94/1075/ECSC: Commission Decision of 21 December 1994 concerning aid to be granted by Germany to the steel company EKO Stahl GmbH, Eisenhüttenstadt (Text with EEA relevance)

• Articles: 9

Article 1

1. The following maximum amounts of aid which Germany plans to grant to EKO Stahl 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 for losses accumulated since 1 July 1990 until the privatization of the company of DM 362,6 million,

- compensation for future losses during the restructuring phase until the end of 1997 of DM 220 million,

- investment aid (beyond that which may already be deemed compatible with the common market according to the third indent of Article 5 of Decision No 3855/91/ECSC) of DM 275 million,

- contribution to cover the cost of repairs of DM 39 million,

- a guarantee granted by the Treuhandanstalt covering a DM 60 million investment loan granted by a consortium of private and public banks, representing an aid element of DM 4,02 million.

2. The compensation for future losses shall be limited to DM 100 million per year and shall not exceed DM 220 million for the period between 1995 and 1997. The purchase price to be paid by EKO Stahl GmbH for the purchase of the hot-rolling mill in Hennigsdorf shall not be taken into account for the limitation of the annual losses to be covered.

3. The guarantee of the Treuhandanstalt covering a DM 60 million investment loan, granted by a consortium of banks on market terms, shall be limited to three years and subject to the payment of a six-monthly premium of 0,25 %.

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

5. The aid has been calculated so as 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 pursuant to Article 95 of the ECSC Treaty for this company.

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

7. Without prejudice to the aid measures under the restructuring plan referred to in paragraphs 1 to 6, 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. Liabilities in the form of loans which have been provided or guaranteed by the Treuhandanstalt, shall remain an integral element of the cost of EKO Stahl GmbH for its new owner and shall not be reduced or eliminated other than in accordance with German laws or regulations generally applicable to privately-owned companies situated in Germany.

Article 2

Production at the new hot-wide-strip mill is to be built up to reach a capacity of 900 kt/y only after three years starting at the beginning of 1995.

The capacity limitation at 900 kt/y shall be retained throughout a period of five years following the date of the last closure, or, if later, following the last payment of aid to investment under the current restructuring plan.

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 GmbH shall be limited to 1,5 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 GmbH will be utilized by the present and future owners exclusively for further processing in EKO Stahl's cold-rolling facilities.

Germany shall ensure that the aid approved pursuant to this Decision is not used to increase the present steel production capacities of EKO Stahl GmbH beyond the planned installation of 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 of the last payment of investment aid under the current restructuring plan, whichever is the later.

Article 3

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

- the medium section strip mill No 450 at HES Hennigsdorfer Elektrostahlwerke GmbH, Hennigsdorf/Brandenburg, with a capacity of 320 kt/y shall be closed down by 31 January 1995 at the latest. The closure must be definitive and irreversible,

- the special steel plates mill at Walzwerk Burg GmbH, Burg/Sachsen-Anhalt, with a capacity of 41 kt/y shall be closed down by 31 January 1995 at the latest. The closure must be definitive and irreversible,

- the definitive and irreversible reduction in hot-rolling capacity in the former German Democratic Republic between 1 July 1990 and 31 December 1996, excluding the capacity closures in Hennigsdorf and Burg, excluding the closures needed to reduce the distortive effect of aid approved for Saechsische Edelstahlwerke GmbH, Freital/Sachsen pursuant to Article 95 of the ECSC Treaty and taking into account the new capacity provided for under the restructuring plan for EKO Stahl GmbH, shall amount to at least 10 % of the initial capacity in hot-rolled finished products in the territory of the former German Democratic Republic on 1 July 1990, needed to balance derogations pursuant to Article 5 of Decision No 3855/91/ECSC.

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 the aid set out in Article 1 is, in addition, subject to the following conditions:

1. the level of net financial charges of EKO Stahl GmbH shall be at least 3,5 % of annual turnover, at the date of its 60 % privatization;

2. the company or its legal successor shall 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 Annex, on the beneficiary company and its restructuring. The first report shall reach the Commission by 15 March 1995 and the last report by 15 September 2000 unless the Commission decides otherwise;

(b) the reports shall contain full information to enable the Commission to monitor the restructuring process and the creation and use of capacity and show sufficient financial data to allow the Commission to assess whether its conditions 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 confidential.

2. The Commission shall, on the basis of these reports, draw up half-yearly reports which are to 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 point (a) of 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 given in the reports referred to in point (a) of 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 shall initiate an investigation, in particular pursuant to Article 60 of the ECSC Treaty.

3. In assessing the reports referred to in point (a) of Article 5 (1), the Commission shall ensure that the requirements of Article 1 (7), 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, at any time, require the suspension of payments of aid or the recovery of aid already paid if, on the basis of the information received, it finds that the conditions laid down in this Decision are not being met. If Germany were to fail to fulfil its obligations under any such decision, Article 88 of the ECSC Treaty shall apply.

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

Article 8

Commission Decision No 94/256/ECSC (1) is rescinded.

Article 9

This decision is addressed to the Federal Republic of Germany.

Done at Brussels, 21 December 1994.

For the Commission Karel VAN MIERT Member of the Commission

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

(1) OJ No L 112, 3. 5. 1994, p. 45.