Proposal for a Council Decision on extension of the advantages conferred on the Joint Undertaking Hochtemperatur-Kernkraftwerk GmbH (HKG)
Date: 2002-01-30
Institutions: European Commission
Subjects: EAEC Joint Undertaking, Lower Saxony, nuclear industry, nuclear power station, privilege, tax relief

COMMISSION OF THE EUROPEAN COMMUNITIES

Brussels, 30.1.2002
COM(2001) 768 final

Proposal for a

COUNCIL DECISION

on extension of the advantages conferred on the
Joint Undertaking Hochtemperatur-Kernkraftwerk GmbH (HKG)

(presented by the Commission)

1.

1.

2.

2.

3.

EXPLANATORY MEMORANDUM

EURATOM TREATY PROVISIONS ON JOINT UNDERTAKING STATUS

Article  45  of  the  Euratom  Treaty  provides  for  the  establishment  of  Joint
Undertakings  which  the  Treaty  defines  as  undertakings  which  are  of  fundamental
importance to the development of the nuclear industry in the Community.

Under Article 46, every project for establishing a Joint Undertaking is subject to an
inquiry by the Commission. For this purpose, the Commission obtains the views of
Member States and of any public or private body which in its opinion can usefully
advise it.

The  Commission  must  forward  to  the  Council  any  project  for  establishing  a  Joint
Undertaking, together with its reasoned opinion.

Under Articles 47 to 49, Joint Undertakings are established by Council decision on a
proposal from the Commission.

BACKGROUND ON HKG AND THE THTR 300 PROJECT

Reasons for the application

The  objectives  of  Hochtemperatur-Kernkraftwerk  GmbH  (HKG)  were  to  construct,
equip and operate a nuclear power station at Uentrop (Unna district)  in  the  Federal
Republic of Germany. This was to be a prototype thorium high-temperature reactor
with  a  capacity  of  approximately  300  MWe  (THTR  300).  In  order  to  attain  this
objective, HKG applied for establishment as a Joint Undertaking.

The  Council  found  that  HKG's  statutes  were  compatible  with  the  provisions  of  the
Euratom  Treaty  relating  to  Joint  Undertakings  and  that,  at  the  time,  HKG's  project
was  of  fundamental  importance  to  the  development  of  the  nuclear  industry  in  the
Community and therefore granted HKG Joint Undertaking status for a period of 25
years from 1 January 1974.

4.

HKG also applied for certain advantages listed in Annex III to the Euratom Treaty.

Considering that:

– 

– 

– 

the nuclear power station was to be constructed by a consortium of Community
undertakings and nearly exclusively with components from the Community;

construction  of  the  power  station  would  allow  considerable  improvements  in
the technical processes for generating electricity on an industrial scale;

conferment  on  HKG  of  advantages  listed  in  Annex  III  to  the  Treaty  could
lighten  the  financial  burden  and  limit  the  economic  risks  inherent  in  such  an
undertaking;

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– 

HKG was to make available to the Community the non-patentable information
it  would  collect  in  the  course  of  implementing  the  nuclear  power  station
project,

the  Council  decided  to  confer  some  of  the  advantages  listed  in  Annex  III  to  the
Euratom  Treaty,  in  particular  in  the  form  of  exemption  from  some  taxes.These
advantages were conferred for  a period  ending three  years  after  final acceptance of
the power station by the undertaking.

Original decisions

5.

In  June  1974  the  Council,  acting  on  proposals  from  the  Commission,  adopted  two
decisions:

– 

– 

Council Decision 74/295/Euratom of 4 June 1974 on the establishment of the
Joint  Undertaking  Hochtemperatur-Kernkraftwerk  GmbH 
(HKG)
(OJ No L 165, 20.6.1974, pp 7 to 13);

Council  Decision  74/296/Euratom  of  4  June  1974  on  the  conferring  of
advantages  on 
the  Hochtemperatur-Kernkraftwerk  GmbH  (HKG)  Joint
Undertaking (OJ No L 165, 20.6.1974, pp 14 to 15).

Amendments to the original decisions

6.

On 11 July 1983 the general meeting of the Joint Undertaking decided to increase the
company's subscribed capital. This increase called for an amendment to the statutes
of the Joint Undertaking.

The  Joint  Undertaking  also  requested  an  extension  of  the  exemption  from  the
"Kapitalverkehrsteuer"  conferred in 1974 on the  assets  contributed, in line with  the
abovementioned increase in capital.

7.

Considering that:

– 

– 

the  amendment  to  the  statutes  had  no  effect  on  the  provisions  governing  the
Joint Undertaking and was consistent with the development of the project;

and  extension  of  the  exemption  could  reduce  financing  expenses  and  thereby
limit the economic risks inherent in such an undertaking,

in February 1984 the Council adopted two decisions adapting the 1974 decisions to
the increase in HKG's capital:

– 

– 

Council  Decision  84/104/Euratom  of  21  February  1984  approving  an
amendment  to  the  Statutes  of  the  Joint  Undertaking  HKG  (OJ  No  L  58,
29.2.1984, p. 35);

Council  Decision  84/105/Euratom  of  21  February  1984  amending  Decision
74/296/Euratom  on  the  conferring  of  advantages  on  the  Joint  Undertaking
HKG (OJ No L 58, 29.2.1984, p. 37).

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8.

9.

10.

11.

12.

13.

Service record of the power station and reasons for change of objective

HKG finally accepted THTR 300 on 1 June 1987. The power station operated until
29  September  1988,  when  it  was  shut  down.  During  that  period  operations  were
interrupted on a number of occasions due to faults.

Economic, technical and fuel element supply difficulties, combined with problems in
obtaining authorisation to restart the plant due to financial uncertainties, resulted in
the  decision,  taken  on  1  September  1989,  immediately  to  shut  down  the  plant
definitively.

Since then the Joint Undertaking's objectives have become shutdown of the reactor,
the  safe  enclosure  and  surveillance.  On
core  unloading,  construction  of 
13 December 1989  a  contract  on  controlled  decommissioning  of  the  THTR  300
project  was  concluded  between  the  Federal  authorities,  the  Land  of  North  Rhine-
Westphalia, HKG and its members. This included provisions on the financial aspects.

Consequent further applications

The  tax  advantages  conferred  on  HKG  by  Decision  74/296/Euratom  expired  on
31 May  1990,  three  years  after  final  acceptance  of  the  power  station  by  the
undertaking on 1 June 1987.

By letters of 9 February and 6 March 1990 the members of HKG submitted a request
for  the  advantages  conferred  to  be  extended  until  HKG's  Joint  Undertaking  status
expired  and  for  the  advantages  to  be  adjusted  to  the  undertaking's  situation  at  the
time,  which  had  necessitated  additional  financial  contributions  regarded,  for  tax
purposes, as contributions of assets.

HKG  was  implementing  a  programme  for  decommissioning  the  nuclear  power
station  up  to  the  safe  enclosure  stage  and  proposed,  thereafter,  to  carry  out  a
programme of surveillance of the nuclear installations concerned.

The  Council  considered  that  there  was  no  equivalent  to  these  programmes  in  the
Community  and  that  implementation  thereof  was,  therefore,  important  to  provide
useful  experience  for  the  nuclear  industry  and  the  future  development  of  nuclear
energy in the Community.

The Council also considered it advisable to assist HKG with implementation of the
programmes  by  lightening  its  financial  burden  and,  therefore,  to  extend  the
advantages conferred.

By its Decision of 16 November 1992 the Council extended the advantages conferred
on  HKG  until  its Joint  Undertaking  status  established  by  Decision  74/295/Euratom
ended, i.e. until 31 December 1998.

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3.

14.

LATEST DEVELOPMENTS

On  30  March  1998  HKG  applied  to  the  Commission  for  extension  of  its  Joint
Undertaking status for a further 25 years beyond 31 December 1998.

The reason given for this request was the importance of the experience which would
be  gained  from  the  definitive  shutdown  and  decommissioning  operations  to  the
nuclear power industry in Germany, Europe and worldwide. This view was based on
the  fact  that  THTR  300  is  the  largest  reactor  of  its  type  in  the  world  and  that  the
unique configuration of the plant, particularly with regard to the enclosure, provides
an  unprecedented  opportunity  to  acquire  experience  on  the  results  and  costs  of
enclosure.

HKG stated that the tax advantages were no longer necessary following the changes
made to the German tax law and the depreciation of the power station site.

HKG  added  that  on  13 November 1989  the  Federal  Republic,  the  Land  of  North
Rhine-Westphalia,  HKG  and  its  members  had  concluded  a  framework  agreement
with a view to completing the final phase of the THTR 300 project. This framework
agreement  and  the  amendment  annexed  thereto  on  18 December 1996  govern  the
phases up to 2009, including the arrangements for financing HKG's activities.

15.

In  its  acknowledgement  of  receipt  dated  25  June  1998  the  Commission  requested
clarification of three points:

16.

17.

– 

– 

what approaches had been made to the German authorities in connection with
the request for extension of the Joint Undertaking status?

which interests lay behind the request, given that the tax advantages conferred
as a result of this status were no longer needed?

– 

which reasons prompted the request for the 25-year extension?

After  receiving  no  reply  from  HKG,  on  9  November  1998  the  Commission  sent  a
second  letter  to  the  undertaking  reminding  it  that  the  clarifications  sought  before
initiating the appropriate procedure had not been given.

In  its  reply  dated  25  November  1998  HKG  confirmed  its  interest  in  extending  its
Joint Undertaking status and supplied the following further details:

– 

– 

– 

HKG  had  informed  the  Federal  Ministry  for  Education  and  Research  and  the
Federal and regional Ministries responsible for decommissioning of the THTR
300 plant of its application;

it  acknowledged  that  its  previous  statement  that  it  no  longer  needed  the  tax
advantages  was  a  mistake  and  asked  for  these  advantages  to  be  maintained
since further amendments of the tax legislation could once again add to its tax
burden;

as regards the 25-year extension of the Joint Undertaking status, HKG said that
the current authorisations and plans provided for maintaining the safe enclosure
for  30  years.  Dismantling  of  the  irradiated  elements  could  take  place  after  a

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4.

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20.

21.

22.

23.

24.

25.

30-year decay time, either in 2019, counting from the definitive shutdown, or
in 2027, counting 30 years' safe enclosure. The current final disposal situation
in  Germany  and  Europe  allows  no  definitive  schedule  for  dismantling  of  the
plant  and  rehabilitation  of  the  site  and  therefore  warrants  the  request  for  a
25-year extension of the status.

The Commission acknowledged receipt of this letter on 21 December 1998.

It  also  set  up  an  interservice  working  party  to  conduct  the  inquiry  provided  for  by
Article 46(1) of the Euratom Treaty.

PRELIMINARY MEASURES BY THE COMMISSION

The first conclusion which must be drawn is that Council Decision 74/295/Euratom
expired  on  31  December  1998  and,  with  it,  the  Joint  Undertaking  status  granted  to
HKG. Also, since 1989 HKG's objectives have changed compared with 1974.

Under these conditions, in its letter dated 21 January 1999 the Commission suggested
that HKG submit a new application for Joint Undertaking status based on its current
objectives.

The  Commission  informed  the  German  authorities  and  asked  them  for  their  initial
response  to  HKG's  request  for  extension  of  its  Joint  Undertaking  status  and  for
maintaining the tax advantages conferred in 1974 and extended in 1992.

By letter of 15 March 1999 HKG sent the Commission a further request to grant it
Joint Undertaking status and maintain its tax advantages. The Commission replied to
this letter on 12 May 1999.

Article  46  of  the  Euratom  Treaty  requires  the  Commission,  in  the  course  of  the
inquiry which it has to conduct, to obtain the views of the Member States and of any
public or private body which in its opinion can usefully advise it.

To  this  end,  on  1  June  1999  the  Commission  sent  a  letter  to  the  Permanent
Representatives  of  the  Member  States  containing  all  the  relevant  details  and
requesting their opinions.

In reply, Germany supported HKG's request and stated that the Federal Government
was in favour of maintaining the tax advantages granted.

Other Member States (Finland, Ireland, Portugal, Sweden and the United Kingdom)
also  supported  the  request.  Soundings  of  the  other  Member  States  also  elicited  a
positive response.

The  United  Kingdom  Government  asked  for  figures  demonstrating  the  financial
benefits derived from the Joint Undertaking status in the past and those expected in
the future. HKG was asked to supply this information and replied that payments on
the  funding  and  subsidies  would  have  added  approximately  22  million  Euro  to  the
tax  burden  over  the  period  from  1974  to  1998,  which  would  have  had  to  be
compensated for by additional funding or subsidies. The tax advantages linked to the
extension  of  the  Joint  Undertaking  status  are  estimated  by  the  undertaking  at
approximately 89500Euro per year.

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26.

On 16 November 1999 the Commission asked HKG for further details, particularly
on the tax advantages requested.

In  its  reply  dated  13  June  2000  HKG  stated  that,  following  the  entry  into  force  of
new  tax  legislation  in  Germany,  it  was  requesting  extension  of  the  following
advantages:

– 

– 

exemption  from 
(Grunderwerbsteuer) - paragraph 4 of Annex III to the Treaty;

the  acquisition  of 

tax  on 

the 

immovable  property

exemption  from  land  tax  (Grundsteuer)  and  exemption  from  the  part  of  the
industrial  or  commercial  profits  tax  which  is  levied,  pursuant  to  Article  8,
point 1 of the Gewerbesteuergesetz (trade tax law), on the interest due on long-
term debt - paragraph 5 of Annex III to the Treaty.

5.

27.

28.

29.

CONCLUSIONS

The Commission considers that the arguments  accepted by the  Council in  1992 for
maintaining HKG's Joint Undertaking status and advantages are still valid today; in
particular, the  undertaking's activities are  still  the same and  the  context  in  which  it
performs  them  is  identical.  The  Commission  therefore  proposes  that  the  Council
extend its 1992 decisions.

The  arrangements  concluded  between  the  Federal  Republic,  the  Land  of  North
Rhine-Westphalia, HKG and its members for financing HKG's activities apply only
for a period up to 31 December 2009.

The Commission therefore proposes that the Council, in accordance with the period
arranged between the German  authorities and  HKG,  approve  extension  of  the  Joint
Undertaking status and of the advantages conferred on HKG for the same period, that
is until 31 December 2009.

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Proposal for a

COUNCIL DECISION

on extension of the advantages conferred on the
Joint Undertaking Hochtemperatur-Kernkraftwerk GmbH (HKG)

THE COUNCIL OF THE EUROPEAN UNION,

Having  regard  to  the  Treaty  establishing  the  European  Atomic  Energy  Community,  and  in
particular Article 48 thereof,

Having regard to the proposal from the Commission1,

Whereas:

(1)

(2)

(3)

(4)

(5)

(6)

(7)

1

2

3

4

5

By Decision 74/295/Euratom2 the Council established Hochtemperatur-Kernkraftwerk
GmbH (HKG) as a joint undertaking, within the meaning of the Treaty, for a period of
25 years as from 1 January 1974.

By  Decision….3  the  Council  extended  the  Joint  Undertaking  status  granted  to
Hochtemperatur-Kernkraftwerk  GmbH  (HKG)  for  eleven  years  with  effect  from
1 January 1999.

By  Decision  74/296/Euratom4  and  its  Decision  of  16  November  19925  the  Council
conferred  on  HKG  a  number  of  advantages  listed  in  Annex  III  to  the  Treaty,  for  a
period of 25 years as from 1 January 1974.

By letters of 25  November 1998, 15 March 1999 and 13 June 2000, HKG  requested
extension of its tax advantages for the new period for which it had been granted Joint
Undertaking status.

The current objective of HKG is to implement a programme for decommissioning the
nuclear  power  station  up  to  the  safe  enclosure  stage  and,  thereafter,  to  carry  out  a
programme of surveillance of the enclosed nuclear installations.

There is no equivalent to these programmes in the Community since, to date, no high-
temperature reactor has been shut down definitively in the Community.

Implementation of these programmes is therefore important since they provide useful
experience  for  the  nuclear  industry  and  the  future  development  of  nuclear  energy  in
the Community.

OJ C , , p. .
OJ L 165, 20.6.1974, p.7.
OJ L […], […], p. […].
OJ L 165, 20.6.1974, p. 14.
Not published in the OJ.

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(8)

(9)

therefore  be  assisted  with 

HKG  should 
the  programme  for
decommissioning  the  nuclear  power  station  up  to  the  safe  enclosure  stage  and  the
programme  of  surveillance  of  the  enclosed  nuclear  installations,  by  lightening  the
financial burden.

implementing 

Arrangements  for  financing  HKG's  activities  have  been  agreed  between  the  Federal
Republic of Germany, the Land of North Rhine-Westphalia, HKG and its members for
the period up to 31 December 2009.

(10)

The advantages conferred on HKG should therefore be extended for the same period
as the extension of its Joint Undertaking status, that is until 31 December 2009.

HAS ADOPTED THIS DECISION:

Article 1

The  Member  States  hereby  extend  for  eleven  years  with  effect  from  1 January  1999  the
following  advantages  listed  in  Annex  III  to  the  Treaty  conferred  on  the  Joint  Undertaking
Hochtemperatur-Kernkraftwerk GmbH (HKG):

1.

2.

Under  paragraph  4  of  the  abovementioned  Annex,  the  exemption  from  the
Grunderwerbsteuer (tax on the acquisition of immovable property);

Under paragraph 5 of the abovementioned Annex:

–  the exemption from Grundsteuer (land tax);

–  the exemption from that part of the industrial or commercial profits tax which is
levied, pursuant to Article 8, point 1 of the Gewerbesteuergesetz (trade tax law),
on the interest due on long-term debt.

Article 2

The conferment of the advantages listed in Article 1 on HKG is subject to the condition that
the Commission  shall have access to all  the  industrial,  technical  and  economic  information,
including  that  relating  to  safety,  acquired  by  HKG  in  the  course  of  implementation  of  the
programme for decommissioning the nuclear power station up to the safe enclosure stage and
of the programme of surveillance of the  enclosed  nuclear  installations. This duty  extends to
all  the  information  which  HKG  is  entitled  to  pass  on  in  accordance  with  the  contracts
concluded  with 
information  must  be
communicated to it, as well as the manner in which such  communication shall be made and
shall ensure that this information is disseminated.

it.  The  Commission  shall  determine  which 

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This  Decision  is  addressed 
Hochtemperatur-Kernkraftwerk GmbH (HKG).

to 

the  Member  States  and 

to 

the  Joint  Undertaking

Article 3

Done at Brussels,

For the Council
The President

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