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- State aid No. N 666/94
- Modification to the Danish Electricity Act
 -   Denmark

The Commission  decided  to  raise  no  objections  to  a  proposal  for  a
modification to  the Danish  Electricity Act  which will  allow the  Danish
electricity company  SEAS, as part  of a restructuring  of the company,  to
cover  its deficit of  approx. DKr 230 million  (ECU 30  million) from past
commercial   activities  other  than   transmission  and   distribution  of
electricity over the electricity prices.

The  Danish  regional  electricity company  SEAS  was  involved in  various
commercial  activities   other  than   transmission  and  distribution   of
electricity  in  the past,  in  particular  a  windmill  project, a  tomato
project  and marine aquaculture. In recent  years SEAS suffered substantial
losses  on these activities and with a  view to return to viability SEAS in
1993  undertook  to  restructure  its  activities  and  in  the  future  to
concentrate  on  its  core  commercial   activity,  i.e.  transmission  and
distribution  of  electricity. As  a  part  of  this  restructuring of  its
activities SEAS  disposed of the  loss-making commercial activities to  the
private sector between  December 1993 and August  1994 and was left  with a
total deficit  from these activities  of approx. DKr  230 million. However,
due to the principle  of cost-related prices in the Danish  Electricity Act
it was  not possible for SEAS to  cover this deficit by  way of an increase
in  the electricity  prices,  which is  now the  company's  only source  of
income. In the context  of the restructuring of SEAS  activities the Danish
Government therefore  intends to  propose a  modification the  cost-related
principle in  the  Electricity  Act  so  to  allow  SEAS  (exclusively)  to
incorporate in the  electricity prices to  consumers the  loss suffered  in
the past  on these  other commercial  activities. This  proposal will  only
cover losses  suffered  by SEAS  on  commercial  activities from  before  1
October  1994 provided the loss-making  activities have  also been disposed
of  before  that date.  The  proposal will  thus  only  have effect  retro-
actively and  will not  allow SEAS to  cover future  losses on existing  or
future commercial activities over the electricity prices.

The incorporation  of SEAS  deficit will be  carried out  over a period  of
approx.  15 years  and  is expected  to  increase SEAS  current electricity
price with approx. DKr 0.005, i.e. 1.2%. SEAS will be obliged to  undertake
rationalization  measures both  on  its own  and  through cooperation  with
other  regional  electricity  companies  with  a  view  to  neutralize this
increase  in the  electricity price.  These  rationalization measures  will
have  to be carried out within a reasonable  time after the proposal is put
into effect.

The aid under the proposal to SEAS will be  provided in connection with the
plan to  restructure SEAS commercial  activities. The Commission  therefore
examined  the aid  under the  new  Community Guidelines  on  state aid  for
rescuing and  restructuring firms  in difficulty.  Having satisfied  itself
that  all the  conditions for  approving the  restructuring aid  was met in
this case, in particular  that the aid  and the restructuring will  restore
SEAS  long-term viability,  that  SEAS, as  a  counterpart  to the  aid  it
receives, has disposed of  all of its loss-making  activities and that  the
aid will only be used to cover  the deficit of approx. DKr 230 million, the
Commission decided to authorize the aid pursuant to Article 92(3)(c) EC.

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