EN Official Journal of the European Union L 34/152

COMMISSION DECISION (EU) 2016/154

of 22 July 2015

on State aid SA.13869 (C 68/2002) (ex NN 80/2002) — reclassification as capital of the tax-exempt accounting provisions for the renewal of the high-voltage transmission network (RAG) implemented by France in favour of EDF

(notified under document C(2015) 4959)

(Only the French text is authentic)

(Text with EEA relevance)

THE EUROPEAN COMMISSION,

Having regard to the Treaty on the Functioning of the European Union, and in particular the first subparagraph of Article 108(2) thereof (1),

Having called on interested parties to submit their comments pursuant to that Article (2),

and having regard to their comments,

Whereas:

(1) By decision of 16 October 2002 the Commission initiated the formal investigation procedure under Article 108(2) of the TFEU (‘the opening decision’) into the advantage resulting from the non-payment by Établissement Public à Caractère Industriel et Commercial ‘Électricité de France (E.D.F.), Service National’ (‘EDF’, which became the public limited company Électricité de France SA towards the end of 2004) of the corporation tax due, when it restructured its balance sheet in 1997, on some of the accounting provisions created free of tax for the renewal of the high-voltage transmission network (réseau d'alimentation général — RAG) and reclassified as capital.

(2) The French authorities, in their comments submitted to the Commission by letter dated 11 December 2002, denied that EDF had received a tax concession and argued that the additional capital contribution corrected an under-capitalisation and was therefore justified.

(3) By letter dated 21 January 2003, the Commission forwarded to France the only observations received from one interested third party and invited the French authorities to submit their comments. France did not present any comments on these observations.

(4) A technical meeting between the Commission and the French authorities was held on 12 February 2003, followed by a request for information by the Commission dated 4 July 2003.

(5) On 11 November 2003, France provided additional information. On 17 November 2003, a further technical meeting was held between the Commission, the French authorities and representatives of EDF. The French authorities provided additional information on 20 November 2003.

(6) By decision of 16 December 2003 (3), the Commission declared the aid measure in favour of EDF incompatible with the internal market and requested recovery of the aid with interest. The aid was repaid in February 2004.

(7) By judgment of 15 December 2009, the General Court annulled the Commission's decision (4). France repaid to EDF the amount of aid which had been reimbursed in 2004.

(8) By judgment of 5 June 2012, the Court of Justice rejected the appeal lodged by the Commission against the judgment of the General Court (5).

(9) By decision of 2 May 2013, the Commission extended the formal investigation procedure (‘the extension decision’) (6).

(10) The French authorities submitted their comments to the Commission on 1 July 2013.

(11) By letter dated 13 August 2013, the Commission forwarded to France the observations dated 29 July 2013 received from one interested third party, namely EDF, and invited the French authorities to submit their comments. On 11 October 2013, France submitted its comments on the observations by EDF.

(12) On 18 October 2013, EDF sent to the Commission a study prepared by a consultant (Oxera) dated 15 October 2013. On 22 October 2013, the Commission sent this study to France and invited the French authorities to submit their comments. However, the invitation was subject to the reservation that the study had been submitted more than two and a half months after the deadline set by the extension decision and, furthermore, it had been drawn up after the decision to invest in EDF on which France was relying. On 6 November 2013, France submitted its comments on the study.

(13) A meeting between the Commission and the French authorities was held on 14 November 2013. On 15 November 2013, the Commission asked for further information and clarifications on the observations by France, which were submitted on 23 December 2013.

(14) On 22 November 2013, EDF sent to the Commission a legal opinion commissioned by EDF further to and in support of its observations of 29 July 2013.

(15) At the request of EDF, a meeting with the Commission in the presence of the French authorities was held on 12 March 2014.

(16) On 13 May 2014, the Commission requested comments on the legal opinion submitted by EDF and clarifications and additional information from France, which the latter provided by letter dated 19 June 2014.

1. DETAILED DESCRIPTION OF THE MEASURE

1.1. THE BENEFICIARY: EDF, CHANGES IN ITS STATUS AND ITS CAPITAL

(17) EDF was set up by Act No 46-628 of 8 April 1946 on the nationalisation of electricity and gas (‘Act No 46-628’), which, in its first article, nationalised the production, transport, distribution, and import and export of electricity in France. This Act entrusted the management of the nationalised electricity enterprises to a national public industrial and commercial establishment called ‘Électricité de France (E.D.F.), Service National’.

(18) Article 16 of Act No 46-628 provided that the net balance of the assets, rights and obligations transferred to EDF constituted its capital, belonged to the nation, was inalienable and, in the event of operating losses, had to be reconstituted using the results of subsequent years. Under Article 1 of Decree No 56-493 of 14 May 1956 on capital contributions to EDF, those contributions were subject to the rules laid down by Article 16 of the above Act. Article 2 of the same Decree stipulates that the capital contributions give rise to payment to the state of interest and a dividend.

(19) By virtue of Act No 46-628, EDF had been since its creation, and still was in 1997, a national public industrial and commercial establishment that was not governed by the provisions applicable to public limited companies. A national public industrial and commercial establishment does not have any share capital, unlike a limited company governed by public law, which is owned by its shareholders (7). Despite the terms ‘capital’ and ‘capital contribution’ used in the relevant instruments, EDF, because of its status as a legal person governed by public law, did not have any share capital. Act No 2004-803 of 9 August 2004 on the public electricity and gas service and on electricity and gas enterprises (‘Act No 2004-803’) provided for a future change to this status. Article 24 of Act No 2004-803 stipulated that EDF, in which the state had to hold more than 70 % of the capital, would be governed by the laws applicable to public limited companies, save as otherwise provided by statute. Article 47 of the Act also provided for the subsequent conversion of the public establishment EDF into a public limited company, subject to the publication of a decree on its new status. Article 46 laid down that the balance sheet of the company EDF at 31 December 2004 would be based on the balance sheet at 31 December 2003 and the income statement of the public establishment EDF for the 2004 financial year.

(20) The conversion of EDF into a public limited company became effective by application of Decree No 2004-1224 of 17 November 2004 on the statutes of the public limited company Électricité de France. The statutes annexed to the Decree provided that EDF would now be a public limited company governed by the laws and regulations applicable to commercial companies, in particular the Commercial Code, unless otherwise specified by more detailed provisions, including the statutes themselves.

(21) Article 6 of the EDF statutes provides that the company's share capital, which was initially wholly owned by the state, is set at EUR 8,129 billion, divided into 1 625 800 000 shares of EUR 5 each. The share capital of the new public limited company EDF was set in November 2004 at the same amount as the cumulated capital and capital contributions of the publicly owned industrial and commercial establishment EDF at that time, i.e. EUR 8,1 billion. This amount of capital and capital contributions had been reached under application of Act No 97-1026 of 10 November 1997 on various economic and commercial measures (‘Act No 97-1026’) and had remained unchanged since 1997.

(22) As stipulated by Act No 2004-803 and the EDF statutes, the state had — and has — to hold more than 70 % of the company's capital at any time. In November 2005, new EDF shares accepted for listing on Euronext were offered at an open price, thereby effectively opening EDF's capital to shareholders other than the state.

1.2. THE CREATION OF ACCOUNTING PROVISIONS FOR THE RENEWAL OF THE HIGH-VOLTAGE TRANSMISSION NETWORK (RAG)

(23) Article 36 of Act No 46-628 transferred all the nationalised electricity concessions to EDF. Under Article 37 of the Act, the concessionaire is required to comply with a standard set of terms and conditions in relation to the concessions. In 1958, the various electricity transmission concessions that had been transferred to EDF by the state were converted into a single concession known as the ‘réseau d'alimentation générale’ (RAG) (high-voltage transmission network).

(24) In the absence of specific accounting rules for concessions, as early as 1946 EDF considered that it was the owner of the assets comprising the RAG and included those assets in its balance sheet. Pursuant to Article 8 of the terms and conditions approved by Decree No 56-1225 of 28 November 1956, EDF was required to carry out, at its expense, all the maintenance and renewal work needed to keep the concession structures in good working order.

(25) In 1987, following a 1982 amendment to the general accounting plan that laid down specific rules for the assets to be returned to the state at the end of the concession, EDF changed its accounting practice for the assets constituting the RAG, which had until then been considered to be own assets, and classified them under the balance sheet item ‘Assets under concession’. EDF applied to those assets the special accounting rules established in France for assets under concession that have to be returned to the state at the end of the concession period, and created tax-free provisions for the renewal of the RAG.

(26) In a 1994 report (8), the French Court of Auditors considered that, in the presence of a sole and permanent concessionaire from the state, nominated by law, such as EDF, it was difficult to regard the assets constituting the RAG as having to be returned to the state at the end of the concession, as opposed to the RAG's own assets belonging to EDF. In other words, the Court of Auditors took the view that the accounting change introduced by EDF in 1987, which was reflected in the setting-up of tax-free provisions, was not justified. Work to regularise EDF's situation was started rapidly between the undertaking and the supervising authorities.

(27) In 1997, EDF's accounts contained two types of tax-exempt provisions for the renewal of the RAG: unused provisions amounting to FRF 38,5 billion, and grantor rights corresponding to renewal operations already carried out, amounting to FRF 18,345 billion.

1.3. RECLASSIFICATION OF THE ACCOUNTING PROVISIONS

(28) Act No 97-1026 clarified the status of the assets constituting the RAG. Article 4 of the Act provides: ‘I. The structures of the high-voltage electricity transmission network are deemed to have been owned by Électricité de France (EDF) from the time that it was granted the concession for that network. II. For the purposes of applying the provisions of paragraph I, as at 1 January 1997, the value of the assets in kind allocated under concession to the high-voltage transmission network appearing as liabilities on EDF's balance sheet is to be entered, net of the corresponding revaluation differences, under the item “Contributed capital” …’.

(29) Reference to the Act was necessary for any operation relating to EDF's capital. Article 16 of Act No 46-628, in the version in force in 1997, provided that EDF's capital was inalienable and belonged to the nation. Therefore, under French law, the capital contributions to EDF resulting from the reclassification of the provisions for the renewal of the RAG were a matter for the law.

(30) Act No 97-1026 establishes the ownership of the assets constituting the RAG. EDF's balance sheet was therefore reorganised by Act No 97-1026. The provisions set up by EDF between 1987 and 1996 for the renewal of the RAG with a view to returning those assets to the state, whether or not they had been used, would become superfluous if EDF were deemed to own the assets constituting the RAG.

(31) Annex 1 to a letter addressed to EDF on 22 December 1997 by the Minister for Economic Affairs, Finance and Industry, the Secretary of State for the Budget and the Secretary of State for Industry (‘the letter from the Minister for Economic Affairs’) explained the restructuring of the upper part of EDF's balance sheet pursuant to Article 4 of Act No 97-1026 of 10 November 1997: ‘— Reclassification of “Grantor rights” (FRF 18 345 563 605): — Consolidation as capital contributions of the value of assets in kind allocated under concession to the RAG, amounting to FRF 14 119 065 335. — Amalgamation of the revaluation reserves for the RAG in 1959 (FRF 2 425 million) and 1976 (non-depreciable fixed assets: FRF 97 million) with the item “Revaluation reserves RAG”, which is thus increased from FRF 1 720 million to FRF 4 145 million. — Amalgamation of the statutory provisions for the revaluation of depreciable fixed assets in 1976 (FRF 1 704 million), the item thus increasing from FRF 877 million to FRF 2 581 million. — Reclassification of the renewal provisions which have become unwarranted (FRF 38 520 943 408) as retained income, in accordance with National Accountancy Council Opinion No 97-06 of 18 June 1997 on accountancy changes.’

(32) In reorganising EDF's balance sheet, the French authorities followed National Accountancy Council Opinion No 97-06 of 18 June 1997 on changes to accounting methods, changes to estimates, changes to tax options and corrections to errors (‘the National Accountancy Council Opinion’), which states that corrections to accounting errors, which by their very nature relate to the posting of past transactions, ‘should be posted in the accounts for the financial year in which they are discovered’.

(33) In accordance with Act No 97-1026 of 10 November 1997 and the letter from the Minister for Economic Affairs, the revaluation reserves were transferred to the item ‘Own funds’ without incurring any tax since they corresponded to revaluation surpluses realised free of tax or under a tax neutrality arrangement pursuant to the 1959 and 1976 Revaluation Acts.

1.4. TAX IMPLICATIONS OF THE RECLASSIFICATION OF THE ACCOUNTING PROVISIONS

(34) Annex 3 to the letter from the Minister for Economic Affairs also sets out the tax implications of the reorganisation of EDF's balance sheet. A net asset variation results from the reclassification of the unused renewal provisions amounting to FRF 38,5 billion as retained income and is subject to corporation tax at the rate of 41,66 % applicable in 1997. The unused provisions amounting to FRF 38,5 billion were thus correctly taxed by the French authorities. However, the part of the tax-free provisions consolidated as a capital contribution corresponding to the grantor rights was not taxed.

(35) A memorandum by the Directorate-General for Taxation dated 9 April 2002, sent to the Commission by the French authorities, stated that ‘the grantor rights in respect of the RAG represent an unowed debt which was unjustifiably exempted from tax by being incorporated into the capital’ and that ‘before this reserve was incorporated into the capital, it should have been transferred from the enterprise's liabilities, where it was incorrectly posted, to a net assets account, thereby resulting in a positive variation in net worth that was taxable under Article 38(2)’ of the General Tax Code. They noted that ‘the tax concession thus obtained [by EDF in 1997] can be estimated at FRF 5,88 billion (14,119 × 41,66 %)’.

2. OPENING DECISION

(36) In its opening decision, the Commission concluded that the irregular creation of additional provisions for the renewal of the RAG between 1987 and 1996 had favoured EDF within the meaning of Article 107(1) of the TFEU. This operation had conferred on EDF a selective economic advantage resulting from the difference between the capitalised value of the unpaid corporation tax on the provisions during the same period and the amount of corporation tax paid by EDF in 1997, following the entry into force of Article 4 of Act No 97-1026.

(37) Despite the fact that EDF engaged in activities in France on a series of markets subject to monopoly rights before the entry into force of Directive 96/92/EC of the European Parliament and of the Council (9) liberalising the electricity sector, the Commission considered that the aid measures in question in favour of EDF had distorted or threatened to distort competition and affected trade between Member States within the meaning of Article 107(1) of the TFEU. This resulted in particular from the fact that, despite the exclusive rights enjoyed by EDF in engaging in certain activities in France, there was nevertheless a degree of trade between Member States on those markets. Moreover, free competition also existed on related markets where EDF had already diversified its activities beyond its exclusive rights in both geographic and sectoral terms. These effects already existed well before the liberalisation of the electricity sector.

(38) The Commission also concluded that it was new aid which did not appear, at that stage, to meet the requirements that must be fulfilled for finding that the conditions laid down in Article 107(2) and (3) of the TFEU were fulfilled. Furthermore, the French authorities did not rely on the application of Article 106(2) of the TFEU.

3. COMMENTS BY AN INTERESTED PARTY

(39) By letter dated 6 January 2003, the National Association of Independent Thermal Electricity Producers (SNPIET) submitted comments to the Commission in the context of the formal investigation procedure. In relation to the non-payment in 1997 of corporation tax on some of the tax-free provisions created for the renewal of the RAG, SNPIET alleged that EDF had not complied in its operations with normal practice in industrial and commercial enterprises, contrary to the provisions of Act No 46-628 of 8 April 1946.

4. COMMENTS BY FRANCE ON THE DECISION TO INITIATE THE FORMAL INVESTIGATION PROCEDURE

(40) The French authorities submitted their comments to the Commission by letter of 11 December 2002. They challenged the classification as State aid of the non-payment in 1997 of corporation tax on some of the accounting provisions created free of tax for the renewal of the high-voltage transmission network.

(41) First of all, they disputed the amount of the provisions created for the renewal of the high-voltage transmission network (RAG) advanced by the Commission. Second, the French authorities claimed that, even if EDF had not set aside provisions for the renewal of the RAG, it would still not have been liable for the payment of corporation tax between 1987 and 1996 because of the carry-over of large tax losses. Furthermore, since the state was both the owner of EDF and the grantor of the concession on the RAG, they considered that the grantor rights did not provide it with a genuinely enforceable claim. Consequently, when the balance sheet was restructured in 1997, they assigned those rights to EDF's capital and reserves in order to correct its under-capitalisation, but without subjecting them to corporation tax.

(42) The French authorities took the view that the restructuring of EDF's accounts in 1997 could be interpreted as a capital contribution of an amount equivalent to the partial tax exemption, the aim of which was also to correct under-capitalisation. EDF and the state would have liked to allocate the quasi-own assets to capital, leaving aside the question of corporation tax. It was thought that it would be more efficient and more neutral to allocate the grantor rights directly, and in their full amount, to own funds, rather than to carry out the equivalent transaction, which would have entailed assigning to capital a net amount after corporation tax, requesting EDF to pay corporation tax in an amount equal to the variation in net worth and, finally, making an additional capital contribution in an amount equal to the tax paid.

(43) The French authorities took the view that an additional contribution was justified by EDF's projected profits in 1997, which were in fact achieved during subsequent years. According to the French authorities, in comparable circumstances, a private investor in a market economy would have made such a capital contribution.

(44) They also denied that the remuneration of the state had been unduly reduced between 1987 and 1996 as a result of the creation of the provisions in question. They argued that, even if the net result had been higher, the remuneration of the state would not have been increased since, during that period, the level of that remuneration did not correspond to a predetermined percentage of EDF's net result. The level was determined freely by the state in absolute terms and did not necessarily depend on EDF's financial situation. Nor did the remuneration have to be deducted from the net profits for each year. In view of the foregoing, and given the losses carried over by EDF, the French authorities stressed that between 1987 and 1996 the state had in fact taken a dividend considerably in excess of the limits laid down by company law.

(45) The French authorities also considered that, even if the creation of provisions for the renewal of the RAG had resulted in an advantage, that advantage had to be regarded as cancelled out by the increase in corporation tax paid in 1997. They claimed that, over the period from 1987 to 1996, EDF paid more to the state overall than the corporation tax that would have been paid by a commercial company which did not create provisions for the renewal of the RAG and which paid its shareholder a dividend equal to 37,5 % of its net result after tax.

(46) The French authorities also argued that, if EDF were found to have benefited from an undue advantage, it would constitute existing aid and not new aid on account of the expiry of the 10-year limitation period laid down in Article 15 of Council Regulation (EC) No 659/1999 (10), which started to run from the date on which the initial aid was granted. Since the Commission's first request for information was made on 10 July 2001, any aid granted before 1991 would be time-barred. The French authorities took the view that the legislative measures adopted in 1997 did not suspend the limitation period since only action by the Commission could have that effect. The French authorities argued finally that the measure would constitute existing aid in any event since it was granted prior to the liberalisation of the electricity market.

(47) In their letter dated 20 November 2003, the French authorities reiterated their arguments concerning the revaluation reserves included in the amount of the grantor rights appearing in the accounts and concerning application of the limitation rule. Moreover, they claimed that the rate of corporation tax that should have been applied when EDF's balance sheet was restructured was the 1996 rate (36,67 %) and not the 1997 rate (41,66 %). They considered that the restructuring was carried out on the basis of a tax return filed on 23 December 1997, after closure of the accounts for 1996 but before the 1997 accounts were finalised.

(48) The French authorities thus disputed the Commission's claim that EDF benefited from an advantage in 1997 on account of the non-payment of corporation tax on some of the provisions created free of tax for the renewal of the high-voltage transmission network.

5. JUDGMENTS BY THE EU COURTS

(49) By its judgment of 15 December 2009, the General Court annulled the Commission's decision of 16 December 2003 on the ground that it was incumbent on the Commission to determine whether a private investor would have invested a comparable amount in similar circumstances. The General Court took the view that the Commission should have checked whether the operation satisfied the private investor test. The General Court therefore considered that the Commission had committed an error of law and infringed Article 107 of the TFEU.

(50) In its judgment of 5 June 2012, the Court of Justice dismissed the appeal brought by the Commission against the judgment of the General Court. The Court of Justice considered that the finding made by the General Court, to the effect that the obligation for the Commission to verify whether the capital had been provided by the state in circumstances corresponding to normal market conditions existed regardless of the way in which that capital had been provided by the state, was not vitiated by an error of law. The Court of Justice also took the view that the General Court did not err in law either in finding that the private investor test may be applicable even where fiscal means have been employed.

6. DECISION TO EXTEND THE FORMAL INVESTIGATION PROCEDURE

(51) As a result of the annulment of the decision of 16 December 2003, the Commission had to adopt a new decision under Article 266 of the TFEU and Article 13 of Regulation (EC) No 659/1999 terminating the procedure by complying with the points of law established definitively by the judgment of the General Court. Since the decision of 16 December 2003 had been annulled, the Commission had to re-examine the questions relating to Articles 3 and 4 of that decision.

(52) On the one hand, neither the Court of Justice nor the General Court had found that the opening decision was irregular. It could therefore form the basis for a new final decision. On the other hand, the General Court clearly laid down the conditions governing the applicability and application of the private investor test. These criteria were based on the existence of objective and verifiable evidence showing that the decision by the Member State was to make an investment in the public undertaking on the basis of economic evaluations comparable to those which a rational private investor would have had carried out, before making the investment, in order to determine its future profitability (11).

(53) In the decision to extend the formal investigation procedure, the Commission noted that, at that stage of the administrative procedure, there was no evidence, demonstration or document to support the statement by the French authorities that the accounting reform of 1997 could be interpreted as a capital contribution of an amount equivalent to the partial tax exemption. Contrary to the observations by the French authorities, nor was such a capital contribution an investment rather than an aid measure which a rational private investor in a market economy would have made in comparable circumstances, justified by EDF's projected profits in 1997, which were in fact achieved during subsequent years.

(54) Accordingly, in the extension decision, the Commission set out, in the light of the available information and documents, its preliminary analysis of the potential economic advantage arising from the non-payment by EDF in 1997 of corporation tax on the part of the provisions corresponding to the FRF 14,119 billion in grantor rights which were reclassified as capital contributions.

(55) In that regard, the overall assessment of the facts of the case seemed to indicate that that measure involved the public authorities, thereby precluding the applicability of the principle of the private investor. In support of their claim, the French authorities had not provided any information or business plan preceding or contemporaneous with the decision not to levy the tax on EDF demonstrating the profitability of such an operation. From a substantive perspective, having regard to the criteria laid down by the General Court, the Commission noted that it was for France to duly establish the date of the documents provided and the evidence that they had been examined by the relevant ministers and officials and the Houses of Parliament before the contested decision was adopted.

(56) In the absence of this information, however, it was in the exercise of its powers of taxation that France appeared to have reserved a more favourable tax treatment for the restructuring of the upper part of EDF's balance sheet, in relation to the reclassification of the grantor rights provided for in Article 4 of Act No 97-1026. No specific budgetary provision earmarked this tax resource to EDF, just as the rules and checks relating to investments had not been implemented to provide a legal basis for the alleged investment.

(57) Likewise, in its extension decision, the Commission noted in the alternative that, even if the principle of the private investor in a market economy had been applicable, application of the principle resulted in the conclusion at that stage that a private investor would not have invested FRF 5,88 billion in the capital contribution to EDF in 1997. In the absence of information provided by the French authorities, it seemed excluded that a private shareholder under normal market conditions would have gone ahead with the alleged investment without previously examining objective and reliable studies, preferably carried out by an impartial independent investment adviser, rather than, for example, by the beneficiary enterprise, which stated, in particular, the return on capital invested, the return period on the investment and the inherent risks in absolute terms and in relation to the remuneration arrangements linked to such an investment.

(58) In that regard, the Commission added to the factors which a rational private investor would have examined before committing funds the uncertainty about the amount and the future course of the pension financing costs facing EDF in 1997, under its specific pension scheme, and the assessment that an investor would make at that time.

(59) Under those conditions, the partial exemption from corporation tax in 1997 was not a productive investment by the state shareholder but rather a tax exemption measure likely to have conferred an economic advantage on EDF.

(60) Furthermore, it appeared that the failure to levy the corporation tax owed by EDF involved state resources and was likely to distort competition and affect trade between Member States, thereby fulfilling the conditions for the application of Article 107(1) of the TFEU.

(61) In the absence of a legal basis justifying the compatibility with the internal market of operating aid that strengthened EDF's position in relation to its competitors, the Commission, in its decision of 2 May 2013, doubted whether the aid was compatible with the internal market. Similar doubts had already been raised in the opening decision.

7. COMMENTS BY THIRD PARTIES

(62) By letter dated 29 July 2013, EDF submitted its comments on the extension decision. EDF levelled three main criticisms at the arguments set out in that decision: (i) the decision ignored the lessons of the judgment of the General Court and failed to recognise the true nature of the recapitalisation of EDF carried out by the state; (ii) the decision was excessively formalistic in that it wrongly postulated the need for a business plan linked to the investment, whereas the recapitalisation was the fruit of a lengthy reflection process, as attested by many documents from that period; and (iii) the decision argued, without any demonstration, that no investor in a situation as close as possible to that of the state would have made a comparable investment, contrary to the information provided by EDF in support of its observations.

(63) EDF took the view that the Commission was therefore continuing to analyse the measure adopted by the French state in 1997 from the sole perspective of its alleged tax implications, even though the General Court had clearly rejected that approach. As the General Court had confirmed, the measure implemented by the state when it reclassified the grantor rights as capital contributions constituted a recapitalisation of EDF intended to correct the imbalance on EDF's balance sheet with view to the opening-up of the energy markets to competition. The letter from the Minister for Economic Affairs dated 22 December 1997 did not contain a tax decision that departed from the 1997 Act but served to point out the tax implications. It was that this single and indivisible recapitalisation measure that should be examined, not the alleged tax implications, which were artificially dissociated in the decision to extend the formal investigation procedure.

(64) According to EDF, a business plan specific to the investment was not required by the case-law, which did not establish any formalism on that question but requires objective and verifiable evidence pre-dating or contemporaneous with the measure under examination. Incidentally, such a business plan would not have been essential for the state in 1997. The state had five representatives on EDF's management board, had held all of EDF's capital since 1946 and, at the time, had detailed knowledge of the enterprise and was involved in its management and in setting its strategic objectives, with a long-term time horizon. According to EDF, such a long-term time horizon was particularly relevant in the case of EDF because of the capital intensiveness of its activity and the decades-long useful life of its installations, ranging from 30 to 75 years in some cases.

(65) EDF took the view that it was as a shareholder and not as a public authority that the state, as attested by many contemporary documents, had carried out an investment on the basis of precise forward-looking analyses and assessments. Thus, as early as 1995 discussions had begun between EDF and its line ministries in order to draw the conclusions from the opinion of the Court of Auditors referred to in recital 26. These discussions focused on the reorganisation of the balance sheet of the undertaking and the return on capital. They resulted in the signature, on 8 April 1997, of the contract for services between the state and EDF for the period 1997-2000 and the concomitant tabling, on 2 April 1997, of a draft law on various economic and financial measures, Article 45 of which was identical to Article 4 of Act No 97-1026. According to EDF, the preparatory work in the National Assembly and the Senate, and even the Act itself, demonstrated that the nature of the intervention by the state was that of a shareholder: a capital contribution recapitalising EDF.

(66) As attested by some 40 contemporaneous documents that EDF attached to its accounts, the state had been guided in its analyses and reflections by four main concerns: — taking into consideration the new competitive context of the gradual opening-up of the markets following Directive 96/92/EC, — normalising its financial relations with EDF on the basis of ordinary law by putting an end to the ambiguities which had existed in the past, — rectifying the significant imbalance which was affecting the structure of EDF's balance sheet by strengthening its own funds, — facilitating international comparisons to increase the credibility of the enterprise within the financial community.

(67) Lastly, for EDF, the criterion of the prudent private investor in a market economy was not only applicable because of the considerations referred to above but was also satisfied in this case since the state had acted as a private investor would have done. In the view of EDF, according to the Court of Justice (paragraphs 78 and 89 of the judgment), the question was one of determining whether EDF, in circumstances which corresponded to normal market conditions, could have obtained the same advantage as that which had been made available to it through state resources and whether the advantage, because of its effects, distorted or threatened to distort competition.

(68) Here again, many contemporaneous documents demonstrate that the state had indeed examined and quantified the profitability of its investment, as would have done an investor who was the sole shareholder in the undertaking operating to a long-term time horizon. It was on that basis that the remuneration of the state had been set in the contract for services between the state and EDF for the period 1997-2000. At the time, the remuneration was consistent with the remuneration of shareholders in comparable companies. The estimates of the amounts that EDF would have to pay to the state from 1997 to 2000 had therefore been examined by the latter before the contract was concluded.

(69) Moreover, in its comments of July 2013, EDF had anticipated a study commissioned from Oxera, which had not yet been finalised when EDF made its submission. EDF had claimed that the Oxera study would compare the internal rate of return expected on the investment by the state in 1997 with that required by the capital markets for a similar investment and would show that a private investor would have made the investment under the conditions set in the contract for services for 1997-2000.

(70) On 18 October 2013, EDF had sent to the Commission the study by Oxera, which was dated 15 October 2013 (12), without further comment. As EDF had anticipated in its comments in July 2013, the study by Oxera concluded that a prudent private investor in a market economy would have invested in the increase in the amount of capital in EDF. This conclusion resulted from the fact that the profitability (internal rate of return) that an investor could have expected in 1997 lay somewhere between 35 % and 15 %, with an average of 27 %, over five years, which in any event was higher than the return of 12,7 % that such an investor would have required. The return was calculated by taking into account the value, at the start and end of the period, of the sale of the rights in EDF held by the state.

(71) EDF took the view that, apart from the weakness in own funds, its economic fundamentals were healthy in 1997, as analysts had commented at the time, without expressing any concerns about its financial viability or its commercial prospects at the time the state made its investment. EDF's credit rating was excellent (Aaa for Moody's between 1992 and 1997, AAA for Standard & Poor's in 1996-1997) and remained so despite it having been necessary to lower it by one or two notches to take account of the state guarantee available to EDF as a public industrial and commercial establishment. Several contemporaneous documents showed that the level of remuneration of the French state by EDF was comparable to the rate of return from dividends from companies listed on the French stock exchange (CAC 40) (4,5 % to 5 % on capital) and from undertakings active in the energy sector in Europe (estimated at 4,7 % and 5,27 % for 1996 and 1997 respectively). Moreover, this demonstrated that EDF could have obtained the same amount of capital on the capital market, so the measure, because of its effects, had not been of such a nature as to distort competition.

(72) In particular, EDF took the view that a private investor holding the entire share capital in a subsidiary would have been able to make, under comparable conditions, a similar investment in that subsidiary by converting any type of claim held against the subsidiary into capital. This analysis was supported by a legal opinion issued at the request of EDF. In seeking to rectify a financial structure that was distorted by the weakness of its own capital compared with the financial indebtedness, the state would also have allowed the undertaking to compete with other leading operators in the sector in the EU. The same shareholder would not, therefore, have left untouched a significant imbalance in the balance sheet of its subsidiary with sound economic fundamentals, while it had an easy method of correcting the imbalance by converting a claim into capital.

(73) In the view of EDF, it was therefore reasonable to think that a private investor in a situation as close as possible to that of the state, i.e. the sole shareholder in the company, operating to a long-term time horizon, in a highly capital-intensive market on the verge of being opened up to competition, would have made the same investment.

8. COMMENTS BY FRANCE ON THE DECISION TO EXTEND THE FORMAL INVESTIGATION PROCEDURE

(74) The French authorities considered, first, that the state had acted as a prudent investor in a market economy when it reclassified, free of corporation tax, the grantor rights as capital contributions to EDF. They took the view that, contrary to the presentation in the decision to open the investigation procedure of 16 October 2002 and in the decision to extend the procedure of 2 May 2013, the measure that the Commission should analyse was a single measure to recapitalise EDF through the adoption of Article 4 of Act No 9-1026 and not the measure to grant a tax exemption on the reclassification of the grantor rights as a capital contribution, which was separable under the said Act. They relied on the information presented in a number of documents dating from 1996 and 1997 annexed to their comments, which they believed supported and corroborated that argument. These documents are referred to in recitals 87 to 108. As far as the French authorities were concerned, other documents submitted by EDF backed up their comments.

(75) In the alternative, the French authorities pointed out that they disputed the amount of aid and reiterated their comments of 20 November 2003 to the effect that the rate of the relevant tax to be applied should be the 1996 rate and not the 1997 rate, as set out in recital 47.

On the applicability of the principle of the private investor in a market economy

(76) The French authorities disputed that France had granted the tax exemption at issue in its capacity as a public authority, which made the principle of the prudent private investor in a market economy inapplicable. They considered that the General Court did not require the Member State to submit a genuine business plan relating to the contested measure.

(77) In that regard, first, they pointed out that in 1997 EDF was a public industrial and commercial establishment placed under the supervision of the state, which, therefore, had a detailed knowledge of the undertaking and of its industrial strategy and financial prospects. Accordingly, they took the view that the submission of the information and evaluations available to the state before it took the contested measure, which demonstrated the profitability of the investment, was admissible. The Commission had to carry out an overall analysis, including in particular this information and any other relevant information.

(78) Second, given the nature and purpose of Article 4 of Act No 97-1026, the French authorities took the view that the state had acted in its capacity as shareholder by granting a tax exemption on the reclassification of the grantor rights. Thus, this Act had been preceded by the signature on 8 April 1997 of the contract for services between the state and EDF for the period 1997-2000, the performance of which involved the adoption of legislative measures to restructure EDF's balance sheet. Previously, in a letter dated 12 July 1996, the supervisory authorities had informed EDF that the contract should set it an ambitious target for the remuneration of the state. Title III of the contract provided for a remuneration of the state comprising two elements: (i) a remuneration on the capital contributions at a fixed rate of 3 %; and (ii) an additional remuneration equal to 40 % of EDF's net income, whereby the combined amount of the two elements could not, however, exceed 6 % of the amount of the capital contributions.

(79) The state had examined this remuneration in the form of prospective dividends and quantified the additional remuneration at FRF 3,5 billion, which could reach FRF 6 billion over the period, as documented by a letter dated 22 April 1997 from the supervisory authorities to EDF. This estimate was based on the economic-financial prospects that EDF had sent to the Ministry of Finance on 19 February 1997 and on the assumptions underlying the contract for services. The report from September 1997 by the rapporteur to the Senate on Act No 97-1026 also included analyses by the Ministry's departments of the expected impact on the remuneration of the state as shareholder for 1998, i.e. FRF 2,6 billion, of which FRF 1,5 billion was fixed interest and FRF 1,1 billion was additional remuneration. The state had therefore estimated the projected remuneration before adopting the measure at issue, as would any shareholder wishing to take part in a capital increase in their company.

(80) Third, the French authorities considered that the reclassification of the grantor rights and, more broadly, the restructuring of EDF's balance sheet and the strengthening of own funds had rectified the weakness in the financial structure of the enterprise. If this weakness had persisted, EDF would probably have had to face an increase in the interest rate on its debt and a difficulty with its commercial partners because of a negative perception of the counterparty risk. That the state as shareholder had had such a concern emerged from the explanatory memorandum to Article 4 of the draft law which then became Act No 97-1026 and from the speech by the minister responsible when he tabled the draft law before the Senate on 2 October 1997.

(81) Furthermore, the reports by the deputy and senator who acted as rapporteurs on the draft law before the National Assembly and the Senate respectively had stressed the positive effect of restructuring EDF's balance sheet on the debt-equity ratios: the first report had judged the equity (FRF 24,2 billion) to be insufficient in relation to the loan debts (FRF 131,9 billion) and the net assets (FRF 696,4 million); the strengthening of own funds had given EDF a balance-sheet structure that better reflected its economic reality, while enabling more relevant comparisons with its European competitors; the second report, moreover, had stressed the positive effect for EDF of greater credibility among the financial community and with its potential partners. The French authorities took the view that strengthening the financial structure of an enterprise was a concern of a prudent private investor in a market economy in a comparable situation.

(82) According to the French authorities, the outcome was that the prudent private investor in a market economy test was indeed applicable since the state had acted as shareholder in reclassifying, free of tax, the provisions for grantor rights as capital contributions to EDF.

On the applicability of the principle of the private investor in a market economy

(83) First of all, the French authorities pointed out that the contract for services between the state and EDF had provided for a remuneration of the state resulting from two elements: (i) a fixed rate of 3 % on its capital contributions; and (ii) additional remuneration of 40 % of EDF's net income, which demonstrated that the state had information on the expected yield on the invested capital. As attested, moreover, by the report by the member of the National Assembly referred to above, given the existence of a fixed rate on the capital contributions, the reclassification of the grantor rights as capital had had the effect of increasing in absolute terms the value of the remuneration of the state, because of the broadening of the capital base.

(84) Next, the French authorities considered that the profitability of the investment in EDF in 1997 should be looked at from a long-term perspective, having regard to the future payments to the state and to the increase in the value of the enterprise. Substantial generation of resources between 1997 and 2000, of almost FRF 70 billion, as forecast by the contract for services, had to be added to the positive net results after taxation and remuneration of the state (FRF 1,4 billion in addition to FRF 2,5 billion remuneration of the state in 1998). As underlined by the letter from EDF dated 19 February 1997, the state had indeed set a target for the increase in the asset value of the enterprise of this amount, resulting from debt reduction, asset formation and investments in development, providing prospects for growth in the capital value of EDF.

(85) Lastly, in assessing the risks of the investment, the state as shareholder had taken into account the characteristics of EDF's main activity, which was conducted principally in France, on the basis of a principle of regulated tariffs which would have to cover the company's costs. These characteristics reduced the risk associated with the investment and, consequently, the profitability requirement. Furthermore, a memo from EDF dated 27 July 1996, which was sent to the Senate on 15 September 1997, showed that the shareholder remuneration in foreign companies differed markedly, depending on the institutional and regulatory environment in the sector in each country.

(86) According to the French authorities, the result was that the state had behaved as a prudent private investor in a market economy when it reclassified the provisions for grantor rights as capital contributions without levying corporation tax. Furthermore, this conclusion was also confirmed by EDF's comments, including the studies and analyses on which it relied, as set out in recitals 62 to73. In particular, as regards the economic study by Oxera submitted by EDF, the French authorities took the view that the Commission should carry out the same analysis in order to determine whether or not the recapitalisation of EDF by the state in 1997 was a prudent investment.

Documents submitted by France in support of its comments

(87) In support of their reply to the extension decision, the French authorities sent the Commission nine documents in attachment to their comments of 1 July 2013. They submitted these nine documents in support of the argument they had already put forward in their comments of 11 December 2002 to the effect that an additional capital contribution equivalent to the revenue from the uncollected tax was justified by EDF's projected profits in 1997, which were achieved in the subsequent years. Without prejudice to the documentary evidence cited by France in its comments, a systematic analysis of the evidence contained in these documents is required.

(88) The documents relate either to the preparation or implementation of the contract for services for 1997-2000 between EDF and the French state or to debates on the draft law which became Act No 97-1026. They date from 1996 to 1997 and thus from the same period as the supposed investment decision. The documents concerned are the 1997-2000 contract for services (13), letters from the line ministers responsible for supervising EDF (14), letters from EDF to the Ministry or the Senate (15) and documents and two reports from the National Assembly and the Senate in preparation for debates on the draft law (16). Their content is outlined in more detail below.

(89) In a letter of 12 July 1996 to the Chairman of EDF, the line ministers welcomed the results of the 1993-1996 Plan contract between EDF and the state and, as it was due to expire on 31 December 1996, launched the preparation of the next Plan contract for 1997-2000. They explained that the financial equilibrium in the 1997-2000 contract would be determined as part of a new tax and accounting framework for EDF, following work conducted since 1995. They asked for discussions to start between the relevant departments and EDF and outlined the three primary objectives for the future contract: — first, the ministers wanted: ‘the productivity gains achieved by the undertaking [to] allow it to continue its price reduction policy, thereby helping to boost the competitiveness of French industry and the purchasing power of domestic consumers’, — at the same time EDF was to continue its debt reduction efforts and to set an ambitious target for the remuneration of the state, with an income-growth incentive mechanism for EDF, — lastly, the contract was to set strategic guidelines for developing EDF worldwide, in order of priority.

(90) As part of the ongoing preparatory work on the contract, on 19 February 1997 EDF's finance director sent the Treasury Department a memo dated 18 February 1997. It contained the main hypotheses regarding the financial scenario underpinning the contract for services between EDF and the state for 1997-2000, including in particular the projected annual income statements and cash flow statements for the period.

(91) The memo forecast a price reduction each year (– […] (17) %, – […] %, – […] %, – […] %), industrial investment of FRF […], of which FRF […] for international development, and investment of FRF […] in the core business over the period 1997-2000. It also mentioned a tax-deductible remuneration for capital contributions of 3 % on an estimated base of FRF 50 billion after restructuring of the balance sheet and of 40 % of income after the fixed remuneration component and corporation tax. Debt at end of year was expected to go from FRF […] at end 1996 to FRF […] at end 2000. Similarly, outstanding debt less assets was expected to go from FRF […] at end 1996 to FRF […] at end 2000.

(92) Of the documents submitted in annex to their comments by the French authorities, the EDF memo of 18 February 1997, sent to the supervising authorities the following day, is the only one to contain systematic quantified projections for EDF's economic and financial operating income. On the basis of these projections dating from February 1997, the state as shareholder could expect a return on the invested capital of FRF 2,1 billion in 1997, FRF 2,5 billion in 1998, FRF 2,4 billion in 1999 and FRF 2,4 billion in 2000, or an annual average of FRF 2,35 billion. EDF's projected income statement for 1997-2000 as set out in the memo was as follows: Table 1 F projected income statement 1997-2000 (FRF billion current value) 1997 1998 1999 2000 Revenue 186,3 184,2 185,7 187,5 Expenses 177,0 177,2 179,1 180,9 of which fuel and energy purchases 36,9 36,8 37,8 38,5 of which operating expenses 88,3 91,2 93,6 95,7 Income from core business 9,3 7,0 6,6 6,6 Income before remuneration of the state 6,8 6,5 6,1 6,1 Remuneration for capital contributions 1,5 1,5 1,5 1,5 Additional remuneration 0,6 1,0 0,9 0,9 Corporation tax 3,9 2,6 2,4 2,3 Net income 0,9 1,4 1,3 1,4 Source: EDF memo of 18 February 1997‘Contract for services — economic and financial prospects’.

(93) As mentioned in the EDF memo, the remuneration paid to the state was tax deductible. This marked a departure from the principle of corporation tax being levied on income after interest and depreciation, thereby reducing net income and thus the amount that could potentially be paid out in dividends. This ad hoc departure potentially increased the state's remuneration as shareholder but decreased by the same amount the tax to be paid to the state as revenue collector. In their reply of 23 December 2013, the French authorities stated that the remuneration for the capital contributions was treated as a standard dividend from 2001 onwards, as a result of which it ceased to be tax deductible. This treatment was used for the group contract between EDF and the state for 2001-2003, which replaced the 1997-2000 contract.

(94) On 8 April 1997 a contract for services between EDF and the state for the 1997-2000 period was agreed and signed by the line ministers and the EDF Chairman and CEO. The contract set out the main direction EDF's medium-term action should take and contained reciprocal commitments by the parties, stating that these commitments had been entered into in the light of broad reference hypotheses and could be called into question only if there was a significant change in the business environment. The contract contained various commitments under three headings: reaffirming the core tasks of a public undertaking (Title I), preparing the undertaking's future today (Title II) and a new financial and institutional framework for the undertaking (Title III). Two annexes to the contract set out performance indicators used for implementation (Annex I) and price movements forecast per year between 1997 and 2000 (Annex II).

(95) The main commitments and guidelines laid down in the contract which relate to the scope of this Decision are described below: — The state confirmed that it wanted the undertaking to retain its legal status, which had proved its effectiveness and should remain a stable point of reference for future developments; this was in compliance with the EU Directive on the internal market in electricity (18). For its part, EDF was to contribute to spatial planning and national solidarity through an ambitious policy to support economic activity and employment by helping local authorities to create jobs and by improving the situation of its poorest customers (Title I). — EDF's development was intended to ‘boost the competitiveness of French business’; the productivity gains to which it was committing were to be allocated as a priority to a reduction in the average level of its prices. The price adjustments should result in an average reduction at constant prices of […] % in April 1997, […] % in April 1998 followed by […] % in April 1999 and […] % in April 2000. At the same time, EDF's development should be geared towards winning new markets, particularly in Europe (Title II). — EDF's balance sheet was to be restructured with the two-fold aim of strengthening its net assets and stabilising its financial relationship with the state on a basis more akin to ordinary law. To this end the Government undertook to present to Parliament a legislative measure restructuring EDF's balance sheet in 1997, with an effective restructuring date of 1 January 1997. The contract provided for a remuneration of the state as shareholder comprising two elements: a remuneration on the capital contributions at a rate of 3 % and an additional remuneration equal to 40 % of net income, whereby the combined amount of the two elements could not exceed 6 % of the amount of the capital contributions, though no estimate of the absolute amounts involved was included. In addition, for the period 1997-2000 EDF undertook to allocate FRF […] to industrial investment worldwide, to cut its gross debt by FRF […] to bring it to FRF […] at end 2000, with a view to an ultimate objective of zero debt by the time the generation system was renewed. Lastly, the contract provided that, if targets were exceeded and a surplus resulted, this should be allocated ‘as a priority to additional price reductions’ before paying out any dividends to the state as shareholder or profit-sharing bonuses to staff (Title III).

(96) A letter dated 22 April 1997 to the EDF Chairman from the ministers who co-signed the contract for services confirmed that the reference hypotheses and financial projections contained in the EDF memo of 18 February 1997 and which underpinned the 1997-2000 contract for services were consensual and fixed. The letter made express reference to the prior concertation between EDF and the public authorities in preparing the financial scenario. It mentioned the target of an average […] % reduction in EDF's prices in four years.

(97) The letter of 22 April 1997 referred to the provisions of the Decree of 14 May 1956, as amended, and the arrangements for the remuneration of the state included in Title III of the contract for services. In accordance with these provisions, the letter stated that ‘the reference scenario gave an additional remuneration amount of FRF 3,5 billion over the period’ 1997-2000 and that in these circumstances it would be possible to achieve a total value of payments to the state of FRF 5,1 billion in 1997, including the fixed interest rate and the advance on corporation tax. These amounts are consistent with those contained in the EDF memo of 18 February 1997. The consistency between the amounts of additional remuneration calculated on the basis of income demonstrates that all the amounts (revenue, expenses, net income, etc.) included in EDF's projected income statement for the period 1997-2000 were examined, validated and approved by the supervising authorities.

(98) The letter of 22 April 1997 from the ministers also stressed that the means of achieving equilibrium in the contract came under the accounting and tax framework accompanying the restructuring of EDF's balance sheet, which was to take effect, subject to the necessary legislative provisions, on 1 January 1997. The letter stated, ‘the detailed arrangements for implementing this restructuring, on both the accounting and the tax fronts, will be the subject, on the basis of the plan now adopted, of further discussions between the line ministries and the undertaking’.

(99) Not long before this letter, the Government had tabled a draft law before the National Assembly. The draft law on various economic and financial measures was adopted by the Council of Ministers on 5 April 1997. Article 45 provided for the reclassification of EDF's accounting provisions. The explanatory memorandum to the draft law stated that the planned accounting adjustments would give EDF a balance sheet that better reflected its real economic circumstances, with a level of own funds proportionate to its volume of activity. The draft law was not examined on account of the National Assembly's being dissolved on 21 April 1997.

(100) After the transmission to Parliament of the draft law on urgent tax and financial measures, subsequently adopted as Act No 97-1026, the National Assembly and the Senate appointed their rapporteurs. National Assembly Report No 204 described the background to the need to clarify the ownership of EDF's transmission structures, which would nullify the accounting practices contested by the Court of Auditors in its special report on the EDF concessions, No 1993 of 10 October 1994. It explained the accounting changes needed and provided estimates of their effects on the various balance-sheet items as follows: Table 2 Effects of the reorganisation of EDF's own funds as a result of Article 4 of the urgent tax and financial measures Act on the accounts for 1996 (FRF billion) End 1996 Effect of Article 4 Own funds 24,2 79,8 of which (liabilities): Paid-in capital 2,6 2,6 Contributed capital 36,6 50,7 Revaluation reserves 2,1 6,2 Statutory reserves 0,15 0,15 Retained income (19) 20,2 18,3 Income after remuneration of the state 1,9 1,9 Source: Ministry of Economic Affairs and Finance

(101) The National Assembly report stressed the draft law's effects that made comparisons with the debt ratios of European competitors (Austria, United Kingdom, Sweden, Spain, Germany) more meaningful: after the restructuring of the balance sheet, EDF's net debt/equity ratio would go from 480 % to 148 %.

(102) The report also stressed the changes in the financial relations between EDF and the state. It explained the legal regime and the remuneration for the capital contributions to EDF, governed by Decree No 56-493 of 14 May 1956, as amended by Decree No 86-1360 of 30 December 1986. This regime provided for a fixed-rate remuneration capped at 8 % and additional remuneration as a percentage of EDF's income after tax and fixed interest. The payments made by EDF from 1991 to 1996 as described in the report total FRF 3,41 billion per year on average during the period; proportional to own funds at the end of 1996, these payments gave an average operating profitability of 14,1 % for the state as shareholder (20). They are summarised in the table below. Table 3 Financial relations between the state and EDF (FRF million current value) 1991 1992 1993 1994 1995 1996 Interest on capital contributions (GB — line 407) 1 816 1 816 1 816 1 816 1 816 1 816 Additional remuneration on capital contributions (GB — line 116) 500 665 965 1 938 1 500 4 002 Total 2 316 2 481 2 781 3 754 3 316 5 818 Source: National Assembly report, p. 77, Committee calculations for ‘total’

(103) The National Assembly report stated with respect to the changes envisaged for the EDF balance sheet that ‘as the capital contributions form the base for the fixed interest, increasing them as a result of this Article would increase the payment burden on EDF. An amendment to the terms of remuneration was therefore included in the state-EDF contract for 1997-2000 signed on 8 April 1997. The fixed interest rate has been brought down to 3 % in order to offset the effect of the base’. The report pointed out that, despite the profits earned since 1990, EDF had not paid corporation tax and that moving the provisions linked to the RAG concessions up would wipe out in one go the accumulated tax and accounting deficit. The report noted that, according to the line ministry, this would leave the public establishment (EDF) owing corporation tax of FRF 3 billion in 1997 and FRF 2,5 billion in 1998.

(104) The National Assembly report referred to a parliamentary amendment to the draft law, which was scrutinised and rejected by the Committee. The amendment specified that the reclassified accounting provisions should be converted to own funds by an accounting entry that bypassed EDF's income statement, in order to avoid showing a very high profit that the state might be tempted to tax in part. To this end, the amendment proposed that the Act should define the accounting process and stipulate that no additional revenue could be collected from EDF by the state on the ownership of the RAG assets being transferred. The report indicated that ‘the inclusion of the accounting process for converting the provisions to own funds in the Act was ruled out at the request of the Council of State on account of its not being of a legislative nature’; in the discussion the report cited a number of parliamentary opinions to the effect that the state should be able to impose other charges on EDF, the undertaking should pay corporation tax on its profits and the real question was ‘how much the Government was to collect from EDF and by what means’.

(105) As for the Senate, its report preparatory to the debate on the draft law found that there was no justification for creating accounting provisions for the renewal of the RAG assets from 1987 onwards. When the draft law was presented to the Senate on 2 October 1997, the minister responsible stressed the ‘fictitious’ nature of EDF's losses from a tax point of view, as well as the non-payment of corporation tax resulting from the provisions. The minister reassured the Senate that the arrangements did nothing to call into question EDF's monopoly position. The Senate report outlined the consequences of the Article under scrutiny on the items in EDF's balance sheet before and after reclassification of the provisions, along similar lines to the National Assembly report, as set out in Table 2. It pointed out that cleaning up the balance sheet would make it easier to compare it with the balance sheets of EDF's competitors; this would make EDF more credible to the financial world, which was all the more important considering that the cost of debt renegotiation depended in particular on the debt/equity ratio.

(106) As part of the ‘clarification’ of EDF's financial relations with the state, the Senate report stated that ‘in exchange for the tax revenue that the public establishment would now pay to the state, the contract for services signed on 8 April 1997 for 1997 to 2000 provides for a slight reduction in EDF transfers to the state’. As a result of the writing back of the renewal provision of FRF 38,5 billion, making EDF liable for corporation tax, the Senate report stated that ‘the financial relations between EDF and the state have been revised downwards’.

(107) The other documents submitted by France include a cover letter dated 15 September 1997 from EDF's finance department to the Senate administration, to which were attached a table quantifying the effects of Article 4 of the draft law, and showing the effects on the balance sheet, a copy of the instruction of 27 July 1993 on the electricity distribution concessions and an internal EDF memo discussing foreign experiences of remunerating shareholders in the electricity sector, dated 27 July 1996. This memo explained the key principles applicable to remunerating shareholders, the disparity and return figures for certain undertakings in the sector: 60-80 % of profits in the US, 40 % for National Power and Power Gen, 78 % for Union Fenosa and 30 % for Endesa, giving the Spanish state a return of 28 % for the period 1991-1996 taking account of dividends and the increase in share price.

(108) Despite the two further documents sent by EDF to the Senate with its letter of 15 September 1997, the principles, figures and their application to shareholder remuneration by EDF as set out in the memo of 27 July 1996 were not analysed or included in the Senate report. On the contrary, the Senate report, like that of the National Assembly, stated that the planned reduction in the remuneration on the capital contributions paid by EDF to the state as shareholder was: ‘to take account of the increase in capital contributions brought about by this Article’.

9. ASSESSMENT OF THE MEASURES: EXISTENCE OF STATE AID

(109) Article 107(1) TFEU provides: ‘Save as otherwise provided in the Treaties, any aid granted by a Member State or through state resources in any form whatsoever which distorts or threatens to distort competition by favouring certain undertakings or the production of certain goods shall, in so far as it affects trade between Member States, be incompatible with the internal market’. The question whether these cumulative tests apply to the tax exemption granted by France to EDF is examined below.

9.1. SELECTIVE ADVANTAGE TO AN UNDERTAKING

(110) Since Act No 97-1026 established that EDF was deemed to have been the owner of the high-voltage transmission network (RAG) for which it had been granted the concession, it has to be ascertained whether the Act involved a transfer of ownership of the RAG.

(111) According to the information provided by the French authorities, EDF can reasonably be regarded as the owner of the RAG before the entry into force of the Act. This finding is supported by the following considerations: the features of the different types of concession contract under French law; the special features of the original concession granted to EDF, which did not include an explicit retrocession clause; the procedure for the acquisition of the assets concerned, for which EDF had to pay a fee similar to compensation under a compulsory purchase procedure; and the conditions for the financing, maintenance and extension of the RAG at EDF's expense. The ‘clarification’ of the ownership of the RAG provided by Act No 97-1026 does not therefore in itself appear to confer an economic advantage on EDF.

(112) It therefore has to be examined whether Act No 97-1026 addressed all the tax implications of the ‘clarification’ of ownership of the RAG and, if not, whether an economic advantage in the form of a tax concession was granted to EDF.

9.1.1. Waiving the tax owed by EDF constitutes prima facie a selective advantage

(113) During the period between 1987 and 1996, EDF created tax-free provisions for the renewal of the RAG, provisions which were identified as irregular by the French Court of Auditors. Article 4 of Act No 97-1026 declaring that EDF was deemed to be the owner of the RAG rendered those provisions superfluous and they therefore had to be reallocated to other items in the balance sheet.

(114) The letter from the Minister for Economic Affairs setting out the tax implications of the restructuring of EDF's balance sheet shows that the unused provisions for renewal of the RAG were subjected by the French authorities to corporation tax at 41,66 %, the rate applicable in 1997.

(115) On the other hand, the provisions corresponding to renewal operations already carried out, also called grantor rights, were reclassified as capital contributions amounting to FRF 14,119 billion without being subjected to corporation tax. The tax authorities acknowledge that this transaction was illegal, as can be seen from the memorandum dated 9 April 2002 addressed by the Directorate-General for Taxation to the Commission and quoted in recital 35.

(116) In line with the National Accountancy Council opinion, corrections to accounting errors should be posted in the accounts for the financial year in which they are discovered. Moreover, since the unused provisions amounting to FRF 38,5 billion that had been created free of tax were subjected to corporation tax at the rate of 41,66 % in 1997, there is no objective reason why the rest of the provisions created free of tax should not have been taxed at the same rate.

(117) The grantor rights should have been taxed at the same time and at the same rate as the other accounting provisions created free of tax. This means that the FRF 14,119 billion in grantor rights should have been added to the FRF 38,5 billion in unused provisions and taxed at the rate of 41,66 % applied to the restructuring of EDF's balance sheet. By not paying all the corporation tax due when it restructured its balance sheet, EDF made tax savings of FRF 5 882 849 762.

(118) The tax measure was advantageous to EDF in 1997, as the amount of FRF 5,88 billion exempted from tax and included in the amount of FRF 14,119 billion was recorded in EDF's balance sheet as grantor rights reclassified by the state when it implemented Act No 97-1026 with retroactive effect from 1 January 1997. The tax implications of the Act are set out in the letter from the Minister for Economic Affairs with effect from the same date of 1 January 1997.

(119) The French authorities claim that, even if EDF had not set aside provisions for the renewal of the RAG, it would still not have been liable for payment of corporation tax between 1987 and 1996 because of the tax loss carry-forward. That argument misses the point. The tax advantage dates from 1997, not from the preceding years. Moreover the irregular provisions were in part responsible for the tax loss carry-forward. The carry-forwards would have been gradually absorbed between 1987 and 1996 and the amount of tax payable by EDF would have been significantly higher, even without taking account of the non-payment of tax for the reclassification of the grantor rights.

(120) The French authorities also take the view that, even if the creation of provisions for the renewal of the RAG resulted in an advantage, that advantage should be regarded as cancelled out by the increase in corporation tax paid in 1997. However, as the French authorities themselves acknowledged in their memorandum dated 9 April 2002 and quoted in recital 35, although the unused replacement provisions were correctly taxed, the grantor rights were reclassified as capital contributions without being subjected to corporation tax. The tax paid by EDF in 1997 is therefore lower than the tax normally due.

(121) The French authorities also claim that, over the period from 1987 to 1996, EDF paid more to the state overall than the corporation tax that would have been paid by a commercial company which did not create provisions for the renewal of the RAG and which paid its shareholder a dividend equal to 37,5 % of its net income after tax. Moreover, the rate of corporation tax that should have been applied when EDF's balance sheet was restructured was the 1996 rate and not the 1997 rate.

(122) First, as stated in recitals 32 and 116, the National Accountancy Council takes the view that corrections to accounting errors should be posted in the accounts for the financial year in which they are discovered. Since the provisions for renewal of the RAG became superfluous following Act No 97-1026 of 10 November 1997, they should have been reclassified in the accounts for the 1997 financial year and therefore taxed at the rate of corporation tax applicable to that year. Second, the French authorities themselves applied the 1997 rate of corporation tax to the share of the provisions that was taxed, as set out in recital 34.

(123) The non-payment by EDF, in 1997, of FRF 5 882 849 762 in corporation tax constitutes an economic advantage for the undertaking. EDF was able to use this amount to increase its own funds without having to raise outside finance. If the tax had in fact been paid and the increase in own funds financed by the undertaking's operating profit, it would have had to cut costs, increase profit or refrain from investment expenditure. By having at its disposal amounts that should have been paid to the French state by way of corporation tax, EDF benefited from a selective measure which placed it at an advantage over French undertakings in a similar situation, and which had to pay corporation tax on the reclassification of irregular provisions under Article 38-2 of the General Tax Code in force in 1997, as set out in recital 35.

(124) However, in its comments of 11 December 2002, France called for application of the principle of the prudent private investor in a market economy. As pointed out by the EU courts in their judgments referred to in recitals 7 and 8 in this case, a further capital contribution to EDF of an amount equal to the tax owed could not be regarded as conferring an economic advantage on the undertaking within the meaning of Article 107(1) TFEU, if it was established that a hypothetical private shareholder would have invested an equivalent amount in EDF, on similar terms and in similar circumstances, in accordance with the prudent private investor in a market economy test.

(125) In paragraph 99 of its judgment of 5 June 2012, the Court of Justice stated that, by the judgment under appeal, the General Court had not prejudged the applicability of that test to the present case or the outcome of applying that test. The applicability and application of that test to the facts of the case must therefore now be examined in the light of the criteria set out by the Court of Justice.

9.1.2. Applicability of the principle of the prudent private investor in a market economy

(126) To determine whether the principle of the prudent private investor in a market economy is applicable, an overall assessment must be made of whether the French Republic granted the tax exemption in its capacity as shareholder or in its capacity as public authority. In its judgment of 5 June 2012, the Court of Justice set out a number of factors that should be taken into account in this overall assessment. These factors, examined in more detail below in relation to the circumstances of the case, are: — the Member State must, where there is doubt, establish unequivocally and on the basis of objective and verifiable evidence that the measure implemented falls to be ascribed to the state acting as shareholder (21); that evidence must show clearly that, before or at the same time as conferring the economic advantage, the Member State concerned took the decision to make an investment, by means of the measure actually implemented, in the public undertaking (22), — in that regard, it may have to produce evidence showing that the decision was based on economic evaluations comparable to those which, in the circumstances, a rational private investor in a situation as close as possible to that of the Member State would have had carried out, before making the investment, in order to determine its future profitability (23); the Commission may refuse to examine evidence established after the decision to make the investment in question (24), — the nature and subject-matter of the measure are relevant in that regard, as is its context, the objective pursued and the rules to which the measure is subject (25), — application of the private investor test must make it possible to determine whether, in similar circumstances, a private shareholder would have subscribed, to an undertaking in a situation comparable with that of EDF, an amount equal to the tax due (26).

(127) In their comments of 11 December 2002 referred to in recital 42, the French authorities argued that it was thought to be more efficient and more neutral for EDF to allocate the grantor rights directly, and in their full amount, to own funds, without paying corporation tax. However, none of the documents prior to or contemporaneous with the supposed decision not to levy tax, that were submitted by France or EDF in support of their comments on the decision to extend the formal investigation procedure, made any direct or indirect mention of the supposed decision to invest, with its implications, benefits or costs, or of the corresponding decision to increase the amount of contributed capital by not levying tax. The documents submitted by the French authorities as described in recitals 87 to 108 do not mention, still less analyse, the benefits or costs for the state of the decision not to levy corporation tax on the part of the grantor rights reclassified as capital under Act No 97-1026 of 10 November 1997.

(128) It is for France, in the event of any doubts, such as those formulated by the Commission, about the applicability of the prudent private investor in a market economy test, to establish unequivocally and on the basis of objective and verifiable evidence that the measure implemented falls to be ascribed to the state acting as shareholder. However, in the light of the evidence provided, the decision to make an investment by way of waiving the tax EDF should have paid must be deemed to have been taken tacitly, without a reasoned legal act that would reveal the precise content of the decision, its grounds and legal basis or by what authority and on what date it was taken. In the light of the factors set out by the Court of Justice for establishing the applicability of the prudent private investor in a market economy test, namely the need for objective and verifiable evidence, a measure that has actually been implemented or economic evaluations carried out in advance, the absence of references or material evidence must be regarded as an initial indication that the test is not applicable.

(129) In the absence of any documentary evidence tracing the supposed decision, the investment measure that the French state might have taken needs to be described. In this case, the Court of Justice found that application of the private investor test must make it possible to determine whether, in similar circumstances, a private shareholder would have subscribed FRF 5,88 billion to an undertaking in a situation comparable to that of EDF. An investment by France would constitute waiving the collection of this amount with a view to making a profit greater than the resources initially invested. The analysis must therefore be made with reference to the amount of corporation tax due.

(130) The absence of any specific studies, references or analyses of the profitability of the investment in the amount of the tax exemption makes it difficult to isolate the effects of the supposed investment in the information submitted by France or by EDF. This difficulty is not insurmountable if, for the purposes of analysing most of the factors relevant for determining the applicability and the application of the prudent private investor principle, the additional capital contribution to EDF equivalent to the amount of unpaid tax is regarded as benefiting from the rights attaching to all the capital contributions. So, if the capital contributions were remunerated at a certain rate, this rate had to be, and indeed was, applied to the amount of unpaid tax. If, on the other hand, the marginal or incremental effect is taken into account, the information provided by France or EDF does not at first sight demonstrate that the amount of contributed capital was increased by the amount of unpaid tax.

(131) The non-collection of the tax had the effect of increasing the capital contribution to EDF, and thus EDF's own funds, by an additional FRF 5,88 billion, within the overall amount of FRF 14,119 billion of reclassified provisions. These provisions, which did not correspond to a prior injection of fresh capital by the state as shareholder, were reclassified as capital contributions and posted under the corresponding item in the upper part of EDF's balance sheet, together with the other equity items (paid-in capital, contributed capital, etc., see Table 2). Without the tax exemption, EDF's own funds, which were to reach FRF 79,8 billion in 1997, would have reached FRF 72,1 billion, according to the documents examined at the time (see Table 2, recital 100). Instead of FRF 50,7 billion, the state contributions to EDF's capital would have stood at FRF 44,8 billion.

Supposed investment decision: factors for analysis

(132) First, as pointed out by the French authorities, given that the amount in unpaid tax was included in the capital contribution base, and that this was remunerated at a fixed rate (3 %), the absolute value of the remuneration to the state was increased by the tax exemption (or non-collection, see recital 83). However, the increase in the capital contribution by the amount of the tax exemption did not have the effect of increasing the state's remuneration in relative terms. It is common ground that the remuneration for the capital contributed to EDF by the state was laid down as from Decree No 56-1360 of 30 December 1956 (recitals 18 and 103). Different types of remuneration were therefore included in the contracts which preceded and succeeded the 1997-2000 contract for services, as set out in recitals 93 and 102. The principle of remuneration pre-dated the supposed decision and was maintained afterwards.

(133) Moreover, an examination of the facts demonstrates that the tax exemption had the effect of reducing the state's return on its investment. The report produced by the National Assembly in September 1997 unequivocally shows that the increase in the total capital contribution was the reason for the reduction in the remuneration so as not to ‘increase the payment burden on EDF’ (recital 103). The Senate report confirms this deliberate reduction by the public authorities (recital 108).

(134) Between 1991 and 1996, EDF gave the state a higher return for a lower capital contribution base compared with what was offered between 1997 and 2000 for a higher base. The average annual remuneration in absolute terms of FRF 3,41 billion for 1991-1996, when the amount of the capital contribution came to FRF 36,6 billion, was well above the FRF 2,35 billion put in place for a base increased to FRF 50,7 billion during the 1997-2000 period (recitals 92 and 102-103, Table 3). It follows that the current marginal return on the FRF 5,88 billion increase in the amount of contributed capital expected in the 1997-2000 period by the state as shareholder was lower than in the period 1991-1996.

(135) The French authorities saw to it that the remuneration paid to the state on its capital contribution fell, in absolute and relative terms, as the contribution base increased, as unequivocally established by the National Assembly and Senate reports. It follows that, by increasing the total capital contribution with a lower return than the contribution which pre-dated Act No 97-1026, the decision to grant a tax exemption did not necessarily constitute an investment.

(136) Second, the way in which the remuneration on the increased capital contribution was determined is not what a prudent private investor in a market economy might have chosen.

(137) As demonstrated by the references contained in the letters from the line ministers and the parliamentary reports referred to in recitals 97, 103 and 106, in making their 1997 scrutiny of the French state's remuneration after the restructuring of EDF's balance sheet, the French authorities took account both of the return on the capital contributions due to the state as shareholder in the strict sense, and of the expected amount of tax that the state, acting as a tax-raising public authority, would collect after 1997 following several years of tax loss carry-over. As set out in recital 93, the remuneration on the capital contributions was in its turn deductible from income tax, by way of exception to the ordinary law.

(138) The concept examined and adopted by the French authorities in 1997 was therefore one of the overall amount collected from EDF, tax and shareholder remuneration combined. The overall amount of tax collected from EDF, above and beyond the contested exemption, under the state's tax-raising powers, and the remuneration paid to the state as shareholder, are mixed up together in the evidence submitted by the French authorities. Nevertheless, in their view, this evidence points to the existence of an investment decision. On the contrary, the fact that the payment of tax due by EDF to the state as revenue collector, including by the regularisation and discharge of the tax that had not been collected prior to Act No 97-1026, was constantly taken into account for the purposes of examining and setting the remuneration to the state as shareholder tends to indicate that the disputed tax exemption was adopted by the state acting as a public authority and not as an investor.

(139) This impression is reinforced by the nature of the objectives set for EDF by the state in 1997 in the light of the concerns and goals of a public authority, not a shareholder. These concerns are reflected in the setting of EDF's tariffs, as agreed in the 1997-2000 contract for services, under which the state as shareholder was remunerated. The state asked EDF to help boost the competitiveness of French industry and the purchasing power of French households. Not only would such concerns have been alien to a prudent private investor in a market economy, they would have run counter to the hypothetical investor's financial interests. The same goes for the objective laid down for EDF in the 1997-2000 contract for services to put in place an ambitious policy to support economic activity and employment by helping local authorities (recitals 89 and 95).

Economic evaluations to determine the profitability of the supposed investment

(140) The contract for services between EDF and the state signed on 8 April 1997 contained a prior evaluation of the financial scenario, including projections of the return for the state as shareholder on the investment in the form of contributions to EDF's capital (recital 92). The documents and analyses put forward by the French authorities relate to the expected effects of reclassifying all the provisions constituted by EDF, whether mandatory or not, whether resulting from Act No 97-1026 or not. The only systematic evaluation presented by the French authorities in the EDF memo of 18 February 1997 (recital 92) is general and confined to the statutory remuneration on the capital contributions, including those pre-dating the restructuring of EDF's balance sheet, but excluding, for example, remuneration on other capital or own funds.

(141) None of the documents submitted by France or by EDF demonstrate that the supposed investment decision, namely to make a bigger capital contribution to EDF by waiving tax on the reclassification, was the subject of specific scrutiny, study or analysis. However, given the amounts involved, a prudent private investor in a market economy would in all probability have conducted a financial and economic analysis of the investment before deciding whether, in view of the statutory return on the capital contributions, the amount of FRF 5,88 billion in tax exemption was needed for the undertaking to guarantee the long-term profitability of its overall investment and for the shareholder to be sufficiently remunerated. This type of prior economic study, cited by the Court of Justice in paragraph 84 of its judgment as one of the conditions for the private investor test to apply, is absent.

(142) It is particularly striking that, apart from the remuneration to be paid to the state over the 1997-2000 period, no study of the remuneration or return in the longer term was carried out, although France claims precisely to have made a long-term investment. However, a prudent private investor in a market economy would not have neglected to conduct an analysis of the profitability of the investment for the period after the year 2000.

(143) While it is reasonable to suppose that a prudent private investor in a market economy would have taken into account the effects of the reduction in EDF's debt ratio, it must be noted that the advantage to EDF of lower-cost borrowing on account of an improved debt/equity ratio is referred to in general terms in some of the documents furnished by France (recitals 101 and 105) and EDF. However, none of the documents mentions the advantages and the profitability for the state as shareholder of a reduction in EDF's borrowing costs or a lower debt ratio. According to the figures produced at the time as set out in recital 101, EDF's net debt/equity ratio was to drop to 148 % as a result of the new capital contribution overall, which came to FRF 50,7 billion, including the FRF 5,88 billion by way of the contested exemption. Without the tax exemption, the ratio would have been around 163 %, or some three times lower than the ratio of 480 % before Act No 97-1026. Considered separately from the other effects of the reclassification of the various provisions, the contribution of the tax exemption to the improvement in the ratio is negligible and it is very doubtful that it had a real effect in terms of reducing the cost of borrowing for EDF (recitals 170 to 172). In any event, the documents submitted by the French authorities do not mention or analyse in investment terms the return for the shareholder resulting from a ratio of 148 %, still less a ratio of 163 %. In this connection, there are no prior economic evaluations comparable to those which a rational private investor in a market economy would have had carried out, as referred to by the Court of Justice in paragraph 84 of its judgment.

(144) The economic study submitted by EDF in support of its comments (recitals 69-70) does not find that France acted as an investor rather than a public authority. The study was produced after the supposed investment decision taken in 1997 and was not examined by the authorities responsible for taking such a decision. For this reason alone, the study is not admissible as evidence, as set out by the Court of Justice (recital 126, paragraph 104 of the judgment of 5 June). The fact that the study used authentic basic data available at the time does not invalidate this conclusion. The study was commissioned to support the case following the extension of the investigation procedure in May 2013 and the conclusions it would reach were apparently known to EDF in July 2013, although the study dates from October 2013. Other grounds also invalidate the quantified findings of the study, and consequently undermine the conclusions that EDF draws from it in support of its comments; these grounds are: — The study uses basic data almost exclusively from the time and applies widely recognised methodological approaches for evaluating enterprise value, subject to the major reservations set out below. For all that, it constitutes a particularly complex economic evaluation, following relatively thorough data research, which took some three months to carry out and validate. This complex process comprised successive and various methodological choices, some of which are questionable. Without this process, it is quite impossible, from the basic data drawn from scattered and diverse sources, to form an overall view or make a quantified projection of the profitability that the French state could expect in 1997, as the study does. However, the Court of Justice requires the private investor test to be based on evaluations which were foreseeable at the time when the decision to make the investment was taken (paragraph 105 of the judgment of 5 June 2012). Contrary to what is claimed by EDF, the very fact that, with data available in 1996-1997, the relevant authorities of the French state did not themselves carry out or commission a study on this scale and with this level of complexity indicates that the profitability of the investment for the shareholder was not the sole relevant consideration for the French authorities when they took their decision. — The study analyses the conduct of the French state in the light of the private investor principle using information and hypotheses that are very different from those outlined in recitals 87 to 108 and which, according to the French authorities, formed the basis for the supposed decision. However, it is not EDF which took the investment decision, and, according to the Court of Justice (paragraphs 82 and 83 of its judgment of 5 June 2012), it falls to France to produce evidence of the nature and context of the decision taken. Since France alleges that it was in the light of the information and data submitted by it that it took its decision, the study, and EDF, are de facto substituting themselves for the alleged investor and claiming to know better than the French state the concerns and information that supposedly underpinned the decision taken and the hypotheses used to reach it. As such, the study is based on speculation and conjecture with respect to the data, information and hypotheses that the French authorities might have taken into account (among other possible options) in 1997 and has no force as evidence in 2015 (or October 2013, when it was carried out) to explain the decision taken by the French authorities in 1997, which these authorities themselves explain with reference to different data and hypotheses. — The study's value as evidence is undermined still further by the fact that, to reach the findings outlined in recital 70, the study relies on hypotheses which are arbitrary or random, or uncorroborated by the facts, or counter to the information contained in the evidence provided by the French authorities and which, according to them, illustrates that the private investor test is applicable and does in fact apply in this case. So, first, the study conjectures that after 2000, the remuneration paid to the state as shareholder would not be regulated by decree and contained in a contract between the state and EDF but would be set by reference to the dividends which other undertakings in the sector paid in 1996-1997 (27). However, the remuneration on the capital contributions to EDF had been regulated by decree since 1956 (recital 102) and was statutory and reflected in the multiannual contracts before and after 1997, in the light of considerations unrelated to the dividends paid by undertakings in the sector operating in markets other than France (recitals 94 and 95). Likewise, and in second place, the study, with no good reason, reintroduced into EDF's income statement provisions from EDF's company accounts worth FRF 11,6 billion