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The details of the subsidy for increased energy prices

Filip Tichý | 22.2.2023 | News

Conditions of application for January-March 2023

On 21 February, the Slovak Ministry of Economy announced a call for applications for subsidies for increased energy prices for the period January to March 2023. The scheme has the same parameters and conditions as the previous scheme for 2022.

In this article, we bring you an overview of the conditions for obtaining financial aid related to increased energy prices.

Why the energy subsidy scheme is here again

For most Slovak companies, energy is a very relevant cost, for some of them even essential. Whether considering a small regulated or other unregulated companies, they are all exposed to uncertainty about high energy prices. As extreme price fluctuations threaten the operation of companies doing business in Slovakia, the Slovak government (like the governments of other EU member states) is trying to help them.

Who can apply for the subsidy

The scheme applies to any firm (entities carrying out an economic activity regardless of their legal status and method of financing and regardless of their size) and to all business sectors except credit and financial institutions.

Costs covered by the subsidy

The subsidy may be granted up to 80% of the eligible costs (i.e. 80% of the price increase compared to the reference prices of EUR 199/MWh for electricity and EUR 99/MWh for gas), and the amount of the subsidy will be calculated automatically after the required data has been entered into the online subsidy application. For regulated customers, the state will provide a subsidy of up to 100% of eligible costs.

The eligible cost for determining the amount of the subsidy shall be the product of the quantity of natural gas and/or electricity, expressed in MWh, which the applicant, as an end-user, has taken from the natural gas and/or electricity supplier in the eligible period and the price increase paid by the applicant per unit consumed for the supply of the natural gas and/or electricity commodity, expressed in EUR/MWh.

The limits of the subsidies

The maximum amount of subsidy is EUR 200 000 per month, cumulative total limit per company is EUR 2 000 000 (a separate cumulative limit of EUR 250 000 applies to primary agricultural production and a cumulative limit of EUR 300 000 to the fisheries and aquaculture sector), provided that the total aid does not exceed the aid limits laid down at any one time. The maximum cumulative aid amount also applies to all subsidies granted by other institutions and departments (Covid-19, etc.).

Conditions of the subsidies

The beneficiary must meet the following conditions: it is not undergoing bankruptcy process or restructuring; it is not the subject of previous aid repayment process based on a previous decision; it is not the subject of a final decision prohibiting it from receiving grants or subsidies; it is not the subject of a final decision prohibiting it from receiving aid and assistance from European Union funds.

Accounting for subsidies

The accounting is the same as for other types of subsidies that we are familiar with from the past, e.g. first aid during the Covid-19 pandemic:

  • Accounting through other income 648 or 668;
  • Accrual through deferred income account 384 when it is almost certain that all the conditions attached to the subsidy will be met and that the firm has performed or will perform the actions necessary to obtain the subsidy (submission of the application).

How to plan in the current uncertainty times

In addition to the high prices themselves, uncertainty is also a major problem for companies, preventing them from making informed decisions. Even for small firms, risk management is an essential activity. This concerns not only risks related to cost levels, but also liquidity and sales.

When planning for 2023, we recommend that companies make an indicative calculation based on contracted or forecasted energy prices - whether and how much the company will qualify for the subsidy. The projected energy consumption in 2023 should also be taken into account (same as last year? Decrease? Increase?).

It should be considered that the cash flows will not follow the costs - the increased energy prices will have to be paid immediately, the state subsidy will come to the company's account only after several months.

As part of liquidity risk management, it is necessary to analyze the possibilities of additional financing (either in the form of loans or extended maturities). It is also necessary to monitor the cumulative amount of all types of assistance.

More details on the subsidy