Romania now needs to recover the illegal aid plus interest, the European Commission said in a press release Thursday.
“A government can support a company in financial difficulty if the company has a sound restructuring plan, contributes to the cost of its restructuring and competition distortions are limited. In the case of CE Hunedoara these conditions were not met – we found that the public loans granted by Romania to CE Hunedoara gave the company an unfair economic advantage. This means that the state aid was illegal. Now Romania needs to recover the illegal aid that was granted to the company,” said EU Commissioner Margrethe Vestager, in charge of competition policy.
On 21 April 2015, the Commission approved under EU State aid rules temporary rescue aid of EUR37.7 million (RON 167 million) to CE Hunedoara, a Romanian state-owned electricity and heat producer. The company had been in financial difficulty since 2013. In the context of this decision, Romania committed to submit a restructuring plan aimed at ensuring the future viability of CE Hunedoara, should the company be unable to pay back the rescue aid in six months’ time.
Following the non-repayment of the rescue aid by CE Hunedoara and in the absence of a credible restructuring plan or any real steps towards the liquidation of the company, in March 2018, the Commission opened an in-depth investigation.
During the investigation, the Commission assessed whether five publicly financed or supported loans granted to CE Hunedoara were in line with EU State aid rules. Together, the loans amounted to approximately EUR73 million (RON 337 million) as of 30 June 2016.
The Commission found that the restructuring plan submitted by Romania in October 2015 and amended in January 2016 did not ensure the long term viability of CE Hunedoara without continued state aid and, in any event, has not been pursued by the company. It also concluded that there was no discernible own contribution by CE Hunedoara to the restructuring costs, and that no measures were proposed by Romania to limit possible distortions of competition following the significant State support.
The Commission concluded that four of the five loans, totaling around EUR60 million plus interest, are incompatible with EU State aid rules and need to be recovered by Romania. The fifth loan constitutes existing aid granted before Romania’s accession to the EU and therefore does not need to be recovered.
CE Hunedoara operates two power plants (Deva and Paroseni) and four hard coal mines to fuel its plants, all stemming from bankrupt state-owned enterprises (Electrocentrale Paroseni and Electrocentrale Deva, and later on Compania Natională a Huilei S.A. Petrosani).
CE Hunedoara currently owes EUR547 million to various Romanian state bodies, including the five loans subject to the state aid investigation. The company, which employs around 6,500 people, has been loss-making since 2013 and entered temporarily into formal insolvency proceedings under Romanian law, which are suspended since January 2016.