The European Commission has opened an in-depth investigation to assess whether various public support measures from Romania in favour of energy producer Complexul Energetic Hunedoara are in line with EU rules on State aid to companies in difficulty.
On 21 April 2015, the Commission approved temporary rescue aid of EUR 37.7 million (RON 167 million) to the Romanian energy producer Complexul Energetic Hunedoara (CE Hunedoara), which has 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, if the company were unable to pay back the rescue aid in six months’ time. In addition, in a separate decision dated 20 April 2015, the Commission concluded that CE Hunedoara had to repay around EUR 6 million of incompatible State aid.
EU State aid rules only allow a state intervention for a company in financial difficulty under specific conditions, requiring in particular that the company is subject to a sound restructuring plan to ensure its return to long-term viability, that the company contributes to the cost of its restructuring and that any competition distortions are limited.
At this stage, the Commission has doubts whether the proposed restructuring plan could restore the long-term viability of the company without continued State aid:
- First, CE Hunedoara entered into insolvency proceedings in 2016 (currently suspended), with more than EUR 500 million debt owed to various State bodies. This includes part of the rescue loan Romania granted CE Hunedoara in 2015, a loan financing the repayment of the incompatible State aid but also additional loans of around EUR 73 million, which Romania has granted to CE Hunedoara since 2015 to keep the company afloat.
- Second, the restructuring plan does not foresee a discernible contribution of CE Hunedoara to the costs of restructuring nor measures to limit possible distortions of competition as a result of the significant State support.
The Commission will now investigate further to find out whether its initial concerns are confirmed. At the same time, the Commission will continue to work closely with Romanian authorities to find a viable solution for CE Hunedoara’s assets that will ensure they continue to supply electricity, reduce costs for consumers and limit the burden on Romanian taxpayers.
The opening of an investigation gives interested third parties the opportunity to submit comments. It does not prejudge the outcome of the investigation.
CE Hunedoara is a Romanian State-owned electricity and heat producer, which also operates hard coal mines to fuel its power plants. Headquartered in Petrosani, Hunedoara County, CE Hunedoara has a market share of approximately 5% of Romanian electricity generation, and employs around 6,600 people.
CE Hunedoara was incorporated in 2012 with assets previously held by other insolvent and liquidated State-owned companies (Electrocentrale Paroseni and Electrocentrale Deva, and later on Compania Nationala a Huilei S.A. Petrosani). It has been loss-making since 2013, and in January 2016 entered into formal insolvency proceedings under Romanian law. In the meantime, the insolvency proceedings have been suspended pending an appeal by trade unions before a Romanian regional court.
Under the Commission’s 2014 Guidelines on State aid for rescue and restructuring, companies in financial difficulty may receive State aid provided they meet certain conditions. Aid may be granted for a period of 6 months (‘rescue aid’). Beyond this period, the aid must either be reimbursed or a restructuring plan must be notified to the Commission for the aid to be approved (‘restructuring aid’). The plan must ensure that the viability of the company is restored without further state support, that the company contributes to an adequate level to the costs of its restructuring and that distortions of competition created by the aid are addressed through compensatory measures.
The non-confidential version of the decision will be made available under the case number SA.43785 in the State Aid Register on the DG Competition website once any confidentiality issues have been resolved.