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State Aid

State aid: No aid in new electricity contracts for PCC silicon metal plant



The EFTA Surveillance Authority concluded today that the power and transmission contracts entered into by PCC Bakki Silicon in March 2015 do not confer an economic advantage upon PCC and therefore do not involve state aid.

PCC foresees to establish a new silicon plant close to Húsavík in North-East Iceland. In order to operate the plant, PCC has signed a power purchase agreement with Landsvirkjun, the national power company, as well as a transmission agreement with Landsnet, the operator responsible for transmission of electricity in Iceland.

The Authority has reviewed the contracts taking into consideration the economic calculations relied on by Landsvirkjun and Landsnet at the time of signature.

Ms. Oda Sletnes, the President of the Authority, said “Under the EEA Agreement, public undertakings are free to participate in the market provided that they act in line with what a private operator would have done. When this can be established on the basis of objective factors, the presence of state aid can be excluded. Conversely, if such contracts primarily respond to public interests, there will be a risk that they involve state aid”.

The Authority underlines that the application of this market economy investor principle requires an individual assessment of the terms of each contract. Accordingly, Landsvirkjun has provided the Authority with extensive information to determine that the power contract is profitable and made on terms that a private player would have accepted.

Landsnet has also demonstrated that it has been acting as a private operator would have done and that PCC will be subject to the correct charges and surcharges established in the Icelandic Electricity Act. In particular, the calculations regarding the step-down and the system contribution surcharges are carried out on the basis of a pre-existing methodology which is applied on a non-discriminatory basis to all power intensive-users. By means of the transmission agreement, PCC is therefore not been exempted from costs that it should bear in normal course of business.

The contracts in question were concluded in March 2015, following a decision by the Authority to open a in-depth investigation into similar contracts signed in 2014. As the 2014 contracts have now been terminated by the parties without entering into force, that investigation has become devoid of purpose and will consequently be closed.

A non-confidential version of the decisions will be published in the register of state aid decisions on the Authority's website, normally within a month.

 For further information, please contact:

Mr. Andreas Kjeldsberg Pihl
Press & Information Officer
tel. (+32)(0)2 286 18 66
mob. (+32)(0)492 900 187

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