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Document 52024AS106107

State Aid — Belgium – State aid SA.106107 (2024/N) — Lifetime extension of two nuclear reactors (Doel 4 and Tihange 3) – Invitation to submit comments pursuant to Article 108(2) of the Treaty on the Functioning of the European Union.

C/2024/5320

OJ C, C/2024/4921, 8.8.2024, ELI: http://data.europa.eu/eli/C/2024/4921/oj (BG, ES, CS, DA, DE, ET, EL, EN, FR, GA, HR, IT, LV, LT, HU, MT, NL, PL, PT, RO, SK, SL, FI, SV)

ELI: http://data.europa.eu/eli/C/2024/4921/oj

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C/2024/4921

8.8.2024

STATE AID — BELGIUM

State aid SA.106107 (2024/N) — Lifetime extension of two nuclear reactors (Doel 4 and Tihange 3)

Invitation to submit comments pursuant to Article 108(2) of the Treaty on the Functioning of the European Union.

(Text with EEA relevance)

(C/2024/4921)

By means of the letter dated 22 July 2024 reproduced in the authentic language on the pages following this summary, the Commission notified Belgium of its decision to initiate the procedure laid down in Article 108(2) of the Treaty on the Functioning of the European Union concerning the abovementioned aid.

Interested parties may submit their comments on the aid within one month of the date of publication of this summary and the following letter, to:

European Commission,

Directorate-General Competition

State Aid Greffe

1049 Bruxelles/Brussel

BELGIQUE/BELGIË

Stateaidgreffe@ec.europa.eu

These comments will be communicated to Belgium. Confidential treatment of the identity of the interested party submitting the comments and/or of parts of the comments submitted may be requested in writing, stating the reasons for the request.


TEXT OF SUMMARY

Procedure

Belgium started pre-notification contacts in January 2023. Several meetings were organised with the Belgian authorities and several documents were exchanged while the Belgian State made progress on the negotiations with the parties. Eventually, Belgium notified the measure on 21 June 2024.

Description of the aid

In the context of the 2022 energy crisis and the war in Ukraine, as a measure to reduce Belgium’s dependency on fossil fuels and to contribute to security of supply, the Belgian government decided to extend the lifetime of two nuclear reactors (Doel 4 and Tihange 3) for ten years. The two nuclear reactors, of which Electrabel, a subsidiary of Engie, is the majority owner and sole operator, were planned to be shut down in 2025, following the 2003 Law on the nuclear phase-out in Belgium. The other (minority) owner of the two nuclear plants is Luminus, a subsidiary of EDF.

The lifetime extension of the two nuclear reactors increases Engie’s risk profile and requires Engie to modify its business strategy. The Belgian government, Engie and Electrabel therefore decided to put in place a partnership on the management of the extended nuclear activities in Belgium. On 13 December 2023, the Belgian government, Engie and Electrabel signed a set of agreements covering all aspects of the partnership, with a view to restarting the two reactors by 1 November 2025, following works necessary to extend their lifetime.

The agreement, which is subject to a standstill clause in line with State aid rules, includes a few interventions, which can be grouped in three main components:

Component 1

Financial and structural arrangements, including

Pre-funding of Electrabel’s costs and expenses for the development activities until all required legislative changes have entered into force, with the objective to come to an eventual cost-sharing on a 50/50 basis.

The creation of a joint-venture (‘JV’), BE-NUC, owned 50/50 by the Belgian State and Electrabel, with equal participation (through a capital increase) and decision-making authority. Both, the Belgian State and Electrabel will provide funding for the JV. BE-NUC will not become a nuclear operator: Electrabel is and will remain the sole operator of the two nuclear reactors through an Operations and Maintenance (‘O&M’) Agreement, including control rights of BE-NUC over the operating costs. Electrabel will also issue to BE-NUC a shareholder loan (the ‘Electrabel Shareholder Loan’) and so will the Belgian government (the ‘Belgian Government Shareholder Loan’) on pari passu terms to finance any expense contemplated by the shareholder’s agreement.

Various financial support mechanisms, including a working capital facility (‘WCF’) and SDC loans, a minimum OPEX and capital payment (‘MOCP’), and a two-way contract for difference (‘CfD’) in order to make sure that the JV and Luminus (in their capacity as co-owners of the reactors and of the electricity produced) receive sufficient income from the power generation to invest in and operate the reactors and to make an appropriate financial return (target rate of return of 7 %), while reducing their market and operational risks and transferring any revenue which is not necessary to attain this objective to the Belgian State.

The set-up of an Energy Management Services Agreement (‘EMSA’) with a third party or an Engie entity, which will act as an agent for BE-NUC to sell the electricity output on the wholesale electricity market.

Component 2

Transfer of liabilities concerning nuclear waste, spent fuel and decommissioning

A cap on the liability of producers of radioactive waste resulting from the production of electricity through nuclear energy in order to reduce uncertainty regarding the cost of nuclear waste and spent fuel in the future, through the payment of a lumpsum amount of EUR 15 billion by the nuclear operator.

Transfer of increased decommissioning liabilities of all Belgian nuclear reactors to the Belgian State, as far as they are resulting from the lifetime extension and can be proven by Electrabel.

Component 3

Legal protections

Provisions on legal protections, which define the risk-sharing in the event of future legislative changes, specifically concerning nuclear operators in Belgium or Electrabel’s nuclear activities and having a negative impact on the material terms of the transaction.

The ultimate beneficiaries of the measures are Engie, including its subsidiary Electrabel, and EDF, including its subsidiaries Luminus and EDF Belgium.

The agreement brought forward a set of legal acts which implement the transaction between Engie and the Belgian State, including:

an amendment of the Nuclear Phase-Out Law of 2003,

a law to guarantee security of supply in the energy sector and reforming the nuclear energy sector (‘Phoenix Law’),

a law on the creation, organisation and operation of the administrative service with autonomous accounting and various provisions relating to the exchange of information (‘BE-WATT Law’), and

a law on the creation, organisation and operation of a public institution whose purpose is to take over the financial responsibility for certain nuclear liabilities ‘Hedera Law’).

The costs of the measures will be financed through the State budget, including the potential paybacks from the two-sided CfD.

Assessment

Existence of aid

The Commission considers that all components of the notified measure included in the agreements between the Belgian State, Electrabel and Engie are part of one single intervention, since they are all related to the same event, i.e., the lifetime extension of the two nuclear reactors. The agreement on the transfer of nuclear waste, spent fuel and decommissioning liabilities, as well as the legal protections were also part of the requests by Engie to agree on the lifetime extension and are therefore an inherent part to the conclusion of the overall deal. Since the two-way CfD establishes a stable revenue stream for the production of electricity from nuclear sources, thereby shielding the plants’ owners from market risks, and since the various financial support mechanisms mentioned above shield the plants’ owners from a share of operational risks, a selective advantage is provided to Electrabel and Luminus, as co-owners of the nuclear reactors. by means of State resources, which constitute State aid.

Incentive effect of the aid

Before Belgium’s decision to extend the lifetime of the two nuclear reactors in 2022, Engie had already announced its plans to leave the nuclear sector in Belgium after 2025, and was initially hesitant to accept the lifetime extension, claiming that nuclear energy had become too expensive and too risky. Therefore, all components of the notified measure were required to have Engie agree to continue the operation of the two LTO Units. The Commission therefore considers, at this stage, that it is plausible that the notified measures have an incentive effect on Engie and Electrabel.

Compliance with relevant EU Laws

The measure was notified to the Commission under the TFEU and under the Euratom Treaty and was preceded by an environmental impact assessment. The costs related to the agreement are covered by the State budget where required, and benefits of the project flow back to the State budget, so that there are no resources hypothecated to the measure and Article 30 and 110 TFEU are complied with. Nevertheless, the Commission has doubts that CfD mechanisms complies with the CfD design principles set out in Article 19d(2) of Regulation (EU) 2024/1747. Therefore, the Commission cannot conclude, at this stage, that the proposed measures comply with relevant provisions of EU law.

Necessity of the aid

In line with Euratom provisions, the transfer of the liabilities for radioactive waste management serves the objective to secure the financing of spent fuel and radioactive waste management as a prerequisite for the responsible and safe management of these materials and is therefore needed. The same holds for the legal protections agreement which is needed in the case of nuclear to deal with regulatory and political risks.

With respect to the financial support measures, the Commission recognises that there is a need for the nuclear operator and owners of the nuclear reactors to have a stable source of revenues, which can be provided by the two-way CfD, given the uncertainties related to the future electricity market price. However, the Commission is currently unable to conclude that additional measures on top of the two-way CfD are all necessary, in particular the creation of a JV to which the Belgian Government will be a shareholder, the minimum OPEX and capital payment and the SDC loans. Therefore, the Commission has, at this stage, doubts on the necessity of the aid.

Appropriateness of the aid

Given the existence of market failures related to the uncertain costs of waste management and decommissioning, as well as related to political and regulatory risks, the Commission considers the agreement on the transfer of nuclear waste and spent fuel liabilities and the legal protections appropriate to address these respective market failures.

However, the Commission has doubts on the CfD design proposed by Belgium, since it lacks appropriate incentives to react to market circumstances and to schedule maintenance in the most efficient way. In this respect, the Commission also wonders whether the day-ahead market price used as market reference price in the CfD design is the most appropriate option in order to provide the right incentives to dispatch the production units. Moreover, the package of remuneration measures might relieve the beneficiaries from too big a share of the market and operational risks. For these reasons, the Commission has doubts on the appropriateness of the aid.

Proportionality of the aid

The Commission has doubts on the proportionality of several of the financial remuneration measures (including the SDC loans and MOCP). Those measures are combined with a CfD and they are set to reach, by design, the target return rate of 7 %, which can only be assessed with respect to the measures themselves and the risk-reduction they provide. Therefore, the proportionality of this target return rate cannot be assessed in abstracto and can only follow the assessment of the appropriateness of the measures.

In addition, the Commission has doubts on the establishment of the amount of the lumpsum payment of EUR 15 billion for the transfer of the nuclear waste and spent fuel liabilities, as well as on the amount of the (potential) transfer of decommissioning liabilities resulting from the LTO Project. Therefore, the Commission has doubts on the proportionality of the aid.

Effects on the market

The Commission considers that some features of the measures may lead to undue market distortions. In particular, the CfD design might not provide the right incentives to the nuclear operator to react in accordance with market signals, while the day-ahead market price might not be the most appropriate reference market price. In addition, further reassurances are needed on the identity and independence of the agent selling the plant’s output in the market under the EMSA.

Conclusion

The Commission has doubts on the compatibility of the aid with the internal market and has thus decided to open the formal investigation procedure.

In accordance with Article 16 of Council Regulation (EU) 2015/1589 (1), all unlawful aid can be subject to recovery from the recipient.


(1)  Council Regulation (EU) 2015/1589 of 13 July 2015 laying down detailed rules for the application of Article 108 of the Treaty on the Functioning of the European Union (OJ L 248, 24.9.2015, p. 9, ELI: http://data.europa.eu/eli/reg/2015/1589/oj).


TEXT OF LETTER

The Commission wishes to inform Belgium that, having examined the information supplied by your authorities on the measure referred to above, it has decided to initiate the procedure laid down in Article 108(2) of the Treaty on the Functioning of the European Union.

1.   THE PROCEDURE

(1)

On 21 June 2024, further to pre-notification contacts, including conference calls, meetings and requests for information, to which responses were submitted, the Kingdom of Belgium (‘Belgium’) notified the agreement to extend the lifetime of two nuclear reactors, Doel 4 and Tihange 3, concluded between Engie S.A. (‘Engie’) and the Belgian government on 13 December 2023.

(2)

By letter dated 14 February 2024, Belgium agreed to exceptionally waive its rights deriving from Article 342 TFEU in conjunction with Article 3 of Regulation 1/1958 (1) and to have the present decision notified and adopted in English.

2.   BACKGROUND ON THE ENERGY SECTOR IN BELGIUM

2.1.   Nuclear fleet in Belgium

(3)

Until 2022, Belgium’s nuclear park consisted of seven nuclear reactors, four located in Flanders (Doel) and three located in Wallonia (Tihange). All reactors came into operation between 1975 and 1985 (2) and were built by public utilities (Ebes, Intercom and Unerg) that were eventually merged to become Electrabel (majority owned by Tractebel) in 1990. In 1996, the Société Générale de Belgique (‘SGB’) became the majority shareholder of Tractebel and in 1999, Suez acquired nearly 100 % of SGB. Since the merger between Suez and Gaz de France (‘GDF’) in 2008, the ultimate owner of Electrabel has been Engie (3).

(4)

In 2003, the Belgian Federal Parliament adopted the ‘Nuclear Phase-Out law’, establishing a nuclear phase-out between 2015 and 2025 (‘2003 Law’ or ‘Nuclear Phase-Out law’) (4). Article 3 of the Nuclear Phase-Out law prohibited the construction of new nuclear units aimed at the industrial production of electricity by nuclear fission in Belgium, and Article 4 limited the operation of the already existing reactors to 40 years. According to the Nuclear Phase-Out law, the closing dates of the nuclear plants in Belgium would have been 15 February 2015 (Doel 1), 1 December 2015 (Doel 2), 1 October 2022 (Doel 3), 1 July 2025 (Doel 4), 1 October 2015 (Tihange 1), 1 February 2023 (Tihange 2) and 1 September 2025 (Tihange 3). As initially foreseen by the Nuclear Phase-Out law, Doel 3 and Tihange 2 were permanently disconnected from the grid on 23 September 2022 and 31 January 2023 respectively. By the laws of 18 December 2013 and 28 June 2015 (5), the Nuclear Phase-Out law was amended and the lifetime of the three oldest reactors, Tihange 1, Doel 1 and Doel 2, was extended by 10 years, until 30 September 2025, 14 February 2025 and 30 November 2025 respectively (10-year lifetime extension) (6). According to the Nuclear Phase-Out law, Doel 4 and Tihange 3 were to close by 2025, but the Belgian government took the principle decision to reverse this decision in 2022 (see section 3.1 below). An overview is provided in Table 1.

(5)

Since 2020, Engie’s strategic objectives concerning nuclear activities were to (i) withdraw from nuclear activities in Belgium to de-risk its exposure as nuclear operator to market price volatility (7), and (ii) no longer position nuclear activity as part of Engie ’s core business (8). This withdrawal has resulted in a halt to all studies relating to the extension of its nuclear power plants (all located in Belgium) from 2020 onwards. Engie’s financial communication since 2020 is in line with this strategic objective of withdrawal and has been taken into account in the accounting assumptions used to prepare the consolidated financial statements, in particular in impairment tests.

(6)

From 2022 onwards, the context changed when the Belgian government announced its decision to amend its energy policy by requesting the extension of the operation (Long-Term Operation, ‘LTO’ (9)) of two of the seven nuclear reactors for 10 years (see section 3.1). Engie entered into discussions with the Belgian State to explore the modalities of this project, regardless of its previous communications to its shareholders and the markets. Since, according to Engie and Belgium, such a lifetime extension of the two nuclear reactors entails significant investments and risks for Engie, the Belgian State agreed with Engie to set up a mechanism to share, in a balanced and transparent manner, the risks and rewards in relation to the lifetime extension of the two reactors. According to Belgium, Engie made it clear from the start that without a risk sharing mechanism and a solution for the costs of nuclear waste stemming from the operation of the seven nuclear power plants, it would not consider the lifetime extension of the two nuclear reactors, which forces Engie to substantially modify its company strategy and risk exposure (10).

(7)

Electrabel, a subsidiary of Engie, has always been the nuclear operator and majority owner of the seven Belgian nuclear reactors. Today the ownership of the Belgian nuclear reactors is as follows:

(a)

Electrabel owns 100 % of Doel 1 and Doel 2, 89,807 % of Doel 3, Doel 4, Tihange 2 and Tihange 3, and 50 % of Tihange 1;

(b)

Luminus, a subsidiary of EDF Belgium, owns 10,193 % of Tihange 2, Tihange 3, Doel 3 and Doel 4;

(c)

EDF Belgium (11) owns the remaining 50 % of Tihange 1.

(8)

Table 1 below provides an overview of the seven Belgian nuclear reactors, including their ownership status, net capacity, and initial deactivation dates according to the Nuclear Phase-Out law and the revisions thereafter.

Table 1

Overview nuclear power plants in Belgium

Nuclear reactor

Ownership

Net capacity (MWe)

Deactivation date (Nuclear Phase-Out law)

Deactivation date (revised)

Doel 1

Electrabel (100 %)

445

15 February 2015

14 February 2025

Doel 2

Electrabel (100 %)

433

1 December 2015

30 November 2025

Doel 3

Electrabel (89,807 %)

Luminus (10,193 %)

1006

1 October 2022

Deactivation on 23 September 2022

Doel 4

Electrabel (89,807 %)

Luminus (10,193 %)

1026

1 July 2025

31 October 2035 (*1)

Tihange 1

Electrabel (50 %)

EDF Belgium (50 %)

962

1 October 2015

30 September 2025

Tihange 2

Electrabel (89,807 %)

Luminus (10,193 %)

1008

1 February 2023

Deactivation on 31 January 2023

Tihange 3

Electrabel (89,807 %)

Luminus (10,193 %)

1038

1 September 2025

31 October 2035 (*1)

Source: Belgian authorities - Reference is made to the website of the FPS Economy on nuclear power production in Belgium, last consulted on 18 June 2024: https://economie.fgov.be/fr/themes/energie/sources-et-vecteurs-denergie/nucleaire/parc-de-production-de . As indicated, Doel 3 and Tihange 2 have been deactivated. The following report includes their former net capacity: International Atomic Energy Agency, Operating Experience with Nuclear Power Stations in Member States, Operating Experience with Nuclear Power Stations in Member States, IAEA, Vienna (2022) (accessible via the FPS for Economy website).

2.2.   Electricity market in Belgium

(9)

Belgium’s energy mix is currently dominated by gas and nuclear-based electricity generation. More details on the wholesale and retail electricity market in Belgium and the market position of Electrabel and Luminus, are provided in sections 2.2.1 and 2.2.2, respectively.

2.2.1.   Generation and wholesale market for electricity

(10)

In 2022, after the closure of Doel 3, the total installed capacity across all voltage levels, i.e., including renewables connected to the distribution grid, reached 26 GW in 2022 (up from 21,4 GW in 2016) (12). The share of nuclear power generation in the total installed capacity in Belgium has been steadily decreasing from 27,6 % (5,9 GW) in 2016 to 18,7 % (4,8 GW) in 2022. Thermal power plants are the second largest source in terms of capacity with 30.7 % (8 GW) in 2022, decreasing from 39,3 % (8,4 GW) in 2016. The share of renewables has been steadily increasing over the past years, from 26,5 % (5,7 GW) in 2016 to 45,1 % (11,7 GW) in 2022. Coal has been fully phased-out in 2016. The total electricity generation capacity connected to the transmission grid in Belgium amounted to 15,7 GW in 2022, increasing from about 14 GW in 2016 (13).

(11)

According to Belgium, the main players in the electricity generation market, in terms of installed capacity connected at the transmission grid level (14), are Electrabel, Luminus, TotalEnergies, RWE and Eneco (15).

(a)

Most of the Belgian electricity generation capacity at transmission level is operated by Electrabel, a fully owned subsidiary of the French energy company Engie. Electrabel has been the former incumbent on the Belgian electricity market before its liberalisation in 1996. The installed generation capacity operated by Electrabel has increased from 10,2 GW in 2016 to 11 GW in 2022, while their market share of installed capacity has decreased from 73 % to 67 % during the same period. Electrabel’s electricity production in Belgium is mostly nuclear based. While Electrabel operates all nuclear power plants in Belgium, it does not fully own the produced energy as Luminus and EDF Belgium own parts of the plants (see Table 1).

(b)

Luminus is the second most important player with operated generation capacity at transmission level, with generation capacity of 2,3 GW in 2022, which corresponds to a market share of 14 % of generation capacity connected to the transmission grid (similar as in 2016). Luminus, as operator, generates electricity mostly with gas-fired and wind power plants and to a smaller extent from hydro power plants.

(c)

RWE is the third most important player at transmission level and has expanded its generation capacity from 0,3 GW in 2016 to 0,9 GW in 2022, thereby increasing its market share from 2 % to 6 % during the same period. The majority of RWE’s electricity generation is natural gas- and wind-based, representing each roughly 50 % of RWE’s capacity.

(d)

Eneco is the fourth player at transmission level with a generation capacity of 0,7 GW in 2022, which is fully wind-based at transmission level, corresponding to a market share of 4 % (up from 2 % in 2016).

(e)

TotalEnergies is the fifth player, with generation capacity consisting mostly of gas-fired plants amounting to 0,6 GW in 2022, which corresponds to a market share of 4 % (up from 3 % in 2016).

(12)

During the period 2016 until 2022, electricity production from installations connected at the transmission grid level has been varying, reaching its lowest level in 2018 with 58,7 TWh, and its highest level in 2021 with 78,7 TWh. For installations connected across all voltage levels, electricity generation amounted to 75 TWh in 2018 and 100,5 TWh in 2021. The variation in generation output and resulting differences with electricity demand are compensated by imports and exports with interconnected markets.

(a)

The share of nuclear in the generation mix varies over time as the availability of nuclear plants is not consistent, with values ranging from 38,1 % up to 50,8 % during the period 2016 to 2022. In 2022, the share of nuclear in the generation mix was 45,7 %.

(b)

Gas-fired power plants made up 22,9 % of the generation mix in 2022, with varying values between 22,4 % and 32 % during the period 2016 to 2022.

(c)

Renewables connected across all voltage levels contributed for 25,5 % to electricity generation in 2022.

(13)

According to Belgium, the main players in terms of electricity generation from installations connected to the transmission grid (16) in Belgium are Electrabel, Luminus, Eneco, T-Power and RWE.

(a)

Electrabel’s market share in terms of electricity production has been relatively stable during the period 2016 to 2022, levelling at 75 % in 2022. In absolute terms, Electrabel’s electricity production at transmission level was 55,1 TWh in 2022 (remaining stable compared to 2016).

(b)

Luminus is the second largest electricity generator operating a plant fleet that produced 9,5 TWh in 2022 at transmission level, up from 7,2 TWh in 2016. Similarly, Luminus’s market share reached 13 % in 2022, up from 10 % in 2016.

(c)

Eneco is the third largest producer and generated 0,7 TWh and 1,9 TWh of electricity in 2016 and 2022 respectively, thereby increasing their market share over the same period to approximately 3 % at transmission level.

(d)

T-Power (17) and RWE are the fourth largest producers, with each less than 2 TWh of electricity production in 2022 and a market share of 2 % at transmission level.

(14)

Besides market shares, the HHI (18) is used as a common index for market concentration.

(a)

In terms of generation capacity at transmission level Belgium submits that the HHI decreased from 5 510 in 2016 to 4 865 in 2022. The decreasing market concentration can be partially explained by the increased development of renewable energy sources (solar and wind) by non-incumbent market players.

(b)

In terms of electricity production, Belgium submits that the HHI decreased from 6 372 in 2016 to 5 795 in 2022. Similarly, as for generation capacity, the decrease can be explained by the increased electricity production from renewable energy sources.

2.2.2.   Retail market for electricity

(15)

According to Belgium, at the retail level, there were in total 17 electricity suppliers present in the regions of Brussels, Wallonia and Flanders in 2022 (19). The main suppliers are Electrabel, Luminus, TotalEnergies and Eneco, while many players are very small.

(a)

Electrabel’s market share in terms of electricity supplied amounted to 47,2 % in 2022 (slightly up compared to 2016 (44,1 %)).

(b)

Luminus is the second largest electricity supplier with a market share of 18,6 % in 2022, up from 15,1 % in 2016.

(c)

TotalEnergies and Eneco are the third and fourth largest players with market shares of 6,1 % and 5,2 % respectively in 2022.

(16)

Market shares in terms of access points supplied were the largest for Electrabel (45,1 %), Luminus (22,6 %), Eneco (9,9 %) and TotalEnergies (9,2 %) in 2022, compared to 45,9 %, 20,2 %, 8,8 % and 7,7 % respectively in 2016.

2.3.   Objectives of the measure and alternative financing options

2.3.1.   Resource adequacy concerns in Belgium

(17)

Since 2019, the Belgian transmission system operator (‘TSO’), Elia, conducted three national resource adequacy studies (‘2019 NRAA’, ‘2021 NRAA’ and ‘2023 NRAA’) (20), which all identified a systematic need for new capacity by the Winter of 2025-2026, as a consequence of the (partial) nuclear phase-out in Belgium, which started with the decommissioning of Doel 3 and Tihange 2 in 2022 and 2023 (see recital (4)), reinforced by the decommissioning of thermal generation capacities in neighbouring countries and problems with the French nuclear assets.

(18)

In order to address these resource adequacy concerns, Belgium set up a capacity mechanism (‘CM’), approved by the Commission in 2021 (21), that will kick in as of Winter 2025. The Belgian CM aims at addressing resource adequacy concerns in electricity, while supporting the energy transition. Capacity holders that have been selected in CM auctions are awarded a capacity contract. The first capacity auctions have taken place in September 2021, 2022 and 2023, for delivery in 2025, 2026 and 2027, respectively.

(19)

In 2022, as a result of the Russian invasion in Ukraine, which caused additional concerns for security of supply and called for measures to reduce dependency on gas, the Belgian government decided to extend the lifetime of Doel 4 and Tihange 3 (see recital (29)). In 2023, Belgium amended the CM in order to take into account this lifetime extension, approved by the Commission in case SA.104336 (22). As shown in the 2023 NRAA, although the lifetime extension of the two nuclear reactors helps to address the resource adequacy concerns, the need for the CM remains.

(20)

Belgium submits that, while contributing to security of supply, the lifetime extension of the nuclear reactors also aims at (1) reducing the dependency on imported fossil fuels (in line with the REPowerEU objectives) and dependency on imports in general (23), and (2) supplying baseload capacity in the context of increased electrification needs in the near future in Belgium. In contrast, the CM is a market-wide measure that aims at compensating the readiness of plants to supply electricity in pre-defined periods, regardless of whether they produce or not (thereby ensuring sufficient capacity to guarantee that production meets demand).

2.3.2.   Market failures and financing of the LTO outside the CM

(21)

Belgium argues that the lifetime extension of the two nuclear reactors requires a specific support package outside the CM, because of the specific economic situation and the specific risk profile of nuclear energy (24).

(22)

First, under the Nuclear Phase-Out law, the Belgian nuclear assets were legally bound to shut down by - at the latest - 2025. Subsequent governments confirmed this final phase-out date. Hence, the nuclear operator abandoned all preparations for their extension accordingly (see recital (5)). Since it has been decided in 2022 to have the two LTO Units operational again for ten more years, there is a need to refurbish the LTO Units depending on the approval by the Belgian Nuclear Safety Agency (AFCN/FANC (25)). The tight schedule for the LTO investments changes the cost, schedule of the LTO works and affects financing arrangements as no provisions for the LTO were made by Electrabel, in accordance with the legally defined closure of all nuclear power plants in 2025. In addition, the fuel costs and the costs of other necessary parts have risen sharply in recent years. The uncertainties regarding the LTO investment costs are therefore considerable.

(23)

Second, as recognised in the decision in case SA.104336 (26), Belgium submits that the objective of the capacity mechanism is to overcome a number of market failures which prevent energy producers to invest in additional generation capacity, such as (i) the lack of efficient price signals (e.g. energy prices are prevented from increasing up to the value of the VOLL), and (ii) risk aversion of investors at times of high volatility of energy prices and regulatory uncertainty. On top of the market failures present in the energy market in general, Belgium submits that electricity and carbon markets exhibit additional market failures, among others:

(a)

The limited ability to hedge on forward markets due to limited transparency and liquidity. With a lack of long-term hedging opportunities, investment projects are exposed to volatile markets, and hence, options to secure the required market revenue streams to make the investment economically viable are not given;

(b)

The negative externalities from greenhouse gases, which are not priced at a socially optimal level and lack a long-term predictable price signal due to the structural volatility of the EU Emission Trading System (‘ETS’);

(c)

The positive externalities associated with a diverse generation mix that are not adequately remunerated in liberalised markets (e.g., contributing to improved energy independence and resilience of the energy system).

(24)

Third, Belgium argues that in addition to the general market failures as well as policy and regulatory uncertainties affecting investment in generation capacities in electricity markets (as described in recital (23)), a number of specificities of nuclear investments create further risks that are difficult to hedge or manage for merchant investors, and that cannot be addressed by the CM. Belgium submits that the objective of the notified measure is to overcome additional risks to which the nuclear operator is exposed:

(a)

Technical and project management risks:

the scope of the necessary investments will only become clear in a later stage, after elaboration and submission of the LTO file by the nuclear operator and its approval by the nuclear safety authority;

depending on the scope of the required works, the implementation of LTO works can impact the availability and therefore the income of the nuclear plants;

whereas the LTO should not face any major technical barriers, potential technical risks that may arise due to the extended operating period need to be anticipated and managed; and

the order, transport and delivery of nuclear fuel can be delayed, taking into account the current tightening of the market for uranium with a reduction of possible suppliers (notably Russia) and rising prices.

(b)

Risks related to waste management and decommissioning:

costs related to the management and disposal of spent fuel and nuclear waste are subject to a substantially larger degree of uncertainty compared to other costs (due to specific regulatory and policy risks); and

longevity of spent nuclear fuel and radiation within the facility create risks concerning waste and decommissioning with significant long-term liabilities.

(c)

Market and investment risks:

the investment costs associated with the LTO increase the nuclear units’ exposure to market risks. The operator may possibly not be able to recover investment costs if wholesale prices are too low. High electricity market prices during the energy crisis have not persisted, and future market prices are too uncertain to be counted upon in order to recover investment costs. In addition, price hedging is only possible to a limited extent, as the forward and power purchase agreement (‘PPA’) markets have limited liquidity.

a nuclear operator is confronted with a general uncertain investment climate because of the particular nature of risks inherent to nuclear energy, increasing the cost of financing and insurance.

(d)

Regulatory and political risks:

the LTO is subject to an extensive procedure, including the approval by the nuclear safety agency and a positive environmental impact assessment (‘EIA’) with a large cross-border public consultation and a vote of a Parliamentary Act modifying the calendar of the nuclear phase-out (27);

high fixed cost technologies such as nuclear power require policy stability, which is not guaranteed as shown by the multiple revisions of the initial nuclear phase-out calendar; and

up-front investment costs create a regulatory hold-up risk, which means that investors are exposed to changes in regulation and policies after having invested in the asset.

(25)

Belgium argues that the existence of market failures and specific risks to nuclear operators, mentioned in recitals (23) and (24) respectively, may ultimately result in a situation where the expected market revenue stream is insufficient to ensure the economic viability of the lifetime extension of the LTO Units (i.e. the expected revenues are too low to ensure a sufficient return on investment given the different risks associated with this investment) or where the ongoing operations are not funded with cash, equity, or debt. Belgium argues that, in the light of these market failures, which are expected to persist in the near future, the specific risks related to nuclear power should be accounted for and therefore a commitment to support the nuclear lifetime extension is needed by the Belgian government.

(26)

Belgium also submits that the potential funding gap, singular economic situation and specific risk profile of the LTO Units cannot be adequately addressed through participation in the CM. First, the CM consists of a competitive process with annual auctions, which have by definition an uncertain outcome for the participants. However, the Belgian government decided that nuclear power should be part of Belgium’s energy mix for the next 10 years, which is not compatible with the uncertain outcome of an auction. Second, the remuneration through the CM auctions is also incompatible with the timing of the lifetime extension. In order for the nuclear capacities to be available by November 2025, the nuclear operator needs to start investments as soon as possible, which cannot await the outcome of the auction. Finally, the CM only aims at addressing the missing money/funding gap issue and does not help to overcome the specific risks to which the nuclear operator is exposed.

(27)

Therefore, participation by the nuclear operator in the CM auctions would not address the specific needs to support the nuclear capacities and their timely lifetime extension, and hence the choice was made by the Belgian State for a combination of the CM and a separate support mechanism in order to address the security of supply concerns in Belgium (28).

(28)

The Belgian government agreed with Engie on the measures as described in section 3, which should mitigate the above-mentioned market failures and risks, and provide an appropriate remuneration outside the CM. Belgium submits that the alternative support mechanism, consisting of several components as described in section 3, ensures the appropriate allocation of risks and allow the necessary investments in order to achieve the timely availability of the two nuclear reactors, while avoiding excessive remuneration and windfall profits. According to Belgium, the notified measure has the following objectives:

(a)

addressing the risk of potential funding gap as market revenues alone may be insufficient to ensure the economic viability of the lifetime extension of the two nuclear reactors, or as the ongoing operations may not be funded;

(b)

reducing risks associated with unpredictable and uncontrollable market price evolution, while preventing excess remuneration and windfall profits;

(c)

mitigating the exposure to policy risk due to a changing stance of public opinion and policymakers towards nuclear assets;

(d)

mitigating the risk related to residual waste management costs;

(e)

ensuring adequate risk allocation and incentives during the initial CAPEX period (29) to manage the constraints and risks of delays and cost overruns, due to the upgrade works and tight timeframe; while

(f)

ensuring proper market integration by maintaining market-based incentives to ensure dispatch and operations in an efficient and non-distortive manner.

3.   DETAILED DESCRIPTION OF THE MEASURE

3.1.   Background on the agreement with Engie and Electrabel

(29)

On 18 March 2022, the Belgian federal government decided to reassess the nuclear phase-out, by allowing the extension of the operating lifetime of two of the then seven existing nuclear reactors, Doel 4 and Tihange 3, with a combined nominal power of approximately 2 GW (see Table 2 below), for a period of 10 years. The decision by Belgium was made in the context of the European response to the Russian war against Ukraine (including the need for EU Member States to reduce their gas consumption and gas dependency), the resulting gas crisis, the increased electrification needs (to enable the energy transition) and the low availability of the French nuclear fleet (due to unforeseen corrosion issues and extensive maintenance to prolong its operation lifetime).

(30)

Subsequently, the government started negotiations with the operator of Doel 4 and Tihange 3, Electrabel. Engie, the parent company of Electrabel, was initially hesitant to accept the lifetime extension, claiming that […]. Engie’s intention was to stop nuclear operations in Belgium after 2025 (see recital (5)).

(31)

On 21 July 2022, the Belgian State and Electrabel concluded a ‘letter of intent’ for the extended operation of Doel 4 and Tihange 3.

(32)

On the basis of that letter of intent, the Belgian State, Engie and Electrabel concluded a ‘Heads of Terms and Commencement of Long-Term Operation (“LTO”) Studies Agreement’ on 9 January 2023, by which Electrabel initiated the studies required for the lifetime extension of Doel 4 and Tihange 3 and by which the parties continued the negotiations towards a more detailed definitive agreement regarding the lifetime extension of the two nuclear reactors with a view to restart operations (initially) on 1 November 2026.

(33)

These negotiations led to the signature of an Amendment to the Heads of Terms and Commencement of the LTO Studies Agreement on 29 June 2023, in which a number of agreements (‘obligation of means’) were developed in more detail, in particular as regards the business model and the long-term storage and disposal of nuclear waste. On the same day, a Joint Development Agreement (‘JDA’) was concluded, setting out the concrete actions taken by Engie and Electrabel with a view to a LTO within the time limit and the terms and conditions under which the Belgian State pre-finances certain costs of Electrabel linked to the development activities preparing for the extension of operation and the start of the actual works related to the lifetime extension.

(34)

On 21 July 2023, the Belgian State, Engie and Electrabel concluded a binding Framework Agreement which imposes an obligation (on a reasonable endeavour basis) on Engie and Electrabel to make it possible to restart the two nuclear reactors by 1 November 2025, one year earlier than initially foreseen, approved by the Belgian Nuclear Safety Authority. On the same day, the JDA was amended and restated ‘JDA+’.

(35)

On 13 December 2023, the Belgian State, Engie and Electrabel concluded a more detailed ‘Implementation Agreement’ in which the agreements contained in the Framework Agreement are developed into definitive agreements. The implementation of these agreements and, more generally, the extension of the lifetime of the Doel 4 and Tihange 3 nuclear reactors require legislative intervention (see section 3.7). On this date, the ‘JDA++’ was signed as well, thereby replacing the JDA+.

(36)

For the purpose of the present decision, the Implementation Agreement between the Belgian State, Engie and Electrabel consists of a set of measures to support the 10-year lifetime extension of Doel 4 and Tihange 3, which can be grouped along three main components:

(a)

‘Component 1’ : the set of sub-measures related to the remuneration and financial arrangements allowing stable revenues for the two nuclear reactors, as well as the changes in the shareholder structure through the creation of BE-NUC (referred to in the transaction documents under the working name ‘NuclearSub’) (see section 3.3);

(b)

‘Component 2’ : the set of sub-measures related to the decommissioning of the nuclear power plants and the long-term storage and final disposal of nuclear waste and spent fuel (including the amendment of the safeguards package to monitor the financial situation of the nuclear operator against the risk profile modified due to the agreed cap) (see section 3.4); and

(c)

‘Component 3’ : the agreements on risk-sharing and indemnification in case of legislative changes (see section 3.5).

(37)

The three components of the notified measure together aim at the lifetime extension of the two nuclear reactors (LTO Units) and a long-term solution on the financing of nuclear waste and spent fuel, will hereafter be referred to as the ‘LTO Project’ or the ‘Transaction’. Belgium recognises that the three components of the notified measure, mentioned in recitals (36)(a), (36)(b) and (36)(c), can be assessed as part of one single intervention.

(38)

Electrabel is and will remain the sole nuclear operator in Belgium and will assume on its own all related tasks and obligations. Belgium submits in this respect that Electrabel is the only market party possessing the necessary know-how and authorizations to operate the LTO Units. Belgium further argues that access to nuclear generation capacity requires special, including country-specific, know-how which is not available to all market players, which the Commission previously acknowledged regarding Electrabel (30). The know-how, intellectual property, and relevant permits regarding nuclear installations in Belgium is unique and only Electrabel currently possesses them. Belgium also submits that in general, given the specificities of nuclear technology, only a limited number of operators have the knowledge and financial strength to undertake the investments needed and operate the nuclear reactors, which the Commission recognised in decisions concerning nuclear energy (31). Therefore, there is no credible alternative to Electrabel and the launch of a tender procedure to select the operator of the LTO Units would not have led to a meaningful outcome given the specificities and constraints of the LTO Project.

(39)

In addition, Belgium argues that, in order to enable the restart of the LTO Units in November 2025, Electrabel had to conduct certain preparatory works and feasibility studies (‘Development Activities’ (32)) before the actual start of works on the LTO, as early as possible and in parallel with the negotiations on the agreement with the Belgian government. With respect to these development activities (governed by the JDA++), Electrabel, in its role as sole nuclear operator in Belgium, has the unique knowledge to undertake these activities quickly and effectively. These activities require very specific knowledge, resources, and tools so that only Electrabel is technically able to carry them out. Therefore, given the timeframe necessary to avoid shortages in the electricity supply, the urgent need to limit dependency on fossil fuel imports and the specific constraints imposed by the LTO, no operator other than Electrabel could have been selected.

3.2.   Availability and technical details of Doel 4 and Tihange 3 after LTO restart

(40)

Table 2 presents the nominal electricity production capacity, annual electricity production and share in national electricity demand in Belgium for Doel 4 and Tihange 3, before and after the lifetime extension (envisaged for 1 November 2025).

Table 2

Key characteristics of Doel 4 and Tihange 3

 

Doel 4

Tihange 3

Before lifetime extension

Nominal capacity

1 026  MWe

1 038  MWe

Annual electricity production

(2022 figures)

8 940  GWh

7 366  GWh

Share of Belgian electricity demand

(2022 figures)

11  %

9  %

After lifetime extension

Nominal capacity

1 026  MWe

1 030  MWe

Annual electricity production

(estimates)

2026-2028: 3 435  GWh

after 2029: 7 158  GWh

2026-2028: 3 435  GWh

after 2029: 7 186  GWh

Share of Belgian electricity demand

(estimates)

2026-2028: 3 -4  %

after 2029: 6 -8  %

2026-2028: 3 -4  %

after 2029: 6 -8  %

Sources: World Nuclear Association; Elia’s Adequacy and flexibility study for Belgium (2024-2034)

(41)

The lower expected electricity production over the period 2026-2028 is due to more than usual scheduled outages of the two reactors during the restart phase (‘scheduled LTO outages’). These planned LTO outages are required to bring the LTO Units in compliance with the requirements of the Belgian Nuclear Safety Authority for the LTO Project. The unavailability of the LTO Units during the scheduled LTO outages is expected to be 24 weeks per year and this during the first 3 years after the LTO restart date. On top of the scheduled LTO outages, a yearly normal outage (‘scheduled non-LTO outages’) is expected for the whole period of the lifetime extension, up to 1 year before the end of operations for Doel 4 and until the last year of operations for Tihange 3. Each scheduled non-LTO outage is expected to last 6 weeks. As a result, during the first 3 years after LTO restart, the two nuclear reactors are expected to be shut down for 30 weeks.

(42)

On top of the scheduled outages mentioned in recital (41), there can be unplanned and unforeseen problems which require additional shut down of the LTO Units. A forced outage rate of 10 % has been assumed in the signing financial model (33) underlying the remuneration agreement. This implies that both Doel 4 and Tihange 3 have a target availability rate of 90 % over 10 years, when not considering the scheduled LTO and non-LTO outages. When including all scheduled outages, Doel 4 and Tihange 3 have a target availability rate of 68,43 % and 67,40 % respectively.

3.3.   Component 1: Financial and structural arrangements

(43)

A set of sub-measures has been foreseen to allow for the financing of a timely and safe lifetime extension of the two nuclear reactors.

3.3.1.   Joint Development Agreement (JDA)

(44)

As mentioned in recital (39), due to the strict timing for the LTO restart (to allow electricity production for the winter 2025/2026), Electrabel has, as nuclear operator, identified and agreed to undertake certain development activities, necessary to enable the LTO restart in time and necessary to meet the Safety Authority’s requirements and expectations, prior to entering into the final transaction. These development activities have been laid down in the JDA, amended by the JDA+ on 21 July 2023 and amended by the JDA++ on 13 December 2023.

(45)

According to the JDA++, the Belgian State pre-funds Electrabel’s costs and expenses for the development activities until all required legislative changes have been adopted and entered into force (the ‘Legislative Condition’). After the satisfaction or waiver of the Legislative Condition, Electrabel will fund its own costs and expenses for the development activities until the amount of Electrabel’s funding equals the amount pre-funded by the Belgian State, after which Electrabel and the Belgian State will fund the costs and expenses for the development activities on a 50/50 basis.

(46)

Belgium submits that the pre-funding by the Belgian State of the costs and expenses for the development activities is limited to any costs and expenses actually (to be) borne by Electrabel. A control mechanism is set up, as well as a ‘True-Up’ (34) at the end of the contract period. Belgium also submits that the funding arrangements under the JDA++, as well as under any agreement between Electrabel and third parties, are on arm’s length and value for money basis.

(47)

Belgium argues that the JDA++ does not provide an economic advantage to Electrabel, since it merely concerns pre-funding and cost coverage of the development activities. Nevertheless, Belgium includes the JDA++ in the notified measure, as part of the set of sub-measures which could be assessed as one single intervention.

3.3.2.   Joint venture

(48)

The Belgian State will invest, together with the nuclear operator Electrabel, in a joint venture (‘JV’), named BE-NUC, which will own 89,807 % of the LTO Units (as Electrabel currently does). The remaining 10,193 % will stay in the hands of Luminus. Electrabel and the Belgian State will each own 50 % of BE-NUC and act as equal shareholders in terms of financial participation and share of power sales earnings. BE-NUC, as co-owner, will bear 89,807 % of the investments needed to extend the operation and the Belgian State will therefore indirectly bear 44,9035 % of the investment costs. However, BE-NUC will not become a nuclear operator: Electrabel is and will remain the sole nuclear operator of the two nuclear reactors through an Operations and Maintenance (‘O&M’) Agreement (see section 3.3.8) which includes that BE-NUC will have control rights over the operating costs.

(49)

There will be no purchase by the Belgian State of co-ownership stakes in the LTO Units, but rather a transfer (partial demerger of the relevant assets) from Electrabel to the JV, according to the following main steps:

(a)

incorporation of the JV (BE-NUC) by Electrabel, after signing of the Transaction Documents (13 December 2023); this incorporation took place on 8 May 2024;

(b)

acquisition by the Belgian State of a 50 % interest in BE-NUC (on the closing date) (according to the share purchase agreement, ‘SPA I’);

(c)

transfer (partial demerger) of the LTO Units from Electrabel to BE-NUC and subsequent transfer of the issued shares by Engie to Electrabel, resulting in Electrabel receiving additional shares in BE-NUC for the contribution of the LTO Units;

(d)

transfer of shares in BE-NUC between Electrabel and the Belgian State in order for the Belgian State not to be diluted, as a result of the partial demerger, and in order for the Belgian State to retain a 50 % stake (according to the share purchase agreement II, ‘SPA II’).

(50)

According to the Joint Partial Demerger Proposal (Schedule 4 of the SPA II), Electrabel will transfer its 89,807 % ownership rights regarding the LTO Units (as well as the related permits and any other assets required) to BE-NUC, in return for the distribution of BE-NUC shares to Engie (at that time Electrabel’s sole shareholder). The contribution of Electrabel to BE-NUC will be valued in consideration of the scrap value of the building, the value of the land and the value of immovable installations.

(51)

More precisely, according to the Joint Partial Demerger Proposal, the value of the contribution of Electrabel to BE-NUC is evaluated on the basis of:

(a)

the scrap value of the buildings (35): 89,807 % of the scrap value of the LTO buildings, which amounts to EUR 28,3 million, based on a third-party assessment as reviewed by two Belgian nuclear authorities (NIRAS/ONDRAF and CPN/CNV) in the context of the 2022 CPN/CNV triennial revision;

(b)

the value of the land (36): 89,807 % of the value of the land, valuated at EUR 21,1 million, based on comparable transactions; and

(c)

the value of immovable installations (to be determined at a later date by Electrabel on the basis of their total costs plus a relevant margin provided by the O&M Agreement).

(52)

This valuation of the contribution of Electrabel is reflected in the purchase price that will be paid by the Belgian State at the closing of the SPA II, which amounts to EUR 24,7 million (subject to adjustments) in order to acquire new shares in BE-NUC and retain a 50 % stake in BE-NUC. The Board of Directors of BE-NUC will request a (statutory) auditor or a certified accountant to prepare a report regarding the contribution in kind, assessing notably the applied valuation and the valuation methods used for that purpose.

(53)

A Shareholders’ agreement between Electrabel, the Belgian government and BE-NUC was concluded to set up the corporate governance of BE-NUC and each of its shareholders’ rights. According to this agreement, the board of directors is composed of four directors, two appointed upon nomination of the Belgian government and two appointed upon nomination of Electrabel. BE-NUC’s chairperson and chief financial officer will always be Belgian government directors. The quorum at the board of directors is a simple majority, and its resolutions are voted by simple majority. Conflict of interest provisions have been put in place.

(54)

The role of the Belgian State as shareholder presupposes, inter alia, the financing of BE-NUC’s capital costs (CAPEX) and operating costs (OPEX), the management of shares and the exercise of shareholder rights (e.g., voting rights), and the support of the two directors of BE-NUC, appointed upon nomination of the Belgian State.

(55)

Certain assets currently held by Electrabel will be transferred to Engie so as to streamline their management from the perspective of Engie:

(a)

European assets currently held by Electrabel (including Belgian assets) are required to remain held by Electrabel, in order to meet and secure its liabilities and obligations as a nuclear operator, whereas

(b)

non-European assets currently held by Electrabel will be transferred to Engie.

(56)

Belgium submits that the transfer will occur at no additional cost or disadvantage for Electrabel and a use funds arrangement has been foreseen to secure the use of the proceeds of the relevant sale.

(57)

As explained in more detail in section 3.4.7, the waste cap modifies the risk profile of the nuclear operator, which justifies and requires an adjustment of the existing security package, i.e., the removal of Electrabel’s non-European assets from the Electrabel perimeter and monitoring of the nuclear operator’s financial position. Moreover, Engie, as mother company of Electrabel, will guarantee that at least EUR 4 billion (equity value as of 30 June 2023) remains in Electrabel at the time of the closing of the agreement between the Belgian State and Electrabel (37). After closing, other safeguards apply such as the continued and enhanced monitoring of the financial position of the nuclear operator by the CPN/CNV, and the uncapped and uncancellable parent company guarantee granted by Engie for certain obligations of the nuclear operator.

(58)

Belgium argues that the JV constitutes a pari passu investment, as the two shareholders enter into the JV under equal terms and conditions and, as shareholders, with the same level of risk and rewards. Nevertheless, Belgium includes the JV in the notified measure, as part of the set of sub-measures which could be assessed as one single intervention.

3.3.3.   Shareholder financing

3.3.3.1.   Equity injection and shareholder loan

(59)

The Belgian government and Electrabel will each provide equity to BE-NUC through a share capital increase in order to finance any expense contemplated by BE-NUC’s shareholders’ agreement.

(60)

Electrabel will also issue to BE-NUC a shareholder loan (the ‘Electrabel Shareholder Loan’) and so will the Belgian government (the ‘Belgian Government Shareholder Loan’) to finance any expense contemplated by the shareholder’s agreement. The terms and conditions of the Electrabel Shareholder Loan and the Belgian Government Shareholder Loan are identical.

(61)

Belgium submits that the introduction of a shareholder loan in addition to the equity injection follows from financial and transactional considerations. On the one hand, the provision of the shareholder loan reduces transaction costs and grants more flexibility in the design of drawdown and repayment schedules. In particular, loan repayment provisions may be agreed upon with less regulatory constraints than dividend payments or equity repayments. On the other hand, the loan optimises the financial structure with respect to taxable income. In particular, up to 30 % of EBITDA is redeemable to deduct interest.

(62)

The loan will be granted on market terms, at interest rates that have not yet been set, but would be, according to the Shareholder Loan Agreements, set by the board of BE-NUC in accordance with the Shareholders’ Agreement by reference to prevailing market rates and any comparable third-party debt financing which may be available at the relevant time.

(63)

The total share capital contribution would amount in total, on the basis of preliminary computations in the signing financial model, to EUR [2 000-2 500] million and would be provided by both the Belgian government and Electrabel on pari passu terms in […] yearly instalments from […] to […] to finance the CAPEX of the LTO project.

(64)

This share capital contribution (equity injection and the shareholder loan) would be paid back to BE-NUC’s shareholders through a series of share capital reduction and be remunerated through the distribution of dividends and shareholder loan interest.

(65)

The internal rate of return of the stream of cashflows would amount to 7 %, defined as the nominal post-tax Project internal rate of return.

(66)

The split of the EUR [2 000-2 500] million shareholder financing into equity injection and the shareholder loan is not yet known.

(67)

Belgium submits that the shareholder funding obligations and the shareholder loan can be considered as pari passu financing. In particular, Belgium submits that the interest rate will be an arm’s length rate determined by reference to prevailing market rates and any comparable third-party debt financing, so that the shareholder loan will be granted on market terms. Nevertheless, Belgium includes the shareholder funding in the notified measure, as part of the set of sub-measures which could be assessed as one single intervention.

3.3.3.2.   Shareholder Support Arrangement

(68)

The Shareholder Support Arrangement (‘SSA’) sets out an arrangement under which Engie will have an obligation to provide financial support to Electrabel, if necessary for Electrabel to meet certain of its payment obligations under the O&M Agreement.

3.3.4.   Two-way contract for difference

(69)

A Remuneration Agreement (‘RA’) will be concluded between BE-NUC, Luminus and the ‘RA Counterparty’, which will be an autonomous service with accounting independence within the Belgian State, named ‘BE-WATT’ (see below section 3.7.3). The objective of the Remuneration Agreement is to address the market price uncertainty and de-risk the project revenues for BE-NUC and Luminus, which should receive sufficient revenues from the operation of the LTO Units to ensure their safe and reliable operation and economic viability, while allowing shareholders to reach the required market-conform financial return. Belgium submits that the RA is set up in a way to maintain the fair functioning of the wholesale electricity market, as all the electricity produced by the LTO Units will be sold on the day-ahead wholesale market and the LTO Units will be remunerated through a two-way contract for difference whose formula contains a market-reference price (‘MRP’) reflecting the market equilibrium and exposing the plants to market incentives.

(70)

As a first part of the RA, a two-way contract for difference (‘CfD’) will apply between the parties. The CfD will also be made available to Luminus, the other co-owner of the two nuclear reactors (see recital (4)). This means that a predefined indexed target price (the ‘strike price’) will be guaranteed by the Belgian State. If the ‘reference market price’ is higher than the strike price, the positive difference will be paid by BE-NUC and Luminus to the Belgian State. If the market price is lower, the negative difference will be paid by the Belgian State to BE-NUC and Luminus. The difference payments become payable on the first power date (the date on which the relevant LTO Unit injects electricity into the high-voltage grid for the first time after its initial legal end date) and will be made in proportion to BE-NUC’s and Luminus’ share of the power generated by the LTO Units.

(71)

The main parameters of the CfD are the market price and the strike price:

(a)

The reference market price refers to the day-ahead spot price for a base-load delivery of electricity in the Belgian bidding zone (38).

(b)

The strike price will be defined by BE-NUC on the basis of a financial model approved by the RA Counterparty to reflect BE-NUC's actual operating, capital and financing costs in respect of the LTO extension as from 21 July 2022 (therefore estimated as the levelized cost of electricity, ‘LCOE’). The strike price will be sized to achieve the expected target Internal Rate of Return (‘IRR’) of 7 % (nominal and post-tax).

(72)

In the base case scenario, Belgium assumes that the costs to modernize the LTO Units amount to approximately EUR [2 000-2 500] million, resulting in a ‘preliminary strike price’ of EUR [80-90] per MWh (39).

(73)

The actual value of the strike price will be set by BE-NUC on the basis of a financial model approved by the RA Counterparty in the course of 2025, prior to the LTO restart date, based on the cost of extending operation under nuclear safety requirements (the scope of the latter being defined by the Belgian nuclear safety agency), estimated on the basis of submitted quotes by contractors (‘initial strike price’ ). The initial strike price will be recalculated as soon as possible after 31 December 2028 (‘True-up date’ ) to reflect the actual timing to restart, LTO outages, operating, capital and financing cost up to that date (based on the actual invoices) and revised projections of these costs for the remainder of the 10-year prolongation period (‘revised strike price’ (40), through a written agreement between BE-NUC and the RA Counterparty. The strike price will be indexed annually by reference to a weighted indexation calculation. After the True-up date, the strike price will in principle be fixed and not be recalculated, except under specific qualifying events (‘re-opener events’ (41).

(74)

The strike price will be calculated using information from detailed financial models which will be produced and updated by BE-NUC. The financial model (and any updates thereto) is subject to the approval of the RA Counterparty. Where such approval is withheld, BE-NUC and the RA Counterparty may refer the determination of such a financial model issue to an independent expert in accordance with a specified expert determination procedure.

(75)

Belgium submits that while the CfD reduces BE-NUC’s exposure to market risk and market price variations, it includes risk-sharing mechanisms which should ensure that BE-NUC is still exposed to some basic market risk:

(a)

Payments by the RA Counterparty to BE-NUC are only made when the market price is below the strike price, and that BE-NUC will be liable to payments to the RA Counterparty when the market price is higher than the strike price.

(b)

The financial model provides only for a reasonable return for BE-NUC: the strike price is sized to achieve a profitability rate (‘IRR’) of 7 %, in line with industry benchmarks.

(c)

BE-NUC will be contractually required to reduce the power output from the LTO Units (subject to technical constraints (42)) when the electricity price is minus EUR 20 per MWh (43) or lower for any period of 24 or more consecutive quarter-hour periods (‘settlement units’), i.e., 6 hours. If BE-NUC fails to modulate as required during such periods of negative market prices, it will be penalised: the difference payments for that period will not include the negative price portion of the difference between the market price and the strike price for the volume that should have been modulated. Hence, this ‘modulation arrangement’ requires decreasing production during consecutive times of negative prices.

(d)

Finally, the remuneration agreement includes a pain/gain sharing mechanism (‘Market Price Risk Adjustment’ or ‘MPRA’ ) when market prices turn out to be lower or higher than the strike price. When the reference market price is between the strike price and a defined floor, the target return (in the form of a lower strike price) gradually decreases from 7 % IRR to minimum 6 % IRR; when the market price is between the strike price and a defined ceiling, the target return (in the form of a higher strike price) gradually increases to maximum 8 % IRR. Those lower and higher strike prices are calculated to ensure that those minimum and maximum target IRRs are respected. Belgium argues that this is an incentive for BE-NUC to optimise its cost structure in order to achieve an as low as possible strike price and therefore increase BE-NUC’s profitability through the pain/gain sharing mechanism.

(76)

As mentioned in recitals (75)(b) and (75)(d), the Belgian State and Electrabel agreed on a target range for the nominal post-tax project IRR between 6 % and 8 % (i.e., a premium of 3-5 % over the estimated average 2023 risk-free rate of approximately 3 %). An independent analysis by Compass Lexecon (44) shows that this range is consistent with the theoretically computed premium and the empirical evidence from regulatory practice and public WACC estimates for comparable projects (see Table 3). In particular, the results of this independent analysis show that:

(a)

The theoretical cost of capital for utility companies comparable to BE-NUC ranges between 6,2-7,4 % according to the Capital Asset Pricing Model (45) (i.e., equivalent to a premium of 3,1-4,3 % over the risk-free rate). Utilities across Europe typically invest in projects exceeding their cost of capital by several percentage points (‘hurdle premium’). In particular, the investors in the JV would also require additional reward for non-diversifiable asset-specific risks (e.g., an illiquidity premium of up to 3 %).

(b)

The benchmark results show that the rate of return and cost of capital for companies with ‘comparable’ risk profiles exhibit premia above the risk-free rate in the range from 3 % (e.g., for utilities with a diversified portfolio, that are subject to a RAB remuneration model (46) and are largely hedged against market risks) to 5-7 % (e.g., for single nuclear new or refurbished unit/project). Premia over risk-free rate decrease with portfolio diversification, lower exposure to risk (market, operational and construction risks), and the nature of the owner/operator, with incumbent, state-owned or state-funded utilities potentially having lower financial costs.

Table 3

Public WACC estimates for comparable projects

Considered company/project

Remuneration framework

Post-tax rate of return/WACC

Premium over risk-free rate

Vertically integrated American utilities (Georgia Power and Duke)

RAB model

6,36 % –7,06 %

2,8 % –4,2 %

State-owned Canadian utility OPG

RAB model

5,6 %

3,5 – 4,3 %

Refurbished Canadian nuclear power station Bruce A

CfD with a strike price based on target IRR

10,6 % –13,8 %

6,0 – 9,7 %

Hinkley Point C new nuclear power plant (United Kingdom)

CfD with a strike price based on target IRR

9,25 % –9,75 %

5,8 % –7,5 %

Hungarian new nuclear power plant Paks II

Market-based remuneration and State support for funding for CAPEX, exposure to market and operational performance risks

7,38 – 8,4 %

3,9 – 5,2 %

Existing French EDF nuclear assets

Mostly exposed to market until 2026, then unknown

7,6 %

4,9 – 6,2 %

Extension of Belgian Tihange 1

Market-based remuneration with a windfall profit tax Exposed to market risks and operational risks

9,3 %

3,1 % –4,3 %

Source: Memo Compass Lexecon, 17 May 2024, ‘SA.106107 BE - Prolongation of two nuclear reactors - Assessment of Aid Proportionality: Analysis of risk allocation and return on investment’

(77)

For the reasons mentioned in recital (76), Belgium considers the 6 %-8 % target IRR of the LTO project to be within the (lower end of the) likely range of market-based returns and therefore will not result in overcompensation.

(78)

Any proceeds from the CfD will flow into the general State budget but will be subject to separate accounting. They will be used primarily to fund the payments of the RA Counterparty under the CfD. Where the CfD proceeds would exceed the amounts necessary to finance the costs of the CfD, they could then be used to finance the costs of another CfD. Belgium commits that if any remaining CfD proceeds would be used for purposes of distributing them to undertakings, the distribution will be carried out in accordance with Article 19d(2), points (d) and (e) of Regulation (EU) 2024/1747. Belgium commits it will inform the Commission in case CfD proceeds would be distributed to undertakings, and, if need be, notify such a measure.

(79)

The counterparty role of the Belgian State in the two-way contract for difference mainly involves the execution and receipt of the various payments to and from BE-NUC and Luminus. Moreover, in that role, the Belgian State must also be able to verify and, if necessary, challenge the various calculations underlying those payments.

(80)

Belgium argues that the CfD is an appropriate instrument to tackle the identified market failures and specific risks as mentioned in recitals (23) and (24). Belgium submits that the CfD is appropriate to achieve the following objectives at the least cost, while preserving efficient market signals.

(a)

The CfD remuneration is limited to the minimum needed to bridge the funding gap, since the CfD strike price will be defined to reflect BE-NUC’s actual operating, capital and financing costs in respect of the LTO extension.

(b)

The CfD ensures stable revenues over the LTO timeframe, given the lack of adequate market-based hedging instruments, while maintaining partial market exposure both in the short term (modulation in case of prolonged negative prices) and medium term (maintenance optimisation). The Market Price Risk Adjustment mechanism acts as a pain/gain sharing mechanism incentivising the reduction of costs and the increase of output in times of high market prices. Moreover, the risk of unexpected lower availability caused by non-scheduled outages and additional outages after the True-Up date remains with BE-NUC.

(c)

Reduced exposure to the risks of delay and cost overruns in the initial period of LTO works with specific outage patterns, since the design of the CfD includes provisions to allow the realisation of the target IRR also in case of cost overruns and delays, unless due to gross negligence (as defined in the RA) by the operator.

(d)

Potential excess remuneration (windfall profits) will be mitigated, through (i) the CfD payback obligation in case the reference price is higher than the strike price, (ii) the strike price revision after the initial start-up phase, and (iii) the lack of a guaranteed return on investment, due to the exposure to operational and technical risks as the CfD payments remain conditional on the operator’s actual operational performance and output.

(e)

The CfD design formula applies output-based remuneration unless in modulation periods and includes additional incentives to optimize the output of the plant subject to market conditions, ensuring that investors are still exposed to the risks they can efficiently manage, i.e., operational risks and (to some extent) market risks.

(81)

Belgium submits that, pursuant to Article 19d(1) of Regulation (EU) 2024/1747 (47), it is not obliged to apply a two-way CfD, since this provision imposes the use of mandatory two-way CfDs (or equivalent schemes with the same effects) only in relation to investments in new power-generating facilities. Belgium submits that in circumstances such as those of the LTO Project, where investments are made to prolong the lifetime of existing facilities, the use of two-way CfDs remains a possibility. Belgium submits that other forms of direct financial support schemes have been considered (fixed feed-in premium, one-way CfD and regulated asset base regime) but were not found appropriate for the LTO Project. Belgium submits that the two-way CfD provides the required support at a lower cost to consumers compared to alternative remuneration support mechanisms, such as the Belgian capacity mechanism, and argues that:

(a)

a fixed feed-in premium would pay the same amount for each unit of electricity (regardless of the wholesale price level), leading to potential over- or undercompensation, and imposing an excessive residual market risk on the operator;

(b)

a one-way CfD would not require generators to pay back market revenues beyond the strike price, thus allowing for potential over-remuneration; and

(c)

a regulated asset base regime (‘RAB’) for nuclear units is better fit for new investments in nuclear capacity to de-risk the construction period and large capital expenditures.

(82)

Belgium refers to Commission’s decisional practice, notably in the case of Hinkley Point C Nuclear Power Station in the UK (48), suggesting that CfD mechanisms may constitute State aid as they protect beneficiaries from price volatility in the electricity market and therefore grant a selective advantage on the counterparty. In addition, Belgium submits that, although it was not obliged to apply a two-way CfD in the case of the present LTO Project, the characteristics of the two-way CfD are fully aligned with the requirements and design principles foreseen by Regulation (EU) 2024/1747 in Article 19d(2) (see the arguments Belgium provided in recitals (75), (80) and (111) to (113)).

(83)

Belgium submitted an independent counterfactual analysis conducted by Compass Lexecon (49), which builds the cashflow streams of the project without a CfD and with three different, central electricity price curve projections (the one used for the signing financial model, built in the fourth quarter of the year 2022, and two other, counterfactual price curves, respectively built in the second and third quarters of the year 2023). Depending on the price curve used, the net present value (‘NPV’) of the project, using a 7 % discount rate (equal to the target IRR), would amount to a range between minus EUR 303 million and EUR 107 million. The positive NPV results from the use of the signing financial model’s price curve, which is older than the other two, which yield negative NPVs. In addition, updated central price curves (built during the first quarter of year 2024) were used to further deepen the counterfactual analysis. The most optimistic updated price curve yields an NPV of EUR 21 million, while the two other updated price curves yield negative NPVs of minus EUR 1,1 billion and minus EUR 1 billion. Belgium therefore argues that the CfD is an appropriate instrument, compatible with State aid rules, necessary to guarantee the execution and profitability of the LTO Project, and does not dispute its State aid character.

3.3.5.   Minimum OPEX and capital payment

(84)

If BE-NUC’s revenues are not sufficient to cover the costs payable in any month under the O&M Agreement, as well as any other operating, fuel and maintenance CAPEX costs (50) required for the operation of the LTO Units, then the RA Counterparty is required to make a shortfall payment to BE-NUC to ensure sufficient cashflow to meet these costs, in order to ensure nuclear safety at all times. The Minimum OPEX and capital payment therefore offers protection against losses from important unexpected unavailability of the LTO Units after the LTO Restart date, in order to ensure the Project’s long term economic viability. BE-NUC shall, in that regard, submit an annual reconciliation report. If the amount in this report is less than the aggregate minimum operating costs amounts, then the RA Counterparty will pay to BE-NUC an amount equal to the absolute value of the relevant shortfall. An equivalent payment will be made to Luminus, calculated to ensure proportionate treatment with BE-NUC.

(85)

Belgium submitted an independent counterfactual analysis conducted by Compass Lexecon (51), which simulates an unexpected 12-month unavailability event in 2029 affecting both LTO Units. Such an event, which represents the occurrence of an extreme operational risk, would generate significant losses for shareholders. The analysis shows a loss of EUR 832 million for year 2029, decreasing the NPV to minus EUR 512 million and the IRR to 1,7 %.

(86)

Belgium submits that the minimum OPEX and capital payments by the Belgian government may constitute State aid, as such payments are intended to cover shortfalls in revenues which would not be covered under normal market conditions (therefore creating a risk of funding gap). The payment of such funds therefore appears to grant BE-NUC a selective advantage on the market.

3.3.6.   Working capital facility

(87)

As second part of the RA, BE-NUC will procure, either from its shareholders or an external party, a working capital facility (‘WCF’) at the latest on the first LTO restart date to occur.

(88)

The WCF serves at funding the need in working capital stemming from the extension of the lifetime of the LTO Units as well as the operation of the LTO Units. BE-NUC will be allowed to draw down the WCF if the difference between its cash inflows and cash outflows is smaller than the estimated operational expenditures of the upcoming spending period defined in the Remuneration Agreement. The amount of the WCF shall be at least the average aggregate estimated operational expenditure for a period of three months.

(89)

The terms of the WCF, which shall be procured on market terms at the latest on the first LTO restart date to occur, are not yet known.

(90)

In effect, the WCF serves as an intra-year bridge to the annual minimum OPEX and capital payment, acting as a revolving credit facility that would be repaid yearly, if drawn down, by the minimum OPEX and capital payment provided by Belgium.

3.3.7.   SDC Loans

(91)

Likewise, another part of the RA, the Belgian government will grant a loan to both BE-NUC and Luminus as of 1 July 2025 (‘SDC Loans’).

(92)

The SDC Loans are each composed of two different facilities (one per LTO Unit), each formed of two tranches, one of which relates to the shut-down costs of the relevant unit (see recital (41)) incurred by BE-NUC and Luminus from the legal shutdown date until the restart date of the relevant unit and the other which relates to the coverage of operating costs incurred with respect to the relevant unit until 31 December 2028.

(93)

The tranche relating to the shutdown period costs shall fund and pay for those costs required to maintain the LTO Units until the restart date. Should shut down period costs be greater than anticipated, the RA Counterparty shall procure that the tranche is resized.

(94)

The tranche relating to operating costs shall fund and pay for those costs required to operate the LTO Units until the True-up date (in particular in the context of the anticipation of the restart date from 1 November 2026 to 1 November 2025). It shall be used to cover operating cashflow shortfalls occurring before 31 December 2028. In effect, this means that the SDC Loans will cover for any WCF drawdown prior to December 2028, replacing the need for minimum OPEX and capital payment during this period (see sections 3.3.5 and 3.3.6 above).

(95)

The SDC Loans provided to BE-NUC and Luminus will be sized by reference to their proportionate share in the LTO Units, and consequently their respective share in the shutdown and operating costs.

(96)

The terms of the SDC Loans are the following:

(a)

Amount:

Tranche relating to shut-down period costs: at least 98,7877 % (i.e., 89,807 % of 110 %) of BE-NUC’s most recent estimate of the total shut-down costs.

Tranche relating to the operating costs: at least 89,807 % of BE-NUC’s most recent estimate of the total operating cashflow shortfalls until 31 December 2028.

(b)

Availability period: the amounts drawn under the facilities are due at the later of 31 December 2028 or the date on which an amount equal to BE-NUC’s share in the project’s capital costs plus BE-NUC’s share in fuel costs has been distributed to BE-NUC’s shareholders or applied in payment towards loans advanced to BE-NUC by its shareholders or Engie.

(c)

The repayment profile: the payments of principal or interest starts in the year when the shareholders’ contributions (excluding any return) will have been repaid. The SDC Loans amortisation schedule assumes the repayment of Principal and/or interest is made on a proportionate basis relative to the payments of the IRR.

(d)

Interest rate: fixed interest rate of the lower of the Belgian 5-year government bonds (OLO (52)) rate plus 200 basis points and 6 %.

(e)

Collateral: none.

(97)

In effect, according to the preliminary computations under the signing financial model submitted to the Commission, the SDC Loans are expected to be drawn down for an aggregated amount of EUR [500-700] million in […] instalments from […] until […], repaid in […] instalments from […] until […], and remunerated through […] interest payments from […] until […]. These computations will be updated in the financial model approved by the RA Counterparty in the course of 2025, prior to the LTO restart date, based on the cost of extending operation under nuclear safety requirements set out by the Belgian nuclear safety agency, estimated on the basis of submitted quotes by contractors.

(98)

Belgium considers that the SDC Loans constitute State aid. Belgium submits in this respect:

(a)

According to advisers of Engie, Electrabel and the Belgian government, any form of commercial debt financing is not a viable alternative due to the non-bankable nature of nuclear projects.

(b)

Even if the banks were not reluctant to provide financing to nuclear assets, the same terms of the SDC Loans may not have been offered by the market. This relates to both the repayment profile (as mentioned above, the amortisation of the SDC Loans would begin after the repayment of the equity contributions and together with the repayment of equity returns) and the interest payable under the SDC Loans (the interest rate and the cap on this interest of 6 %) which might not have been offered by commercial banks. It is however challenging to assess market terms based on market comparisons, since comparable transactions cannot be identified.

(c)

The cancellation modalities of the SDC Loans appear to be more favourable than what would normally be granted by lenders operating according to market conditions.

(d)

Finally, since the SDC Loans would be drawn down to avoid minimum OPEX and capital payment, the SDC Loans amount to a repayable minimum OPEX and capital payment which, should the revenues of the LTO Units not allow its repayment, would not be repaid. Absent the SDC Loans, the Belgian government would need to cover cash shortfalls during the shut-down period and the initial period through the minimum OPEX and capital payment which, contrary to the SDC Loans, would not need to be repaid (53).

3.3.8.   O&M Agreement

(99)

Under the O&M Agreement, Electrabel shall perform:

(a)

‘LTO Services’: from the closing date of the transaction, the works and services required to extend the operational life of each LTO Unit by 10 years; and

(b)

‘O&M Services’: from the end of the initial legal lifetime of each LTO Unit (54), the services to operate and maintain the LTO Units, the common systems and common assets to the extent used in connection with the LTO Units (including waste handling services).

(100)

Certain services are explicitly excluded from the O&M Agreement, including services, works or activities in respect of decommissioning and dismantling of the LTO Units, which remain under the responsibility of Electrabel.

(101)

Pursuant to Article 12.1 of the O&M Agreement and subject to certain adjustments and exceptions, BE-NUC will pay Electrabel 89,807 % (reflecting Luminus holding of 10,193 % of the LTO Units) of all costs incurred in the provision of the LTO services and O&M services plus the relevant margin, being:

(a)

[0-5] % for insurance costs and taxes;

(b)

[0-5] % for goods and services supplied by Engie group members; and

(c)

[10-20] % for all other costs.

(102)

Belgium submits that the levels of margins are aligned with those applied under the LTO Partnership Agreement with Luminus (which itself covers a wide range of services including but not limited to O&M). The original agreement, concluded on 26 June 2003 and re-confirmed on 13 December 2023, with a third-party (Luminus) and covering similar services, is a relevant reference to support that the O&M Agreement reflects arm’s length costs for nuclear operations. In addition, Belgium argues that the financial risks borne by Electrabel are greater than under the Partnership Agreement with Luminus, since, under the O&M Agreement, the margin of Electrabel will be reduced in case of (non-excusable) cost overruns (i.e., costs not included in the budget as proposed by Electrabel and validated by the parties) and in case of unavailability of the plant beyond a target.

(103)

In addition, Belgium submits that the O&M Agreement includes certain cost controls, including rights for BE-NUC to audit Electrabel’s calculation of the fees and performance of the services and to request a benchmark review of the prices charged by Electrabel for technical affiliate services.

(104)

Finally, as the (sole) operator of the LTO Units and a service provider to BE-NUC under the O&M Agreement, Electrabel will be incentivised to achieve technical and economic performance of the LTO Units. In particular, under the O&M Agreement:

(a)

Electrabel will be liable to pay liquidated damages if the availability of the LTO Units during a contract year is less than [90-100] % (excluding LTO outages, normal outages and excused events (Article 17.1.A and Article 31.1.A of the O&M Agreement) and imply that the margin obtained by Electrabel for that contract year decreases on a sliding scale from [10-20] % to [0-5] % (55), and

(b)

in case of cost overruns, penalties will be applicable to Electrabel’s margin (up to [50-60] % of the margin on the O&M services and up to [70-80] % of the margin on the LTO services) (Articles 9.9, 12.2 and 12.3 of the O&M Agreement).

(105)

As a consequence, Belgium concludes that the O&M Agreement is limited to covering of costs incurred and that the financial conditions of the O&M Agreement are set to reflect market terms. Nevertheless, Belgium includes the O&M Agreement in the notified measure, as part of the set of sub-measures which could be assessed as one single intervention.

3.3.9.   Energy Management Services Agreement (‘EMSA’)

(106)

Although BE-NUC will be the technical owner of the electricity produced by the LTO Units, the electricity output will be sold by an energy manager. To this purpose, BE-NUC will enter into an Energy Management Services Agreement (‘EMSA’) with a third party or an Engie entity (Global Energy Management & Sales (‘GEMS’)).

(107)

The Implementation Agreement foresees that the EMSA will be awarded and tendered at the request of the Belgian government. If no successful tender takes place within certain time limits, Electrabel and the Belgian government shall negotiate and find an agreement, which must reflect the EMSA Terms (which are jointly decided by Belgian government and Electrabel). Failing such agreement, the pricing terms will be determined based on market conditions by an independent expert.

(108)

The EMSA will stipulate key terms, conditions and risk allocations and will, consequently, stipulate in a detailed manner how the electricity must be sold on the market by the energy manager. The energy manager appointed under the EMSA will only have limited power of decision on how the electricity produced by BE-NUC is sold, within the limits of a predefined Bidding and Imbalance Strategy (‘BIS’) to be implemented in the EMSA (56).

(109)

The Bidding and Imbalance Strategy can be reviewed and amended from time to time (57). The Belgian government, in its capacity as RA Counterparty, has the final say. More precisely,

(a)

the energy manager provides a Bidding and Imbalance Strategy to the JV; the Belgian government has an ongoing right to propose changes to that strategy;

(b)

any change must reflect certain ‘BIS Conditions’ set out in article 9.3(B) of the RA but, provided the changes reflect those conditions, the Belgian government can unilaterally impose the changes;

(c)

if any changes are agreed or imposed by the Belgian government, the JV is obliged to try and ensure that those changes are adopted under the EMSA.

(110)

The agreements between the Belgian government and Electrabel foresee that all the electricity produced by the LTO Units will be sold on the day-ahead wholesale market, according to the BIS. This corresponds to the use of the day-ahead market (‘DAM’) price as market reference price (‘MRP’) in the CfD design (see recital (71)(a)). The Belgian Federal Commission for Electricity and Gas Regulation (‘CREG’) provided its view on the choice of DAM price as MRP (58). The CREG questioned the choice of the DAM price and proposed as an alternative design the use of long-term products as part of the MRP, stating that the design of the CfD would amount to allocating the full strike price to the plants, thus incentivising a permanent, nominal run of the plants and reducing liquidity in the daily market.

(111)

According to Belgium, based on an independent analysis by Compass Lexecon (59), the DAM reference price allows for appropriate market risk allocation/hedging, together with the marketing arrangements provided in the BIS, in particular because it is granular and allows matching the MRP with the captured market prices. In addition, the CfD design based on the DAM price as MRP and electricity marketing arrangement fosters sound bidding behaviour. In particular, Belgium submits that selling the electricity on the day-ahead market incentivises sound bidding behaviour for the following reasons:

(a)

The DAM confers no discretion on the choice of the purchasers because the volume is offered in an anonymous auction. The auction further concentrates supply and demand to one period which maximises market depth. This anonymity and high market depth mitigates the ability to collude or actively distort the market.

(b)

Further, the DAM as Market Reference Price (MRP) benefits from the pay-as-cleared principle (with no disclosure of the ask price) which reduces the likelihood that BE-NUC’s bids can distort the market. This holds particularly when considering the alternative: bilateral contracts such as forwards would require BE-NUC to identify and potentially disclose a specific ask price. These disclosed prices could be at risk of market distortions because the disclosed prices would pose a threshold or benchmark among available electricity in the Belgian power market.

(112)

Belgium further notes that the DAM price is a suitable reference as it is transparent, robust, and as the DAM is liquid compared to other markets. In addition, Belgium argues that the chosen CfD formula design in combination with specific arrangements (MPRA, modulation arrangement) preserves incentives to operate and participate efficiently in the electricity market by providing incentives for production at times of high market prices and modulation arrangements at times of low prices.

(113)

Belgium also submits, based on the memo by Compass Lexecon, that the DAM price is particularly suited as MRP in the initial period of LTO works, notably compared to long-term products, since (i) it reduces the market risk for BE-NUC compared to using forwards as it allows to closely match the specific availability pattern during the initial period of the LTO works (as explained in section 3.2), and (ii) using futures as MRP could induce additional market risks for the plant operator due to the higher risk of unplanned outages in the initial period of the LTO works.

(114)

Finally, Belgium submits that the initial choice of the MRP may be revisited by the Belgian government, as RA Counterparty, up to three times over the contract duration, subject to BE-NUC and Luminus agreement, as from the end of the initial period of the LTO works. Any changes to the MRP would likely result in amendments to the BIS to accommodate the incentive of the JV to achieve that revised MRP. The Belgian government intends to base its position on this matter taking into account the advice from the CREG.

(115)

Belgium submits that the EMSA does not provide an economic advantage to Electrabel, since the EMSA will in principle be subject to an open, transparent, non-discriminatory and unconditional tender procedure. Belgium argues that, even if no successful tender takes place, the parties will attempt to find an agreement reflecting EMSA Terms. Failing such an agreement, the alignment with market conditions would be ensured through the determination by an independent expert of the pricing terms to be applied. As a consequence, Belgium submits that the awarding and tendering modalities of the EMSA ensure the application of arm’s length and market conditions. Nevertheless, Belgium includes the EMSA in the notified measure, as part of the set of sub-measures which could be assessed as one single intervention.

3.3.10.   Administration Services Agreement (‘ASA’)

(116)

The Administration Services Agreement (‘ASA’) is an agreement entered into by BE-NUC with Electrabel. The Implementation Agreement provides with regard to the ASA that ‘Electrabel shall […] provide a written proposal to the Belgian government [BEGOV] describing the key terms and conditions on which Electrabel would be willing to enter into an administration services agreement with NuclearSub [BE-NUC] for the provision of the following services to NuclearSub [BE-NUC] on arms’ length terms: secretarial, accounting, tax, insurance, media relations and communications, legal document management, litigation management and compliance services’.

(117)

Belgium submits that, although the ASA has not been adopted yet, the Belgian government and Electrabel have foreseen in their agreements that the ASA will be concluded on arms’ length terms, as mentioned in recital (116), thereby ensuring that it will be aligned on market terms and conditions. Nevertheless, Belgium includes the ASA in the notified measure, as part of the set of sub-measures which could be assessed as one single intervention.

3.3.11.   Indemnification of cost coverage losses in case of no closing

(118)

The closing of the transaction is subject to the satisfaction and/or waiver of the Conditions Precedent (60). In principle, the Belgian State and Electrabel will bear 50/50 of the cost coverage losses in case of no closing, except under certain circumstances, where the party responsible will have to bear all costs incurred by the other. Hence, both Electrabel and the Belgian State are 100 % liable if there is no closing of the Transaction due to their own responsibility.

(119)

The cost coverage losses are limited to:

(a)

Profit losses incurred by an ‘Engie indemnified entity’ (i.e. Electrabel and each relevant member of the Engie group and BE-NUC) in connection with any outage due to the LTO, that would not have occurred other than to undertake (or as a result of) works in relation to the LTO Units (if the Belgian State has given prior approval of such outage or Electrabel considers that such outage is required). As co-owner of the LTO Units, a similar mechanism applies for Luminus’ profit losses under the same conditions.

(b)

loss in value from selling Synatom’s fuel inventory for an amount less than the market value of such fuel inventory as of 21 July 2022;

(c)

costs caused by the demobilisation or reallocation of staff and contractors; and

(d)

termination costs in relation to terminating any third-party agreements.

(120)

Belgium submits that this cost coverage arrangement is in line with normal market terms in comparable transactions, whereby each party is held liable for costs incurred in relation to (the preparation of) the agreement in case of no closing due to either party. Hence, Belgium considers that there is no economic advantage in this cost coverage arrangement, neither vis-à-vis Electrabel, nor vis-à-vis Luminus. Nevertheless, Belgium includes this cost coverage arrangement in the notified measure, as part of the set of sub-measures which could be assessed as one single intervention.

3.4.   Component 2: Cap on the nuclear operator’s liability for long-term storage and final disposal of nuclear waste and spent fuel

3.4.1.   EU legislative framework

(121)

The legislative framework applicable to radioactive waste and spent fuel in the European Union is grounded inter alia on the following two fundamental principles:

(a)

First, operators of nuclear installations have the prime responsibility for the safe and responsible management of spent fuel and radioactive waste. They must bear the costs from generation to disposal of all by-products of their processing/reprocessing process, including secondary radioactive waste. This obligation is contained in Article 4(3)(e) of Council Directive 2011/70/Euratom (61) which requires that ‘the costs for the management of spent fuel and radioactive waste shall be borne by those who generated those materials’.

(b)

Second, Member States have the ultimate responsibility for the responsible and safe management (including disposal) of spent fuel and radioactive waste (Article 4(1) of Council Directive 2011/70/Euratom) and ‘shall ensure that […] adequate financial resources be available when needed […] for the management of spent fuel and radioactive waste, taking due account of the responsibility of spent fuel and radioactive waste generators’ (Article 9 of Council Directive 2011/70/Euratom).

(122)

In addition, the Euratom Treaty calls on the Community to ensure the establishment of the basic installations necessary for the development of nuclear energy in the Community.

(123)

Belgium submits that Electrabel will keep some responsibilities as sole operator of the LTO Units, resulting from (1) European and Belgian legislation, and (2) contractual obligations of the Implementation Agreement, hereby respecting the ‘polluter pays’ principle.

(124)

First, Electrabel will continue to assume all the responsibilities of a licensed operator of a nuclear power plant, including responsibilities regarding operating and maintaining the two nuclear reactors, their decommissioning and dismantling, which is also covered by a guarantee by the mother company Engie, and making the nuclear waste compliant with the contractual transfer criteria (see recital (133)(c)). Therefore, Electrabel remains exposed to extended civil liability and financial guarantee and insurance obligations.

(a)

The main applicable security and safety requirements are provided by European and Belgian legislation complemented with requirements issued by the Belgian nuclear safety authority:

every reactor must undergo a decennial revision, according to Directive 2009/71/Euratom of 25 June 2009 establishing a Community framework for the nuclear safety of the nuclear installations, as transposed into Belgian Law by the Royal Decree of 30 November 2011. The Royal Decree of 30 November 2011 also imposes safety obligations on the nuclear operator in respect of decommissioning and dismantling; and

other safety requirements provided in Directive 2011/70/Euratom of 19 July 2011 establishing a Community framework for the responsible and safe management of spent fuel and radioactive waste and Directive 2013/59/Euratom of 5 December 2013 laying down basic safety standards for protection against the dangers arising from exposure to ionizing radiation.

(b)

In addition, Electrabel is required to provide information to and comply with instructions from the Belgian National Agency for Radioactive Waste and Enriched Fissile Material (NIRAS/ONDRAF (62)), pursuant to the Law of 8 August 1980 (63) and the Royal Decree of 30 March 1981. They must also separate radioactive waste from other waste.

(c)

The Law of 22 July 1985 on civil liability in the field of nuclear energy in Belgium specifies that the nuclear operator is liable for nuclear damage caused by any nuclear accident, unless the accident is the result of an armed conflict. Even in the absence of fault, the operator may be held responsible, up to a maximum of EUR 1,2 billion per accident. Nuclear operators are required to have insurance or a financial guarantee covering their liability in the event of a nuclear accident. The arrangements with the Belgian State also foresee a guarantee and a hold harmless obligation for Electrabel in this respect.

(125)

Second, at contractual level, pursuant to Article 25.1.A of the O&M Agreement, Electrabel is responsible (and bound to compensate BE-NUC) in case of ‘any material action and/or material failure to act by Electrabel (in its capacity as Nuclear Operator) that would not have been undertaken or committed by a licensed operator of a nuclear power plant, seeking in good faith to perform its contractual, legal and regulatory obligations, and exercising the degree of diligence, skill, care and prudence reasonably expected of a licensed nuclear operator [...]’ (‘LTO Operator Failure’).

3.4.2.   Current system of waste management and financing in Belgium

(126)

Under the current regulations, the nuclear operator is financially (through the nuclear provision company, Synatom (64)) and operationally responsible for the decommissioning of the seven nuclear power plants. For the financial part, Electrabel is responsible together with EDF Belgium and Luminus (the ‘Contributing Companies’) (65). The nuclear provisions for spent fuel and decommissioning waste are funded by Electrabel in accordance with the applicable accounting laws (including control by a statutory auditor) (66), are managed by Synatom (on its balance sheet) and are subject to the prudential control of an independent governmental authority, the Nuclear Provision Commission (‘CPN/CNV’) (67). In addition, the nuclear operator is also financially and operationally responsible for the conditioning and management of the radioactive waste and spent fuel, and its long-term storage after its acceptance by NIRAS/ONDRAF until its final disposal.

(127)

Established in 1980, NIRAS/ONDRAF is the Belgian waste management agency, responsible for the management of all radioactive waste, today and in the future. NIRAS/ONDRAF manages waste legacy sites in Belgium and holds funds to pay for the management of interim storage, geological and near-surface disposal sites and socio-economic costs. The ‘polluter pays’ principle holds since the producers of radioactive waste pay a fee for every waste package transferred to NIRAS/ONDRAF. Every owner of a nuclear installation or of nuclear waste should foresee the necessary means to pay for the liability.

(128)

A comprehensive inventory report is drawn up every 5 years by NIRAS/ONDRAF for all nuclear waste producers, in which the funds are evaluated. Future reference scenarios are estimated using reference scenarios elaborated by NIRAS/ONDRAF regarding radioactive waste, by Electrabel regarding decommissioning and by Synatom regarding spent nuclear fuel. The net present value of future liabilities must be present in the accounts of Synatom, and every 3 years there is an audit of the methodology, reference scenario, etc. The future liabilities are built up during the exploitation of the reactors with yearly interest supplements. Even after NIRAS/ONDRAF has accepted the waste, the nuclear operator remains liable for any costs incurred by NIRAS/ONDRAF which are not covered by the paid fees. This implies that for a very long period, the nuclear operator could still receive payment requests from NIRAS/ONDRAF. In addition, this also implies that if the nuclear operator no longer exists at that time, the Belgian State bears the responsibility of the full costs (68).

(129)

Following the CPN/CNV triennial revision decision issued on July 2023, the nuclear provisions, held on the balance sheet of Synatom, for dismantling activities (EUR 8,122 billion) and spent fuel management (EUR 9,070 billion) equalled a total amount of EUR 17,192 billion. In addition to this amount, outside the scope of supervision of the CPN/CNV, a provision of EUR 1,033 billion for operational waste, yet to be transferred to NIRAS/ONDRAF, is held on the balance sheet of Electrabel. This brings the current total amount of provisions related to nuclear liabilities to EUR 18,225 billion.

3.4.3.   Cap on nuclear waste payments (‘waste cap’)

(130)

In order to reduce uncertainty regarding the cost of nuclear waste and spent fuel in the future, the ‘Phoenix Law’ (see section 3.7.2) introduces a cap on the liability of producers of radioactive waste resulting from the production of electricity through nuclear energy.

(131)

The ‘waste cap’ is a transfer of certain financial liabilities from the nuclear operator (Electrabel) to the Belgian State against the payment of a lump sum amount. The liabilities transferred are the liabilities in relation to the production, detention or ownership of conditioned radioactive waste and spent fuel of all seven Belgian nuclear units, subject to and after compliance of such radioactive waste and spent fuel with the relevant contractual transfer criteria. The conditioned radioactive waste and spent fuel are distributed in three types (69):

(a)

category A-waste (short-lived waste with a low or intermediate level of radio activity);

(b)

category B-waste (long-lived waste with a low or intermediate level of radio activity); and

(c)

category C-waste (short- and long-lived waste with a high level of radio activity) and spent fuel.

(132)

This radiological classification into three categories has been used historically by NIRAS/ONDRAF and is defined in a manner consistent with the International Atomic Energy Agency (‘IAEA’) classification (70). This radiological classification is contractually established by NIRAS/ONDRAF with the various producers. The producers classify their historical, current and future waste according to this classification in their (preliminary) reference inventory that they must submit to NIRAS/ONDRAF. The producers thereby assume that their waste will either be stored in a yet-to-be-built storage facility in Dessel for category A waste or in a hypothetical single geological storage facility for category B and C waste and spent nuclear fuel.

(133)

The cap system works according to the following principles:

(a)

Capped Amounts: A lumpsum payment, including a risk premium and indexed at 3 % per year as of 31 December 2022 (71), has been set for each category of radioactive waste meeting the contractual transfer criteria, amounting to a total amount of EUR 15 billion (‘Capped Amounts’):

category A waste: EUR 3,5 billion, paid on the LTO restart date, i.e. when the Doel 4 and Tihange 3 nuclear power plants produce again electricity on an industrial scale;

category B: EUR 1 billion, paid at the closing of the agreement between the Belgian State and Electrabel;

category C: EUR 10,5 billion, paid at the closing of the agreement between the Belgian State and Electrabel.

(b)

Volume credits: The capped (lumpsum) amount per category corresponds to a volume credit for predetermined volumes (established for category A waste in equivalent cubic metres, for category B waste in equivalent volume credits and for category C in metres of gallery length of the reference geological disposal facility used to estimate the corresponding nuclear provisions). Belgium submits that this system provides an incentive for the nuclear operator to minimize the production of nuclear waste.

(c)

Waste transfer criteria: For each type of nuclear waste package, contractual transfer criteria (‘CTC’) have been established, which define the criteria that each waste package must meet for the financial responsibility to be transferred to the public entity Hedera (see section 3.4.4) (72). The responsibility (and associated costs) for bringing radioactive waste in line with the contractual transfer criteria remains with the nuclear operator. In case the contractual transfer criteria are not met, the nuclear operator remains liable for the waste package. The contractual transfer criteria generally include an obligation to condition the waste before it is transferred to NIRAS/ONDRAF.

(d)

Volume adjustment fees: When the volume credit of a waste category has been fully used, an additional amount must be paid to the public fund Hedera (see section 3.4.4) for each additional volume credit needed. This is known as the ‘volume adjustment fee’. The amount of the volume adjustment fee is expressed in 2022 nominal value and will be indexed at the same rate as the Capped Amounts (i.e., 3 % per year as of 31 December 2022). The Engie Parent Company Guarantee secures among others the payment of the volume adjustment fees of Electrabel. Radioactive waste and spent fuel generated during the extension of operation of the two nuclear reactors will be invoiced to BE-NUC and Luminus (pro rata to their ownership share in the LTO Units) on the basis of the volume adjustment fee (73).

(134)

Belgium submits that the volumes underlying the Capped Amounts are based on the waste inventory used for the last CPN/CNV revision of the nuclear provisions in 2022 and are the current best estimate of the volume of conditioned nuclear waste and spent fuel produced (and to be produced) by the seven nuclear power plants in a no-LTO scenario. For each waste package a conversion factor is determined to accommodate optimization in the waste production during decommissioning. To properly reflect the risk that waste packages may need post-conditioning after transfer to the Belgian State, the rate of consumption of the waste credit is not solely linked to its physical volume and therefore some waste packages will consume more of the volume credit of a waste category than others. This is an incentive for the nuclear operator to produce nuclear waste packages bearing a minimal risk for the Belgian State. In the event of an overestimation of volumes and of the Capped Amounts, the Belgian State retains the full amount, and no reimbursement will be made to the nuclear operator.

(135)

Belgium submits that the Capped Amounts, mentioned in recital (133)(a), are the result of applying a risk premium to the existing nuclear provisions that are based on the current waste inventory, and the industrial reference scenario of NIRAS/ONDRAF and the nuclear operator. Therefore, the lumpsum payment only grants a limited volume credit per waste category. Section 3.4.5 provides more details about the establishment of the Capped Amounts and calculation of the risk premium.

(136)

The amounts of the volume adjustment fees are determined in the Phoenix Law (see section 3.7.2). The amounts are established as the arithmetic average between (i) the capped amount of the waste category divided by the number of volume credits of that category and (ii) the marginal cost of one additional volume credit. Belgium submits that, hereby, the waste producer is not paying twice for costs that are already covered by the Capped Amounts, while providing incentives to produce as little additional waste as possible and covering the risks related to the long-term management of additional waste.

(137)

Belgium submits that the waste transfer deal mitigates the risks for both, the Belgian State and Engie.

(a)

The Belgian State mitigates its residual liability in case of insolvency of a waste producer. The Belgian State (through Hedera, see section 3.4.4) receives the Capped Amounts already upfront 2024 and 2025, instead of receiving waste tariffs paid to NIRAS/ONDRAF gradually (and mainly) during the decommissioning phase (when the waste is transferred to NIRAS/ONDRAF) and after 2050 for the spent fuel. Therefore, in case of insolvency of the nuclear operator before all waste or spent fuel has been transferred, the Belgian State has already secured the money related to the waste disposal. Hereby, the Belgian State can ensure that the adequate financial resources are available when needed for the implementation of its National Programme for the Management of Spent Fuel and Radioactive Waste. Possible increases of the waste tariffs, due to e.g., changes in industrial reference scenario, that are currently passed on to the waste producers, are covered through the risk premium.

(b)

For the nuclear operator, the waste cap mechanism mitigates the risk of being charged additional amounts decades after the nuclear operations and their commercial revenues have stopped, and it mitigates the uncertainties related to the additional charges.

3.4.4.   Management of the nuclear waste fund by Hedera

(138)

Since the nuclear operator, after payment in full and final of a lumpsum amount (although under certain conditions) will be exempt from and will no longer be financially liable for the obligations transferred regarding the management of radioactive waste and nuclear spent fuel, the Belgian State must organise itself for those obligations and resources in the very long term.

(139)

Hedera is established as a new public institution sui generis to manage assets dedicated to the financing of the Belgian State’s long-term commitments. The amounts received must be invested, to generate the desired return to pay the costs for waste management when they are due. The fixed amounts will also have to be sufficiently ringfenced from the general budget of the Belgian State, so that the amount is only used to pay for the costs for the long-term storage and final storage and cannot be used for other purposes or to absorb any future budget deficits.

3.4.5.   Establishment of the Capped Amounts

(140)

The computation of the EUR 15 billion of Capped Amounts is based on the current nuclear provisions of the nuclear operator (the base amount) and a risk premium.

3.4.5.1.   Base amount

(141)

Belgium submits that the base amount of nuclear provisions of the nuclear operator includes already margins for contingencies, uncertainties and other risks that may arise in relation to dismantling, radioactive waste management and spent fuel management. Contingency margins relating to the disposal of waste are determined by NIRAS/ONDRAF and built into its nuclear waste tariffs. The nuclear operator also estimates appropriate margins for each cost category in its nuclear provisions.

(142)

The nuclear provisions for managing spent fuel cover all of the costs linked to the base scenario, including on-site storage, transportation, conditioning, storage and geological disposal. Their present value is calculated based on the following principles:

(a)

Storage costs: the costs of building and operating additional dry storage facilities and operating existing dry and wet storage facilities, along with the costs of the procurement of containers.

(b)

Conditioning facilities: radioactive spent fuel that has not been reprocessed is to be conditioned, which requires conditioning facilities to be built according to NIRAS/ONDRAF’ approved criteria.

(c)

The cost of disposing fuel in deep geological repositories is estimated using the fee rate established by NIRAS/ONDRAF based on a total disposal facility cost of EUR 12 billion based on a probabilistic model (AACE Cost Estimate Classification).

(d)

The long-term obligation is calculated using estimated internal and external costs assessed based on offers received from third parties.

(e)

The baseline scenario includes NIRAS/ONDRAF latest scenario, with geological storage starting in 2070 and ending in 2135.

(143)

The nominal discount rate used by the CPN/CNV is 3 % (including an inflation rate of 2 %), based on the opinion of the CPN/CNV of 7 March 2023 (74). Belgium submits that a long-term discount rate of 1 % in real terms can be considered prudent, since it is in line with current actuarial practices, such as the EIOPA curve (75), and more conservative than those previously applied in similar financial transfers (76).

(144)

For the various phases, margins for contingencies, reviewed by CPN/CNV, are included.

(145)

The present value of the obligation to manage nuclear waste produced by the decommissioning activities are determined based on the following principles and inputs:

(a)

waste tariffs for category A and category B dismantling waste are determined using the waste tariff established by NIRAS/ONDRAF and include the margins recommended by NIRAS/ONDRAF for waste reclassification risk given the uncertainty over the acceptation by NIRAS/ONDRAF;

(b)

for the various phases, margins for contingencies, reviewed by the CPN/CNV, are included;

(c)

an inflation rate of 2 % is applied until the last waste package is transferred to NIRAS/ONDRAF in order to determine the value of the future obligations;

(d)

the nominal discount rate used by the CPN/CNV is 3 % (including an inflation rate of 2 %).

(146)

The nuclear waste tariffs of NIRAS/ONDRAF are based on an industrial reference scenario:

(a)

Category A waste: the surface disposal facility in Dessel;

(b)

Category B waste, category C waste and spent fuel: the long-term disposal assumption assumes that the waste will be buried in a hypothetical deep geological repository at a depth of 400 m in a clay host formation at a site yet to be determined in Belgium.

(147)

The net present value of the future liabilities regarding decommissioning and radioactive waste management must be present in the accounts of Synatom as nuclear provision company. The discount factor applied to these liabilities decreased from 5 % in 2005 to 3,5 % at the end of 2018 to progressively bring it in line with the long-term risk-free interest rate based on the rate of government bonds (OLO) and AAA-rated corporate bonds (77). The discount factor affects the amount that nuclear operators must set aside today to cover future decommissioning and waste management costs: a higher discount rate reduces the present value of future liabilities, thereby reducing the amount that needs to be provisioned currently, while a lower discount rate increases the present value, requiring higher current provisions. As of 2019, the CPN/CNV decided to further decrease the discount rate and to implement a separate approach for spent nuclear fuel and nuclear waste/decommissioning funds. At the end of 2021 the discount factor was 3,25 % for spent nuclear fuel and 2,5 % for nuclear waste/decommissioning.

(148)

The discount rate established in the context of the 2022 triennial revision is important since it establishes the long-term discount factor and hereby influences the amount of provisions to be transferred by the nuclear operator to the Belgian state. In this respect, the CPN/CNV considers in its advice of 7 March 2023 that:

(a)

So far, the discount rate, the methodology and the costs and the provisions for dismantling and the management of radioactive waste and spent fuel were reviewed every 3 years, and the provisions adjusted accordingly by Synatom. After transfer of the liabilities, such revision is not possible any longer.

(b)

A study by the Bank of England shows that the very long-term interest rate has been on a downward trend since the 14th century until now.

(149)

Considering the arguments in recital (148), the CPN/CNV proposed to keep the discount rate for dismantling activities at 2,5 %, while adjusting the discount factor for nuclear waste/decommissioning and spent fuel liabilities, applying a two-step approach, consisting in applying a discount factor based on the actual 30-year OLO rate of 3,17 % for the first 30 years, and applying a discount factor of 2,17 % based on the risk-free rate for the 30 years thereafter. The CPN/CNV argues that this methodology is balanced and allows the cash flows to be actualised over a long period at a lower interest rate. The remaining period with the risk-free interest rate must correspond to the main cash flows for the construction of the deep repository of radioactive waste of category B and category C, including spent fuel recognised as waste in the reference scenario of NIRAS/ONDRAF.

(150)

The CPN/CNV also refers to additional risks regarding the transfer of nuclear waste liabilities that the Belgian government would need to consider in the negotiations with Engie on the transfer of waste liabilities:

(a)

There is a risk that the anticipated overnight costs are underestimated and, therefore, contingencies are insufficient (78).

(b)

The difference between the inflation assumed in the CPN/CNV discount rate and the actual construction inflation: construction inflation (as estimated e.g., on the basis of the ABEX index) is higher than the 2 % inflation target of the European Central Bank (79) assumed in the discount rate.

(c)

Investment risk: in a scenario where inflation is lower than the 2 % inflation target and a return of 2 % cannot be achieved, a shortage of funds may arise (a low probability scenario).

(151)

The capped nuclear liabilities that are transferred to the Belgian State were identified and the corresponding existing provisions allocated, as part of the Capped Amounts. Table 4 shows the allocation of the EUR 18,225 billion existing provisions between Electrabel (EUR 8,410 billion) and the Belgian government (EUR 9,815 billion), according to the waste cap agreement.

Table 4

Allocation of the nuclear provisions according to the waste cap agreement

(EUR billion)

Liabilities retained by Electrabel

Liabilities transferred to Belgian State

Total

Dismantling activities (incl. nuclear waste management)

6,727

1,395

8,122

Spent fuel management

1,683

7,387

9,070

Operational waste

-

1,033

1,033

Total

8,410

9,815

18,225

Source: Belgian authorities

(152)

The Capped Amounts were determined after taking into consideration every step of the management of the nuclear waste package and spent fuel after their transfer to the Belgian State, with the support of NIRAS/ONDRAF (for the industrial scenario) and the advice of the CPN/CNV (for the discount rate) (see Figure 1, Figure 2 and Figure 3).

Figure 1

Allocation of capped nuclear liabilities for category A and B waste transfer

Image 1

Figure 2

Allocation of capped nuclear liabilities for spent nuclear fuel transfer

Image 2

Figure 3

Allocation of capped nuclear liabilities for category C waste transfer

Image 3

3.4.5.2.   Risk premium

(153)

Belgium submits that, although the nuclear provisions already contain different layers of contingencies and margins meant to cover the industrial reference scenarios approved by the CPN/CNV, to the base amount of EUR 9,815 billion a significant additional risk premium of EUR 5,185 billion, has been added to cover remaining uncertainties.

(154)

Belgium submits that the determination of the risk premium considered a technical analysis made by NIRAS/ONDRAF, read together with the CPN/CNV’s opinions on provisions. In particular, NIRAS/ONDRAF issued a technical note documenting an analysis of the uncertainties and risks associated with the transfer of financial responsibility for the management of radioactive waste and spent fuel from the seven Belgian nuclear power plants to the Belgian State (80). The analysis concerns various components of the transferred liabilities to estimate the cost of ‘less likely than not’ scenarios, i.e., costs that had not been included in the base amount and therefore were considered to calculate the risk premium. The NIRAS/ONDRAF technical note’s findings have identified certain risks which have been dealt with and reflected in the risk premium:

(a)

The overnight estimated cost (50th percentile) of the geological disposal installation at a depth of 400 m currently valued in the 2022 CPN/CNV’s triennial review, including contingencies, amounts to EUR 12 billion (for all waste producers, of which nuclear waste constitutes approximately 55 %) and is considered in the base amount. The risk premium covers approximately 55 % of the estimated cost increase at the 70th percentile. In addition, based on the NIRAS/ONDRAF Technical Note, the risk premium covers the additional costs related to a different disposal site at a depth of 600 m (instead of the 400 m currently envisaged in the reference program). This assessment led to a combined additional risk margin of approximately EUR 4 billion.

(b)

The overnight cost of operating and maintaining the storage facilities at the Belgoprocess site (81), of the operation of the Spent Fuel Storage Facilities after 2050 and of building additional facilities as currently valued in the 2022 CPN/CNV’s triennial review, including contingencies for cost overruns. An additional margin of approximately EUR 0,5 billion was added to cover additional contingencies for longer operating periods and the risks identified by NIRAS/ONDRAF that might not be covered by the contingencies in the base amount.

(c)

With respect to category A waste and related risks:

The overnight cost of the surface disposal installation was valued in the 2022 CPN/CNV’s triennial review at EUR 2,604 billion. The nuclear waste is expected to occupy approximately 60 % of the surface disposal. NIRAS/ONDRAF identified potential additional costs: since the reference scenario for surface disposal assumes that all category A waste is eligible for surface disposal, NIRAS/ONDRAF identified uncertainties relating to the eligibility, which might lead to the risk of additional costs related to the adequate prior handling of waste. As mentioned in recital (133)(c), Electrabel has to meet a strict set of CTC before the waste is eligible to be transferred, mitigating the risk of additional costs for the Belgian State after transfer of the nuclear waste. The CTC were set considering the anticipated evolution of the acceptance criteria for this disposal as the project progresses. To cover the risks relating to uncertainties associated with the anticipated evolution of the acceptance criteria, the industrial risks and the potential costs of making the waste compliant with the disposal acceptance criteria, an additional premium of EUR 0,9 billion was added to the base amount.

(d)

Although the CPN/CNV concluded its 2022 triennial revision with a reduction in decommissioning provisions of EUR 0,642 billion (82), the Belgian government adopted a prudent approach and kept in an amount in the risk premium corresponding to Category A waste after transfer.

(e)

Other industrial risks identified by NIRAS/ONDRAF were reduced by requiring Electrabel:

to support the potential cost of a new storage building for thin shell containers (‘TSC’) that would be required to transfer category B waste;

to deliver all nuclear waste in a conditioned and inert form which would require to swiftly develop all the conditioning techniques required to transfer all the waste to the Belgian government in conditioned and/or inert form; and

to transfer all spent fuel in dry storage casks, to build a new spent fuel storage facility and to decommission the existing wet storage building. As this cost was partly included in the nuclear provisions, it led to a reduction of the risk premium by EUR 0,5 billion.

(155)

The total amount of the transferred liabilities therefore equals (i) the base amount of EUR 9,815 billion and (ii) a risk premium of EUR 5,185 billion, amounting to EUR 15 billion in total. This led to the lumpsum amounts of EUR 3,5 billion for category A waste and EUR 11,5 billion for the category B and C waste and spent fuel. The cost for category B and C waste was split up based on their respective part of the inventory: EUR 1 billion for category B waste and EUR 10,5 billion for category C waste and spent fuel.

(156)

For the reasons mentioned in recitals (141) to (146) and (153) to (155), Belgium considers that the waste cap is sized to cover realistically the expected costs, including an adequate risk premium. In addition, Belgium argues that the risk premium of 52,83 % exceeds the risk premium of 35,47 % applied in the case of the German waste deal and exceeds the range of 34-43 % that was submitted by Germany as a plausible range in the context of the German waste deal (83).

3.4.5.3.   Payment of the Capped Amounts

(157)

In order to implement the waste cap, the Law of 12 July 2022 has been amended as follows:

(a)

First, the provisions for operational waste held by the nuclear operator and the Contributing Companies will be transferred to Synatom and be submitted to the control of the CPN/CNV, as is already the case for the provisions for decommissioning and spent fuel.

(b)

Second, the definition of decommissioning costs and spent fuel management costs will be modified to exclude and distinguish them from the capped nuclear and spent fuel liabilities. This means that Synatom is no longer required to establish provisions for the capped nuclear waste and spent fuel liabilities. These provisions will be established within Hedera.

(158)

The Capped Amount of EUR 15 billion will be paid (after indexation) by Synatom to Hedera. On 31 December 2022, out of the EUR 15 billion, EUR 8,782 billion has already been provisioned within Synatom. The remaining EUR 6,218 billion consists of (i) the operational waste provisions that are currently on the balance sheet of the nuclear operator (and the Contributing Companies) and (ii) the risk premium. This delta will be transferred to Synatom by the nuclear operator and the Contributing Companies, the same way as if it were a shortfall in the provisions.

(159)

The amounts that are already within Synatom have been contributed by the nuclear operator and the Contributing Companies in the past years. Therefore, from a financial point of view, both the nuclear operator and the Contributing Companies ‘pay’ for their share in the Capped Amounts. The residual financial liability of both the Contributing Companies and the nuclear operator in case of a shortfall of money will be limited to the uncapped liabilities (including the decommissioning provisions for the nuclear units, making the waste packages compliant with the contractual transfer criteria).

(160)

Belgium considers that the transferred liabilities regarding nuclear waste do not provide an economic advantage to Electrabel and the Contributing Companies, since it considers that the transferred Capped Amounts adequately reflect the risk of subsequent cost fluctuations taken over by the State, and that the set-up of the risk transfer is such that a private investor would have accepted to bear it. Nevertheless, Belgium includes the transfer of nuclear waste and spent fuel liabilities in the notified measure, as part of the set of sub-measures which could be assessed as one single intervention.

3.4.6.   Decommissioning liabilities

(161)

At the end of the O&M Agreement, the LTO Units will be in a decommissioning and dismantling phase. The provisions for the decommissioning of all the Belgian nuclear power plants and the management of spent nuclear fuel are regulated by the Law of 11 April 2003 (84). The main principles are (i) the incorporation of the CPN/CNV, an independent governmental entity that has advisory and supervisory power of the establishment and management of the nuclear provisions, and (ii) the designation of Synatom as the ‘nuclear provisioning company’. This means that the nuclear provisions in relation to the decommissioning and dismantling of the Belgian nuclear power plants and the nuclear fuel used in these plants are established on the balance sheet of Synatom and no longer as provisions for environmental liabilities on the balance sheet of the nuclear operator and the (other) co-owners of the nuclear power plants, as was the case prior to 2003. The nuclear operator and the Contributing Companies then transferred the countervalue of their provisions to Synatom.

(162)

The Law of 12 July 2022 has confirmed and enhanced CPN/CNV’s supervisory powers and replaced the Law of 11 April 2003 with regard to the nuclear provisioning. Under the current mechanism, Synatom establishes the decommissioning provisions in order to cover, for each nuclear unit, the full discounted amount of the decommissioning costs at the time of the programmed decommissioning of the relevant nuclear unit. Synatom establishes the spent fuel provisions as well. Every year Synatom increases the spent fuel provisions in the pro rata of the amounts of spent fuel produced in the relevant year. In accordance with the law, every three years the CPN/CNV carries out an audit of the application and appropriateness of the calculation methods used to establish nuclear provisions.

(163)

The decommissioning and dismantling of the whole nuclear park in Belgium are and remain a legal obligation of solely the nuclear operator, and the waste cap agreement (see section 3.4.3) does not affect the decommissioning obligations of the nuclear operator, which include the obligation to condition the waste into nuclear waste packages compliant with the CTC. Therefore, the existing decommissioning and dismantling liabilities for both the non-LTO and LTO Units remain with Electrabel. Under the law on nuclear provisioning of 12 July 2022, companies other than a nuclear operator that have or have had a share in the industrial production of electricity by fission of nuclear fuels, contribute to the dismantling costs. The contribution of such companies is governed in a contract between the nuclear operator and the contributing company.

(164)

The EUR 8,410 billion mentioned in Table 4, corresponds to the IAS 37 provision for the environmental liabilities relating to the decommissioning nuclear liabilities which will remain with Electrabel. The provision covers (i) the costs for the decommissioning of the whole nuclear park and (ii) the costs of making the waste (both the decommissioning and the operational waste of the whole nuclear park) and spent fuel (of the whole nuclear park) compliant with the relevant CTC to be transferred in line with the Implementation Agreement. The amount of the provision fluctuates and depends on the likelihood of the cost and the consumption of the provisions. In contrast to the nuclear waste provision, the decommissioning provision made by Electrabel is not capped, nor is it a fixed amount. Therefore, if the actual costs exceed the provision, the additional cost will need to be paid by Electrabel and the Contributing Companies. The same goes for the case when the countervalues of these provisions are lower than the provisions (e.g., in case of unsuccessful investments).

(165)

BE-NUC does not bear any decommissioning liability, except for two exceptions where the Belgian State will be liable for any direct or indirect increase in decommissioning liabilities:

(a)

in relation to the nuclear operations other than the nuclear units Doel 4 and Tihange 3 (non-LTO Units) if and to the extent that they demonstrably result from the LTO Project (85), and

(b)

in relation to nuclear operations at Doel 4 and Tihange 3 (LTO Units), to the extent that they demonstrably result from the LTO Project or from circumstances occurring after the LTO restart date in respect of the first LTO Unit to achieve such date (86).

(166)

The burden and risk of proof for the increased decommissioning costs linked to the LTO Project lies with Electrabel, as the nuclear operator.

(167)

These LTO decommissioning and dismantling liabilities (‘additional decommissioning liabilities resulting from the LTO Project’), if proven by Electrabel, will be borne by the Belgian State by the means of a one shot (full and final) lump sum payment on the closing date of the transaction. Like the nuclear waste provision, the decommissioning provision has been calculated by Synatom, based on its industrial scenario for the decommissioning and dismantling (based on a no LTO-scenario), including margins for contingencies, uncertainties, and other risks that may arise in accordance with applicable accounting standards (IAS 37) (same assumptions as submitted to the CPN/CNV for the 2022 revision of its nuclear provisions). This calculation is also subject to the CPN/CNV’s triennial review. The methodology aims at coming to a realistic estimate of expected decommissioning costs and to ensure sufficient provisioning.

(168)

The Belgian State and Electrabel should agree on the amount within a set timeframe, and if they fail to do so, the matter will be submitted to the CPN/CNV for decision. Since the Belgian government and Electrabel failed to agree on the amount within the set timeframe, the matter was submitted to the CPN/CNV for decision (in accordance with Article 16.4.E of the IA) and is pending there. The payment made by the Belgian State to the nuclear operator will be transferred to Synatom and used to increase the nuclear provisions within Synatom.

(169)

If the LTO does not progress as intended, Electrabel and the Belgian State can reduce the LTO decommissioning and dismantling liabilities, and the Belgian State will be reimbursed accordingly by Electrabel. However, LTO decommissioning and dismantling liabilities cannot be increased in case the costs are higher than the payment made by the Belgian State. If at the time of decommissioning and dismantling, the provisions itself or the countervalue of the provisions are too low to cover the costs, Electrabel, EDF Belgium and Luminus (the Contributing Companies, see footnote 65) will be obliged to pay for the shortfall. Electrabel and the Contributing Companies will pay their share of the amount respectively of the increase in the provisions directly to Synatom. The Contributing Companies will agree with the nuclear operator on the detailed terms and conditions of this contribution. BE-NUC will not pay for any increase in the decommissioning provisions.

(170)

The provisions for the radioactive operational waste (i.e., radioactive waste that is produced because of the operation of a nuclear power plant but not yet conditioned into nuclear waste package) are currently not governed by the Law of 12 July 2022 as they are not considered as waste stemming from decommissioning activities. Therefore, they are not part of the nuclear provisions managed by Synatom. Costs related to the operational waste and spent fuel produced by the LTO Units during the LTO Period will be paid by the co-owners of the LTO Units (BE-NUC and Luminus): this includes the costs for making the operational waste compliant with the CTC and a volume adjustment fee for these additional volumes. Electrabel and the Contributing Companies (to the extent they have agreed to cover for their share of these costs) will establish provisions for radioactive operational waste in accordance with the applicable accounting rules.

(171)

Belgium submits that the (potential) payment for decommissioning and dismantling liabilities by the Belgian government is only intended to cover the risks of increased decommissioning costs that would result from (among others) regulatory or technical circumstances, such as the modification of buildings or equipment. Insofar as the payment only covers extra decommissioning cost due to the LTO, it does not cover any operating costs relating to day-to-day management or usual activities and do not have distortive effects. Nevertheless, Belgium includes the additional decommissioning liabilities resulting from the LTO Project in the notified measure, as part of the set of sub-measures which could be assessed as one single intervention.

3.4.7.   Impact on risk profile and release of non-European assets

(172)

Belgium acknowledges that the payment of the cap has a positive impact on the risk profile of the nuclear operator, since a significant part of its nuclear liabilities will be covered by the cap. Moreover, these liabilities also include costs to be borne over a very long period of time. This long term inherently leads to uncertainties, which are therefore covered by the payment of the cap. Belgium submits that there are nevertheless risks remaining for the nuclear operator, such as for instance (i) decommissioning costs that could be higher than the current provisions or the final value of the assets constituting the value of the provisions, (ii) volume risk if final volumes of nuclear waste and spent fuel turn out to be higher than the volume credit, (iii) repayment of loans to Synatom, and (iv) other costs and liabilities associated with the operation of a nuclear power plant. Belgium submits that this different risk profile justifies and requires a revision of the package of measures to ensure the safety and supervision of the nuclear operator’s financial situation.

(173)

Belgium submits that the lumpsum payment of EUR 15 billion to Hedera justifies the release of Electrabel’s non-European assets from Electrabel’s perimeter (and the accompanying monitoring of the CPN/CNV). In addition, Engie, as the French parent company of Electrabel, will ensure that at the time of closing the agreement between the Belgian State and Electrabel, at least EUR 4 billion of assets (equity value as of 30 June 2023) will remain in Electrabel.

(174)

In addition, Belgium submits that Engie grants an unlimited and non-cancellable parent company guarantee on request for (i) Electrabel’s decommissioning obligations (which also includes the risk that the value of the provisions is insufficient), (ii) volume risk under the cap and (iii) the repayment of (current or future) loans with Synatom. This parent company guarantee is based on the principle of ‘pay first, discuss later’. The Law of 12 July 2022 strengthening the framework applicable to provisions established for the decommissioning of nuclear power stations and spent fuel management and partially repealing and amending the Law of 11 April 2003 on provisions for the decommissioning of nuclear power stations and for the management of fissile material irradiated in those nuclear power plants is amended in order to provide a legal basis for the obligation to provide this parent company guarantee. In addition, the French parent company also provides shareholder support to Electrabel to enable Electrabel to honour its payment obligations as a nuclear operator under the O&M Agreement and a guarantee under the cash pooling scheme in the group.

(175)

Belgium submits that the thresholds for capital decisions will be considerably lowered. At present, the CPN/CNV must give its prior approval for capital decisions of EUR 750 million, which will be lowered to EUR 150 million, EUR 200 million or EUR 250 million (depending on the repayment degree of the loans) (87). In addition, Electrabel will also have to provide the CPN/CNV with an update of the valuation of European assets to enable the CPN/CNV to better assess the impact of the proposed capital decision.

(176)

Belgium submits that the release of non-EU assets of Electrabel does not grant Electrabel a selective economic advantage. As the waste cap modifies the risk profile of the nuclear operator, it justifies and requires an adjustment of the existing security package, i.e., the removal of Electrabel’s non-European assets from the Electrabel perimeter (and the associated supervision of the CPN/CNV). Nevertheless, Belgium includes the release of non-EU assets of Electrabel in the notified measure, as part of the set of sub-measures which could be assessed as part of one single intervention.

3.5.   Component 3: Legal protections

(177)

The agreement between the Belgian State and Engie also includes provisions on legal protections (a.o. Clause 19 of the Implementation Agreement), which define the risk-sharing in the event of future legislative changes. These provisions are also mentioned in Chapter 4 of the Phoenix Law (see section 3.7.2) concerning the security of supply of energy and the reform of the nuclear energy sector. Chapter 4 of the before-mentioned law does not establish a compensation system but provides the legal basis for concluding the contracts to protect against changes in the law. The relationship between the parties will therefore be governed solely by the provisions of the Implementation Agreement.

(178)

These provisions concluded with Engie and Electrabel, as part of the broader transaction, provide, inter alia, that if the Federal Government or the Federal Parliament adopts new regulations specifically concerning nuclear operators in Belgium or Electrabel’s nuclear activities and having a negative impact on the material terms of the transaction, the Belgian State will indemnify Engie (or one of the Engie group companies) for the direct losses it actually incurs. This also includes the payments Engie has to make to Luminus in the context of the indemnification. In accordance with Belgian law, the claimant must prove its claim and the amount of indemnification will be determined by a court or an arbitration procedure. Belgian courts are competent, but there is a reciprocal arbitration option for UNICTRAL arbitration.

(179)

This provision does not apply if the legal amendment results from the transposition of European or international law, unless if the Federal Government or the Federal Parliament has actively promoted such legislation at another level (international, supranational, European regional, municipal, etc.) or has actively promoted a judicial decision.

(180)

Belgium submits that the Commission’s decisional practice suggests that protections against change in law can constitute State aid. Belgium refers in this respect to Commission decision regarding the lifetime extension of three other nuclear reactors in Belgium, in which the Commission examined the indemnification clauses contained in the agreements concluded between the Belgian State and the owners of nuclear power plants. As a consequence, Belgium concludes that the legal protections agreement between the Belgian State and Engie could imply the granting of a selective economic advantage to Engie.

3.6.   Beneficiaries

(181)

The ultimate beneficiaries of the notified measure are (1) Engie, as parent company of Electrabel, which is the sole operator and co-owner of the LTO Units (89,807 %) and as direct party to the Implementation Agreement concluded with the Belgian government, and (2) EDF S.A. (‘EDF’), as ultimate parent company of Luminus, which is co-owner of the LTO Units (10,193 %) and part of the Contributing Companies and as parent company of EDF Belgium, as part of the Contributing Companies.

(182)

Regarding Component 1 of the notified measure, Electrabel and Luminus, are counterparties of the State in the two-way CfD and benefit from the SDC Loans, and are therefore direct beneficiaries of these sub-measures. Regarding the other sub-measures under Component 1, which provide support for the operation and maintenance of the LTO Units, Electrabel, is a direct beneficiary as nuclear operator, shareholder in the JV with the Belgian State and co-owner of the LTO Units, while Luminus is an indirect beneficiary as co-owner of the LTO Units. Luminus benefits from the reduction of operational risks through the access to the WCF for the nuclear operator, the provision of the shareholder loan, and the set-up of the ASA and EMSA, without itself being direct beneficiary of these sub-measures.

(183)

Regarding Component 2 of the notified measure, the transfer of nuclear waste liabilities and the agreement on decommissioning liabilities benefit the nuclear operator, Electrabel, as well as Luminus and EDF Belgium in their role as Contributing Companies, who are, together with the nuclear operator, financially responsible for the nuclear waste and decommissioning liabilities.

(184)

Regarding Component 3 of the notified measure, the legal protections provide that unilateral measures adopted by the Belgian State specifically affecting or applying to the operators of the nuclear units in Belgium and adversely modifying the material terms of the transaction would trigger a right to indemnification. Therefore, the direct beneficiaries are the operator (and co-owner) of the nuclear reactors in Belgium, Electrabel, BE-NUC and any affected entity of the Engie group, while the indirect beneficiary is Luminus, as co-owner of the LTO Units.

3.7.   National legal basis and transparency

(185)

The lifetime extension of the two nuclear reactors and related support mechanisms which are part of the agreement with Engie and Electrabel (LTO Project) require a number of legislative changes. The different legislative changes related to different parts of the LTO Project are described in the sections below.

(186)

The federal State is the granting authority for the measure addressed in the current decision.

3.7.1.   Amendment of the Nuclear Phase-Out law

(187)

As mentioned in recital (4), in 2003, Belgium decided to gradually phase out the production of electricity through nuclear power. Following the Nuclear Phase-Out law, the seven nuclear reactors in Belgium would have to shut down 40 years after the start of their industrial electricity production and no new nuclear plants could be built. As mentioned in recital (4) and footnote 5, the Nuclear Phase-Out law has been modified three times in order to allow for the lifetime extension of Tihange 1 (Law of 18 December 2013), Doel 1 and Doel 2 (Laws of 28 June 2015 and 11 October 2022).

(188)

The 10-year lifetime extension of Doel 4 and Tihange 3 requires another modification of the Nuclear Phase-Out law. In accordance with Directive 2011/92/EU of the European Parliament and of the Council of 13 December 2011 on the assessment of the effects of certain public and private projects on the environment, Council Directive 92/43/EEC of 21 May 1992 on the conservation of natural habitats and of wild fauna and flora and Directive 2009/147/EC of the European Parliament and of the Council of 30 November 2009 on the conversation of wild birds, an environmental impact assessment is required and has been made.

(189)

The modifications to the Nuclear Phase-Out law are limited to allow for the extended operation of the two LTO Units. The start of the 10-year lifetime extension is the ‘LTO Restart Date’ of the LTO Unit concerned as defined in the agreement between Engie and the Belgian State.

(190)

These modifications have been implemented by the ‘Law amending the Nuclear Phase-Out Law’ (88), which modifies articles 2 and 4 of the Nuclear Phase-Out Law. The Law amending the Nuclear Phase-Out Law has been approved by the Parliament in plenary session on 18 April 2024 and has been signed by the King on 26 April 2024. It has been published in the Belgian Official Gazette on 5 June 2024.

3.7.2.    ‘Phoenix Law’

(191)

The different elements of the LTO Project are implemented through a separate ‘Law to guarantee security of supply in the energy sector and reforming the nuclear energy sector’ (89), also referred to as ‘Phoenix Law’. The Phoenix Law includes the following chapters:

(a)

the first chapter includes a list of definitions of concepts used throughout the Law;

(b)

the second chapter implements the cap mechanism and allows for the release of the non-European Assets; it is a transposition of the articles 16.1 and 16.2 and Schedule 4 of the Implementation Agreement;

(c)

the third and fourth chapters provide for the legal basis to conclude the Remuneration Agreement and the legal protections’ provisions of the Implementation Agreement respectively;

(d)

the fifth and sixth chapters modify the Gas Law (90) and Electricity Law (91) respectively (92);

(e)

the seventh chapter states that the cap mechanism as set out in chapter 2 is an exception to the unlimited liability of the waste producer and that the Phoenix Law prevails over article 179 of the NIRAS/ONDRAF Law (93);

(f)

the eight chapter modifies the Law on nuclear provisions of 11 April 2003 (94). These modifications include (i) the implementation of the cap mechanism (i.e. Synatom will no longer be required to establish provisions for the capped nuclear waste and spent fuel liabilities), (ii) enhancing of the control on nuclear provisions, (iii) the impact of a possible annulment of the B&C-cap, (iv) the legal basis for the LTO dyssynergies payment; (v) the obligation for Engie to provide the parent company guarantee (‘PCG’) for decommissioning liabilities, volume adjustment fees and the Synatom loans, as well as the PCG for the cash pooling entities, and (vi) the obligation to include an accelerated repayment clause in all intragroup loans;

(g)

the nineth chapter provides for the legal basis for the Belgian State to take the participation in BE-NUC;

(h)

the tenth chapter deals with the entry into force of the Phoenix Law (95).

(192)

The Phoenix Law has been approved by the Parliament in plenary session on 18 April 2024 and signed by the King on 26 April 2024. It has been published in the Belgian Official Gazette on 5 June 2024.

3.7.3.   Laws on Belgian government structure

(193)

The Belgian State will establish two new public entities that will take up certain responsibilities in relation to the LTO Project.

(a)

an autonomous service with accounting independence, named ‘BE-WATT’ (96), has been incorporated by the ‘BE-WATT Law’ (97) to become the Belgian government’s shareholder in BE-NUC and the counterparty of the Remuneration Agreement; and

(b)

a new sui generis public institution with legal personality, Hedera, has been incorporated by the ‘Hedera Law’ (98) to take over the financial responsibility for the capped nuclear waste and spent fuel liabilities and manage the capped amounts.

(194)

The BE-WATT Law and the Hedera Law have been approved by the Parliament in plenary session on 18 April 2024 and signed by the King on 26 April 2024. They have been published in the Belgian Official Gazette on 5 June 2024.

3.7.4.   Modification Royal Decree Authorisations

(195)

The Royal Decree Authorisations regulates the authorisation of installations that condition nuclear waste. This Royal Decree will be modified to allow the authorisation of conditioning installations that condition nuclear waste in accordance with the contractual transfer criteria. A separate category will be introduced for authorisations for conditioning installations that condition in accordance with contractual transfer criteria.

(196)

The Royal Decree Authorisations has been adopted on 11 July 2024 and has been published in the Belgian Official Gazette on 15 July 2024 (99).

3.7.5.   Royal Decree on Contractual Transfer Criteria

(197)

The Royal Decree on Contractual Transfer Criteria (‘CTC’) will determine the contractual transfer criteria and the categorisation of the waste package, as well as the way they consume the volume credit.

(198)

The Royal Decree on CTC has been adopted on 11 July 2024 and has been published in the Belgian Official Gazette on 15 July 2024 (100).

3.8.   Budget and financing

(199)

The total funding requirement of the LTO Project will be financed via the general State budget, including the potential paybacks from the two-sided CfD.

(200)

Belgium estimates that the CAPEX costs of the LTO Project amount to EUR [2 000-2 500] million, and the total operating costs over the lifetime to be EUR [7 000-7 500] million.

(201)

The net impact on the Belgian State budget is twofold: first, through the capital contribution of EUR 24,7 million to the JV (see recital (52)) (101), and, second, through the net cost of measures payable by the RA Counterparty. Belgium submits that the expected budget spending depends not only on costs projections, but also on energy market price/revenues projections, because the LTO Project will be funded by a combination of market revenues, CfD difference payments, minimum OPEX and capital payments, and SDC Loans.

(a)

Under the base case projection of the signing financial model, over the lifetime of the project the RA Counterparty will receive a total net nominal amount of EUR [0-500] million.

(b)

However, if electricity prices were to evolve according to a lower projection, the cost of the measure to the Belgian government would increase by EUR [4 000-4 500] million due to higher CfD payments. In case of an unexpected event whereby both nuclear plants would be unavailable, the RA Counterparty would also be exposed to providing additional support of EUR [500-1 000] million per year of unavailability. In a negative scenario of low electricity prices and a 12-month unavailability event, the RA Counterparty would have to provide a total net (nominal) amount of EUR [4 000-4 500] million over the project lifetime, i.e., the budget of the measure would be close to [40-50] % of total capital and operating costs.

4.   ASSESSMENT OF THE MEASURE

4.1.   Existence of aid

(202)

Under Article 107(1) TFEU, any aid granted by a Member State 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, in so far as it affects trade between Member States, is incompatible with the internal market.

(203)

To conclude whether State aid is present in this case, the Commission must assess whether all cumulative criteria of Article 107(1) TFEU are met for the measures under assessment.

4.1.1.   A single intervention comprising multiple sub-measures

(204)

As mentioned in recital (29), it was the Belgian State who took the initiative in March 2022 to start negotiating the LTO Project. As mentioned in recitals (30) to (33), these negotiations led to the conclusion of a ‘Heads of Terms’ agreement in June 2023, comprising the business model, long-term storage and disposal of nuclear waste, and legal protections. This Heads of Terms agreement led to a more complete set of definitive agreements in December 2023. As mentioned in recital (37), all these parts of the measure aimed together at the lifetime extension of the LTO Units. Therefore, all components of the notified measure, as detailed in sections 3.3, 3.4 and 3.5, were planned together, have the same objective and are established by the same agreement, namely the Implementation Agreement (see recital (35)), the same legislative act, namely the Phoenix Law concerning the security of supply of energy and the reform of the nuclear energy sector (see section 3.7.2), and are all granted by the same granting authority, namely the Belgian State.

(205)

In addition, the lifetime extension of the two nuclear reactors, and hence the LTO Project, was initiated by the Belgian government, and Engie’s and Electrabel’s participation to the agreement was conditional upon obtaining an appropriate level of remuneration, a guarantee against legal changes concerning electricity production from nuclear sources, and additional de-risking as regards the cost of nuclear waste and decommissioning of the nuclear reactors (see recitals (5) and (6)). Therefore, each of the three components of the notified measure constituted a necessary condition to Engie and Electrabel’s participation in the extension of the LTO Units’ lifetime.

(206)

Furthermore, even before the final agreement was signed in December 2023, Electrabel had to kick-off certain development activities as early as 2023 in order to have the nuclear reactors back online by the LTO restart target date of 1 November 2025 (see recital (39)). To this end, Engie and the Belgian government concluded Heads of Terms on a potential Joint Development Agreement (‘JDA’) in March 2023, which they eventually agreed upon on 29 June 2023, and amended on 21 July by the JDA+ and on 13 December 2023 by the JDA++ (see recitals (33) to (35)). The JDA++ stipulates that Electrabel and the Belgian State would both cover 50 % of the costs of the development activities (e.g., feasibility studies, but no physical intervention or start of works by Engie), while the full cost of those works would be borne by Belgium should the lifetime of the nuclear reactors eventually not be extended.

(207)

Where consecutive interventions are so closely linked to each other, especially having regard to their chronology, their purpose and the circumstances of the undertaking at the time of those interventions, that they are inseparable, they can be considered as a ‘single intervention’ (102). For instance, a series of State interventions which take place in relation to the same undertaking in a relatively short period of time, are linked to each other, or were all planned or foreseeable at the time of the first intervention, may be assessed as one intervention.

(208)

The Commission observes that all sub-measures of Component 1 of the notified measure (the JV, JDA++, the CfD, the SDC Loans, WCF, MOCP, shareholder loan) are closely linked, since they all have as primary purpose the de-risking of the lifetime extension and the provision of stable revenues to the LTO Units (through the pre-funding of certain development activities, a guaranteed level of remuneration and the participation by the Belgian State in the LTO project through the set-up of a JV (BE-NUC) (described in detail in section 3.3)), and therefore are all related to the enabling of the lifetime extension as such. All the sub-measures of Component 1 can therefore be seen as one single intervention. All sub-measures of Component 2 (described in detail in section 3.4) consider the transfer of liabilities related to nuclear waste, spent fuel and decommissioning, which are related to the nuclear provisions managed by Synatom64, as subsidiary of Electrabel. Hence, also the sub-measures of Component 2 can therefore be seen as one single intervention. In addition, all the financial provisions provided under Component 1, the agreements related to nuclear waste and decommissioning in Component 2, and the agreement regarding legal protections in Component 3 (described in detail in section 3.5) are all related to the same purpose and event, namely the lifetime extension of the two nuclear reactors (LTO Project). The waste and decommissioning agreements were part of the requests by Engie to agree on the lifetime extension and are therefore inherent parts to the conclusion of the overall deal (see recital (6)). In addition, both the waste cap in Component 2 and the legal protection measures in Component 3 modify the risk profile of the nuclear operator (see recital (57)), hereby also affecting the financial conditions of the sub-measures in Component 1. Therefore, the three components of the notified measure are closely linked and all part of the same single intervention, the LTO Project. The three components are interdependent and have mutually enhancing effects for the performance of the agreement on the lifetime extension.

(209)

The Commission therefore considers that the three components of the notified measure (Component 1, Component 2 and Component 3) should be examined together as one single intervention.

(210)

As mentioned in recital (37), Belgium agrees that the three components of the notified measure (Component 1, Component 2 and Component 3), including the several sub-measures, can be considered as part of one single intervention.

4.1.2.   Imputability to the State and financing through State resources

(211)

For measures to be categorised as aid within the meaning of Article 107(1) TFEU, they must be granted directly or indirectly through State resources. It is established case-law (103) that measures financed through compulsory charges imposed by the legislation of the Member State, managed and apportioned in accordance with the provisions of that legislation, may be regarded as State resources within the meaning of Article 107(1) TFEU, even if they are managed by private or public entities separate from the public authorities. This means that both advantages which are granted directly by the State and those granted by a public or private body designated or established by the State are included in the concept of State resources within the meaning of Article 107(1) TFEU.

(212)

Furthermore, it is not necessary to establish, in all cases, that there has been a transfer of State resources to assess the measure as State aid within the meaning of Article 107(1) TFEU (104).

(213)

Since (i) the combination of sub-measures of the LTO Project as described in section 3 has been decided by the Belgian State (in agreement with Engie) at the time of signing the Implementation Agreement on 13 December 2023, (ii) the LTO Project also involves the creation of a partly State-owned entity (BE-NUC), and (iii) the granting authority is the Belgian State, the three components of the notified measure are imputable to the Belgian State.

(214)

The LTO Project involves a number of sub-measures involving a transfer of State resources to the benefit of a newly set-up JV owned by the State and Electrabel (BE-NUC). In particular, a State-backed CfD, allowing the JV to receive a complementary remuneration in case market prices would lead to a shortfall in revenues from operation, exposes the State to a transfer of State resources to the benefit of the JV.

(215)

Therefore, the LTO Project involves State resources and is imputable to the State.

4.1.3.   Economic advantage conferred on certain undertakings or the production of certain goods (selective advantage)

(216)

An advantage, within the meaning of Article 107(1) TFEU, is any economic benefit, which an undertaking would not have obtained under normal market conditions, i.e., in the absence of State intervention (105).

(217)

The LTO Project, including the three components of the notified measure, targets the lifetime extension of two nuclear power plants with a view to offering electricity in the energy market and hereby contributing to security of supply. The measure will provide the main beneficiaries, Electrabel and Luminus, with a specific advantage which is not made available to other energy operators in similar legal and factual situations, having regard to the objective and the effects of the measure, namely, to provide financing and stable revenues to extend the lifetime of two nuclear reactors and to guarantee security of electricity supply in Belgium, which it would not have obtained under normal market conditions and without a specific agreement regarding the various components of the measure as set out in section 3. This advantage is selective in that it favours the owners and the operator of the LTO Units, that are in a comparable factual and legal situation to other generation capacity providers that do not have the opportunity to operate nuclear plants in Belgium, but that can also contribute to security of supply (such as gas plants, demand response operators, storage providers).

(218)

In addition, many of the individual sub-measures that are part of the LTO Project, confer a selective economic advantage to Electrabel and/or Luminus (and to a lesser extent to the Contributing Companies where relevant). For instance, the RA, including a two-way CfD, establishes a fixed revenue stream for the production of electricity from nuclear sources, hereby shielding the owners of the plants, Electrabel and Luminus, from market risks. The State also provides a shareholder loan, SDC Loans and a minimum OPEX and capital payment to cover for the start-up costs of the LTO Units and their potential lack of profitability. These loans and agreements are not available to other competitors and thus confer a selective economic advantage to Electrabel and Luminus.

(219)

Therefore, since the CfD confers a selective economic advantage to the beneficiaries, the LTO Project confers a selective economic advantage to its beneficiaries.

(220)

As mentioned in recital (82), Belgium agrees that CfD mechanisms may constitute State aid as they protect beneficiaries from price volatility in the electricity market and grant a selective advantage on the counterparty.

4.1.4.   Distortion of competition and trade within the Union

(221)

The electricity market has been liberalised and electricity producers are engaged in trade between Member States so that an advantage granted to the producers of nuclear electricity is likely to distort competition and affect trade between Member States. Electricity from nuclear sources is generally sold on the internal market for electricity where it enters in competition with all sources of electricity, including those in other Member States. In addition, the Belgian electricity market is highly interconnected in the Core Capacity Calculation region.

(222)

Therefore, the advantage granted to Electrabel and Luminus through the LTO Project is likely to distort competition and affect trade between Member States.

4.1.5.   Conclusion on the existence of aid under Article 107(1) TFEU

(223)

For the reasons mentioned in sections 4.1.1, 4.1.2, 4.1.3 and 4.1.4, the Commission considers that Component 1, Component 2 and Component 3 of the notified measure, together the LTO Project or single intervention, constitute State aid within the meaning of Article 107(1) TFEU. The Commission notes that Belgium does not dispute the State aid character of the CfD, the MOCP, the SDC Loans, and the legal protections (see sections 3.3.4, 3.3.5, 3.3.7, and 3.5). Regarding the other components of the measure to support the LTO Project, Belgium does not consider them as State aid, but has included them in the notified measure, as part of the set of sub-measures which could be assessed as one single intervention (see sections 3.3.1, 3.3.2, 3.3.3, 3.3.6, 3.3.8, 3.3.9, 3.3.10, 3.3.11, and 3.4).

4.2.   Legality of the aid

(224)

The measure was notified to the Commission on 21 June 2024 and has not been implemented before the target closing date of the transaction (30 November 2024 is the current Longstop Date in the Implementation Agreement, and no actual works – other than the preparatory works that are part of the development activities under the JDA++ - will be executed before that date). The implementation is furthermore made conditional upon the Commission approval of the notified measure (State aid approval is part of the conditions precedent to the agreement). Therefore, the Belgian authorities have fulfilled the notification and standstill obligations under Article 108(3) TFEU.

4.3.   Compatibility of the measure with Article 107(3)(c) TFEU

(225)

Article 107(3)(c) TFEU provides that the Commission may declare compatible ‘aid to facilitate the development of certain economic activities or of certain economic areas, where such aid does not adversely affect trading conditions to an extent contrary to the common interest’. Therefore, compatible aid under that provision of the Treaty must contribute to the development of certain economic activity. Furthermore, the aid should not distort competition in a way contrary to the common interest. The Commission must thus verify:

(a)

Whether the aid measure facilitates the development of an economic activity by:

identifying the economic activity supported by the aid; and

showing that the aid effectively facilitates the development of the economic activity,

without that activity breaching any relevant Union rules.

(b)

Whether the aid measure cannot unduly affect trading conditions to an extent contrary to the common interest by:

identifying the market(s) affected by the aid;

identifying the positive effects of the aid measure on the internal market;

assessing how the aid measure minimises the distortions on competition and trade by evaluating the necessity of the aid, its appropriateness and its proportionality;

identifying the outstanding distortions of trading conditions that cannot be avoided (despite the aid being necessary, appropriate, proportionate); and

(c)

weighing up the positive effects of the aid with the negative effects on competition and trade in the internal market.

4.3.1.   Positive condition: development of an economic activity

(226)

Under Article 107(3)(c) TFEU, the measure must contribute to the development of certain economic activities (106).

4.3.1.1.   Contribution to the development of an economic activity

(227)

The objective of the LTO Project is to ensure the continuation of nuclear power generation in Belgium for a prolonged period of 10 years, hereby contributing to security of supply in Belgium, and securing the financing of nuclear waste and spent nuclear fuel in the long term.

(228)

The Court of Justice has established that Article 107(3)(c) TFEU may be applied to investments in nuclear power generation (107), so that the LTO Project contributes to the development of an economic activity in Belgium.

(229)

The Commission therefore considers that the LTO Project facilitates the development of certain economic activities, namely the generation of nuclear based energy, as required by Article 107(3), point (c), TFEU.

4.3.1.2.   Incentive effect

(230)

State aid can only be considered to facilitate an economic activity if it has an incentive effect. An incentive effect occurs when the aid induces the beneficiary to change its behaviour towards the development of an economic activity pursued by the aid, and if this change in behaviour would not otherwise occur without the aid. In analogy with point 29 of the Guidelines on State aid for climate, environmental protection and energy (‘CEEAG’) (108) the Commission considers that ‘in cases where the beneficiary starts implementing a project before applying for aid, any aid granted in respect of that project will, in principle, not be considered compatible with the internal market’ .

(231)

The support provided by the Belgian State through the LTO Project targets directly the lifetime extension of nuclear capacity in Belgium. Belgium argues that Engie had already announced its plans to leave the nuclear sector in Belgium and adapted its communication and strategy accordingly (see recital (5)).

(232)

Belgium submits that the financial support mechanisms under Component 1 of the notified measure (e.g. two-way contract for difference, SDC Loans, MOCP, shareholder loans, etc.) are necessary to allow Electrabel to de-risk the LTO Project and to cover its investment costs, including a reasonable profit (see recitals (75) and (80)). On top of the financial reassurance regarding the profitability of electricity generation from nuclear, Electrabel also required reassurance regarding the cost of nuclear waste and spent nuclear fuel (Component 2), before being willing to discuss the LTO Project with Belgium, as well as an agreement on legal protections (Component 3) in case of a change in the laws concerning nuclear power generation (see recital (6)).

(233)

Belgium argues that the different components of the notified measure brings sufficient incentives for the change of behaviour of an investor who would not make investments in the lifetime extension of nuclear generation capacity if no State aid were provided, and that investments in existing nuclear capacity without State support is unlikely profitable due to the uncertainty of developments on the electricity market (see recitals (25) and (83)).

(234)

Belgium submits that the development activities undertaken as a result of the conclusion of the JDA++ before closing of the transaction, are merely preparatory works and feasibility studies, and that no actual works will be undertaken before the formal closing of the transaction (see recital (39)).

(235)

The Commission considers that the fact that the nuclear operator has to cease their operation activities after the 10-year lifetime extension, as a result of the Belgian decision to phase out nuclear electricity generation, creates a high level of uncertainty relating to revenues from nuclear energy generation and financing of future waste management costs and may put at risk its financial solidity. The Commission considers that:

(a)

Engie and Electrabel prepared for the decommissioning of Doel 4 and Tihange 3 and were not aiming at a lifetime extension of these LTO Units, taking into account the Nuclear Phase-Out law which obliged nuclear plants in Belgium to shut down after 40 years (see recital (5)). The Belgian government announced its decision to change its energy policy by requesting the extension of the operation of two of the seven nuclear reactors for 10 years. Engie had not prepared for the prolongation, nor was willing to undertake the risks, without State support (see recital (6)). Therefore, the reassurance provided by the Belgian State in the form of the creation of a JV and the conclusion of a two-way CfD made it re-consider its position.

(b)

In addition, the sub-measure whereby the Belgian State will fully cover any additional costs resulting from the decommissioning of the LTO Units further incentivises the LTO Project because it removes additional costs related to decommissioning (see recital (165)).

(c)

The immediate payment of a lumpsum amount (including a risk premium) eliminates for Electrabel a large part of the uncertainty attached to potential cost overruns related to nuclear waste and spent fuel. Only if the actual volume of nuclear waste is higher than expected, a volume adjustment fee will have to be paid (see recital (133)(d)). However, the payment of potential volume adjustment fees in the future is smaller and less risky than the future payment of the total amount. By transferring the spent fuel and radioactive waste management liabilities to the State and inciting Electrabel to pay in cash EUR 15 billion, the sub-measure removes an uncertainty that otherwise would hinder both the securing of the current available funds and the funding of responsible and safe spent fuel and radioactive waste management solutions.

(d)

The risks associated with the necessary investments in the LTO Project are reduced by the creation of the JV and the provision of various remuneration mechanisms mentioned in section 3.3; these remuneration mechanisms also ensure that the required revenues from the lifetime extension will be obtained and that a profitable investment is made.

(e)

The agreement on risk sharing in case of legislative changes is required for lowering the amount of aid necessary to bring the lifetime extension forward by reducing certain risks of changes in Belgian law that are considered to be beyond the control of the operator.

(f)

Finally, the Commission has verified that the development activities as listed in Schedule 1 of the JDA++ (see footnote 32), are merely preparatory works (to meet the expectations from the safety authority) and do not include actual works on the lifetime extension of the LTO Units.

(236)

At this stage, and notably in light of the counterfactual analysis referred to under recitals (83), (85) and (98)(d), the Commission therefore considers that it is plausible that the notified measure has an incentive effect on Engie and Electrabel to continue the operation of the two LTO Units and to transfer their financial and management liabilities in relation with waste management in exchange of immediate payment of a substantial amount of money, allowing to financially secure the funds available and to ensure that responsible and safe spent fuel and radioactive waste management solutions can be financed.

4.3.1.3.   No breach of any relevant provision of Union law

(237)

In its ruling in the Hinkley Point C case (109), the Court of Justice clarified that ‘State aid which contravenes provisions or general principles of EU law cannot be declared compatible with the internal market’ . For nuclear energy specifically, the Court of Justice clarified that for the sector ‘covered by the Euratom Treaty, State aid for an economic activity falling within that sector that is shown upon examination to contravene rules of EU law on the environment cannot be declared compatible with the internal market pursuant to that provision’.

(238)

The Court also clarified that investments in nuclear energy for security of supply reasons are aligned with Article 194 TFEU (110). That reasoning is fully applicable to the measure at stake, since Belgium has opted to continue including nuclear energy in its energy mix to address future resource adequacy issues and security of supply concerns (see the Phoenix Law in section 3.7.2 and recitals (23)(c) and (26)). According the CJEU case law (111), the principle of protection of the environment, the precautionary principle, the ‘polluter pays’ principle and the principle of sustainability cannot be regarded as precluding, in all circumstances, the grant of State aid for the construction or operation of a nuclear power plant.

(239)

Moreover, the Court of Justice highlighted that secondary legislation, such as Directive 2011/92/EU of the European Parliament and of the Council of 13 December 2011 on the assessment of the effects of certain public and private projects on the environment (112), under which certain projects are subject to an environmental impact assessment, applies to nuclear power stations and other nuclear reactors (113).

(240)

The Belgian authorities submit that the LTO Project was preceded by an environmental impact assessment with cross-border consultations, conducted in compliance with EU secondary legislation requirements (see recital (24)(d)).

(241)

Furthermore, the LTO Project was communicated to the Commission and the Belgian authorities notified it pursuant to Article 41 of the Euratom Treaty.

(242)

Regarding the potential need to execute construction works by Electrabel in order to bring the LTO Project in line with requirements imposed by the safety authority, according to the case-law, ‘when the Commission applies the State aid procedure, it is required, in accordance with the general scheme of the Treaty, to ensure that provisions governing State aid are applied consistently with specific provisions other than those relating to State aid and, therefore, to assess the compatibility of the aid in question with those specific provisions. However, such an obligation is imposed on the Commission only where the aspects of aid are so inextricably linked to the object of the aid that it is impossible to evaluate them separately. […] By contrast, if the aspect at issue can be separated from the object of the aid, the Commission is not required to assess its compatibility with provisions other than those relating to State aid in the context of the procedure provided for in Article 108 TFEU’ (114). The General Court confirmed in its judgment relating to State aid for the nuclear power plant PAKS II that the Commission is not required to verify that any aspect of an aid measure or any element relating to an aid, in the absence of an inextricable link, is in compliance with Union law (115). In the respective case, the General Court further observed that ‘[t]he carrying out of a public procurement procedure and the possible use of another undertaking for the construction of the reactors would alter neither the object of the aid […] nor the beneficiary of the aid […]’ (116).

(243)

The Commission considers that the compatibility assessment of the notified measure could be affected by a possible incompliance with Directive 2014/25/EU if it produced additional distortion of competition and trade on the electricity market (market on which the beneficiaries are active). The Commission notes that Directive 2014/25/EU is of relevance as regards the direct award of (potential) construction works for the LTO Units to specific undertakings.

(244)

In the present case, even if Electrabel would subcontract all or part of the (potential) construction works related to the LTO Project which could be subject to public procurement regulation (of which Belgium is not convinced, see footnote 25), the Commission considers that there is no ‘indissoluble link’ between the aid and public procurement aspects, because it is possible to evaluate them separately. The notified measure supports the lifetime extension of the two nuclear reactors independently of how the future contractor(s) is(are) chosen. The implementation of the notified aid also does not depend on the exact application of public procurement rules. Indeed, a possible inobservance of public procurement rules might only lead to distortive effects on the market of nuclear construction works and not on the market for electricity. The operation of the LTO Units and the conditions for marketing the electricity are therefore separable from the public procurement aspects regarding the refurbishment works of the nuclear reactors. It is therefore possible for the Commission to assess the measure without evaluating the public procurement aspects of the refurbishment works since such aspects are not inextricably linked to either the economic activity promoted by the aid or its modalities.

(245)

Regarding the transfer of liabilities concerning nuclear waste and spent nuclear fuel, the agreement is in line with the provisions in Council Directive 2011/70/Euratom. The Euratom Treaty and its secondary legislation put the prime responsibility for ensuring the responsible and safe management of spent fuel and radioactive waste and the financing thereof on the operators of nuclear installations in line with the principle set out in Article 4(3) of Directive 2011/70/Euratom. However, the State has the ultimate responsibility for the responsible and safe management of radioactive waste and spent fuel and for ensuring that adequate financial resources are available for such management. The Belgian authorities have demonstrated that the measure aims at securing the financing of spent fuel and nuclear waste management as a prerequisite for the responsible and safe management of these materials.

(246)

As regards the design of the two-way CfD, the Commission considers that the principles set out in Article 19d(2) of Regulation (EU) 2024/1747 apply to all new two-way CfDs, as of entry into force of the Regulation. This includes instances where a Member State, without having the obligation to do so under Regulation (EU) 2024/1747, decides to introduce a two-way CfD in relation to investments aiming to prolong the lifetime of existing facilities, as in the case of the LTO Project. In this context, the Belgian authorities have not demonstrated compliance with the design principles in Article 19d(2) of the Regulation, as explained in more detail in recitals (366)-(367) and (290)-(291).

(247)

Belgium submits that any proceeds from the CfD will flow into the general budget (subject to separate accounting) and will be used primarily to fund the payments of the RA counterparty under the CfD for the LTO Units. Where the CfD proceeds would exceed the amounts necessary to finance the costs of the CfD for the LTO Units, they could be used to finance the costs of another CfD. Belgium commits that if any remaining CfD proceeds would be used for purposes of distributing them to undertakings, the distribution will be carried out in accordance with Article 19d(2), points (d) and (e) of Regulation (EU) 2024/1747. Belgium will inform the Commission upfront in case CfD proceeds would be distributed to undertakings and, if need be, notify such a measure (see recital (78)). Through this commitment, the Commission considers that the Belgian authorities provided further assurances regarding compliance with the principles set out in Article 19d(2), points (d) and (e) of Regulation (EU) 2024/1747.

(248)

With respect to compliance of the JV with the EU Merger Regulation, it appears from the submissions by the Belgian State and Engie that the planned JV cannot be considered full-functional within the meaning of Article 3 of the Merger Regulation. Therefore, it follows that the notified measure is not notifiable to the European Commission as regards its compliance with the EU Merger Regulation.