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Compensation for power companies level with revenue to be recovered

Aid to be paid by the Hungarian state to compensate power companies for certain costs resulting from the termination of long-term power purchase agreements will be equivalent to the amount of revenue the state must recover from the companies because of the contracts, a government decree reveals.

The aid, as well as the amount of revenue to be recovered, comes to HUF 179 billion, the decree shows.

The European Commission on Tuesday said it approved an aid scheme by the Hungarian state to compensate power companies for “certain costs” resulting from the termination of long-term power purchase agreements.

“The compensation will not exceed what is necessary to recoup the shortfall in investment costs repayment over the assets' lifetime, including a reasonable profit margin,” the Commission said.

In June 2008, the Commission issued a directive ending long-term power purchase agreements in Hungary, because they involved illegal state aid, and instructed the state to recover revenue which the companies could not have obtained without the agreements. But the Commission on Tuesday said it found the companies could be compensated for "stranded costs", that is, costs that cannot be recouped related to investments in assets that have become non-economical because of the termination of the long-term power purchase agreements.

The compensation for the stranded costs - to be paid to Budapesti, a subsidiary of EDF, Dunamenti, a subsidiary of GDF Suez, and Pannon, a subsidiary of Dalkia - will be deducted from the aid the state is to recover. (MTI-Econews)