A recent commission decision regarding the reacquisition of the Hamburg District Heating Network (Decision) has given some useful insight in to ensuring that investment in to a district heating scheme by a public body is done in a way which is compliant with state aid principles, specifically the market economy operator principle (MEOP).
This article is taken from July's public matters newsletter. Click here to view more articles from this issue.
A recent commission decision regarding the reacquisition of the Hamburg District Heating Network (Decision) has given some useful insight in to ensuring that investment in to a district heating scheme by a public body is done in a way which is compliant with state aid principles, specifically the market economy operator principle (MEOP).
State aid decisions and judgments on district heating projects are few and far between, so any guidance from the Commission on these projects is invaluable.
The district heating network was owned by Vattenfall Wärme Hamburg GmbH (VWH) whose majority shareholder was Vattenfall GmbH. In 2012 the city-owned Hamburger Gesellschaft für Vermögens- und Beteiligungsmanagement GmbH (HGV) acquired an interest of 25.1 % in VWH at a price of EUR 325 million. Following a referendum a decision was made to move towards public ownership of the city’s energy networks. In 2014, HGV and Vattenfall agreed on a purchase option in order for HGV to acquire the remaining 74.9% of the district heating network. The purchase option defines a minimum purchase price of EUR 950 million corresponding to 100% of VWH’s equity value.
The City also announced that it would be implementing a new energy generation concept following the completion of the purchase by replacing two coal fired generation plants with high efficient gas-fired CHP plants in 2025 and 2030 including also upgrading and extending the district heating grid infrastructure. During the course of 2018 different consultants made evaluations regarding VWH’s equity value with results ranging from EUR 645 Million to EUR 1,097 million. The Commission was asked to consider whether the purchase price was set at a level which would satisfy the MEOP; i.e. the price that a rational private operator might have been willing to pay.
The commission looked at the various reports and valuations and how the City of Hamburg had approached the differences in these reports in order to assess whether the value paid could be seen as satisfying MEOP. Usefully, it reached conclusions on the factors a private investor would take into account for the purposes of MEOP. Some of the key points to note are:
On the face of it this decision appears very specific to the facts (a public-owned company buying its private sector partner out of the SPV which owns the heat network). However, the principles set out in the decision will apply to the application of the MEOP to any district heating project, or even to the calculations used to determine eligible costs under district heating exemption in the General Block Exemption Regulation (article 46).
Common scenarios where this decision may prove useful include:
This decision provides useful guidance for public bodies investing in, acquiring or disposing of district heating networks. Projecting a heat network project’s funding requirements and finding appropriate comparators for MEOP analyses is often complex, so this guidance from the Commission should prove useful to public and private bodies active in the sector.
Law firm Browne Jacobson has collaborated with Wiltshire Council and Christ Church Business School on the launch event of The Council Company Best Practice and Innovation Network, a platform which brings together academic experts and senior local authority leaders, allowing them to share best practice in relation to council companies.
In the Autumn Statement delivered on 17 November, rises to the National Living Wage and National Minimum Wage rates were announced, to take effect from 1 April 2023.
Announced in September but scrapped on 17 November the investment zone proposals were very short lived. The proposal has now morphed into the proposal for a smaller number of clustered zones earmarked for investment.
Settlement agreements are commonplace in an employment context and are ordinarily used to provide the parties to the agreement with certainty following the conclusion of an employment relationship.
On 2 November 2022, the Supreme Court handed down its judgment in the much awaiting case of Hillside Parks Ltd v Snowdonia National Park Authority [2022] UKSC 30. The Court’s judgment suggests that the long established practice of using drop-in applications is in fact much more restricted than previously thought. This judgment therefore has significant implications for both the developers and local planning authorities.
In ‘failure to remove’ claims, the claimant alleges abuse in the family home and asserts that the local authority should have known about the abuse and/or that they should have removed the claimant from the family home and into care earlier.