Christmas present to Austrian (energy-intense) companies by the federal government: Energy cost subsidy will be prolonged and funding criteria expanded!

Overview

In response to the continuing sharp increase in energy prices, the Austrian federal government announced at a press conference on 22 December the prolongation of the energy cost subsidy including a considerable extension of the applicable funding criteria. Accordingly, the energy cost subsidy no. 1 will be prolonged until the end of 2022, for which a separate application phase is planned. For companies that missed the original pre-application deadline, an extension period will be offered, which was announced to last from 16 to 20 January 2023. 

In addition, a new energy cost subsidy no. 2 was announced to be implemented for covering the period of the entire year of 2023, which will be subject to extended funding criteria, but also allowing for higher funding-rations and increased subsidy limits. Grants of EUR 3,000 to EUR 150 million shall be available per company based on a 5-staged funding model. Based on the yet communicated details and funding criteria it is expected that additional companies will qualify for the energy cost subsidy no. 2 and that grant amounts might increase compared to the energy grant subsidy no. 1. Whether similarly to the energy cost subsidy no. 1 there will be a budget cap on the funds available for the energy cost subsidy no. 2 has not yet been communicated and needs to be awaited like further details on funding criteria.

Who is eligible?

Equal to the energy cost subsidy no. 1 both, the extension of the energy cost subsidy no. 1 and the energy cost subsidy no. 2 shall be made available to commercial enterprises and non-profit companies as well as to commercial divisions of non-profit associations provided having the registered seat or place of business in Austria. However,  contrary to the energy cost subsidy no. 1,the energy cost subsidy no. 2 for covering 2023 is based on a five-stage funding model which only foresees the energy intensity criterion for two out of the five stages (stages 3 and 4), while it will be omitted for stages 1, 2 and 5. For purposes of the energy cost subsidy no. 2 companies are considered energy-intense if their energy costs amounted to at least 3% of their production value based on 2021 financials or alternatively to at least 6% of their half year financials.

On the other hand, companies which are considered governmental/state owned units, public bodies, energy-producing or mineral oil-processing companies, agricultural and forestry production, the banking and insurance sector, political parties and others explicitly specified will again be excluded from the subsidy.

Subject of funding

The energy cost subsidy no. 2 is intended to fund the additional costs for purchasing energy for own use during the eligible period ranging from 1 January 2023 to 31 December 2023. As it has already been the case for the energy cost subsidy no. 1 the storage of energy will not be funded.

The energy cost subsidy no. 2 foresees five different funding stages:

(1)    In stage 1, additional energy costs (compared to 2021) shall be funded at a funding rate of 60%, with the maximum eligible quantity of consumption capped at the 2021 consumption volumes. Eligible types of energy include electricity, natural gas, fuels, heating/cooling (incl. district heating), steam and heating oil. The first funding stage foresees a minimum grant limit of EUR 3,000 and is capped at EUR 2 million.

(2)    Stage 2 shall provide for subsidies between EUR 2 million and EUR 4 million by funding additional energy costs that exceed a 1.5 times price increase at a funding rate of 50%. The eligible quantity of consumption shall be limited at a maximum of 70% of the 2021 consumption volumes. Eligible types of energy for stage 2 shall include electricity, natural gas and heating/cooling generated directly from natural gas or electricity (including district heating).

(3)    Stage 3 also foresees a funding of additional energy costs for the consumption of electricity, natural gas and heating/cooling generated directly from natural gas and electricity (incl. district heating) which exceed a 1.5 times price increase. The funding rate shall amount to 65%. The minimum grant limit of stage 3 shall be set at EUR 4 million, while the maximum grant shall be capped at EUR 50 million. The eligible quantity of consumption shall again be limited to a maximum of 70% of the 2021 consumption volumes. In addition, to being eligible to stage 3 the energy intensity criterion must be fulfilled.

(4)    Stage 4 shall provide for a funding rate of 80% for additional energy costs for the consumption of electricity, natural gas and heating/cooling generated directly from natural gas and electricity (incl. district heating) which exceed a 1.5 times price increase. The minimum grant limit of stage 3 shall be set at EUR 50 million, while the maximum grant shall be capped at EUR 150 million. Similarly, to stages 2 and 3, the eligible quantity of consumption shall be limited at a maximum of 70% of the 2021consumption volumes. Identical to stage 3 the energy intensity criterion must be fulfilled to be eligible for stage 4.

(5)    Stage 5 shall be newly introduced for the energy cost subsidy no. 2 compared to the energy cost subsidy no. 1. Similarly, to stages 2-4, additional energy costs from electricity, natural gas and heating/cooling generated directly from natural gas and electricity (including district heating) which exceed a 1.5 times price increase are to be funded. The eligible quantity of consumption shall again be limited at a maximum of 70% of the 2021 consumption volumes. A 40% funding rate was announced for stage 5 with the minimum grant limit amounting to EUR 4 million while a cap of 100 million shall apply.

Comparable to the energy cost subsidy no. 1, several conditions and criteria are stipulated for being eligible to the energy cost subsidy no. 2 and to actually obtain it, such as good and compliant conduct in tax matters and the restriction of bonus payments. However, based on the announcement published so far, this shall also be extended to include a specific restriction of dividend distributions by the funded company, although further details in this regard have to be awaited. Another new funding criterion compared to the energy cost subsidy no.1 was implemented based on the comparable German model, i.e., that the company applying for funding must provide an employment guarantee by committing to retain at least 90% of the jobs by the end of 2024.

Relevant amendments for the energy cost subsidy no. 2

Compared to the energy cost subsidy no. 1, the funding rate shall be increased throughout all foreseen stages, which is likely to allow more companies to be eligible to apply and also to benefit from higher grant amounts.

Firstly, a completely new funding stage shall be introduced in the form of stage 5, which shall allow for grants of up to EUR 100 million. In addition, the criterion for applicants to be considered as energy intense shall only be relevant for stages 3 and 4 while for the other stages of the 5-stage funding model it will no longer apply.

Furthermore, the types of energy eligible for funding under the energy cost subsidy no. 2 have been expanded throughout all subsidy levels. Whereas only electricity, natural gas (and fuels in stage 1) were eligible for the energy cost subsidy no. 1, these shall be expanded to heating/cooling (incl. district heating), (steam and heating oil in stage 1). Finally, also the funding rates were considerably increased for the newly envisaged energy cost subsidy no. 2, allowing for raise of the funding rate from 30% to 60% in stage 1 and from 30% to 50% in stage 2.

At the same time, however, the conditions and funding criteria for the energy cost subsidy no. 2 were expanded accordingly compared to the energy cost subsidy no. 1.

Application process

The application for the energy cost subsidy no. 2 shall follow the process already known from the energy cost subsidy no. 1 and shall therefore again be administered by Austria Wirtschaftsservice (aws). The application must again be submitted online via the aws funding manager tool. The exact application process and whether a multi-stage application process similar to the energy cost subsidy no. 1 is again foreseen, has not yet been announced and remains to be awaited.

Conclusion

The recently published energy cost subsidy no. 2 and the prolongation of the energy cost subsidy no. 1 are intended as the federal government's response to the continuing high energy prices. By expanding the types of energy eligible for funding and considerably increasing the funding rates, as well as abandoning the funding criterion on energy intensity for several subsidy stages, higher grants could be expected for an extended number of companies. Further details remain to be awaited, since the federal government only announced the rough framework and initial details of the extension of the energy cost subsidy at a press conference, and since the actual funding regulations must by nature also comply with the limits set forth by European state aid restrictions. We will of course inform you immediately once such additional details will become available.