shareholders to the share of electricity of Meri-Pori coal-

fired power plant. This new division of shares to A, B and C series is effective

from December 2003. The companies which subscribed B shares also provided

shareholder loan to TVO amounting to EUR 180 million. Total price of B

shares issue was EUR 16 million and new shares will be issued during 2004-

2009 amounting to EUR 712 million to cover internal financing share of

Olkiluoto 3. All public authorities own shares of A, B and also C series.120

119 Electricity companies participating in Oliluoto 3 are: Alajärven Sähkö Oy, Esse Elektro Kraft Ab, Etelä-Pohjanmaan Voima Oy, Etelä-Savon Energia Oy, Fortum Power and Heat Oy ,Graninge Energia Oy, Haminan Energia Oy, Helsikni kaupunki, Hiirikosken Energia Oy, Iin Energia Oy, Imatran Seudun Sähkö Oy, Jylhän Sähköosuuskunta, Järviseudun Sähkövoiman Kuntayhtymä,Kaakon Energia Oy, Kemira Oyj, Keravan Energia Oy, Keskusosuuskunta Oulun Seudun Sähkö, Kokemäen Sähkö Oy, Kokkolan kaupunki/energialaitos,Korpelan Voima kuntayhtymä, Kruunupyyn kunta/sähkölaitos, KSS Energia Oy, Kumera Oy, Kymenlaakson Sähkö Oy, Kumppivoima Tuotanto Oy, Köyliö Säkylän Sähkö, Lahti Energia Oy, Laihian Sähkö Oy, Lammaisten Energia Oy, Lankoksen Sähkö Oy, Lehtimäen Sähkö Oy, Leppäkosken Sähkö Oy, Oy Metsä-Botnia,M-Real Oy, Myllykoski Oyj, Mäntsälän Sähkö Oy, Nurmijärven Sähkö Oy, Oulun kaupunki/Oulun Energia,Outokumpu Oyj, Paneliakosken Voim Oy, Pietarsaaren kaupunki/energialaitos,Pohjolan Voima Oy, Porin kaupunki, Porvoon Energia Oy, Pohjois-Karjalan Sähkö Oy, Päijät-Hämeen Voima Oy, Rauman Energia Oy, Rautaruukki Oyj, Rovakaira Oy, Sallila Energia Oy, Savon Voima Oy (Atro), Seinäjoen Energia Oy,Stora-Enso, Suur-Savon Sähkö Oy, Tornionlaakson Sähkö Oy, UPM-Kymmene Oyj, Uusikaarlepyyn kaupunki/liikelaitos, Vaasan Sähkö Oy, Vantaan Energia Oy, Vatajankosken Sähkö Oy, Vetelin Sähkölaitos, Vimpelin Voima Oy, Ääneseudun Energia Oy,Pohjolan Voima

120 http://www.tvo.fi/uploads/Vuosikertomus%202003%20Eng(2).pdf, page 6


http://www.tvo.fi/uploads/Vuosikertomus%202003%20Eng(2).pdf


164. The shareholders provide TVO with EUR 180 million loans and also

they agreed to buy TVO’s shares to be issued during 2004-2009 for the amount

of EUR 712 million.

165. Directive 93/36/EEC of 14 June 1993 coordinates procedures for the

award of public supply contracts, which is transposed by Finish Law on Public

Procurement 1505/1992. The Finnish Decree on public supply contracts

concerning the procurement of goods and services, and on works contracts

exceeding given threshold values (380/1998) implements the above Directive.

The Finnish Decree on the procurement procedures of entities operating in the

water, energy, transport and telecommunications sectors (381/1998) implements

the Directive 93/38/EEC coordinating the procurement procedures of entities

operating in the water, energy, transport and telecommunication sectors..

166. All those public authorities which do fall under the scope of Directive

93/36/EEC are obliged to public procurement procedure with regards to their

supply of electricity from TVO and could not engage themselves in long term

supply agreements with TVO without public tendering procedure. We therefore

formally ask the Commission to investigate if public partners on the Finnish

side of the transaction would fall within the discretion of the above Public

Procurement Rules concerning public entities involved.

Violation of Public Procurement Rules by TVO for the Purchase of the new Nuclear Power Station

167. As outlined in detail below TVO had to follow all relevant Public

Procurement Rules. We formally ask the European Commission to investigate

how the procurement proceeded in detail and to evaluate if public procurement

laws were fully observed.

168. In case of non-appliance we ask the Commission to order a new

procurement procedure.



169. We ask for infringement procedures concerning the violation of public

procurement rules by TVO when knowing of predatory fixed price scheme

proposed by Framatome/ANP/Siemens.



TVO tender characteristics

170. The tender was launched by TVO in October 2002 with deadline for

March 2003. TVO requested bids for a light water plant unit with either a

boiling water or pressurised water reactor with an electric power capacity of

1.000 to 1.6000 MW.121 Tenders have been submitted to TVO by three vendors

and for four designs: Framatome ANP: European Pressurised Water Reactor

(EPR) of 1600MWe and SWE-1000 of 1200MWe, General Electrics: European

Simplified Boiling Water Reactor (ESBWR) of 1390MWE and Russian

Atomstoryexport: VVER-91/99 of 1060MWe.

171. Since the considerate size of the new nuclear power plant and in view of

the non-discriminatory ruling of Directive 2003/54/EC of the European

Parliament and of the Council of 26 June 2003 concerning common rules for the

internal market in electricity and repealing Directive 96/92/EC consistently asks

for removal of various barriers and asks Member States to refrain from

discrimination. TVO was in our view obliged to ask for state aid clearance and

was obliged to reject the offer of Framatome ANP .

Violation of the Public Procurement Directive 93/38/EC by TVO

172. Directive 93/38/EEC coordinating the procurement procedures of entities

operating in the water, energy, transport and telecommunications sector

(„Directive“) applies to TVO.

173. This maybe questionable since Art. 2 paragraph 1 (a) of the Directive

provides that this Directive shall apply to contracting entities which are public

authorities or public undertakings.

174. TVO cannot be considered as a “public undertaking“ since public

authorities may not exercise directly or indirectly a dominant influence, nor can

such influence be presumed. The ownership structure of TVO shows that it is

121 http://www.tvo.fi/301.htm





56.9% private owned and 43.1% public owned company. There is also a number

of public authorities involved in the private investor’s shareholding structure.

However, the public authorities do not hold the majority of TVO’s capital, nor

its voting rights, neither can they appoint more than half of TVO’s

administrative, managerial or supervisory body (Art.1, para 2).

175. On the other hand Art. 2. paragraph 1 (b) of the Directive states that it

should apply to “contracting authorities” which when they are not public

authorities or public undertakings, have as one of their activities any of those

referred to in paragraph 2 or any combination thereof and operate on the basis

of special or exclusive rights granted by a competent authority of e Member

State.“

176. Art.2 paragraph 3 than states that a contracting entity shall be considered

to enjoy special or exclusive rights in particular where - in case of paragraph 2

(a)- the entity supplies with drinking water, electricity, gas or heat a network

which is itself operated by an entity enjoying special or exclusive rights granted

by a competent authority of the Member State concerned.

177. This means that one has to evaluate if the Finnish transmission system is

such a network enjoying special or exclusive rights granted by the Finnish state.

Finland’s national transmission system operator is Fingrid Oy122. It was created

by Government in November 1996 when the Government bought the electricity

transmission assets of IVO (state-owned) and PVO in the two then existing

transmission networks. It now owns more than 99% of the grid as well as all

major interconnections. It has the following shareholders: Finland : 12%, PVO:

25% (PVO holds 56,8% of TVO) Fortum : 25% (Fortum is a state company,

which holds 26,6% of TVO), Institutional owners: 38%. The following voting

rights are given:

Finland: 16.7%

PVO: 33.3%

Fortum: 33.3%

122 www.fingrid.fi



Institutional owners: 16.7%

178. Overall, the Finnish state holds 37% of shares and 50% of votes in

Fingrid Oy123.

179. According to Section 4 of the Finnish Electricity Market Act 386/1995

and Decree 518/1999 any interested entity can construct a power line, subject to

a licence issued by the Finnish Electricity Market Authority. Thus, Fingrid does

not have a statutory monopoly on transmission facilities.

180. Fingrid sets its own transmission prices and functions as common carrier

– it has the obligation of carrying the load of every potential customer,

connecting all generation installations and duty to extend the infrastructure.

Fingrid also owns 20% of Nord Pool, the Nordic interstate transmission system.

But it was the Finnish state which bought the network from PVO and IVO in

1996 for FM 7 billion to resell consequently Fingid’s shares on the market,

while still holding 50% of votes.

181. In our view this initial investment, which was the largest financial

operation on Finland’s domestic market ever carried out, constitutes some

special position of Fingrid. This links it to the direct applicability of

procurement rules.

182. Therefore TVO was obliged to follow Public Procurement rules.

Violation of procurement rules by TVO due to non enquiry into state aid schemes

183. According to our investigation and the above fact presentation TVO was

fully aware of the above predatory pricing scheme of Framatome/ANP and also

of the COFACE guarantee. Therefore TVO, knowing that it was done by public

support, TVO was obliged to demand of the applicant in the tendering process

to ask if state support schemes were notified to the European Commission. The

tendering agency should ask in cases of “abnormally low” offers and according 123 IEA report,1999, saved, ownership structures printed into file



to Art. 34 Directive 93/38/EEC coordinating the procurement procedures of

entities operating in the water, energy, transport and telecommunications sector

which provides: „Contracting entities may reject tenders which are abnormally

low owing to the receipt of State aid only if they have consulted the tenderer

and if the tenderer has been unable to show that the aid in question has been

notified to the Commission…“.

184. TVO was aware that Siemens and AREVA were asking for state

guarantees. This was published in the press at least and broadly concerning

details on the question of Siemens in negotiating with HERMES.

185. Already preamble, recital 9 of Directive 93/38/EEC states that „…to

ensure a real opening-up of the market and a fair balance in the application of

procurement rules in these sectors requires that the entities to be covered must

be identified on a different basis than by reference to their legal status.“

186. Directive 93/38/EEC, Art. 4 states: „1. When awarding supply, works or

service contracts, or organising design contests, the contracting entities shall

apply procedures which are adapted to the provision of this Directive. 2.

Contracting entities shall ensure that there is no discrimination between

different suppliers, contractors or service providers“.

187. Art.30 provides: “2. The system, (…), shall operate on the basis of

objective criteria and rules to be established by the contracting entity….“

“5. In reaching their decision as to qualification or when the criteria and rules are

being updated, contracting entities may not:

- impose conditions of an administrative, technical or financial nature on

some suppliers, contractors or service providers which are not imposed

on others,…“

188. In our opinion, TVO would have needed to enquire whether the above

received COFACE guarantee had been notified to the European Commission

and to reject the offer since no such notification was submitted to the European

Commission. Since the considerate size of the new nuclear power plant and in

view of the non-discriminatory ruling of Directive 2003/54/EC TVO was in our




view obliged to ask for state aid clearance and was obliged to reject the offer of

Framatome ANP. Concerning all the related facts around the fixed-price offer

and concerning the probably higher costs to be expected we refer to Par. 120 to

132 of this complaint.

189. Again we ask the European Commission to open infringement

procedures.

Infringement of EEA Agreement

190. We reserve the right for further submission but ask the Commission to

enquire if the AGREEMENT ON THE EUROPEAN ECONOMIC AREA

(EEA Agreement) and especially Chapter Two “State Aid” and Article 61(1) of

the EEA Agreement are not violated and subsequently to also open infringement

procedures. This is a necessary examination since EEA Member state Norway

is one of the direct neighbours to Finland and has import links to Finland as

shown above under par. 16. The same considerations that apply in the

Community context with regard to the OECD Agreement are also true with

regard to EFTA. Particularly since the only countries bound by EFTA

competition rules are Lichtenstein, Norway and Iceland. These countries share a

common understanding on discrimination and market distortion.



191. Article 61 (1) asks as following:

“Save as otherwise provided in this Agreement, any aid granted by EC Member States,

EFTA States or through State resources in any form whatsoever which distorts or

threatens to distort competition by favouring certain undertakings or the production

of certain goods shall, in so far as it affects trade between Contracting Parties, be

incompatible with the functioning of this Agreement.”

We suggest investigating under considering the above arguments on state aid violation in this

EEA investigation procedure.

Formal legal demand

192. We ask the European Commission to open formal main procedure on all above

grounds for violation of EC law.

193. We ask to receive reasoned interim decisions in writing concerning all above

complaint points.

194. We repeat that so far only DG Comp was reacting to this complaint concerning

the state aid parts (CP238/04) . We had a constructive discussion with DG COMP and

this adjusted complaint gives a thorough reflection and reaction to the arguments

exchanged with DG Comp during meeting.

195. We did not receive any acknowledgement of any of the other services of the

Commission which are obliged to evaluate our complaint.

196. We underline necessity to receive these acknowledgements in due time and

repeat that our complaint was introduced almost one year ago and the question of non-

action procedure against the European Commission arises.

Dr. Dörte Fouquet Rechtsanwältin 16th of November 2005


european commission secretariat general brussels, 16th of

Documents