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State support approval

In accordance with the Decision of the Government of the Republic of Croatia on financing the project and in order to implement the Decision i.e. for the funds to be received in accordance with the adopted decision, it was necessary to obtain the approval from the European Commission that the aid complies with the European Union state aid regulations. The Republic of Croatia has notified the European Commission of a direct financial contribution to the financing of the project in the amount of EUR 100 million, as well as a security of supply fee, which is determined annually by the Croatian Energy Regulatory Agency in the event when terminal revenues are not sufficient to cover operating costs and which is collected by the gas transmission system operator (Plinacro Ltd.) within the transportation tariff.

In accordance with European Union state aid regulations, pre-notification and notification was prepared and European Commission has assessed that the support measures are in line with EU state aid regulations, and in particular in line with the State and Environmental Aid Guidelines from 2014.

European Commission established that:

  • the aid measures are necessary, as the project would not be carried out without them. In this respect, the Commission's financial analysis has shown that the revenues originating exclusively from the tariffs charged to the users of the LNG terminal would not be enough to recoup the investment costs and ensure a sufficient remuneration of the LNG promoter,

  • the aid measures are proportionate and therefore limited to the minimum necessary, as they will only cover the "funding gap", that is the difference between the positive and negative cash-flows over the investment lifetime, discounted to their current value (using the cost of capital).

Therefore, the Commission concluded that the measures are in line with EU State aid rules, as they contribute to further key strategic objectives of the EU, including diversifying gas supply sources and increasing the EU's security of gas supply, notably in the Central and South-Eastern regions, without unduly distorting competition.

With the approval of state support by the European Commission, the last administrative risk for the implementation of the LNG terminal on the Island of Krk was closed, thus eliminating all risks in the project implementation. Now, in accordance with the Government's decision on financing the floating LNG terminal, the planned state support may be implemented since it was necessary for adopting the Final Investment Decision and for closing the financial construction of the project.

The Decision on State support approval can be found HERE.