94/256/ECSC: Commission Decision of 12 April 1994 concerning aid to be granted by Germany to the steel company EKO Stahl AG, Eisenhüttenstadt (Only the German text is authentic)

• Articles: 9

Article 1

1. The following maximum amounts of aid which Germany plants to grant to EKO Stahl AG/GmbH may be regarded as compatible with the orderly functioning of the common market provided that the conditions and requirements of Articles 2 to 6 are met:

- compensation of losses accumulated since 1 July 1990 until the privatization of the company of DM 163 million,

- compensation of future losses during the restructuring phase until the end of 1996 of DM 300 million,

- investment aid of DM 350 million.

2. Germany shall ensure that the total aid granted under Article 95 of the ECSC Treaty and Decision No 3855/91/ECSC for the total EKO Stahl restructuring plan under no circumstances exceed an overall intensity of 70 % and that the investment aid is being closely allocated to the individual investment costs.

3. The new owner of EKO Stahl shall not receive any supplementary aid support (but social aid under Decision No 3855/91/ECSC in connection with the related closure of its production facilities at Hennigsdorf.

4. The aid has been calculated to enable the company to return to viability by the end of 1997. In the case that such viability is not attained by that date, Germany shall not request any further derogation under Article 95 of the ECSC Treaty for this company.

5. The aid shall not be used for the purpose of unfair competition practices.

6. Without prejudice to the aid measures referred to in this Article under the restructuring plan, any loans to the company must be on normal commercial terms; and the beneficiary company must not receive debt holidays or friendly treatment of debts to the State.

Article 2

1. The new hot-wide-strip mill that is to be purchased by the new company shall be of a production capacity as close as possible to the maximum capacity of 900 000 t/y hot-wide-strip.

Germany shall demonstrate to the Commission, before the new mill is acquired, that the new company has fulfilled the aforementioned condition after due consideration is given to the availability on the market of such installations, second has as well as new.

If the mill agreed by the Commission were to have a technological capacity exceeding 900 000 t/y, a technological bottleneck shall be imposed on the new hot-wide-strip mill to limit its capacity to 900 000 t/y.

2. The production at the new hot-wide-strip mill is to be built up to reach its capacity of 900 kt/y only after three years, starting in 1994.

The capacity limitation will be retained throughout a period of five years following the date of the last closure, or the last payment of aid to investment under the present plan, whichever is the later.

Upon the expiry of the aforementioned five-year period another five-year period will start to run, during which the production capacity for hot-wide strip at EKO Stahl shall be limited significantly below two million t/y.

During the first five-year period of capacity limitation Germany shall ensure that the hot-rolled steel capacity to be established at EKO Stahl will be utilized by the present and future owners exclusively for further processing in EKO Stahl's cold-rolling facilities.

3. Germany shall ensure that the aid approved under this Decision is not used to increase the present steel production capacity of EKO Stahl beyond the planned installation of a hot-wide-strip mill bottlenecked at 900 kt/y. There shall be no increase in capacity remaining under the aided restructuring plan, other than resulting from productivity improvements, for a period of five years starting from the date of the last closure, or the last payment of aid to investment under the present concept, whichever is the later.

Article 3

1. The following definitive closures of production capacity shall be carried out:

- the medium-section-strip mill No 450 of HES Hennigsdorfer Elektrostahlwerke GmbH, Hennigsdorf/Brandenburg, with a capacity of 320 kg/y shall be closed down by 30 June 1994 at the latest. The closure must be definitive and irreversible,

- the definitive and irreversable reduction in hot-rolling capacity in the former German Democratic Republic between 1 July 1990 and 31 December 1996, including the capacity closure in Hennigsdorf, shall amount to 2 057 kt/y, including closures needed to balance derogations under Article 5 of Decision No 3855/91/ECSC and aid approved for Saechsische Edelstahlwerke GmbH, Freital/Sachsen under Article 95 of the ECSC Treaty, not taking into account the new capacity provided for under the restructuring plan for EKO Stahl.

2. The finality of the closures shall be ensured either by the demolition of the installations concerned or by their disposal by sale outside Europe.

Article 4

The approval of aid as outlined in Article 1 is in addition subject to the following conditions:

1. the level of net financial charges of the new EKO Stahl GmbH will be set at least at 3,5 % of annual turnover, at the date of its privatization;

2. the company or its legal successor will not claim or be granted tax reduction or relief on the basis of past losses accumulated until privatization and of future losses when these are being covered by State aid;

3. the beneficiary company shall carry out all the restructuring measures laid down in the restructuring plan as it has been submitted to the Commission, in accordance with the timetable contained therein.

Article 5

1. Germany shall cooperate fully with the following arrangements for monitoring this Decision:

(a) Germany shall supply the Commission twice a year, and not later than 15 March and 15 September respectively, with reports containing full information in accordance with the enclosed Annex, on the beneficiary company and its restructuring. The first report should reach the Commission by 15 March 1994 and the last report by 15 September 1998, unless the Commission decides otherwise;

(b) the reports shall contain full information necessary for the Commission to monitor the restructuring process, the creation and use of capacity and show sufficient financial data to allow the Commission to asses whether its conditions and requirements are fulfilled. The reports shall at least contain full information in accordance with the Annex, which the Commission reserves the right to modify in line with its experiences during the monitoring process. It is up to Germany to oblige the beneficiary company to disclose all relevant data which may, under other circumstances, be considered as confidential.

2. The Commission shall, on the basis of the reports, draw up half-yearly reports which shall be submitted to the Council not later than 1 May and 1 November respectively, in order to allow discussion in the Council, if appropriate. If the beneficiary company envisages investments creating or extending capacity the Commission shall inform the Council on the basis of a report presenting the financing arrangements and demonstrating the absence of State aid.

Article 6

1. The Commission may at any time decide that the reports referred to in Article 5 (1) shall be on a quarterly basis if it deems such necessary to fulfil its monitoring tasks. The Commission may at any time decide to mandate an independent consultant, selected with the agreement of Germany, to evaluate the monitoring results, to undertake any research necessary and to report to the Council.

2. The Commission may have any necessary checks made in the aided company in accordance with Article 47 of the ECSC Treaty in order to verify the accuracy of the information givenin the reports referred to in Article 5 (1) and in particular compliance with the conditions laid down in this Decision. In the case that a Member State makes a complaint that State aid is enabling the aided company to under-price, the Commission will initiate an investigation pursuant to Article 60 of the ECSC Treaty in particular.

3. In assessing the reports referred to in Article 5 (1), the Commission will ensure that the requirements of Article 1 (6), in particular, are being respected.

Article 7

1. Without prejudice to any penalties it may impose by virtue of the ECSC Treaty, the Commission may require the suspension of payments of aid or the recovery of aid already paid if, on the basis of the information received, at any time it were to find that the conditions laid down in this Decision had not been met. If Germany were to fail to fulfil its obligations under any such decision, Article 88 of the ECSC Treaty shall apply.

2. Moreover, if the Commission establishes, on the basis of the reports referred to in Article 5 (1), that substantial deviations from the financial data, on which the viability assessment has been made, have occured, it may require Germany to take appropriate measures to reinforce the restructuring measures of the aided company.

Article 8

This Decision is addressed to the Federal Republic of Germany.

Done at Brussels, 12 April 1994.

For the Commission

Karel VAN MIERT

Member of the Commission

(1) OJ No L 362, 31. 12. 1991, p. 57.

Schedules & Appendices

ANNEX

The Commission's information requirements (a) Capacity reductions

- date (or expected date) of cessation of production,

- date (or expected date) of dismantling (1) of the installation concerned,

- where installation is sold, date (or expected date) of sale, identity and country of purchaser,

- sale price;

(b) investments

- details of investments realized,

- date of completion,

- the costs of the investment, the sources of finance and the sum of any related aid involved,

- the date of aid payment;

(c) workforce reductions

- number and timing of job losses,

- the total costs,

- a breakdown of how the costs are being financed;

(d) production and market effects

- monthly production of crude steel and finished products per category,

- products sold, including volumes, prices and markets;

(e) financial performance

- evolution of selected key financial ratios to ensure progress is being made towards viability (the financial results and ratios must be provided in a way allowing comparisons with the company's financial restructuring plan),

- level of financial charges,

- details and timing of aids received and costs covered,

- terms and conditions of any new loans (irrespective of source);

(f) Privatization

- selling price and treatment of existing liabilities,

- disposal of proceeds of sale,

- date of sale,

- financial position of company at time of sale;

(g) creation of a new company or new plants incorporating capacity extensions

- identity of each private and public sector participant,

- sources of their financing for the creation of the new company or new plants,

- terms and conditions of the private and the public shareholders' participation,

- management structure of a new company.

(1) As defined in Commission Decision No 3010/91/ECSC (OJ No L 286, 16. 10. 1991, p. 20).