Compensation for energy costs for businesses: basic parameters
The expected aid for companies facing increased natural gas and electricity costs due to extraordinary energy price increases is imminent. The government has specified the terms of the programme with an expected allocation of up to CZK 30 billion and has announced a call with specific parameters to take place in the first half of November. However, these parameters are still to be adjusted according to the amended Temporary Crisis Framework, approved by the European Commission as a building stone of the programme on 28 October 2022.
According to the latest information from mid-October, the support for the increased costs of natural gas and electricity is intended for businesses operating in all sectors of the Czech economy, except for sectors where the introduction of a windfall tax is being considered. Entities and enterprises with capped electricity and gas prices according to Government Decree No. 298/2022 Coll. will also be excluded from the compensation’s scope.
Businesses will be able to apply for support for eligible costs determined using:
- the volume of natural gas and electricity units purchased by the company in the eligible period, i.e., from 1 February 2022 to 31 December 2022 (the revised framework extends the eligible period to 31 December 2023) and
- the increase in the unit price for these energies, which is determined as the difference between the unit price paid in a given month of the eligible period and twice (1.5 times under the revised framework) the unit price paid by the company on average for the so-called reference (comparative) period from 1 January 2021 to 31 December 2021.
Businesses will thus be eligible for support if their energy costs increase at least twofold (or 1.5-fold under the revised framework).
The support will take the form of a subsidy for eligible costs provided to the beneficiary's bank account on the basis of a decision to grant the subsidy issued by the aid provider. For all businesses, the basic subsidy will be at least 30% of eligible costs (50% under the revised framework), up to a maximum of EUR 45 million (CZK 100 million under the revised framework).
The revised framework also includes the possibility to grant public aid amounting to 40% of eligible costs, up to EUR 100 million. However, the EBITDA (including aid granted) for the eligible period cannot exceed 70% of the EBITDA for the comparative period.
For energy-intensive businesses where energy costs account for at least 3% (of the production/turnover value), the following will apply:
- obligation to prove an operating loss with relevant documentation; at least half of the loss must be due to the cost of natural gas and electricity (the revised framework only includes a requirement to document a decrease in EBITDA of at least 40% in the eligible period or negative EBITDA compared to 2021).
- entitlement to 50% (65% under the revised framework) of eligible costs.
- Where turnover from activities in particularly affected sectors such as the production of paper, chemical fibres, hollow glass, copper and other listed in Annex I of the Temporary Crisis Framework accounts for more than 50% of the company's total turnover for 2021, the aid may reach up to 70% of the eligible costs for all the activities of the company (80% under the revised framework).
The proposed maximum aid amount for energy-intensive businesses is EUR 200 million, limited to 80% of the business's operating loss. The revised framework provides for maximum aid of EUR 50 million or EUR 150 million (if the business operates in selected sectors). At the same time, however, it lays down the condition that the EBITDA (including the aid granted) for the eligible period cannot exceed 70% of the EBITDA for the comparative period.
The programme specifies other conditions, such as the obligation to keep the documentation related to the aid for ten years, during which time the relevant authorities may carry out inspections. At the same time, the company's management must declare that, at the time of submitting the application for support, they fully (and not only temporarily) waive any increases in their remuneration (and components thereof including any variables) for the current fiscal period without compensation. Other conditions such as a commitment to determine a pathway to reduce the carbon footprint of energy consumption or the introduction of energy efficiency measures may be added according to the revised framework.
Applications should be administered through the Ministry of Industry and Trade’s Agenda Information System or a similar system.
The specific parameters of this support programme will be described in the call expected to be announced in the first half of November.
Update: The Programme has been announced by the Ministry of Industry and Trade on 2 November. You can learn more here.