# Official Journal L 86/2016

| | ISSN 1977-0677 |
| --- | --- |
| Official Journal
  of the European Union | L 86 |
| | |
| English edition | Legislation | Volume 591 April 2016 |

ISSN 1977-0677

Official Journal

of the European Union

L 86

English edition

Legislation

Volume 591 April 2016

---

| Contents | | II   Non-legislative acts | page |
| --- | --- | --- | --- |
| | | DECISIONS |
| | * | Commission Decision (EU) 2016/449 of 28 July 2015 on State aid SA.38544 2014/C (ex 2014/N) which France is planning to implement in favour of Kem One
  (notified under document C(2015) 5169)

   (
  1
  ) | 1 |
| | | GUIDELINES |
| | * | Guideline (EU) 2016/450 of the European Central Bank of 4 December 2015 amending Guideline ECB/2014/15 on monetary and financial statistics (ECB/2015/44) | 42 |

Contents

II   Non-legislative acts

page

DECISIONS

*

Commission Decision (EU) 2016/449 of 28 July 2015 on State aid SA.38544 2014/C (ex 2014/N) which France is planning to implement in favour of Kem One
  (notified under document C(2015) 5169)

   (
  1
  )

(notified under document C(2015) 5169)

1

1

GUIDELINES

*

Guideline (EU) 2016/450 of the European Central Bank of 4 December 2015 amending Guideline ECB/2014/15 on monetary and financial statistics (ECB/2015/44)

42

| | |
| --- | --- |
| | (1)   Text with EEA relevance |

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(1)   Text with EEA relevance

1

| EN | Acts whose titles are printed in light type are those relating to day-to-day management of agricultural matters, and are generally valid for a limited period.
  The titles of all other Acts are printed in bold type and preceded by an asterisk. |
| --- | --- |

EN

Acts whose titles are printed in light type are those relating to day-to-day management of agricultural matters, and are generally valid for a limited period.

The titles of all other Acts are printed in bold type and preceded by an asterisk.

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II Non-legislative acts

DECISIONS

| 1.4.2016 | EN | Official Journal of the European Union | L 86/1 |
| --- | --- | --- | --- |

1.4.2016

EN

Official Journal of the European Union

L 86/1

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COMMISSION DECISION (EU) 2016/449

of 28 July 2015

on State aid SA.38544 2014/C (ex 2014/N) which France is planning to implement in favour of Kem One

(notified under document C(2015) 5169)

(Only the French version is authentic)

(Text with EEA relevance)

THE EUROPEAN COMMISSION,

Having regard to the Treaty on the Functioning of the European Union, and in particular the first subparagraph of Article 108(2) thereof,

Having regard to the Agreement on the European Economic Area, and in particular Article 62(1)(a) thereof,

Having called on interested parties to submit their comments pursuant to those articles (1), and having regard to their comments,

Whereas:

1.   PROCEDURE

PROCEDURE

| (1) | On 30 July 2014, after pre-notification contacts, France notified to the Commission three financial support measures (an FDES loan, grants and repayable advances, and a possible write-off of tax and social security debts) included in the restructuring plan to ensure the continued existence of Kem One SAS (‘Kem One’ or ‘the company’). |
| --- | --- |

(1)

On 30 July 2014, after pre-notification contacts, France notified to the Commission three financial support measures (an FDES loan, grants and repayable advances, and a possible write-off of tax and social security debts) included in the restructuring plan to ensure the continued existence of Kem One SAS (‘Kem One’ or ‘the company’).

| (2) | By letter dated 1 October 2014, the Commission informed France that it had decided to initiate the procedure laid down in Article 108(2) of the Treaty on the Functioning of the European Union (‘TFEU’) in respect of these measures (‘the opening decision’). France submitted its comments by letter dated 3 November 2014. |
| --- | --- |

(2)

By letter dated 1 October 2014, the Commission informed France that it had decided to initiate the procedure laid down in Article 108(2) of the Treaty on the Functioning of the European Union (‘TFEU’) in respect of these measures (‘the opening decision’). France submitted its comments by letter dated 3 November 2014.

| (3) | The Commission decision to initiate the procedure was published in the Official Journal of the European Union (2). The Commission invited interested parties to submit their comments on the measures in question. |
| --- | --- |

(3)

The Commission decision to initiate the procedure was published in the Official Journal of the European Union (2). The Commission invited interested parties to submit their comments on the measures in question.

Official Journal of the European Union

2

| (4) | The Commission received comments from six interested parties and forwarded them to France, giving it the opportunity to comment on them, and received its observations by letter dated 25 February 2015. |
| --- | --- |

(4)

The Commission received comments from six interested parties and forwarded them to France, giving it the opportunity to comment on them, and received its observations by letter dated 25 February 2015.

| (5) | On 20 March 2015, France submitted additional information in support of its observations. On the same day, the Commission requested additional information, which France provided on 8 May 2015. The Commission subsequently requested additional information on 23 June 2015, which France provided on 2 July 2015. |
| --- | --- |

(5)

On 20 March 2015, France submitted additional information in support of its observations. On the same day, the Commission requested additional information, which France provided on 8 May 2015. The Commission subsequently requested additional information on 23 June 2015, which France provided on 2 July 2015.

| (6) | In addition, several conference calls and meetings took place between the Commission and the French authorities. |
| --- | --- |

(6)

In addition, several conference calls and meetings took place between the Commission and the French authorities.

2.   BACKGROUND

BACKGROUND

2.1.   THE BENEFICIARY: KEM ONE

| (7) | Kem One was a wholly owned subsidiary of Kem One Holding, which had been set up in 2012 to enable Arkema's vinyl business to be transferred to a subsidiary and taken over by the Klesch Group, a financial group based in Switzerland. In 2012, Kem One and its subsidiaries (Kem One Italia and Kem One Hernani) generated total turnover of EUR [...] (*1) million, of which EUR [...] million in France, the main centre of production and sales. They employ 1 315 staff in France and approximately 80 in Spain and Italy.

  Diagram 1


  Structure of the Kem One group before the takeover




  KEM ONE International
  Alphacan BV (Netherlands)
  Alphacan Omniplast Gmbh
  Alphacan D.o.o. (Croatia)
  Alphacan Spa (Italy)
  Alphacan SA (France)
  Akishima Chemicals Industries Co Ltd (Japan)
  Resinoplast Vietnam Ltd (Vietnam)
  Changshu Resichina Engineering Polymers Co Ltd (China) 1
  Resitech Germany Gmbh
  Resinoplast North America SRL (Mexico)
  Resilia Srl (Italy)
  Plasgom (Spain)
  Resinoplast (France)
  KEM ONE Hernani
  KEM ONE Italia
  KEM ONE Trésorerie
  KEM ONE Innovative Vinyls
  KEM ONE SAS
  KEM ONE Holding
  Scope of the beneficiary

  Source: Disclosure |
| --- | --- |

(7)

Kem One was a wholly owned subsidiary of Kem One Holding, which had been set up in 2012 to enable Arkema's vinyl business to be transferred to a subsidiary and taken over by the Klesch Group, a financial group based in Switzerland. In 2012, Kem One and its subsidiaries (Kem One Italia and Kem One Hernani) generated total turnover of EUR [...] (*1) million, of which EUR [...] million in France, the main centre of production and sales. They employ 1 315 staff in France and approximately 80 in Spain and Italy.

*1

Diagram 1

Diagram 1

Structure of the Kem One group before the takeover

Structure of the Kem One group before the takeover

KEM ONE International

Alphacan BV (Netherlands)

Alphacan Omniplast Gmbh

Alphacan D.o.o. (Croatia)

Alphacan Spa (Italy)

Alphacan SA (France)

Akishima Chemicals Industries Co Ltd (Japan)

Resinoplast Vietnam Ltd (Vietnam)

Changshu Resichina Engineering Polymers Co Ltd (China) 1

Resitech Germany Gmbh

Resinoplast North America SRL (Mexico)

Resilia Srl (Italy)

Plasgom (Spain)

Resinoplast (France)

KEM ONE Hernani

KEM ONE Italia

KEM ONE Trésorerie

KEM ONE Innovative Vinyls

KEM ONE SAS

KEM ONE Holding

Scope of the beneficiary

Source: Disclosure

Source:

| (8) | Kem One engages in several activities in a vertically integrated chain from the production of salt to the processing of polyvinyl chloride (PVC). Thus, Kem One combines under one roof the upstream activities of production and marketing of chlorochemicals and PVC for use in many economic sectors: the car industry, construction, agriculture and health.

  Diagram 2


  Kem One activities in the PVC production chain




  Balan (France)
  ·
  [...] kt S-PVC
  Lavéra (France)
  ·
  [...] kt chlorine
  ·
  [...] kt VCM
  ·
  [...] kt caustic soda
  Fos-sur-Mer (France)
  ·
  [...] kt chlorine
  ·
  [...] kt VCM
  ·
  [...] kt caustic soda
  Saint-Fons (France)
  ·
  [...] kt M-PVC
  ·
  [...] kt PVC-C
  Hernani (Espagne)
  ·
  [...] kt E-PVC
  Saint-Aubain (France)
  ·
  [...] kt E-PVC
  Berre (France)
  ·
  [...] kt S-PVC
  PVC-C
  M-PVC
  E-PVC
  S-PVC
  Polyvinyl chloride (PVC)
  polymerisation
  Vinyl chloride monomer (VCM)
  Cracking
  Ethylene dichloride (EDC)
  Chlorination
  Caustic soda
  Chlorine
  Ethylene
  Electrolysis
  NaCl
  Cracking of NGLs or naphtha
  Kem One (capacity estimates in kt/year)
  PVC production chain

  Source: Commission, on the basis of the information provided by France and the comments by interested parties |
| --- | --- |

(8)

Kem One engages in several activities in a vertically integrated chain from the production of salt to the processing of polyvinyl chloride (PVC). Thus, Kem One combines under one roof the upstream activities of production and marketing of chlorochemicals and PVC for use in many economic sectors: the car industry, construction, agriculture and health.

Diagram 2

Diagram 2

Kem One activities in the PVC production chain

Kem One activities in the PVC production chain

Balan (France)

·

[...] kt S-PVC

Lavéra (France)

·

[...] kt chlorine

·

[...] kt VCM

·

[...] kt caustic soda

Fos-sur-Mer (France)

·

[...] kt chlorine

·

[...] kt VCM

·

[...] kt caustic soda

Saint-Fons (France)

·

[...] kt M-PVC

·

[...] kt PVC-C

Hernani (Espagne)

·

[...] kt E-PVC

Saint-Aubain (France)

·

[...] kt E-PVC

Berre (France)

·

[...] kt S-PVC

PVC-C

M-PVC

E-PVC

S-PVC

Polyvinyl chloride (PVC)

polymerisation

Vinyl chloride monomer (VCM)

Cracking

Ethylene dichloride (EDC)

Chlorination

Caustic soda

Chlorine

Ethylene

Electrolysis

NaCl

Cracking of NGLs or naphtha

Kem One (capacity estimates in kt/year)

PVC production chain

Source: Commission, on the basis of the information provided by France and the comments by interested parties

Source:

| (9) | Kem One's main business object is the production ([...] % of turnover) and marketing of PVC. Kem One produces three types of PVC: (i) general-purpose PVC (M-PVC and S-PVC), which accounts for [...] % of its PVC output; (ii) emulsion PVC (E-PVC), which accounts for [...] % of its PVC output but [...] % of its total margin associated with its PVC business; and (iii) chlorinated PVC (PVC-C), which accounts for [...] % of its PVC output. It has already been established by previous Commission decisions (3) that the PVC market comprises two separate market segments: S-PVC and E-PVC. The S-PVC segment must be further subsegmented by type of S-PVC: commodity S-PVC, specialty S-PVC and extender S-PVC. The same applies to the E-PVC segment (E-PVC paste, specialty E-PVC). |
| --- | --- |

(9)

Kem One's main business object is the production ([...] % of turnover) and marketing of PVC. Kem One produces three types of PVC: (i) general-purpose PVC (M-PVC and S-PVC), which accounts for [...] % of its PVC output; (ii) emulsion PVC (E-PVC), which accounts for [...] % of its PVC output but [...] % of its total margin associated with its PVC business; and (iii) chlorinated PVC (PVC-C), which accounts for [...] % of its PVC output. It has already been established by previous Commission decisions (3) that the PVC market comprises two separate market segments: S-PVC and E-PVC. The S-PVC segment must be further subsegmented by type of S-PVC: commodity S-PVC, specialty S-PVC and extender S-PVC. The same applies to the E-PVC segment (E-PVC paste, specialty E-PVC).

3

| (10) | Furthermore, the Commission found that these markets were likely to be Europe-wide (as big as the European Economic Area, EEA) but that it was possible for the S-PVC segment to cover a narrower geographical area, corresponding to western Europe or even north-western Europe (Germany, Belgium, Denmark, France, Ireland, Luxembourg, the Netherlands, Norway, Sweden and the United Kingdom taken together). |
| --- | --- |

(10)

Furthermore, the Commission found that these markets were likely to be Europe-wide (as big as the European Economic Area, EEA) but that it was possible for the S-PVC segment to cover a narrower geographical area, corresponding to western Europe or even north-western Europe (Germany, Belgium, Denmark, France, Ireland, Luxembourg, the Netherlands, Norway, Sweden and the United Kingdom taken together).

| (11) | Today, Kem One is present mainly in the market for commodity S-PVC. Kem One estimates its market shares and those of its competitors as follows:

  Table 1


  Market share for commodity S-PVC in north-western Europe (2012-2014)












  S-PVC — north-western Europe |
| --- | --- |
| | 2012 | 2013 | 2014 |
| Market share
  (Volume)
  (%) | Market share
  (Value)
  (%) | Market share
  (Volume)
  (%) | Market share
  (Value)
  (%) | Market share
  (Volume)
  (%) | Market share
  (Value)
  (%) |
| Kem One | [10-20] | [5-20] | [5-10] | [5-20] | [10-20] | [5-20] |
| Ineos | [30-40] | [30-40] | [30-40] | [30-40] | [30-40] | [30-40] |
| SolVin | [20-30] | [20-30] | [20-30] | [20-30] | [20-30] | [20-30] |
| ShinEtsu | [10-20] | [10-20] | [10-20] | [10-20] | [10-20] | [10-20] |
| Vinnolit | [0-10] | [0-10] | [0-10] | [0-10] | [0-10] | [0-10] |
| Vestolit | [0-10] | [0-10] | [0-10] | [0-10] | [0-10] | [0-10] |
| Source: Reply from France dated 7 July 2015 |

(11)

Today, Kem One is present mainly in the market for commodity S-PVC. Kem One estimates its market shares and those of its competitors as follows:

Table 1

Table 1

Market share for commodity S-PVC in north-western Europe (2012-2014)

Market share for commodity S-PVC in north-western Europe (2012-2014)

S-PVC — north-western Europe

2012

2013

2014

Market share

(Volume)

(%)

Market share

(Value)

(%)

Market share

(Volume)

(%)

Market share

(Value)

(%)

Market share

(Volume)

(%)

Market share

(Value)

(%)

Kem One

[10-20]

[5-20]

[5-10]

[5-20]

[10-20]

[5-20]

Ineos

[30-40]

[30-40]

[30-40]

[30-40]

[30-40]

[30-40]

SolVin

[20-30]

[20-30]

[20-30]

[20-30]

[20-30]

[20-30]

ShinEtsu

[10-20]

[10-20]

[10-20]

[10-20]

[10-20]

[10-20]

Vinnolit

[0-10]

[0-10]

[0-10]

[0-10]

[0-10]

[0-10]

Vestolit

[0-10]

[0-10]

[0-10]

[0-10]

[0-10]

[0-10]

Source: Reply from France dated 7 July 2015

Source:

| (12) | On the E-PVC market, France takes the view that the joint venture between INEOS and Solvay has a market share in capacity terms of around [20-30] %, while Vinnolit's market share is some [30-40] %, Vestolit's [10-20] % and Kem One's [10-20] %. Thus, the three leading competitors (Vinnolit, the INEOS/Solvay joint venture and Vestolit) together account for almost [80-90] % of output and sales of E-PVC in western Europe. |
| --- | --- |

(12)

On the E-PVC market, France takes the view that the joint venture between INEOS and Solvay has a market share in capacity terms of around [20-30] %, while Vinnolit's market share is some [30-40] %, Vestolit's [10-20] % and Kem One's [10-20] %. Thus, the three leading competitors (Vinnolit, the INEOS/Solvay joint venture and Vestolit) together account for almost [80-90] % of output and sales of E-PVC in western Europe.

| (13) | In addition to PVC, Kem One produces and markets caustic soda, chloromethanes and chlorine used in the manufacture of PVC (4). |
| --- | --- |

(13)

In addition to PVC, Kem One produces and markets caustic soda, chloromethanes and chlorine used in the manufacture of PVC (4).

4

2.2.   THE DIFFICULTIES ENCOUNTERED BY KEM ONE

| (14) | The difficulties encountered arise from both structural disadvantages and the global crisis which led to substantial financial losses between the second half of 2012 and the beginning of 2013. |
| --- | --- |

(14)

The difficulties encountered arise from both structural disadvantages and the global crisis which led to substantial financial losses between the second half of 2012 and the beginning of 2013.

2.2.1.   Kem One's structural handicaps

Kem One's structural handicaps

2.2.1.1.   The vertical disintegration of the ethylene chain

The vertical disintegration of the ethylene chain

| (15) | The French authorities consider that the competitiveness of the players in the PVC sector depends on various factors, including the price of energy and raw materials, the integration and size of the units in any vinyl chain, their geographical location and the associated logistics, the technologies employed by the units and the possibility for certain players to use chlorine twice. |
| --- | --- |

(15)

The French authorities consider that the competitiveness of the players in the PVC sector depends on various factors, including the price of energy and raw materials, the integration and size of the units in any vinyl chain, their geographical location and the associated logistics, the technologies employed by the units and the possibility for certain players to use chlorine twice.

| (16) | Kem One's current activities developed within Arkema's vinyl division, which became an independent group in 2006. These activities were then sold to the Klesch Group in 2012. The current structure of Kem One is the result of several carve-outs during different disposals of existing activities in the chemical sector in France, which led to a vertical disintegration of the ethylene chain that was unfavourable to Kem One because of the part played by the cost of purchasing ethylene in the production of PVC. Kem One does not, therefore, have integrated access to ethylene, in particular because of the loss of the link with the Total steam cracker, its source of ethylene supplies. Kem One's main competitors are partially integrated thanks to integrated ethylene production for part of their needs (INEOS steam cracker in Norway and Solvay steam cracker in France) or to long-term agreements tantamount to a form of integration (e.g. Shin-Etsu in the Netherlands for access to the Shell steam cracker). |
| --- | --- |

(16)

Kem One's current activities developed within Arkema's vinyl division, which became an independent group in 2006. These activities were then sold to the Klesch Group in 2012. The current structure of Kem One is the result of several carve-outs during different disposals of existing activities in the chemical sector in France, which led to a vertical disintegration of the ethylene chain that was unfavourable to Kem One because of the part played by the cost of purchasing ethylene in the production of PVC. Kem One does not, therefore, have integrated access to ethylene, in particular because of the loss of the link with the Total steam cracker, its source of ethylene supplies. Kem One's main competitors are partially integrated thanks to integrated ethylene production for part of their needs (INEOS steam cracker in Norway and Solvay steam cracker in France) or to long-term agreements tantamount to a form of integration (e.g. Shin-Etsu in the Netherlands for access to the Shell steam cracker).

2.2.1.2.   The heart of the production process (electrolysis) is dated and underperforming

The heart of the production process (electrolysis) is dated and underperforming

| (17) | Of four electrolysis units, only one can be considered technologically modern and three are energy-intensive (the diaphragm cell plants at Fos-sur-Mer and Lavéra and the mercury cell plant at Lavéra). Kem One's main competitors embarked on conversion of their mercury cell and diaphragm cell plants to membrane cell electrolysis in the period 2003-2013. |
| --- | --- |

(17)

Of four electrolysis units, only one can be considered technologically modern and three are energy-intensive (the diaphragm cell plants at Fos-sur-Mer and Lavéra and the mercury cell plant at Lavéra). Kem One's main competitors embarked on conversion of their mercury cell and diaphragm cell plants to membrane cell electrolysis in the period 2003-2013.

| (18) | Kem One therefore has only [...] % of the most modern capacity (membrane electrolysis), whereas this technology accounts for almost [...] % of existing capacity. |
| --- | --- |

(18)

Kem One therefore has only [...] % of the most modern capacity (membrane electrolysis), whereas this technology accounts for almost [...] % of existing capacity.

2.2.1.3.   High production costs

High production costs

| (19) | The transfer of Arkema's vinyl business to Klesch was not preceded by the setting-up of a subsidiary and internal restructuring, which would have optimised the structural costs. Those costs amounted to EUR [...] million in 2013. |
| --- | --- |

(19)

The transfer of Arkema's vinyl business to Klesch was not preceded by the setting-up of a subsidiary and internal restructuring, which would have optimised the structural costs. Those costs amounted to EUR [...] million in 2013.

| (20) | Furthermore, many services and performance contracts had to be established between Arkema and Kem One, which resulted in competitiveness gaps. |
| --- | --- |

(20)

Furthermore, many services and performance contracts had to be established between Arkema and Kem One, which resulted in competitiveness gaps.

2.2.1.4.   A commercial policy too geared to southern Europe

A commercial policy too geared to southern Europe

| (21) | The geographical location of Kem One, whose main production units have direct access to the Mediterranean, has led to the establishment of a sales policy (PVC and caustic soda) largely geared to the countries of southern Europe, whose markets were directly affected by the crisis of 2008-2009 and by the import of low-priced products, in particular caustic soda, compared with prices in the markets of north-western Europe. This commercial policy approach has contributed to the deterioration in Kem One's margin. |
| --- | --- |

(21)

The geographical location of Kem One, whose main production units have direct access to the Mediterranean, has led to the establishment of a sales policy (PVC and caustic soda) largely geared to the countries of southern Europe, whose markets were directly affected by the crisis of 2008-2009 and by the import of low-priced products, in particular caustic soda, compared with prices in the markets of north-western Europe. This commercial policy approach has contributed to the deterioration in Kem One's margin.

2.2.2.   Kem One's financial difficulties

Kem One's financial difficulties

| (22) | The poor economic climate in the second half of 2012 and in early 2013 soon led to substantial financial losses for Kem One. |
| --- | --- |

(22)

The poor economic climate in the second half of 2012 and in early 2013 soon led to substantial financial losses for Kem One.

| (23) | The negative effects of the crisis were reinforced by a number of events which resulted in a significant drop in sales and affected the company's margin: the five-yearly shutdown of the Fos-sur-Mer site in 2012 lasted longer than planned; a problem with the quality of the ethylene supplied by Total; a major incident at the Total steam cracker in Lavéra at the end of December 2012, which resulted in its complete shut-down until March 2013, then its operating at half capacity. |
| --- | --- |

(23)

The negative effects of the crisis were reinforced by a number of events which resulted in a significant drop in sales and affected the company's margin: the five-yearly shutdown of the Fos-sur-Mer site in 2012 lasted longer than planned; a problem with the quality of the ethylene supplied by Total; a major incident at the Total steam cracker in Lavéra at the end of December 2012, which resulted in its complete shut-down until March 2013, then its operating at half capacity.

2.2.3.   Insolvency and the opening of the court-supervised administration procedure

Insolvency and the opening of the court-supervised administration procedure

| (24) | The recurring difficulties encountered by Kem One prompted it to request the opening of a conciliation procedure before Lyon Commercial Court in January 2013. Since no agreement had been reached, on 27 March 2013 the court held that Kem One was insolvent and opened the court-supervised administration procedure. |
| --- | --- |

(24)

The recurring difficulties encountered by Kem One prompted it to request the opening of a conciliation procedure before Lyon Commercial Court in January 2013. Since no agreement had been reached, on 27 March 2013 the court held that Kem One was insolvent and opened the court-supervised administration procedure.

| (25) | By judgment of 20 December 2013, Lyon Commercial Court accepted the joint bid from Mr Alain de Krassny and the investment firm OpenGate Capital (‘OpenGate’) and approved the recovery plan. The objective of the recovery plan was business continuity. |
| --- | --- |

(25)

By judgment of 20 December 2013, Lyon Commercial Court accepted the joint bid from Mr Alain de Krassny and the investment firm OpenGate Capital (‘OpenGate’) and approved the recovery plan. The objective of the recovery plan was business continuity.

| (26) | A new company, K1 Group SAS (‘K1’), was set up for the purposes of the recovery plan; the company object is to acquire and hold the shares in Kem One and Kem One Innovative Vinyls. K1 is 50 % owned by AK1, a company controlled by Mr de Krassny, and 50 % owned by K1 International, a company controlled by OpenGate. |
| --- | --- |

(26)

A new company, K1 Group SAS (‘K1’), was set up for the purposes of the recovery plan; the company object is to acquire and hold the shares in Kem One and Kem One Innovative Vinyls. K1 is 50 % owned by AK1, a company controlled by Mr de Krassny, and 50 % owned by K1 International, a company controlled by OpenGate.

2.3.   DESCRIPTION OF THE PUBLIC SUPPORT MEASURES

| (27) | [...] (5):






  — | a loan from the Economic and Social Development Fund (‘the FDES loan’) for a maximum amount in principal of EUR 30 million, |
| --- | --- | --- |

(27)

[...] (5):

5

—

a loan from the Economic and Social Development Fund (‘the FDES loan’) for a maximum amount in principal of EUR 30 million,

| — | a grant of EUR 15 million and repayable advances of up to EUR 80 million, |
| --- | --- |

—

a grant of EUR 15 million and repayable advances of up to EUR 80 million,

| — | a possible write-off of social security and tax debts at the request of the buyer. |
| --- | --- |

—

a possible write-off of social security and tax debts at the request of the buyer.

2.3.1.   The FDES loan (EUR 30 million)

The FDES loan (EUR 30 million)

| (28) | The FDES is used by the French authorities as a tool accompanying the restructuring of certain undertakings in difficulty. The guidelines for using the FDES are currently based on the circular of 26 November 2004 on state action in the prevention and resolution of business difficulties (6). The FDES intervenes in the form of loans that are limited to undertakings whose viability is assured at the end of the restructuring period and whose disappearance would have a substantial effect on an entire sector or a region. In any event, the state intervenes in co-financing with the private sector. In November 2013 the French Minister for Economic Regeneration introduced an exceptional package to provide specific help, under the FDES, to viable intermediate-sized enterprises (7), which are often placed in collective insolvency proceedings. |
| --- | --- |

(28)

The FDES is used by the French authorities as a tool accompanying the restructuring of certain undertakings in difficulty. The guidelines for using the FDES are currently based on the circular of 26 November 2004 on state action in the prevention and resolution of business difficulties (6). The FDES intervenes in the form of loans that are limited to undertakings whose viability is assured at the end of the restructuring period and whose disappearance would have a substantial effect on an entire sector or a region. In any event, the state intervenes in co-financing with the private sector. In November 2013 the French Minister for Economic Regeneration introduced an exceptional package to provide specific help, under the FDES, to viable intermediate-sized enterprises (7), which are often placed in collective insolvency proceedings.

6

7

| (29) | The FDES loan of EUR 30 million is intended to be used as a guarantee for the granting of supplier credits to Kem One and to participate in the financing of its working capital requirements and its short-term cash flow needs. |
| --- | --- |

(29)

The FDES loan of EUR 30 million is intended to be used as a guarantee for the granting of supplier credits to Kem One and to participate in the financing of its working capital requirements and its short-term cash flow needs.

| (30) | The loan will be granted to Kem One after the signature of the loan contract and will be conditional on the contribution by the buyers to a fully paid-up cash capital increase of at least EUR 10 million. |
| --- | --- |

(30)

The loan will be granted to Kem One after the signature of the loan contract and will be conditional on the contribution by the buyers to a fully paid-up cash capital increase of at least EUR 10 million.

| (31) | The loan will generate interest at the fixed annual rate of 3,5 %. Kem One will repay the FDES loan in seven annual instalments. |
| --- | --- |

(31)

The loan will generate interest at the fixed annual rate of 3,5 %. Kem One will repay the FDES loan in seven annual instalments.

| (32) | The state has a first-rank pledge agreed by Kem One on its plant and equipment. The net book value of the plant and equipment included in the accounts prepared on 31 December 2013 was EUR 138,49 million. Given the validation of the contributions by an auditor in July 2012 and the absence of exceptional circumstances that might call into question the depreciation periods, the French authorities consider that the net book values reflect the actual value of those assets. |
| --- | --- |

(32)

The state has a first-rank pledge agreed by Kem One on its plant and equipment. The net book value of the plant and equipment included in the accounts prepared on 31 December 2013 was EUR 138,49 million. Given the validation of the contributions by an auditor in July 2012 and the absence of exceptional circumstances that might call into question the depreciation periods, the French authorities consider that the net book values reflect the actual value of those assets.

2.3.2.   The grant (EUR 15 million) and repayable advances (EUR 80 million)

The grant (EUR 15 million) and repayable advances (EUR 80 million)

| (33) | These financing measures are intended to implement the SAM project to convert the industrial plant (mercury electrolysis unit at the Lavéra site) under the ‘Support for re-industrialisation’ investment plan for the future. |
| --- | --- |

(33)

These financing measures are intended to implement the SAM project to convert the industrial plant (mercury electrolysis unit at the Lavéra site) under the ‘Support for re-industrialisation’ investment plan for the future.

| (34) | In its notification, France agreed that the grant constituted State aid. |
| --- | --- |

(34)

In its notification, France agreed that the grant constituted State aid.

| (35) | The advances will be reimbursed over seven years. They include a grace period of two years and comprise two tranches: (i) EUR 65 million at an annual fixed rate of 3,5 %; and (ii) EUR 15 million at an annual fixed rate of 10 %. |
| --- | --- |

(35)

The advances will be reimbursed over seven years. They include a grace period of two years and comprise two tranches: (i) EUR 65 million at an annual fixed rate of 3,5 %; and (ii) EUR 15 million at an annual fixed rate of 10 %.

| (36) | As part of the arrangements for the provision of such funding, a Monitoring Committee comprising representatives of the state, Kem One and the buyers will be set up. It will be responsible for sanctioning expenditure under the SAM project, validating continued activity and employment at the Lavéra site and monitoring the conformity of any management fees received by Mr de Krassny. |
| --- | --- |

(36)

As part of the arrangements for the provision of such funding, a Monitoring Committee comprising representatives of the state, Kem One and the buyers will be set up. It will be responsible for sanctioning expenditure under the SAM project, validating continued activity and employment at the Lavéra site and monitoring the conformity of any management fees received by Mr de Krassny.

2.3.3.   Possible write-off of tax and social security debts

Possible write-off of tax and social security debts

| (37) | In its notification, France assessed the tax and social security debts owed by Kem One at EUR 42 million. |
| --- | --- |

(37)

In its notification, France assessed the tax and social security debts owed by Kem One at EUR 42 million.

| (38) | On 20 February 2014, Kem One referred itself to the Committee of Heads of Financial Services (Commission des Chefs de Services Financiers — CCSF), which is responsible for waivers of tax and social security debts. |
| --- | --- |

(38)

On 20 February 2014, Kem One referred itself to the Committee of Heads of Financial Services (Commission des Chefs de Services Financiers — CCSF), which is responsible for waivers of tax and social security debts.

Commission des Chefs de Services Financiers — CCSF

| (39) | [...], Kem One lodged with Lyon Commercial Court an application for a substantial modification of the company's recovery plan in accordance with Article 626-26 of the Commercial Code (8), with a request for a sizeable remission of the legally remissible public debts. In accordance with the judgment of Lyon Commercial Court, Kem One's request for remission covers 90 % of the remissible part of the debts. The French authorities agreed to EUR [...], which corresponds to [...] % of the tax and social security debts. The request for remission had not yet been formally examined by the CSSF when the aid measures were notified to the Commission. |
| --- | --- |

(39)

[...], Kem One lodged with Lyon Commercial Court an application for a substantial modification of the company's recovery plan in accordance with Article 626-26 of the Commercial Code (8), with a request for a sizeable remission of the legally remissible public debts. In accordance with the judgment of Lyon Commercial Court, Kem One's request for remission covers 90 % of the remissible part of the debts. The French authorities agreed to EUR [...], which corresponds to [...] % of the tax and social security debts. The request for remission had not yet been formally examined by the CSSF when the aid measures were notified to the Commission.

8

2.4.   KEM ONE'S RESTRUCTURING PLAN

2.4.1.   The planned measures

The planned measures

| (40) | The restructuring plan is based on the continued existence of Kem One, grouped together with the other subsidiaries owned by Kem One Innovative Vinyls SASU in order to reconfigure the upstream and downstream businesses. |
| --- | --- |

(40)

The restructuring plan is based on the continued existence of Kem One, grouped together with the other subsidiaries owned by Kem One Innovative Vinyls SASU in order to reconfigure the upstream and downstream businesses.

| (41) | The restructuring plan involves three types of measure: industrial, commercial and financial. |
| --- | --- |

(41)

The restructuring plan involves three types of measure: industrial, commercial and financial.

2.4.1.1.   Industrial measures: Modernisation of the production process, in particular the electrolysis cells at Lavéra

Industrial measures: Modernisation of the production process, in particular the electrolysis cells at Lavéra

| (42) | The project has three main objectives:






  — | to comply with the voluntary commitment made by the chlorine producers in Eurochlor to phase out mercury cell technology for chlorine production by 2020, |
| --- | --- | --- |

(42)

The project has three main objectives:

—

to comply with the voluntary commitment made by the chlorine producers in Eurochlor to phase out mercury cell technology for chlorine production by 2020,

| — | to restore the competitiveness of the Lavéra site in the chlorine-caustic soda-chloromethanes-VCM sector to the level of that of its European competitors through the production of chlorine using membrane cell technology, |
| --- | --- |

—

to restore the competitiveness of the Lavéra site in the chlorine-caustic soda-chloromethanes-VCM sector to the level of that of its European competitors through the production of chlorine using membrane cell technology,

| — | to retain the site's upstream vertical integration, through access to brine from Vauvert, and downstream, by business opportunities for VCM and chloromethane. |
| --- | --- |

—

to retain the site's upstream vertical integration, through access to brine from Vauvert, and downstream, by business opportunities for VCM and chloromethane.

| (43) | Kem One's estimate of the cost saving of closing its competitiveness gap is in the order of EUR [20-40] million per year in production costs. Commissioning is planned for 2016. The total cost of the SAM project is EUR [150-250] million. |
| --- | --- |

(43)

Kem One's estimate of the cost saving of closing its competitiveness gap is in the order of EUR [20-40] million per year in production costs. Commissioning is planned for 2016. The total cost of the SAM project is EUR [150-250] million.

2.4.1.2.   Commercial measures: reorientation of commercial policy towards value-added markets

Commercial measures: reorientation of commercial policy towards value-added markets

| (44) | Kem One intends to use most of its production capacity for the most profitable markets, in particular PVC-C, E-PVC and the liquid chlorine business, thereby enabling it to increase its margin for a constant chlorine capacity. |
| --- | --- |

(44)

Kem One intends to use most of its production capacity for the most profitable markets, in particular PVC-C, E-PVC and the liquid chlorine business, thereby enabling it to increase its margin for a constant chlorine capacity.

| (45) | Kem One also intends to expand its sales of caustic soda and commodity S-PVC in France and north-western Europe. |
| --- | --- |

(45)

Kem One also intends to expand its sales of caustic soda and commodity S-PVC in France and north-western Europe.

| (46) | The recovery plan forecasts an increase of EUR [10-30] million by 2016, i.e. an increase of approximately [0-10] % in the gross margin on turnover. |
| --- | --- |

(46)

The recovery plan forecasts an increase of EUR [10-30] million by 2016, i.e. an increase of approximately [0-10] % in the gross margin on turnover.

2.4.1.3.   Financial measures: reduction in structural costs

Financial measures: reduction in structural costs

| (47) | The plan provides for [90-110] job losses. Substantial amendments were made to the employment contracts of [1-15] staff as a result of the closure of the Aix-en-Provence site. As regards regrading, [80-100] jobs have been identified within Kem One and the Group. The redundancy plan will result in wage cost savings of EUR [0-10] million. |
| --- | --- |

(47)

The plan provides for [90-110] job losses. Substantial amendments were made to the employment contracts of [1-15] staff as a result of the closure of the Aix-en-Provence site. As regards regrading, [80-100] jobs have been identified within Kem One and the Group. The redundancy plan will result in wage cost savings of EUR [0-10] million.

| (48) | The plan also provides for structural cost savings of EUR [10-20] million linked to a reduction in insurance costs, the closure of the head office branch in Aix-en-Provence and the postponement of IT projects. |
| --- | --- |

(48)

The plan also provides for structural cost savings of EUR [10-20] million linked to a reduction in insurance costs, the closure of the head office branch in Aix-en-Provence and the postponement of IT projects.

| (49) | Finally, the plan is intended to make savings of EUR [15-25] million resulting from improved productivity: reduction in fixed and variable costs, improvement in yields. These measures are independent of the SAM project and are scheduled for 2014 and 2015. |
| --- | --- |

(49)

Finally, the plan is intended to make savings of EUR [15-25] million resulting from improved productivity: reduction in fixed and variable costs, improvement in yields. These measures are independent of the SAM project and are scheduled for 2014 and 2015.

2.4.2.   Estimate of restructuring costs and financing of the restructuring plan

Estimate of restructuring costs and financing of the restructuring plan

| (50) | The restructuring costs total EUR 222 million: the project for converting the electrolysis installations in Lavéra (EUR [150-210] million) and the sinking of two doublets at the Vauvert saltworks (EUR [15-30] million). |
| --- | --- |

(50)

The restructuring costs total EUR 222 million: the project for converting the electrolysis installations in Lavéra (EUR [150-210] million) and the sinking of two doublets at the Vauvert saltworks (EUR [15-30] million).

| (51) | In order to finance the restructuring costs, the plan provides for the following financing:

  Table 2


  Sources of financing provided for in the restructuring plan, as set out in the notification









  Private contributions (EUR million) | Public contributions (EUR million) |
| --- | --- | --- |
| Self-financing | [30-40] | Grants | 15 |
| Bank loan | [60-70] (9) | Reimbursable advances | 80 |
| Financing (private operator 1) | [35-45] | FDES loan | 30 |
| Financing (private operator 2) (financing by factoring) | [40-50] | |
| Capital increase | 10 |
| Total | 187,5 | Total | 125 |
| Total financing | 312,5 |
| Source: Notification |

(51)

In order to finance the restructuring costs, the plan provides for the following financing:

Table 2

Table 2

Sources of financing provided for in the restructuring plan, as set out in the notification

Sources of financing provided for in the restructuring plan, as set out in the notification

Private contributions (EUR million)

Public contributions (EUR million)

Self-financing

[30-40]

Grants

15

Bank loan

[60-70] (9)

9

Reimbursable advances

80

Financing (private operator 1)

[35-45]

FDES loan

30

Financing (private operator 2) (financing by factoring)

[40-50]

Capital increase

10

Total

Total

187,5

187,5

Total

Total

125

125

Total financing

Total financing

312,5

312,5

Source: Notification

Source:

| (52) | The financing of the restructuring is completed by measures to write off claims by private creditors amounting to EUR 158,8 million and by public creditors amounting to EUR [...]. |
| --- | --- |

(52)

The financing of the restructuring is completed by measures to write off claims by private creditors amounting to EUR 158,8 million and by public creditors amounting to EUR [...].

| (53) | Finally, in the context of the transfer of shares in Kem One to K1, Kem One Trésorerie repaid EUR [10-19] million, corresponding to the ‘Seveso’ guarantee which had been set up by Kem One Holding through Kem One Trésorerie for Kem One's sites in France when they were transferred by Arkema, pursuant to Article L 515-8 of the Environmental Code (10) relating to facilities classified for the protection of the environment. The French authorities explained that, although the release and transfer to Kem One of the amount of the Seveso guarantee initially set up by the Klesch Group have an immediate positive effect on its cash flow, the corresponding amount has not been booked as a private contribution because it will have to be gradually allocated to the reconstitution of the financial guarantees in question. |
| --- | --- |

(53)

Finally, in the context of the transfer of shares in Kem One to K1, Kem One Trésorerie repaid EUR [10-19] million, corresponding to the ‘Seveso’ guarantee which had been set up by Kem One Holding through Kem One Trésorerie for Kem One's sites in France when they were transferred by Arkema, pursuant to Article L 515-8 of the Environmental Code (10) relating to facilities classified for the protection of the environment. The French authorities explained that, although the release and transfer to Kem One of the amount of the Seveso guarantee initially set up by the Klesch Group have an immediate positive effect on its cash flow, the corresponding amount has not been booked as a private contribution because it will have to be gradually allocated to the reconstitution of the financial guarantees in question.

10

2.4.3.   Kem One's business plan

Kem One's business plan

| (54) | Kem One's business plan covers the period 2013-2017, with a return to viability expected in 2017 on the basis of realistic assumptions, according to the French authorities. In the base-case scenario, Kem One returns to a satisfactory level of cash flow in 2014, a level of gross margin of [25-35] % of turnover from 2017 and an EBITDA of around [4-12] % from 2018, in line with the benchmarks in the chemical commodities sector. |
| --- | --- |

(54)

Kem One's business plan covers the period 2013-2017, with a return to viability expected in 2017 on the basis of realistic assumptions, according to the French authorities. In the base-case scenario, Kem One returns to a satisfactory level of cash flow in 2014, a level of gross margin of [25-35] % of turnover from 2017 and an EBITDA of around [4-12] % from 2018, in line with the benchmarks in the chemical commodities sector.

| (55) | The improvement in profitability stems in particular from the following five measures: significant private contributions for an immediate recovery of cash balances; investments to secure reliable electrolysis and drilling operations in order to improve the competitiveness of the undertaking; renegotiation of contracts for access to raw materials and industrial platforms; an internal restructuring accompanied by a performance and productivity plan and a review of Kem One's commercial policy of market positioning. |
| --- | --- |

(55)

The improvement in profitability stems in particular from the following five measures: significant private contributions for an immediate recovery of cash balances; investments to secure reliable electrolysis and drilling operations in order to improve the competitiveness of the undertaking; renegotiation of contracts for access to raw materials and industrial platforms; an internal restructuring accompanied by a performance and productivity plan and a review of Kem One's commercial policy of market positioning.

| (56) | The French authorities consider that the assumptions used are realistic: the expected gains are already taken into account by new contracts; with the exception of the electrolysis units, the size of the VCM and S-PVC units is on a par with the best competing plants in western Europe; finally, the market price assumptions are not based on a recovery in demand or an improvement in the balance between supply and demand for PVC, which was none the less expected by the main industry consultants. |
| --- | --- |

(56)

The French authorities consider that the assumptions used are realistic: the expected gains are already taken into account by new contracts; with the exception of the electrolysis units, the size of the VCM and S-PVC units is on a par with the best competing plants in western Europe; finally, the market price assumptions are not based on a recovery in demand or an improvement in the balance between supply and demand for PVC, which was none the less expected by the main industry consultants.

| (57) | The business plan also takes alternative scenarios into consideration. Under the pessimistic scenario, the French authorities assume that repeated incidents affecting production cut production and sales by [8-14] % in relation to the base-case scenario, as well as variable costs and the gains identified on the supply contracts. EBITDA remains impaired over the period 2014-2016 ([1-5] % of turnover). The cash position returns to a satisfactory level at the end of 2014 but does not enable Kem One to reduce its debt. However, the return to long-term viability is assured even in this scenario thanks to the project to convert the electrolysis installations. |
| --- | --- |

(57)

The business plan also takes alternative scenarios into consideration. Under the pessimistic scenario, the French authorities assume that repeated incidents affecting production cut production and sales by [8-14] % in relation to the base-case scenario, as well as variable costs and the gains identified on the supply contracts. EBITDA remains impaired over the period 2014-2016 ([1-5] % of turnover). The cash position returns to a satisfactory level at the end of 2014 but does not enable Kem One to reduce its debt. However, the return to long-term viability is assured even in this scenario thanks to the project to convert the electrolysis installations.

| (58) | The optimistic scenario assumes a gradual increase in sales prices of commodity PVC and caustic soda in the years ahead. Under this scenario, the cash position returns to a satisfactory level in 2014 (+ EUR [40-60] million). The plan also enables Kem One to finance some of its investments (EUR [300-500] million between 2014 and 2020), reduce its debt over the period 2017-2020 and achieve EBITDA of [10-15] % from 2018 onwards. |
| --- | --- |

(58)

The optimistic scenario assumes a gradual increase in sales prices of commodity PVC and caustic soda in the years ahead. Under this scenario, the cash position returns to a satisfactory level in 2014 (+ EUR [40-60] million). The plan also enables Kem One to finance some of its investments (EUR [300-500] million between 2014 and 2020), reduce its debt over the period 2017-2020 and achieve EBITDA of [10-15] % from 2018 onwards.

3.   DOUBTS RAISED IN THE OPENING DECISION

DOUBTS RAISED IN THE OPENING DECISION

| (59) | By decision of 1 October 2014, the Commission initiated the formal investigation procedure. In the opening decision, the Commission raised doubts about both the classification of the measures in question as State aid and their possible compatibility with the internal market under the rules on State aid granted to firms in difficulty. |
| --- | --- |

(59)

By decision of 1 October 2014, the Commission initiated the formal investigation procedure. In the opening decision, the Commission raised doubts about both the classification of the measures in question as State aid and their possible compatibility with the internal market under the rules on State aid granted to firms in difficulty.

3.1.   CLASSIFICATION AS STATE AID

| (60) | In relation to the three notified measures, i.e. (i) the FDES loan; (ii) the grant and the repayable advances; and (iii) the write-off of claims, the Commission had concerns about the existence of an economic advantage and, if there were one, its amount. |
| --- | --- |

(60)

In relation to the three notified measures, i.e. (i) the FDES loan; (ii) the grant and the repayable advances; and (iii) the write-off of claims, the Commission had concerns about the existence of an economic advantage and, if there were one, its amount.

3.1.1.   FDES loan

FDES loan

3.1.1.1.   Value of collateral

Value of collateral

| (61) | The Commission had doubts, firstly, about the terms of the FDES loan. The Commission voiced several reservations on the estimate of the value of the collateral. Firstly, the French authorities did not indicate which plant and equipment was pledged. The Commission also noted that the French authorities presented the dated and under-performing, or even obsolete, state of certain production facilities as one of Kem One's major difficulties; that was the case in particular of the mercury cell and diaphragm cell units. The Commission therefore had doubts about the real value of the pledged plant and equipment and doubted that the net book value used to estimate the collateral was the most relevant value, in particular in comparison with the alternative solution, which would be to estimate the value of the pledges on the basis of the net income that can be achieved by operating them. |
| --- | --- |

(61)

The Commission had doubts, firstly, about the terms of the FDES loan. The Commission voiced several reservations on the estimate of the value of the collateral. Firstly, the French authorities did not indicate which plant and equipment was pledged. The Commission also noted that the French authorities presented the dated and under-performing, or even obsolete, state of certain production facilities as one of Kem One's major difficulties; that was the case in particular of the mercury cell and diaphragm cell units. The Commission therefore had doubts about the real value of the pledged plant and equipment and doubted that the net book value used to estimate the collateral was the most relevant value, in particular in comparison with the alternative solution, which would be to estimate the value of the pledges on the basis of the net income that can be achieved by operating them.

3.1.1.2.   Level of remuneration of the loan

Level of remuneration of the loan

| (62) | In the light of these doubts, increasing the reference rate for France at the time the loan was granted (0,53 %) by 400 basis points in order to calculate the remuneration of the loan was insufficient. |
| --- | --- |

(62)

In the light of these doubts, increasing the reference rate for France at the time the loan was granted (0,53 %) by 400 basis points in order to calculate the remuneration of the loan was insufficient.

| (63) | The Commission also had concerns about the conditions of remuneration of the loan. Indeed, the French authorities, by applying the communication from the Commission on the revision of the method for setting the reference and discount rates (‘the 2008 Reference Rate Communication’) (11), arrive at a remuneration of 4,53 %, but set a rate of 3,5 %. |
| --- | --- |

(63)

The Commission also had concerns about the conditions of remuneration of the loan. Indeed, the French authorities, by applying the communication from the Commission on the revision of the method for setting the reference and discount rates (‘the 2008 Reference Rate Communication’) (11), arrive at a remuneration of 4,53 %, but set a rate of 3,5 %.

11

| (64) | The Commission considered on the contrary that the increase in relation to the quality of the collateral was insufficient and that the rate should instead be in the range between 6,53 % and 10,53 % (12). |
| --- | --- |

(64)

The Commission considered on the contrary that the increase in relation to the quality of the collateral was insufficient and that the rate should instead be in the range between 6,53 % and 10,53 % (12).

12

| (65) | The Commission also noted that, in the absence of a loan granted to Kem One by a private bank on the same terms, in the context of the undertaking's difficulties and restructuring, the entire loan could be considered aid. |
| --- | --- |

(65)

The Commission also noted that, in the absence of a loan granted to Kem One by a private bank on the same terms, in the context of the undertaking's difficulties and restructuring, the entire loan could be considered aid.

3.1.2.   Grant and repayable advances

Grant and repayable advances

| (66) | The Commission was of the opinion that a subsidy constitutes an economic advantage that the beneficiary would not obtain under market conditions. A grant is a financial instrument whose capital is not repayable and which does not generate interest to be paid by the beneficiary. A private lender, who has a cost of financing and has to remunerate its capital, would not have agreed to finance a company by grants. |
| --- | --- |

(66)

The Commission was of the opinion that a subsidy constitutes an economic advantage that the beneficiary would not obtain under market conditions. A grant is a financial instrument whose capital is not repayable and which does not generate interest to be paid by the beneficiary. A private lender, who has a cost of financing and has to remunerate its capital, would not have agreed to finance a company by grants.

| (67) | With regard to the repayable advances, the Commission noted the presence of certain conditions relating to the granting of the advances that a private lender would probably not have required. These included in particular the condition relating to the maintenance of activity and jobs at the Lavéra site for five years after project completion, the sustainability of Kem One permitting, and with the prior agreement of the state. Furthermore, in the absence of the demonstration by the French authorities that private lenders would have been willing to lend such a sum on the same terms to an undertaking in difficulty, the Commission considered that the full amount of the repayable advances could be classified as aid. |
| --- | --- |

(67)

With regard to the repayable advances, the Commission noted the presence of certain conditions relating to the granting of the advances that a private lender would probably not have required. These included in particular the condition relating to the maintenance of activity and jobs at the Lavéra site for five years after project completion, the sustainability of Kem One permitting, and with the prior agreement of the state. Furthermore, in the absence of the demonstration by the French authorities that private lenders would have been willing to lend such a sum on the same terms to an undertaking in difficulty, the Commission considered that the full amount of the repayable advances could be classified as aid.

3.1.3.   Possible write-off of social security and tax debts

Possible write-off of social security and tax debts

| (68) | The Commission observed first that the percentages of debt write-off were not the same for the private creditors (70 %) as for the public creditors ([...] %), even though it was not certain that the state was in the same position as the private creditors which had long-standing relationships with Kem One. |
| --- | --- |

(68)

The Commission observed first that the percentages of debt write-off were not the same for the private creditors (70 %) as for the public creditors ([...] %), even though it was not certain that the state was in the same position as the private creditors which had long-standing relationships with Kem One.

| (69) | Moreover, with regard to the principle of the private creditor in a market economy, a write-off of debts a priori constitutes aid since it provides an advantage to an undertaking over its competitors by reducing its costs. This is all the more true when the undertaking is in difficulty and subject to collective proceedings. In the case at hand, the Commission had doubts about the motives behind the write-off of tax and social security debts, which gave precedence to the offer from one buyer. The Commission did not discount the possibility that the amount of aid was equal to the total amount of the planned write-off. |
| --- | --- |

(69)

Moreover, with regard to the principle of the private creditor in a market economy, a write-off of debts a priori constitutes aid since it provides an advantage to an undertaking over its competitors by reducing its costs. This is all the more true when the undertaking is in difficulty and subject to collective proceedings. In the case at hand, the Commission had doubts about the motives behind the write-off of tax and social security debts, which gave precedence to the offer from one buyer. The Commission did not discount the possibility that the amount of aid was equal to the total amount of the planned write-off.

a priori

3.2.   COMPATIBILITY ASSESSMENT

| (70) | With regard to the compatibility of the measures with the applicable State aid rules, the Commission considered that the applicable legal basis was the 2004 Community guidelines on State aid for rescuing and restructuring firms in difficulty (‘the 2004 Guidelines’) (13). By that yardstick, the Commission raised doubts about: (i) the restoration of Kem One's long-term viability; (ii) the avoidance of any distortion of competition; and (iii) the limitation of aid to the minimum necessary. |
| --- | --- |

(70)

With regard to the compatibility of the measures with the applicable State aid rules, the Commission considered that the applicable legal basis was the 2004 Community guidelines on State aid for rescuing and restructuring firms in difficulty (‘the 2004 Guidelines’) (13). By that yardstick, the Commission raised doubts about: (i) the restoration of Kem One's long-term viability; (ii) the avoidance of any distortion of competition; and (iii) the limitation of aid to the minimum necessary.

13

3.2.1.   Restoration of Kem One's long-term viability

Restoration of Kem One's long-term viability

| (71) | First, the Commission questioned the precise duration of the restructuring plan, given the lack of clarity on this point by France. |
| --- | --- |

(71)

First, the Commission questioned the precise duration of the restructuring plan, given the lack of clarity on this point by France.

| (72) | The Commission then noted that the French authorities had included in the restructuring costs only the costs of modernising the production facilities [project to convert the electrolysis units in Lavéra (EUR [150-210] million) and sinking two doublets at the Vauvert saltworks (EUR [15-30] million)]. The Commission considered that Kem One's internal restructuring necessarily had to create additional costs linked to the reduction in structural costs and the reorientation of the commercial policy. |
| --- | --- |

(72)

The Commission then noted that the French authorities had included in the restructuring costs only the costs of modernising the production facilities [project to convert the electrolysis units in Lavéra (EUR [150-210] million) and sinking two doublets at the Vauvert saltworks (EUR [15-30] million)]. The Commission considered that Kem One's internal restructuring necessarily had to create additional costs linked to the reduction in structural costs and the reorientation of the commercial policy.

| (73) | Moreover, the Commission had doubts about the credibility of certain aspects of the scenarios for the restoration of long-term viability presented by France. Thus, the restoration of the cash position seemed uncertain, whether under the base-case scenario or the pessimistic scenario. |
| --- | --- |

(73)

Moreover, the Commission had doubts about the credibility of certain aspects of the scenarios for the restoration of long-term viability presented by France. Thus, the restoration of the cash position seemed uncertain, whether under the base-case scenario or the pessimistic scenario.

| (74) | The three scenarios proposed by France in the notification included the obtaining of a bank loan of EUR [60-70] million in 2016 from private financial institutions. However, at this stage, the French authorities did not appear to have any guarantee that the loan would be granted. This uncertainty therefore undermined the realistic nature of the three scenarios. |
| --- | --- |

(74)

The three scenarios proposed by France in the notification included the obtaining of a bank loan of EUR [60-70] million in 2016 from private financial institutions. However, at this stage, the French authorities did not appear to have any guarantee that the loan would be granted. This uncertainty therefore undermined the realistic nature of the three scenarios.

3.2.2.   Prevention of distortion of competition

Prevention of distortion of competition

| (75) | In the absence of any compensatory measures proposed by France, the Commission pointed out that the presence of compensatory measures is one of the criteria for the compatibility of restructuring aid. Accordingly, it called on the French authorities to propose compensatory measures taking into account all of their arguments. |
| --- | --- |

(75)

In the absence of any compensatory measures proposed by France, the Commission pointed out that the presence of compensatory measures is one of the criteria for the compatibility of restructuring aid. Accordingly, it called on the French authorities to propose compensatory measures taking into account all of their arguments.

3.2.3.   Aid limited to the minimum

Aid limited to the minimum

| (76) | The Commission had doubts about the data used by the French authorities to calculate the amount of Kem One's own contribution, and therefore about compliance with the rule that the own contribution by a large firm to the costs of its restructuring must be 50 % of the total amount. |
| --- | --- |

(76)

The Commission had doubts about the data used by the French authorities to calculate the amount of Kem One's own contribution, and therefore about compliance with the rule that the own contribution by a large firm to the costs of its restructuring must be 50 % of the total amount.

4.   RESPONSE BY FRANCE TO THE OPENING DECISION

RESPONSE BY FRANCE TO THE OPENING DECISION

| (77) | By letter dated 3 November 2014, France presented its observations on the opening decision. |
| --- | --- |

(77)

By letter dated 3 November 2014, France presented its observations on the opening decision.

4.1.   ON THE CLASSIFICATION AS STATE AID

4.1.1.   FDES loan

FDES loan

4.1.1.1.   Value of collateral

Value of collateral

| (78) | France stresses that the book value of the pledged assets corresponds to their market value. The net book value is the gross book value less depreciation. The gross book value is the acquisition cost of the assets or their transfer value. Thus, at the time of the partial transfer of assets from Arkema to Kem One on 2 July 2012, the transfer was valued by independent experts at EUR [110-120] million. Furthermore, France pointed out that two transactions that had recently taken place in the PVC sector involving companies smaller than Kem One had been concluded at much higher amounts than the book value of Kem One's assets. In addition, although Kem One's activities were valued using the net present value method, their amount would be EUR [80-90] million in 2014, EUR [110-130] million in 2015 and EUR [330-340] million in 2016. Finally, France noted that the collateral was first-rank, ensuring that the state would be satisfied before all other creditors. |
| --- | --- |

(78)

France stresses that the book value of the pledged assets corresponds to their market value. The net book value is the gross book value less depreciation. The gross book value is the acquisition cost of the assets or their transfer value. Thus, at the time of the partial transfer of assets from Arkema to Kem One on 2 July 2012, the transfer was valued by independent experts at EUR [110-120] million. Furthermore, France pointed out that two transactions that had recently taken place in the PVC sector involving companies smaller than Kem One had been concluded at much higher amounts than the book value of Kem One's assets. In addition, although Kem One's activities were valued using the net present value method, their amount would be EUR [80-90] million in 2014, EUR [110-130] million in 2015 and EUR [330-340] million in 2016. Finally, France noted that the collateral was first-rank, ensuring that the state would be satisfied before all other creditors.

| (79) | France concluded therefore that it should be considered that the state had a sound guarantee that was very high in relation to the amount of the FDES loan. |
| --- | --- |

(79)

France concluded therefore that it should be considered that the state had a sound guarantee that was very high in relation to the amount of the FDES loan.

4.1.1.2.   Level of remuneration

Level of remuneration

| (80) | First of all, France takes the view that the methodology for calculating the interest rate on the basis of a sample of companies for which four-year credit default swap (CDS) contracts are negotiated and with a CCC rating, as set out in paragraph 92 of the opening decision, resulting in a rate of 20,95 %, is not able to provide an approximation of actual market rates. These cannot be borrowing operations comparable to those of Kem One in relation to FDES, since there is no identification of the guarantees or the level of collateral attached to the operations taken as a benchmark for determining the rate of 20,95 %. |
| --- | --- |

(80)

First of all, France takes the view that the methodology for calculating the interest rate on the basis of a sample of companies for which four-year credit default swap (CDS) contracts are negotiated and with a CCC rating, as set out in paragraph 92 of the opening decision, resulting in a rate of 20,95 %, is not able to provide an approximation of actual market rates. These cannot be borrowing operations comparable to those of Kem One in relation to FDES, since there is no identification of the guarantees or the level of collateral attached to the operations taken as a benchmark for determining the rate of 20,95 %.

| (81) | Furthermore, given Kem One's financial situation and the level of collateral, application of the 2008 Reference Rate Communication results in a remuneration of 4,53 % (reference rate of France of 0,53 % + 400 basis points), and not 6,53 % as stated by the Commission in the opening decision. |
| --- | --- |

(81)

Furthermore, given Kem One's financial situation and the level of collateral, application of the 2008 Reference Rate Communication results in a remuneration of 4,53 % (reference rate of France of 0,53 % + 400 basis points), and not 6,53 % as stated by the Commission in the opening decision.

| (82) | In any event, the rate calculated on the basis of the 2008 Reference Rate Communication serves only as an indication. In the case at hand, Kem One's low risk of insolvency, taking account in particular of the effective implementation of the recovery plan enabling the company's viability to be restored by 2017 and sound financial management, and the high level of collateral, justified a rate of 3,5 % consistent with the market. |
| --- | --- |

(82)

In any event, the rate calculated on the basis of the 2008 Reference Rate Communication serves only as an indication. In the case at hand, Kem One's low risk of insolvency, taking account in particular of the effective implementation of the recovery plan enabling the company's viability to be restored by 2017 and sound financial management, and the high level of collateral, justified a rate of 3,5 % consistent with the market.

| (83) | Lastly, the financing contract with [private operator 2] provides for a financing rate of Euribor 3 months + [...] % with a minimum of [...] %. Although this is not a bank rate, the conditions for granting the financing are such that they confirm that the FDES loan is consistent with market conditions. |
| --- | --- |

(83)

Lastly, the financing contract with [private operator 2] provides for a financing rate of Euribor 3 months + [...] % with a minimum of [...] %. Although this is not a bank rate, the conditions for granting the financing are such that they confirm that the FDES loan is consistent with market conditions.

4.1.1.3.   Amount of aid

Amount of aid

| (84) | As stated in the notification, France considers that the amount of aid, if any, should be equal to the difference between the rate calculated on the basis of the 2008 Reference Rate Communication and the rate applied, i.e. 4,53 % and 3,5 %, and not the total amount of the loan. |
| --- | --- |

(84)

As stated in the notification, France considers that the amount of aid, if any, should be equal to the difference between the rate calculated on the basis of the 2008 Reference Rate Communication and the rate applied, i.e. 4,53 % and 3,5 %, and not the total amount of the loan.

| (85) | France highlights the fact that, in the past, the Commission has applied this approach on several occasions. |
| --- | --- |

(85)

France highlights the fact that, in the past, the Commission has applied this approach on several occasions.

4.1.2.   Grant and repayable advances

Grant and repayable advances

| (86) | As already pointed out, France acknowledges that the entire grant constitutes State aid. |
| --- | --- |

(86)

As already pointed out, France acknowledges that the entire grant constitutes State aid.

| (87) | With regard to the repayable advances, France takes the view that they cannot be considered State aid in their entirety. The repayment of the advances is certain since it becomes automatic two years after the end of the modernisation work. Therefore, the advances should be equated to loans and, consequently, the amount of aid is the grant equivalent, i.e. EUR 14,4 million. |
| --- | --- |

(87)

With regard to the repayable advances, France takes the view that they cannot be considered State aid in their entirety. The repayment of the advances is certain since it becomes automatic two years after the end of the modernisation work. Therefore, the advances should be equated to loans and, consequently, the amount of aid is the grant equivalent, i.e. EUR 14,4 million.

4.1.3.   Possible write-off of tax and social security debts

Possible write-off of tax and social security debts

| (88) | First of all, France notes that, contrary to what was stated in the notification, the amount of the tax and social security debts is EUR [...] and not EUR 42 million. The EUR [...] is broken down as follows: EUR [...] million in debts contracted before the opening of the court-supervised administration procedure and EUR [...] in debts contracted after the opening of the procedure. The relevant authorities intend to grant a write-off of [...] % of the remissible debts contracted before the opening of the procedure (14), i.e. EUR [...] out of a total public liability of EUR [...] ([...] % of the total public liability). |
| --- | --- |

(88)

First of all, France notes that, contrary to what was stated in the notification, the amount of the tax and social security debts is EUR [...] and not EUR 42 million. The EUR [...] is broken down as follows: EUR [...] million in debts contracted before the opening of the court-supervised administration procedure and EUR [...] in debts contracted after the opening of the procedure. The relevant authorities intend to grant a write-off of [...] % of the remissible debts contracted before the opening of the procedure (14), i.e. EUR [...] out of a total public liability of EUR [...] ([...] % of the total public liability).

14

| (89) | Second, France points out that the write-off applicable to most of the debts owed to private creditors was 100 % or 70 %. |
| --- | --- |

(89)

Second, France points out that the write-off applicable to most of the debts owed to private creditors was 100 % or 70 %.

| (90) | Moreover, the waiver by France of part of its tax and social security claims against Kem One is such as to enable the company's recovery plan to be implemented smoothly. If Kem One were to disappear, France could lose an additional EUR [...] million (15) if it does not grant a total write-off not exceeding EUR [...] million. |
| --- | --- |

(90)

Moreover, the waiver by France of part of its tax and social security claims against Kem One is such as to enable the company's recovery plan to be implemented smoothly. If Kem One were to disappear, France could lose an additional EUR [...] million (15) if it does not grant a total write-off not exceeding EUR [...] million.

15

| (91) | In the light of this information, France is therefore behaving like a prudent creditor. |
| --- | --- |

(91)

In the light of this information, France is therefore behaving like a prudent creditor.

| (92) | In any event, if the measure were to be considered State aid, the amount of aid would be the difference between the level of the write-off finally agreed to by France and the level of the minimum write-off accepted by all the private creditors. |
| --- | --- |

(92)

In any event, if the measure were to be considered State aid, the amount of aid would be the difference between the level of the write-off finally agreed to by France and the level of the minimum write-off accepted by all the private creditors.

4.2.   COMPATIBILITY

4.2.1.   Restoration of viability

Restoration of viability

| (93) | In the opening decision, the Commission called on France to comment on the statement that it had included in the restructuring costs only the costs of modernising the production facilities, whereas Kem One's restructuring necessarily had to generate additional costs linked to each restructuring measure (reduction in structural costs and reorientation of the commercial policy). In its observations, France stresses that the reduction in structural costs resulted in only 13 redundancies, with an associated financial cost of EUR [...] million. This cost was not identified separately in the business plan or the cash flow plan attached to the notification, but was none the less deducted from the opening cash position. Furthermore, the other intense efforts associated with the reduction in central costs did not result in specific financial charges. The reorientation of the commercial policy did not result in any directly associated cost. |
| --- | --- |

(93)

In the opening decision, the Commission called on France to comment on the statement that it had included in the restructuring costs only the costs of modernising the production facilities, whereas Kem One's restructuring necessarily had to generate additional costs linked to each restructuring measure (reduction in structural costs and reorientation of the commercial policy). In its observations, France stresses that the reduction in structural costs resulted in only 13 redundancies, with an associated financial cost of EUR [...] million. This cost was not identified separately in the business plan or the cash flow plan attached to the notification, but was none the less deducted from the opening cash position. Furthermore, the other intense efforts associated with the reduction in central costs did not result in specific financial charges. The reorientation of the commercial policy did not result in any directly associated cost.

| (94) | In addition, a number of positive aspects confirm the realistic nature of the restoration of viability scenarios presented by the company. Thus, in the base-case scenario, the cash position was increased by EUR [30-40] million at the end of 2017, because of a reduction in the investments needed and an earlier than expected restart in activity, while the projected operating income has been revised to EUR [35-45] million per year instead of EUR [25-35] million. Furthermore, the involvement of a number of private companies, such as [private operator 1], [private operator 3], [private operator 4] and [private operator 5], which have agreed to write off all of their claims against Kem One, and of [private operator 2], which has agreed to increase Kem One's factoring capacity, demonstrate these companies' belief in the undertaking's return to long-term viability. |
| --- | --- |

(94)

In addition, a number of positive aspects confirm the realistic nature of the restoration of viability scenarios presented by the company. Thus, in the base-case scenario, the cash position was increased by EUR [30-40] million at the end of 2017, because of a reduction in the investments needed and an earlier than expected restart in activity, while the projected operating income has been revised to EUR [35-45] million per year instead of EUR [25-35] million. Furthermore, the involvement of a number of private companies, such as [private operator 1], [private operator 3], [private operator 4] and [private operator 5], which have agreed to write off all of their claims against Kem One, and of [private operator 2], which has agreed to increase Kem One's factoring capacity, demonstrate these companies' belief in the undertaking's return to long-term viability.

| (95) | The bank loan of EUR [60-70] million remains hypothetical and had not yet been applied for when France submitted its response. Under these conditions, France considers that the fact that there is no guarantee about the bank loan does not undermine the three scenarios relating to the undertaking's return to viability, nor does the amount of the undertaking's own contribution. |
| --- | --- |

(95)

The bank loan of EUR [60-70] million remains hypothetical and had not yet been applied for when France submitted its response. Under these conditions, France considers that the fact that there is no guarantee about the bank loan does not undermine the three scenarios relating to the undertaking's return to viability, nor does the amount of the undertaking's own contribution.

4.2.2.   The company's own contribution

The company's own contribution

| (96) | It its observations, France does not challenge the decision not to include the bank loan of EUR [60-70] million in Kem One's own funds because it is a hypothetical element, given the lack of a firm commitment by a financial institution. |
| --- | --- |

(96)

It its observations, France does not challenge the decision not to include the bank loan of EUR [60-70] million in Kem One's own funds because it is a hypothetical element, given the lack of a firm commitment by a financial institution.

| (97) | A contrario, the debt write-offs agreed to by [private operator 3], [private operator 1], [private operator 4] and [private operator 5] should be considered to be genuine financial flows to the benefit of Kem One and therefore taken into account in the own contribution. These companies are long-standing commercial partners of Kem One, and it is in their interest that Kem One succeeds. Accordingly, the debt write-offs amounting to EUR 180,5 million correspond to prudent industrial decisions, with a direct interest in the success of the recovery plan adopted by Kem One and its buyers. The other debt write-offs follow the same logic and involve lower amounts. |
| --- | --- |

(97)

A contrario, the debt write-offs agreed to by [private operator 3], [private operator 1], [private operator 4] and [private operator 5] should be considered to be genuine financial flows to the benefit of Kem One and therefore taken into account in the own contribution. These companies are long-standing commercial partners of Kem One, and it is in their interest that Kem One succeeds. Accordingly, the debt write-offs amounting to EUR 180,5 million correspond to prudent industrial decisions, with a direct interest in the success of the recovery plan adopted by Kem One and its buyers. The other debt write-offs follow the same logic and involve lower amounts.

A contrario

| (98) | The private contributions therefore total EUR 282,5 million, broken down as follows:

  Table 3


  Sources of the private contributions allowed for in the restructuring plan, according to France







  Source of contribution | Amount (EUR m) |
| --- | --- | --- |
| Kem One self financing | [30-40] |
| Financing [private operator 1] | [35-45] |
| Financing [private operator 2] | [55-65] |
| Capital injection by the buyers | [5-15] |
| Satisfaction of debts [private operator 6] | [0-10] |
| Write-off of debts [private operator 1] | [90-100] |
| Write-off of debts [private operator 3] | [25-35] |
| Write-off of debts [private operator 4] | [0-10] |
| Write-off of debts [private operator 5] | [0-10] |
| Total | 282,5 |
| Source: Response by France to the opening decision |

(98)

The private contributions therefore total EUR 282,5 million, broken down as follows:

Table 3

Table 3

Sources of the private contributions allowed for in the restructuring plan, according to France

Sources of the private contributions allowed for in the restructuring plan, according to France

Source of contribution

Amount (EUR m)

Kem One self financing

[30-40]

Financing [private operator 1]

[35-45]

Financing [private operator 2]

[55-65]

Capital injection by the buyers

[5-15]

Satisfaction of debts [private operator 6]

[0-10]

Write-off of debts [private operator 1]

[90-100]

Write-off of debts [private operator 3]

[25-35]

Write-off of debts [private operator 4]

[0-10]

Write-off of debts [private operator 5]

[0-10]

Total

Total

282,5

282,5

Source: Response by France to the opening decision

Source:

5.   COMMENTS BY INTERESTED THIRD PARTIES AND OBSERVATIONS BY FRANCE

COMMENTS BY INTERESTED THIRD PARTIES AND OBSERVATIONS BY FRANCE

5.1.   COMMENTS BY INTERESTED THIRD PARTIES

5.1.1.   Comments by Ineos

Comments by Ineos

5.1.1.1.   Amount of State aid and own contribution by Kem One

Amount of State aid and own contribution by Kem One

| (99) | Ineos takes the view that the request by France severely underestimates the amount of State aid and does not envisage a sufficient contribution by Kem One and its shareholders. |
| --- | --- |

(99)

Ineos takes the view that the request by France severely underestimates the amount of State aid and does not envisage a sufficient contribution by Kem One and its shareholders.

| (100) | Amount of State aid. With regard, first, to the FDES loan, Ineos refutes France's analysis that only the difference between the actual rate on this loan (3,5 %) and a supposedly market rate of 4,53 % (i.e. 1,03 percentage points) may be considered aid. If the assertions by France were correct, Kem One should be able to obtain a loan from a private creditor on the same terms, which the firm was not able to do. Furthermore, the value of the collateral has been greatly overvalued. The book value of assets cannot be equated to the market value in the event of severe economic and financial difficulties, all the more so since the collateral only has value in an operating cycle that has proven to be fragile. In conclusion, according to Ineos, the entire FDES loan should be considered aid. |
| --- | --- |

(100)

Amount of State aid. With regard, first, to the FDES loan, Ineos refutes France's analysis that only the difference between the actual rate on this loan (3,5 %) and a supposedly market rate of 4,53 % (i.e. 1,03 percentage points) may be considered aid. If the assertions by France were correct, Kem One should be able to obtain a loan from a private creditor on the same terms, which the firm was not able to do. Furthermore, the value of the collateral has been greatly overvalued. The book value of assets cannot be equated to the market value in the event of severe economic and financial difficulties, all the more so since the collateral only has value in an operating cycle that has proven to be fragile. In conclusion, according to Ineos, the entire FDES loan should be considered aid.

| (101) | With regard to the direct grant and the repayable advances, Ineos takes the view that the full amount constitutes aid. As to the repayable advances, the condition of maintaining activity at the Lavéra site would not be required by any private creditor. Furthermore, the rates are too low in comparison with those applied under the same conditions by a private creditor. |
| --- | --- |

(101)

With regard to the direct grant and the repayable advances, Ineos takes the view that the full amount constitutes aid. As to the repayable advances, the condition of maintaining activity at the Lavéra site would not be required by any private creditor. Furthermore, the rates are too low in comparison with those applied under the same conditions by a private creditor.

| (102) | With regard to the debt reduction, Ineos stresses that, although the commercial creditors have a legitimate commercial interest in Kem One's recovery, the French state itself is in the position of being a pure financial creditor. Thus, the debt reductions agreed by the French state cannot be likened to the reductions agreed by the private creditors. |
| --- | --- |

(102)

With regard to the debt reduction, Ineos stresses that, although the commercial creditors have a legitimate commercial interest in Kem One's recovery, the French state itself is in the position of being a pure financial creditor. Thus, the debt reductions agreed by the French state cannot be likened to the reductions agreed by the private creditors.

| (103) | Ineos emphasises that Kem One benefits from advantageous contracts for the supply of electricity and ethylene. Ineos has no doubt that the decisions by EDF on this issue are imputable to the French state. Ineos calls on the Commission to look into the reasons underlying the granting of these reductions. These preferential tariffs are likely to improve the competitive position of Kem One. |
| --- | --- |

(103)

Ineos emphasises that Kem One benefits from advantageous contracts for the supply of electricity and ethylene. Ineos has no doubt that the decisions by EDF on this issue are imputable to the French state. Ineos calls on the Commission to look into the reasons underlying the granting of these reductions. These preferential tariffs are likely to improve the competitive position of Kem One.

| (104) | Own contribution by Kem One. Ineos believes that France has overestimated the amount of Kem One's own contribution to the restructuring costs. France includes in the own contribution three loans from private sources: a loan of between EUR 60 and 80 million and two further loans of, respectively, EUR 35 to 45 million and EUR 40 to 50 million. According to Ineos, there is no evidence that a private entity would consent to such a risk, and the hypothetical and improbable nature of these loans implies that they should not be taken into account when assessing the amount of Kem One's own contribution. |
| --- | --- |

(104)

Own contribution by Kem One. Ineos believes that France has overestimated the amount of Kem One's own contribution to the restructuring costs. France includes in the own contribution three loans from private sources: a loan of between EUR 60 and 80 million and two further loans of, respectively, EUR 35 to 45 million and EUR 40 to 50 million. According to Ineos, there is no evidence that a private entity would consent to such a risk, and the hypothetical and improbable nature of these loans implies that they should not be taken into account when assessing the amount of Kem One's own contribution.

| (105) | First, Ineos stresses the fact that OpenGate, one of Kem One's parent companies, is in good financial health, so that it could participate in the restructuring costs. Ineos takes the view that France must demonstrate that Kem One's difficulties are too severe to be addressed by its shareholders (OpenGate in particular). Second, if the State aid is found to be admissible in the case of Kem One, the shareholders, and OpenGate in particular, must substantially increase the amount of their contribution. |
| --- | --- |

(105)

First, Ineos stresses the fact that OpenGate, one of Kem One's parent companies, is in good financial health, so that it could participate in the restructuring costs. Ineos takes the view that France must demonstrate that Kem One's difficulties are too severe to be addressed by its shareholders (OpenGate in particular). Second, if the State aid is found to be admissible in the case of Kem One, the shareholders, and OpenGate in particular, must substantially increase the amount of their contribution.

5.1.1.2.   Restructuring plan

Restructuring plan

| (106) | Ineos takes the view that France is not proposing a realistic restructuring plan capable of returning Kem One to economic viability within a reasonable time. |
| --- | --- |

(106)

Ineos takes the view that France is not proposing a realistic restructuring plan capable of returning Kem One to economic viability within a reasonable time.

| (107) | First, the current restructuring plan is based on very substantial investments and cash injections but does not provide for rationalisation of Kem One's activities. Second, the restructuring plan assumes that Kem One will be able to increase significantly its market share and sales in markets for products which are already suffering from severe overcapacity problems and intense competition, and for which demand estimates are low. |
| --- | --- |

(107)

First, the current restructuring plan is based on very substantial investments and cash injections but does not provide for rationalisation of Kem One's activities. Second, the restructuring plan assumes that Kem One will be able to increase significantly its market share and sales in markets for products which are already suffering from severe overcapacity problems and intense competition, and for which demand estimates are low.

| (108) | In the view of Ineos, the restructuring plan does not provide for the rationalisation of Kem One's loss-making activities. Kem One is suffering from a structural problem of overcapacity. In 2012, the ratio of its production to its total S-PVC capacity was only 60-70 %, well below the average utilisation rates of S-PVC producers in the north-western European market. |
| --- | --- |

(108)

In the view of Ineos, the restructuring plan does not provide for the rationalisation of Kem One's loss-making activities. Kem One is suffering from a structural problem of overcapacity. In 2012, the ratio of its production to its total S-PVC capacity was only 60-70 %, well below the average utilisation rates of S-PVC producers in the north-western European market.

| (109) | Under the restructuring plan's underlying assumption, Kem One should increase considerably its production and sales in the north-western European market. Besides the fact that Kem One has traditionally concentrated its sales of S-PVC in southern Europe, this prospect seems implausible to Ineos. The PVC market in north-western Europe is already characterised by very high oversupply and the forecasts for this market are for weak demand growth over the next five years. Moreover, the acquisition of Vestolit and Vinnolit by two American PVC producers should provide those two players with a more efficient cost structure, which will make them more effective competitors. Lastly, Kem One has a bad reputation among customers in the north-western European market. |
| --- | --- |

(109)

Under the restructuring plan's underlying assumption, Kem One should increase considerably its production and sales in the north-western European market. Besides the fact that Kem One has traditionally concentrated its sales of S-PVC in southern Europe, this prospect seems implausible to Ineos. The PVC market in north-western Europe is already characterised by very high oversupply and the forecasts for this market are for weak demand growth over the next five years. Moreover, the acquisition of Vestolit and Vinnolit by two American PVC producers should provide those two players with a more efficient cost structure, which will make them more effective competitors. Lastly, Kem One has a bad reputation among customers in the north-western European market.

| (110) | The restructuring plan provides for the reorientation of commercial policy towards more profitable products, i.e. E-PVC, PVC-C and liquid chlorine. An increase in sales of caustic soda in the north-western European market is also planned. According to Ineos, this strategy is unlikely to succeed. |
| --- | --- |

(110)

The restructuring plan provides for the reorientation of commercial policy towards more profitable products, i.e. E-PVC, PVC-C and liquid chlorine. An increase in sales of caustic soda in the north-western European market is also planned. According to Ineos, this strategy is unlikely to succeed.

| (111) | First, the plan provides for growth of production and sales of E-PVC with the aim of utilising Kem One's excess capacity, and because the product is relatively more profitable. Yet the E-PVC market in the EEA is highly competitive and already suffering from overcapacity. No substantial increase in demand in the market is expected in the medium or long term. Ineos also stresses that other E-PVC producers who are more credible and better placed in the EEA have announced recent or future investments in their production capacity. |
| --- | --- |

(111)

First, the plan provides for growth of production and sales of E-PVC with the aim of utilising Kem One's excess capacity, and because the product is relatively more profitable. Yet the E-PVC market in the EEA is highly competitive and already suffering from overcapacity. No substantial increase in demand in the market is expected in the medium or long term. Ineos also stresses that other E-PVC producers who are more credible and better placed in the EEA have announced recent or future investments in their production capacity.

| (112) | With regard to the project to increase production of PVC-C with a view to benefiting from its higher profitability, Ineos insists that it is a niche product, for which European demand is very low. The French market for liquid chlorine is characterised by its small size and high degree of competition. |
| --- | --- |

(112)

With regard to the project to increase production of PVC-C with a view to benefiting from its higher profitability, Ineos insists that it is a niche product, for which European demand is very low. The French market for liquid chlorine is characterised by its small size and high degree of competition.

| (113) | Lastly, with regard to the project to increase sales of caustic soda in the north-western European market, Ineos points out that caustic soda is an inevitable by-product of chlorine production. The level of production of caustic soda (and hence the volume of sales) is determined by demand for chlorinated derivatives (such as PVC). Kem One cannot hope to increase its volume of sales of caustic soda without presenting a plausible plan to increase its sales of chlorinated derivatives downstream. |
| --- | --- |

(113)

Lastly, with regard to the project to increase sales of caustic soda in the north-western European market, Ineos points out that caustic soda is an inevitable by-product of chlorine production. The level of production of caustic soda (and hence the volume of sales) is determined by demand for chlorinated derivatives (such as PVC). Kem One cannot hope to increase its volume of sales of caustic soda without presenting a plausible plan to increase its sales of chlorinated derivatives downstream.

5.1.1.3.   Compensatory measures

Compensatory measures

| (114) | According to Ineos, France is not proposing any appropriate compensatory measures. Ineos stresses that the 2004 Guidelines unambiguously require the use of compensatory measures. |
| --- | --- |

(114)

According to Ineos, France is not proposing any appropriate compensatory measures. Ineos stresses that the 2004 Guidelines unambiguously require the use of compensatory measures.

| (115) | Ineos notes that only half the production capacity for S-PVC in the north-western European market is used for sales in the same market. This serious problem of overcapacity does not seem likely to disappear in the medium term, given the prospects for the construction industry. The consequence of overcapacity and low demand is a reduction in the margins of European PVC producers. Against this background, the planned aid would give Kem One a significant advantage. |
| --- | --- |

(115)

Ineos notes that only half the production capacity for S-PVC in the north-western European market is used for sales in the same market. This serious problem of overcapacity does not seem likely to disappear in the medium term, given the prospects for the construction industry. The consequence of overcapacity and low demand is a reduction in the margins of European PVC producers. Against this background, the planned aid would give Kem One a significant advantage.

| (116) | In particular, it would enable it to convert its technology to mercury, which would exacerbate the risk for its competitors of having to close down certain parts of their capacity. Furthermore, if Kem One actually succeeds in increasing its sales in the north-western European market, it would contribute to increasing the competitive pressure still further. |
| --- | --- |

(116)

In particular, it would enable it to convert its technology to mercury, which would exacerbate the risk for its competitors of having to close down certain parts of their capacity. Furthermore, if Kem One actually succeeds in increasing its sales in the north-western European market, it would contribute to increasing the competitive pressure still further.

| (117) | Ineos takes the view that it is essential to reduce Kem One's PVC production capacity permanently, given that the structural problem of overcapacity in the market will continue in the long term. |
| --- | --- |

(117)

Ineos takes the view that it is essential to reduce Kem One's PVC production capacity permanently, given that the structural problem of overcapacity in the market will continue in the long term.

| (118) | Lastly, Ineos notes that, in the context of relevant markets suffering from structural overcapacity, the 2004 Guidelines lay down that the Commission should grant in principle only targeted aid for the costs of social and environmental restructuring. Ineos takes the view that the restructuring aid should therefore be targeted on the environmental and social costs linked to closure of the Lavéra site, rather than its conversion. |
| --- | --- |

(118)

Lastly, Ineos notes that, in the context of relevant markets suffering from structural overcapacity, the 2004 Guidelines lay down that the Commission should grant in principle only targeted aid for the costs of social and environmental restructuring. Ineos takes the view that the restructuring aid should therefore be targeted on the environmental and social costs linked to closure of the Lavéra site, rather than its conversion.

| (119) | Ineos believes that Kem One is very well positioned in the S-PVC market in north-western Europe, which constitutes an additional reason why substantial compensatory measures should be effectively applied. In 2012, Kem One was the third biggest player in the S-PVC market in north-western Europe, with between 10 and 20 % of total capacity. |
| --- | --- |

(119)

Ineos believes that Kem One is very well positioned in the S-PVC market in north-western Europe, which constitutes an additional reason why substantial compensatory measures should be effectively applied. In 2012, Kem One was the third biggest player in the S-PVC market in north-western Europe, with between 10 and 20 % of total capacity.

| (120) | Furthermore, France cannot assert, on the one hand, that Kem One is suffering from a weak position in the S-PVC market, and, on the other, that any reduction in its production capacity would lead to a weakening of the competitive structure in the same market. |
| --- | --- |

(120)

Furthermore, France cannot assert, on the one hand, that Kem One is suffering from a weak position in the S-PVC market, and, on the other, that any reduction in its production capacity would lead to a weakening of the competitive structure in the same market.

| (121) | Ineos stresses that the purpose of these compensatory measures is not to take out the firm entirely, but to reduce its capacity. Moreover, Ineos takes the view that it is incorrect that a reduction in capacity — and even the very disappearance of Kem One from the market — would render its customers unable to put in place a strategy of multiple sources of supply. Ineos notes that there are, or that there will be in the near future, five other sizeable suppliers, plus other, smaller competitors. Ineos stresses again that Kem One is not, in any case, regarded as reliable in this market. Lastly, Ineos highlights the fact that the market in question is competitive. |
| --- | --- |

(121)

Ineos stresses that the purpose of these compensatory measures is not to take out the firm entirely, but to reduce its capacity. Moreover, Ineos takes the view that it is incorrect that a reduction in capacity — and even the very disappearance of Kem One from the market — would render its customers unable to put in place a strategy of multiple sources of supply. Ineos notes that there are, or that there will be in the near future, five other sizeable suppliers, plus other, smaller competitors. Ineos stresses again that Kem One is not, in any case, regarded as reliable in this market. Lastly, Ineos highlights the fact that the market in question is competitive.

| (122) | According to Ineos, compensatory measures are also necessary in other markets, which are all characterised by overcapacity problems and sound positioning by Kem One. The first market is the E-PVC market, in which Kem One had 10 to 20 % of total capacity in 2012. In the chloromethanes market, the aid in question will result in downstream production on a cost basis that is more advantageous than that of Kem One's competitors. With regard, lastly, to the caustic soda market, Ineos points out that it is an inevitable by-product of chlorine production. |
| --- | --- |

(122)

According to Ineos, compensatory measures are also necessary in other markets, which are all characterised by overcapacity problems and sound positioning by Kem One. The first market is the E-PVC market, in which Kem One had 10 to 20 % of total capacity in 2012. In the chloromethanes market, the aid in question will result in downstream production on a cost basis that is more advantageous than that of Kem One's competitors. With regard, lastly, to the caustic soda market, Ineos points out that it is an inevitable by-product of chlorine production.

| (123) | Ineos takes the view that compensatory measures are possible and that they would help to create a viable production chain. |
| --- | --- |

(123)

Ineos takes the view that compensatory measures are possible and that they would help to create a viable production chain.

| (124) | In that regard, Ineos takes the view that Kem One should adopt a restructuring plan involving:






  — | closure of its Lavéra electrolysis cell rooms, |
| --- | --- | --- |

(124)

In that regard, Ineos takes the view that Kem One should adopt a restructuring plan involving:

—

closure of its Lavéra electrolysis cell rooms,

| — | closure of the PVC production plants that can no longer receive adequate supplies of VCM from the Fos-sur-Mer site, i.e. Saint-Fons and Balan. |
| --- | --- |

—

closure of the PVC production plants that can no longer receive adequate supplies of VCM from the Fos-sur-Mer site, i.e. Saint-Fons and Balan.

| (125) | In the opinion of Ineos, such a capacity reduction by Kem One would mitigate the distortive effects of the aid in the market, rationalise Kem One's activities on a more competitive basis, and make good the withdrawal from structurally loss-making activities (in particular on the Lavéra site). This solution would resolve the problem of Kem One's overcapacity and obviate the need for the French state to contribute to the conversion of the Lavéra site through substantial investments. |
| --- | --- |

(125)

In the opinion of Ineos, such a capacity reduction by Kem One would mitigate the distortive effects of the aid in the market, rationalise Kem One's activities on a more competitive basis, and make good the withdrawal from structurally loss-making activities (in particular on the Lavéra site). This solution would resolve the problem of Kem One's overcapacity and obviate the need for the French state to contribute to the conversion of the Lavéra site through substantial investments.

5.1.2.   Comments by anonymous undertaking 1

Comments by anonymous undertaking 1

5.1.2.1.   Justification for State aid

Justification for State aid

| (126) | First, anonymous undertaking 1 emphasises the fact that the PVC sector is in crisis and the major players are subject to substantial economic and financial pressure. European operators must agree to substantial investments under the regulatory framework in a context marked since 2007 by a fall in margins, a reduction in European demand for PVC, falling prices, high energy costs, overcapacity problems and, lastly, the poor economic situation of the construction sector. |
| --- | --- |

(126)

First, anonymous undertaking 1 emphasises the fact that the PVC sector is in crisis and the major players are subject to substantial economic and financial pressure. European operators must agree to substantial investments under the regulatory framework in a context marked since 2007 by a fall in margins, a reduction in European demand for PVC, falling prices, high energy costs, overcapacity problems and, lastly, the poor economic situation of the construction sector.

| (127) | Against this background, it is important to maintain a level playing field. Aid to Kem One is considered a potential source of serious market distortion. |
| --- | --- |

(127)

Against this background, it is important to maintain a level playing field. Aid to Kem One is considered a potential source of serious market distortion.

| (128) | France claims that, without any aid measures to Kem One, the market would be characterised by a situation of tight oligopoly. Anonymous undertaking 1 does not agree with that point of view. It points out that the Commission, in its Ineos/Solvay/JV decision, did not conclude that the market was characterised by such a situation. At the time, the Commission referred to the fact that S-PVC was currently produced or imported by 11 companies. |
| --- | --- |

(128)

France claims that, without any aid measures to Kem One, the market would be characterised by a situation of tight oligopoly. Anonymous undertaking 1 does not agree with that point of view. It points out that the Commission, in its Ineos/Solvay/JV decision, did not conclude that the market was characterised by such a situation. At the time, the Commission referred to the fact that S-PVC was currently produced or imported by 11 companies.

| (129) | Moreover, anonymous undertaking 1 notes that granting aid to the third-largest player in the sector would only delay the necessary market adjustments and improvements and exacerbate the financial difficulties of the other operators. According to anonymous undertaking 1, it is even possible to argue that no aid may be granted, under point 8 of the 2004 Guidelines, because the market is suffering from structural overcapacity. |
| --- | --- |

(129)

Moreover, anonymous undertaking 1 notes that granting aid to the third-largest player in the sector would only delay the necessary market adjustments and improvements and exacerbate the financial difficulties of the other operators. According to anonymous undertaking 1, it is even possible to argue that no aid may be granted, under point 8 of the 2004 Guidelines, because the market is suffering from structural overcapacity.

| (130) | Anonymous undertaking 1 also raises doubts about Kem One's prospects of returning to profitability. It notes that the Commission, in its Ineos/Solvay/JV decision, had already established Kem One's inability to return to economic viability, even after its acquisition by Klesch. |
| --- | --- |

(130)

Anonymous undertaking 1 also raises doubts about Kem One's prospects of returning to profitability. It notes that the Commission, in its Ineos/Solvay/JV decision, had already established Kem One's inability to return to economic viability, even after its acquisition by Klesch.

| (131) | The measures in the restructuring plan as announced in the opening decision lack detail, in particular with regard to Kem One's new commercial strategy, the conversion of the electrolysis units and the credibility of the firm's future contracts. Furthermore, it seems likely that the restructuring period will exceed five years — the duration judged acceptable by the Commission in its previous decisions. |
| --- | --- |

(131)

The measures in the restructuring plan as announced in the opening decision lack detail, in particular with regard to Kem One's new commercial strategy, the conversion of the electrolysis units and the credibility of the firm's future contracts. Furthermore, it seems likely that the restructuring period will exceed five years — the duration judged acceptable by the Commission in its previous decisions.

| (132) | Moreover, the timing of the investments required to modernise the electrolysis plants is uncertain (2016 or 2017). The European rules require European operators to convert from mercury technology by the end of 2017. If France allowed Kem One to delay the necessary investments, it would be preferential treatment that could constitute a financial advantage and therefore a form of State aid. |
| --- | --- |

(132)

Moreover, the timing of the investments required to modernise the electrolysis plants is uncertain (2016 or 2017). The European rules require European operators to convert from mercury technology by the end of 2017. If France allowed Kem One to delay the necessary investments, it would be preferential treatment that could constitute a financial advantage and therefore a form of State aid.

| (133) | Lastly, implementing restructuring measures depends on external factors that are outside the firm's control. That is the case in particular with the bank loan of EUR 60 to 70 million in 2016. |
| --- | --- |

(133)

Lastly, implementing restructuring measures depends on external factors that are outside the firm's control. That is the case in particular with the bank loan of EUR 60 to 70 million in 2016.

5.1.2.2.   Amount of State aid

Amount of State aid

| (134) | With regard to the amount of aid, anonymous undertaking 1 stresses the fact that it is much higher than the amount granted by France. Certain measures may be considered State aid in their entirety, such as the direct grant of EUR 15 million and the repayable advances of EUR 80 million for the modernisation of production plant. A private investor would not, under any circumstances, have made his decision conditional on the maintenance of activity and staff at the Lavéra site. Moreover, the purely hypothetical nature of the private bank loan is not enough to demonstrate the willingness of a private investor to grant a loan on the same terms. |
| --- | --- |

(134)

With regard to the amount of aid, anonymous undertaking 1 stresses the fact that it is much higher than the amount granted by France. Certain measures may be considered State aid in their entirety, such as the direct grant of EUR 15 million and the repayable advances of EUR 80 million for the modernisation of production plant. A private investor would not, under any circumstances, have made his decision conditional on the maintenance of activity and staff at the Lavéra site. Moreover, the purely hypothetical nature of the private bank loan is not enough to demonstrate the willingness of a private investor to grant a loan on the same terms.

| (135) | With regard to the FDES loan of EUR 30 million, in the absence of a detailed list of the assets and equipment constituting the collateral, and of an evaluation of their market value, it is impossible to conclude that the level of collateral is ‘high’. According to anonymous undertaking 1, the level may at most be regarded as normal, in which case, in accordance with the 2008 Reference Rate Communication, the base rate of 0,53 % would have to be increased by at least 6,00 %. This would considerably increase the amount considered to be aid in the FDES loan. |
| --- | --- |

(135)

With regard to the FDES loan of EUR 30 million, in the absence of a detailed list of the assets and equipment constituting the collateral, and of an evaluation of their market value, it is impossible to conclude that the level of collateral is ‘high’. According to anonymous undertaking 1, the level may at most be regarded as normal, in which case, in accordance with the 2008 Reference Rate Communication, the base rate of 0,53 % would have to be increased by at least 6,00 %. This would considerably increase the amount considered to be aid in the FDES loan.

| (136) | Lastly, anonymous undertaking 1 cites the write-off of tax debts and social security contributions of EUR [...]. According to anonymous undertaking 1, these debt write-offs by the state authorities may be likened to the write-offs agreed to by the private creditors only to the extent that they do not exceed the average of such write-offs. Since the average write-off was 70 %, the EUR [...] that exceed the average should be considered State aid. |
| --- | --- |

(136)

Lastly, anonymous undertaking 1 cites the write-off of tax debts and social security contributions of EUR [...]. According to anonymous undertaking 1, these debt write-offs by the state authorities may be likened to the write-offs agreed to by the private creditors only to the extent that they do not exceed the average of such write-offs. Since the average write-off was 70 %, the EUR [...] that exceed the average should be considered State aid.

| (137) | Moreover, anonymous undertaking 1 highlights the fact that the deferred payment of the Seveso guarantee may also be potential aid. An intra-group transfer of EUR 10-19 million was made to Kem One by the Klesch Group for the purposes of the Seveso guarantee. France has confirmed that the amount paid and transferred from the Seveso guarantee would have to be gradually allocated to the reconstitution of the Seveso financial guarantee by Kem One. The financial guarantees are intuitu personae, so that in the event of a change in site operator, the French Environmental Code requires the new operator to make a statement to the relevant Prefect within one month. The Commission should seek confirmation from France that the amount transferred will be actually used to reconstitute the Seveso guarantee and that the delayed payment of the guarantee does not constitute preferential financial treatment granted to Kem One by the Prefect, which potentially implies State aid. |
| --- | --- |

(137)

Moreover, anonymous undertaking 1 highlights the fact that the deferred payment of the Seveso guarantee may also be potential aid. An intra-group transfer of EUR 10-19 million was made to Kem One by the Klesch Group for the purposes of the Seveso guarantee. France has confirmed that the amount paid and transferred from the Seveso guarantee would have to be gradually allocated to the reconstitution of the Seveso financial guarantee by Kem One. The financial guarantees are intuitu personae, so that in the event of a change in site operator, the French Environmental Code requires the new operator to make a statement to the relevant Prefect within one month. The Commission should seek confirmation from France that the amount transferred will be actually used to reconstitute the Seveso guarantee and that the delayed payment of the guarantee does not constitute preferential financial treatment granted to Kem One by the Prefect, which potentially implies State aid.

intuitu personae

| (138) | Moreover, according to anonymous undertaking 1, the existence of possible reductions granted by EDF to Kem One on its new electricity contracts is a fact of which the market is aware. If this point were to be proven, there would then be no doubt about the fact that this preferential treatment is imputable to the French state, since it controls EDF's board of directors and holds more than two thirds of its capital. |
| --- | --- |

(138)

Moreover, according to anonymous undertaking 1, the existence of possible reductions granted by EDF to Kem One on its new electricity contracts is a fact of which the market is aware. If this point were to be proven, there would then be no doubt about the fact that this preferential treatment is imputable to the French state, since it controls EDF's board of directors and holds more than two thirds of its capital.

| (139) | Anonymous undertaking 1 also expresses doubts about the limitation of the aid to the strict minimum, in particular for the SAM investment project. The EUR 95 million awarded in the form of a direct grant and repayable advances serve to finance an investment that the undertaking is required in any case to undertake in accordance with current legislation. The aid for this conversion project may possibly no longer have any incentive effects for Kem One because the company would only be acting in accordance with its legal obligations. There are therefore serious doubts about whether the SAM project is actually an investment essential for restoring Kem One's viability. |
| --- | --- |

(139)

Anonymous undertaking 1 also expresses doubts about the limitation of the aid to the strict minimum, in particular for the SAM investment project. The EUR 95 million awarded in the form of a direct grant and repayable advances serve to finance an investment that the undertaking is required in any case to undertake in accordance with current legislation. The aid for this conversion project may possibly no longer have any incentive effects for Kem One because the company would only be acting in accordance with its legal obligations. There are therefore serious doubts about whether the SAM project is actually an investment essential for restoring Kem One's viability.

| (140) | The bulk of Kem One's own resources is constituted by the debt write-offs by its private creditors. On that basis, Kem One's own contribution does not even reach half of the amount of aid calculated by France, an amount which, as has already been explained, is much lower than the actual amount of aid that has to be taken into account. |
| --- | --- |

(140)

The bulk of Kem One's own resources is constituted by the debt write-offs by its private creditors. On that basis, Kem One's own contribution does not even reach half of the amount of aid calculated by France, an amount which, as has already been explained, is much lower than the actual amount of aid that has to be taken into account.

| (141) | Moreover, the private debt write-offs cannot be considered an own contribution because they do not provide any additional resources to Kem One to cover the costs of its restructuring. |
| --- | --- |

(141)

Moreover, the private debt write-offs cannot be considered an own contribution because they do not provide any additional resources to Kem One to cover the costs of its restructuring.

| (142) | The other block constituting Kem One's own contribution is represented by the bank loan of EUR 60 to 70 million. However, anonymous undertaking 1 has already stressed the hypothetical nature of this loan. |
| --- | --- |

(142)

The other block constituting Kem One's own contribution is represented by the bank loan of EUR 60 to 70 million. However, anonymous undertaking 1 has already stressed the hypothetical nature of this loan.

5.1.2.3.   Compensatory measures

Compensatory measures

| (143) | Lastly, anonymous undertaking 1 stresses the need for compensatory measures to neutralise the consequences of the aid. It does not agree with the position of France that the compensatory measures would jeopardise Kem One's viability and the effects of the aid on the competitive structure would be limited, or even beneficial, for competition in the market. |
| --- | --- |

(143)

Lastly, anonymous undertaking 1 stresses the need for compensatory measures to neutralise the consequences of the aid. It does not agree with the position of France that the compensatory measures would jeopardise Kem One's viability and the effects of the aid on the competitive structure would be limited, or even beneficial, for competition in the market.

| (144) | Anonymous undertaking 1 stresses in particular point 40 of the 2004 Guidelines, which states that compensatory measures should take place in particular in markets where the firm will have a significant market position after restructuring. Anonymous undertaking 1 estimates Kem One's market share in the S-PVC market in north-western Europe at 20 %. |
| --- | --- |

(144)

Anonymous undertaking 1 stresses in particular point 40 of the 2004 Guidelines, which states that compensatory measures should take place in particular in markets where the firm will have a significant market position after restructuring. Anonymous undertaking 1 estimates Kem One's market share in the S-PVC market in north-western Europe at 20 %.

| (145) | Anonymous undertaking 1 disagrees with the position of France that the measures in question are also necessary to maintain a competitive structure in the market. Following the implementation of the corrective measures provided for in the Ineos/Solvay/JV decision, the market will see the emergence of new players, whatever the situation of Kem One. Moreover, there is no evidence that the fact of maintaining Kem One's production capacities constitutes an essential condition for its economic recovery. The measures in question risk exacerbating the problem of overcapacity in the market. |
| --- | --- |

(145)

Anonymous undertaking 1 disagrees with the position of France that the measures in question are also necessary to maintain a competitive structure in the market. Following the implementation of the corrective measures provided for in the Ineos/Solvay/JV decision, the market will see the emergence of new players, whatever the situation of Kem One. Moreover, there is no evidence that the fact of maintaining Kem One's production capacities constitutes an essential condition for its economic recovery. The measures in question risk exacerbating the problem of overcapacity in the market.

| (146) | With regard to possible compensatory measures, anonymous undertaking 1 puts forward a number of proposals:






  — | reduce Kem One's capacity by 200 to 300 kilotonnes. If this reduction were to affect the Lavéra site, that would require a corresponding reduction in the site's VCM capacity, |
| --- | --- | --- |

(146)

With regard to possible compensatory measures, anonymous undertaking 1 puts forward a number of proposals:

—

reduce Kem One's capacity by 200 to 300 kilotonnes. If this reduction were to affect the Lavéra site, that would require a corresponding reduction in the site's VCM capacity,

| — | reduce Kem One's production (if the State aid measures enable the company to artificially maintain a certain level of marginal production), |
| --- | --- |

—

reduce Kem One's production (if the State aid measures enable the company to artificially maintain a certain level of marginal production),

| — | other measures: sell a minority shareholding, terminate certain cooperation agreements, undertake not to diversify Kem One's production during a limited period of time, divide the payment of the restructuring aid into a number of instalments conditional on the effective implementation of the planned measures to a detailed timetable. |
| --- | --- |

—

other measures: sell a minority shareholding, terminate certain cooperation agreements, undertake not to diversify Kem One's production during a limited period of time, divide the payment of the restructuring aid into a number of instalments conditional on the effective implementation of the planned measures to a detailed timetable.

5.1.3.   Comments by Arkema

Comments by Arkema

| (147) | In relation to recital 13 of the opening decision, Arkema points out that its vinyl business was transferred to two subsidiaries when the company was sold to the Klesch Group. At the time of the transfer, an initial adjustment was made to the structural costs of the two units sold. Arkema states that between 2005 and 2010 it implemented a restructuring plan in its vinyl division. Arkema points out that exceptional events, such as the reversal in the economic situation in the second half of 2012 and the interruption of ethylene supplies because of an incident at the Lavéra site, explain the financial difficulties encountered by Kem One in 2013. |
| --- | --- |

(147)

In relation to recital 13 of the opening decision, Arkema points out that its vinyl business was transferred to two subsidiaries when the company was sold to the Klesch Group. At the time of the transfer, an initial adjustment was made to the structural costs of the two units sold. Arkema states that between 2005 and 2010 it implemented a restructuring plan in its vinyl division. Arkema points out that exceptional events, such as the reversal in the economic situation in the second half of 2012 and the interruption of ethylene supplies because of an incident at the Lavéra site, explain the financial difficulties encountered by Kem One in 2013.

| (148) | With regard to recital 14 of the opening decision, Arkema points out that the services and performance contracts between Arkema and Kem One were concluded at the request of Kem One to enable it to continue its activities as usual once the transfer of the business to a subsidiary had been completed. |
| --- | --- |

(148)

With regard to recital 14 of the opening decision, Arkema points out that the services and performance contracts between Arkema and Kem One were concluded at the request of Kem One to enable it to continue its activities as usual once the transfer of the business to a subsidiary had been completed.

| (149) | In recital 126 of the opening decision, the Commission notes that the debt write-offs by the private partners must not be taken into account in the private contributions. In this regard, Arkema points out that, at the same time as its debt write-off, it provided a consolidated contribution of EUR 40,5 million, which did constitute a genuine financial flow and expressed its confidence in the viability of Kem One's recovery plan. According to Arkema, there is no reason to consider the debt write-off differently. The purpose of the write-off of EUR 95,6 million to which Arkema agreed was to assist in providing Kem One with a balance-sheet structure enabling it to contract the necessary loans on acceptable terms, when the time was right. |
| --- | --- |

(149)

In recital 126 of the opening decision, the Commission notes that the debt write-offs by the private partners must not be taken into account in the private contributions. In this regard, Arkema points out that, at the same time as its debt write-off, it provided a consolidated contribution of EUR 40,5 million, which did constitute a genuine financial flow and expressed its confidence in the viability of Kem One's recovery plan. According to Arkema, there is no reason to consider the debt write-off differently. The purpose of the write-off of EUR 95,6 million to which Arkema agreed was to assist in providing Kem One with a balance-sheet structure enabling it to contract the necessary loans on acceptable terms, when the time was right.

| (150) | Arkema recalls that it is a stakeholder in part of the risks involved in Kem One continuing its activity. For example, Arkema has chosen to maintain its flow of supplies of products and by-products with Kem One, whereas they could have been reallocated to other suppliers. |
| --- | --- |

(150)

Arkema recalls that it is a stakeholder in part of the risks involved in Kem One continuing its activity. For example, Arkema has chosen to maintain its flow of supplies of products and by-products with Kem One, whereas they could have been reallocated to other suppliers.

5.1.4.   Comments by Vestolit

Comments by Vestolit

| (151) | Vestolit considers that the measures granted to Kem One by the French state will have an adverse impact on the competitive situation of the PVC market in Europe. Vestolit draws the Commission's attention to the fact that the market is in a state of overcapacity and that a number of independent studies are forecasting stagnation of demand. |
| --- | --- |

(151)

Vestolit considers that the measures granted to Kem One by the French state will have an adverse impact on the competitive situation of the PVC market in Europe. Vestolit draws the Commission's attention to the fact that the market is in a state of overcapacity and that a number of independent studies are forecasting stagnation of demand.

| (152) | These measures will cause difficulties in particular for the companies which have modernised their assets themselves (using own resources). The State aid will enable Kem One to maintain obsolete assets that are not economically viable. |
| --- | --- |

(152)

These measures will cause difficulties in particular for the companies which have modernised their assets themselves (using own resources). The State aid will enable Kem One to maintain obsolete assets that are not economically viable.

| (153) | Lastly, Vestolit stresses that Kem One would not have been able to obtain the loans on the same terms in the market. |
| --- | --- |

(153)

Lastly, Vestolit stresses that Kem One would not have been able to obtain the loans on the same terms in the market.

| (154) | Accordingly, Vestolit calls on the Commission to consider imposing compensatory measures. |
| --- | --- |

(154)

Accordingly, Vestolit calls on the Commission to consider imposing compensatory measures.

5.1.5.   Comments by the ECVM

Comments by the ECVM

| (155) | The European Council of Vinyl Manufacturers (ECVM) represents the interests of the European producers of PVC resin. Its five members account for some 70 % of the PVC produced in the EU and Norway. The ECVM is a founder member of the VinylPlus programme, which is a 10-year voluntary commitment relating to sustainable development launched in 2011. |
| --- | --- |

(155)

The European Council of Vinyl Manufacturers (ECVM) represents the interests of the European producers of PVC resin. Its five members account for some 70 % of the PVC produced in the EU and Norway. The ECVM is a founder member of the VinylPlus programme, which is a 10-year voluntary commitment relating to sustainable development launched in 2011.

| (156) | In 2012, Kem One took a unilateral decision to leave the EVCM, at the same time ceasing to contribute to the VinylPlus programme. The ECVM takes the view that Kem One benefits from the efforts and financial contributions of other PVC producers to the VinylPlus programme, without sharing the financial burden. This situation is at the origin of an unfair competitive advantage for a company that is also a beneficiary of State aid. Consequently, the ECVM calls for the setting-up of a compensatory measure consisting of an obligation for Kem One to contribute to VinylPlus. |
| --- | --- |

(156)

In 2012, Kem One took a unilateral decision to leave the EVCM, at the same time ceasing to contribute to the VinylPlus programme. The ECVM takes the view that Kem One benefits from the efforts and financial contributions of other PVC producers to the VinylPlus programme, without sharing the financial burden. This situation is at the origin of an unfair competitive advantage for a company that is also a beneficiary of State aid. Consequently, the ECVM calls for the setting-up of a compensatory measure consisting of an obligation for Kem One to contribute to VinylPlus.

5.1.6.   Comments by anonymous undertaking 2

Comments by anonymous undertaking 2

| (157) | The Commission notes first that the comments by anonymous undertaking 2 were submitted after the deadline for receiving comments from third parties. |
| --- | --- |

(157)

The Commission notes first that the comments by anonymous undertaking 2 were submitted after the deadline for receiving comments from third parties.

| (158) | First, anonymous undertaking 2 claims that the measures in question give a substantial competitive advantage to Kem One. It takes the view that, given the current market situation, the conversion from mercury technology is not profitable for its competitors. As a result, only companies in receipt of State aid will be able to undertake such an investment. This is explained by the fact that the difference between the cost of production of ethylene dichloride (EDC) by chlorination and its cost of acquisition is not such as to justify a large investment to produce chlorine to be used for chlorination. Yet directly produced EDC is less expensive, so Kem One will enjoy a considerable advantage in relation to its competitors, thanks to State aid. |
| --- | --- |

(158)

First, anonymous undertaking 2 claims that the measures in question give a substantial competitive advantage to Kem One. It takes the view that, given the current market situation, the conversion from mercury technology is not profitable for its competitors. As a result, only companies in receipt of State aid will be able to undertake such an investment. This is explained by the fact that the difference between the cost of production of ethylene dichloride (EDC) by chlorination and its cost of acquisition is not such as to justify a large investment to produce chlorine to be used for chlorination. Yet directly produced EDC is less expensive, so Kem One will enjoy a considerable advantage in relation to its competitors, thanks to State aid.

| (159) | Second, anonymous undertaking 2 stresses the fact that the market is characterised by substantial oversupply, which it estimates at 1 million tonnes per year. In this context, which is made still more difficult by forecasts of stagnant or even falling demand, the return on investment is very uncertain. |
| --- | --- |

(159)

Second, anonymous undertaking 2 stresses the fact that the market is characterised by substantial oversupply, which it estimates at 1 million tonnes per year. In this context, which is made still more difficult by forecasts of stagnant or even falling demand, the return on investment is very uncertain.

| (160) | Anonymous undertaking 2 disagrees with France about the counterfactual scenario in the absence of aid. It points out that, since Kem One's commercial policy is largely geared to southern Europe, there is no risk that the disappearance of that firm would have a significant impact on available capacity to the detriment of consumers of S-PVC in northern Europe. Anonymous undertaking 2 takes the view that, should Kem One not carry out the conversion of its mercury technology, it could still supply its clients from its industrial site that has already been converted. |
| --- | --- |

(160)

Anonymous undertaking 2 disagrees with France about the counterfactual scenario in the absence of aid. It points out that, since Kem One's commercial policy is largely geared to southern Europe, there is no risk that the disappearance of that firm would have a significant impact on available capacity to the detriment of consumers of S-PVC in northern Europe. Anonymous undertaking 2 takes the view that, should Kem One not carry out the conversion of its mercury technology, it could still supply its clients from its industrial site that has already been converted.

| (161) | Moreover, since the market is characterised by oversupply, Kem One's competitors would have no trouble in supplying its customers from that excess supply if Kem One were to reduce its commercial presence. |
| --- | --- |

(161)

Moreover, since the market is characterised by oversupply, Kem One's competitors would have no trouble in supplying its customers from that excess supply if Kem One were to reduce its commercial presence.

| (162) | Anonymous undertaking 2 suggests that a reduction in Kem One's capacity or commercial presence should be imposed on it by way of compensatory measures. |
| --- | --- |

(162)

Anonymous undertaking 2 suggests that a reduction in Kem One's capacity or commercial presence should be imposed on it by way of compensatory measures.

| (163) | Lastly, with regard to the viability of the restructuring plan, anonymous undertaking 2 takes the view that the context of oversupply, already emphasised above, coupled with stagnant demand, makes a gradual increase in PVC prices, as envisaged in recital 52 of the opening decision, impossible. |
| --- | --- |

(163)

Lastly, with regard to the viability of the restructuring plan, anonymous undertaking 2 takes the view that the context of oversupply, already emphasised above, coupled with stagnant demand, makes a gradual increase in PVC prices, as envisaged in recital 52 of the opening decision, impossible.

5.2.   OBSERVATIONS BY FRANCE

| (164) | By letter dated 25 February 2015, France replied to the comments by interested parties. |
| --- | --- |

(164)

By letter dated 25 February 2015, France replied to the comments by interested parties.

| (165) | France began by making some general remarks on the comments submitted by Ineos and anonymous undertaking 1.






  — | According to France, their comments contained factual errors in the references to the opening decision and groundless allegations such as those regarding the supposed discounts granted by EDF or disguised State aid. |
| --- | --- | --- |

(165)

France began by making some general remarks on the comments submitted by Ineos and anonymous undertaking 1.

—

According to France, their comments contained factual errors in the references to the opening decision and groundless allegations such as those regarding the supposed discounts granted by EDF or disguised State aid.

| — | France was surprised that the comments made by the two undertakings in this case differed significantly from those submitted by Ineos and Solvay in reply to the statement of objections in the Ineos/Solvay/JV case. In that case, Ineos and Solvay had argued that ‘despite [its financial difficulties], Kem One was a strong competitor in the market’ and that ‘Kem One's production problems have been resolved’. Regarding Kem One's investment project to convert its mercury technology, Ineos and Solvay had stated that: ‘this investment will give Kem One the ability to produce sufficient chlorine in its fully owned integrated membrane plant to operate its S-PVC plant at full capacity’. |
| --- | --- |

—

France was surprised that the comments made by the two undertakings in this case differed significantly from those submitted by Ineos and Solvay in reply to the statement of objections in the Ineos/Solvay/JV case. In that case, Ineos and Solvay had argued that ‘despite [its financial difficulties], Kem One was a strong competitor in the market’ and that ‘Kem One's production problems have been resolved’. Regarding Kem One's investment project to convert its mercury technology, Ineos and Solvay had stated that: ‘this investment will give Kem One the ability to produce sufficient chlorine in its fully owned integrated membrane plant to operate its S-PVC plant at full capacity’.

| — | Lastly, the French authorities pointed out that Ineos and Solvay had been obliged to divest vertically integrated PVC production plants, comprising production assets in Belgium, Germany, France, the Netherlands and the United Kingdom (‘Newco’).
  These combined assets were deemed to constitute a viable and independent entity likely to exert competitive pressure comparable to that exerted by Solvay on Ineos before the merger. The positive assessment of these assets in the Ineos/Solvay/JV decision seemed to be in contradiction with the doubts expressed by Ineos and anonymous undertaking 1 with respect to Kem One's return to viability. The two entities (Newco and Kem One) were likely to have comparable turnover figures, even though Newco's business was focused exclusively on S-PVC and caustic soda, for which margins were smaller than for other derivatives in Kem One's portfolio.
  These factors contradicted the comments by Ineos to the effect that, in current market conditions of high overcapacity and low customer demand, Kem One's restructuring plan was unlikely to return it to viability. |
| --- | --- |

—

Lastly, the French authorities pointed out that Ineos and Solvay had been obliged to divest vertically integrated PVC production plants, comprising production assets in Belgium, Germany, France, the Netherlands and the United Kingdom (‘Newco’).

These combined assets were deemed to constitute a viable and independent entity likely to exert competitive pressure comparable to that exerted by Solvay on Ineos before the merger. The positive assessment of these assets in the Ineos/Solvay/JV decision seemed to be in contradiction with the doubts expressed by Ineos and anonymous undertaking 1 with respect to Kem One's return to viability. The two entities (Newco and Kem One) were likely to have comparable turnover figures, even though Newco's business was focused exclusively on S-PVC and caustic soda, for which margins were smaller than for other derivatives in Kem One's portfolio.

These factors contradicted the comments by Ineos to the effect that, in current market conditions of high overcapacity and low customer demand, Kem One's restructuring plan was unlikely to return it to viability.

| (166) | In summary, France regarded the comments by Ineos and anonymous undertaking 1 as biased, vitiated by errors of fact and motivated by opportunistic considerations. |
| --- | --- |

(166)

In summary, France regarded the comments by Ineos and anonymous undertaking 1 as biased, vitiated by errors of fact and motivated by opportunistic considerations.

| (167) | The compensatory measures requested by Ineos and anonymous undertaking 1 could compromise Kem One's return to viability and trigger its exit from the market, which would undeniably benefit Ineos and anonymous undertaking 1 by strengthening their market positions, resulting in less intense competition in the various PVC markets. |
| --- | --- |

(167)

The compensatory measures requested by Ineos and anonymous undertaking 1 could compromise Kem One's return to viability and trigger its exit from the market, which would undeniably benefit Ineos and anonymous undertaking 1 by strengthening their market positions, resulting in less intense competition in the various PVC markets.

| (168) | Lastly, France pointed out that numerous conversions of electrolysis facilities from mercury to membrane technology had benefited from Commission-approved State aid between 2003 and 2007. For example, Ineos had received EUR 57,2 million for modernisation at the Runcorn site and Solvay, EUR 36 million for the Rosignano and Bussi sites. To France's knowledge, this aid had been granted without any compensatory measures being required. |
| --- | --- |

(168)

Lastly, France pointed out that numerous conversions of electrolysis facilities from mercury to membrane technology had benefited from Commission-approved State aid between 2003 and 2007. For example, Ineos had received EUR 57,2 million for modernisation at the Runcorn site and Solvay, EUR 36 million for the Rosignano and Bussi sites. To France's knowledge, this aid had been granted without any compensatory measures being required.

| (169) | France went on to discuss the classification of the measures as aid and their compatibility with the internal market. |
| --- | --- |

(169)

France went on to discuss the classification of the measures as aid and their compatibility with the internal market.

5.2.1.1.   Classification of the measures as aid

Classification of the measures as aid

| (170) | FDES loan. France first stressed that it had already shown that the state had a sound guarantee, meaning that the actual rate of 3,5 % corresponded to a market rate. If aid was found to exist, it should be calculated as the difference between the actual rate and a reference rate. |
| --- | --- |

(170)

FDES loan. France first stressed that it had already shown that the state had a sound guarantee, meaning that the actual rate of 3,5 % corresponded to a market rate. If aid was found to exist, it should be calculated as the difference between the actual rate and a reference rate.

| (171) | As regards the value of the collateral, which had been called into question by the interested third parties, France reasserted that its net book value was equal to its market value. In support of this assertion, France had provided independent expert reports carried out at the time of the partial transfer of assets from Arkema to Kem One in July 2012. Moreover, the value of the transfers had been validated by a contributions auditor (commissaire aux apports). Even supposing that the value of these assets had fallen on account of Kem One's financial difficulties, France pointed out that the assets had been estimated at EUR [130-140] million, while the value of the FDES loan was no higher than EUR 30 million: the value of the collateral would therefore still largely cover the value of the loan. |
| --- | --- |

(171)

As regards the value of the collateral, which had been called into question by the interested third parties, France reasserted that its net book value was equal to its market value. In support of this assertion, France had provided independent expert reports carried out at the time of the partial transfer of assets from Arkema to Kem One in July 2012. Moreover, the value of the transfers had been validated by a contributions auditor (commissaire aux apports). Even supposing that the value of these assets had fallen on account of Kem One's financial difficulties, France pointed out that the assets had been estimated at EUR [130-140] million, while the value of the FDES loan was no higher than EUR 30 million: the value of the collateral would therefore still largely cover the value of the loan.

commissaire aux apports

| (172) | As regards the loan repayment terms, France stated that the appropriate rate of repayment had to be calculated in accordance with the beneficiary undertaking's risk of insolvency and the quality of collateral offered. In accordance with the 2008 Reference Rate Communication, a reference rate could be calculated using a base rate of 0,53 % + 400 basis points, giving 4,53 % and not 6,53 % as cited by anonymous undertaking 1. However, the reference rate served merely as a guide and the low risk of insolvency for Kem One coupled with the very high level of collateral justified a rate of 3,5 %. |
| --- | --- |

(172)

As regards the loan repayment terms, France stated that the appropriate rate of repayment had to be calculated in accordance with the beneficiary undertaking's risk of insolvency and the quality of collateral offered. In accordance with the 2008 Reference Rate Communication, a reference rate could be calculated using a base rate of 0,53 % + 400 basis points, giving 4,53 % and not 6,53 % as cited by anonymous undertaking 1. However, the reference rate served merely as a guide and the low risk of insolvency for Kem One coupled with the very high level of collateral justified a rate of 3,5 %.

| (173) | Lastly, as indicated by the Commission in the opening decision, Kem One's restructuring plan was also being financed by [private operator 2] to the tune of EUR [55-65] million. |
| --- | --- |

(173)

Lastly, as indicated by the Commission in the opening decision, Kem One's restructuring plan was also being financed by [private operator 2] to the tune of EUR [55-65] million.

| (174) | Repayable advances. France pointed out that it had never argued that these advances contained no State aid. However, it took the view that they should be assessed as a loan repayable by Kem One. Accordingly, the difference in the rates was the element that could constitute aid and not the entire value of the advances. Contrary to what was argued by Ineos and anonymous undertaking 1, it was not the entire amount in repayable advances that was likely to constitute aid but the grant equivalent estimated at EUR 29,4 million (including the grant of EUR 15 million). |
| --- | --- |

(174)

Repayable advances. France pointed out that it had never argued that these advances contained no State aid. However, it took the view that they should be assessed as a loan repayable by Kem One. Accordingly, the difference in the rates was the element that could constitute aid and not the entire value of the advances. Contrary to what was argued by Ineos and anonymous undertaking 1, it was not the entire amount in repayable advances that was likely to constitute aid but the grant equivalent estimated at EUR 29,4 million (including the grant of EUR 15 million).

| (175) | As regards the funding of the SAM project, France indicated that the project was an important element of the restructuring plan and that the funding measures accordingly formed part of the restructuring plan approved by Lyon Commercial Court. They should be analysed in the light of the 2004 Guidelines on the same terms as the other measures that were part of the restructuring plan. |
| --- | --- |

(175)

As regards the funding of the SAM project, France indicated that the project was an important element of the restructuring plan and that the funding measures accordingly formed part of the restructuring plan approved by Lyon Commercial Court. They should be analysed in the light of the 2004 Guidelines on the same terms as the other measures that were part of the restructuring plan.

| (176) | Write-off of tax and social security debts. France reiterated that the CCSF decision to waive [...] % of remittable debts was unlikely to contain any State aid elements, as the remission rate was in line with the average rate of remission by the private creditors to allow the undertaking to recover (some creditors, in connection with the recovery plan by way of continuing the business adopted by Lyon Commercial Court, agreed to write off their entire claim, resulting in an average rate of remission by creditors of [...] %). |
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(176)

Write-off of tax and social security debts. France reiterated that the CCSF decision to waive [...] % of remittable debts was unlikely to contain any State aid elements, as the remission rate was in line with the average rate of remission by the private creditors to allow the undertaking to recover (some creditors, in connection with the recovery plan by way of continuing the business adopted by Lyon Commercial Court, agreed to write off their entire claim, resulting in an average rate of remission by creditors of [...] %).

| (177) | EDF electricity tariffs. France stressed that the argument by the third parties regarding the existence of discounts was based on an erroneous reference to the opening decision (which made no mention of any such discounts) and on market rumours reported by anonymous undertaking 1: ‘It is indeed well known in the market that Kem One has been granted price reductions by EDF for its new electricity contracts.’ |
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(177)

EDF electricity tariffs. France stressed that the argument by the third parties regarding the existence of discounts was based on an erroneous reference to the opening decision (which made no mention of any such discounts) and on market rumours reported by anonymous undertaking 1: ‘It is indeed well known in the market that Kem One has been granted price reductions by EDF for its new electricity contracts.’

| (178) | France insisted that Kem One had not been granted any discounts by EDF. |
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(178)

France insisted that Kem One had not been granted any discounts by EDF.

5.2.1.2.   Compatibility of the measures with the internal market

Compatibility of the measures with the internal market

| (179) | Return to long-term viability. France stressed that the industrial restructuring measures provided an appropriate response to the various factors giving rise to Kem One's financial difficulties and would therefore allow the undertaking to return to long-term viability. |
| --- | --- |

(179)

Return to long-term viability. France stressed that the industrial restructuring measures provided an appropriate response to the various factors giving rise to Kem One's financial difficulties and would therefore allow the undertaking to return to long-term viability.

| (180) | First, in response to the argument by Ineos to the effect that Kem One's structural overcapacity problem could not be resolved in a competitive environment suffering in its turn from overcapacity and low demand forecasts, France pointed out that the nominal overcapacity in the S-PVC market in western Europe needed to be qualified. Practical capacity should be cut by 10 % in view of the inevitable irregularity of production (seasonal nature of sales, major shutdowns). France considered real overcapacity in the global market to be no higher than 14 %. |
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(180)

First, in response to the argument by Ineos to the effect that Kem One's structural overcapacity problem could not be resolved in a competitive environment suffering in its turn from overcapacity and low demand forecasts, France pointed out that the nominal overcapacity in the S-PVC market in western Europe needed to be qualified. Practical capacity should be cut by 10 % in view of the inevitable irregularity of production (seasonal nature of sales, major shutdowns). France considered real overcapacity in the global market to be no higher than 14 %.

| (181) | The concept of overcapacity used by Ineos was not that of spare capacity but that of the sum of spare capacity (ignoring the need for a reserve of 8 %) and quantities sold outside Europe. |
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(181)

The concept of overcapacity used by Ineos was not that of spare capacity but that of the sum of spare capacity (ignoring the need for a reserve of 8 %) and quantities sold outside Europe.

| (182) | This concept presupposed both that plants were operating permanently at 100 % of their technical capacity and that the European market was the only profitable outlet (something that was contradicted by export trends), and it ignored geographical reality (very dispersed European locations). |
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(182)

This concept presupposed both that plants were operating permanently at 100 % of their technical capacity and that the European market was the only profitable outlet (something that was contradicted by export trends), and it ignored geographical reality (very dispersed European locations).

| (183) | Kem One estimated available capacity in the PVC market in north-western Europe at [...] kt and maximum production at [...] kt (- [5-15] % for seasonal effects and maintenance). Operating rates for the S-PVC market therefore stood at [85-95] % of the realistic maximum and [80-90] % of operational capacity. For paste PVC (E-PVC), the figures were almost identical: [85-95] % of the realistic maximum and [80-90] % of operational capacity. |
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(183)

Kem One estimated available capacity in the PVC market in north-western Europe at [...] kt and maximum production at [...] kt (- [5-15] % for seasonal effects and maintenance). Operating rates for the S-PVC market therefore stood at [85-95] % of the realistic maximum and [80-90] % of operational capacity. For paste PVC (E-PVC), the figures were almost identical: [85-95] % of the realistic maximum and [80-90] % of operational capacity.

| (184) | The real figures showed that the situations of the S-PVC market and Kem One were better than described by Ineos in its comments. |
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(184)

The real figures showed that the situations of the S-PVC market and Kem One were better than described by Ineos in its comments.

| (185) | Second, France took the view that the assertions by Ineos and anonymous undertaking 1 to the effect that Kem One's production sites suffered from overcapacity of 40 % were groundless. Ineos had not explained its calculation method. Even with a fall in production volumes at Kem One's plants in the 2011-2013 period due to technical incidents, the average utilisation rate of the S-PVC plants over five years was [70-80] %, according to France. |
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(185)

Second, France took the view that the assertions by Ineos and anonymous undertaking 1 to the effect that Kem One's production sites suffered from overcapacity of 40 % were groundless. Ineos had not explained its calculation method. Even with a fall in production volumes at Kem One's plants in the 2011-2013 period due to technical incidents, the average utilisation rate of the S-PVC plants over five years was [70-80] %, according to France.

| (186) | So, contrary to what was argued by Ineos and anonymous undertaking 1, Kem One's difficulties were not linked to overly low production levels. The real reasons behind Kem One's filing for insolvency at the end of March 2013 were an accumulation of structural problems (high costs of raw materials, insufficiently competitive chlorine and caustic soda production plant at Lavéra) and cyclical difficulties (scheduled long-term shutdown and technical problem affecting ethylene supplies). |
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(186)

So, contrary to what was argued by Ineos and anonymous undertaking 1, Kem One's difficulties were not linked to overly low production levels. The real reasons behind Kem One's filing for insolvency at the end of March 2013 were an accumulation of structural problems (high costs of raw materials, insufficiently competitive chlorine and caustic soda production plant at Lavéra) and cyclical difficulties (scheduled long-term shutdown and technical problem affecting ethylene supplies).

| (187) | To provide an effective response to these various handicaps, the restructuring plan included:






  — | major investment to convert the electrolysis facilities at Lavéra and carry out drilling at the Vauvert saltworks, |
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(187)

To provide an effective response to these various handicaps, the restructuring plan included:

—

major investment to convert the electrolysis facilities at Lavéra and carry out drilling at the Vauvert saltworks,

| — | renegotiation of Kem One's main contracts for the supply of key raw materials, |
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—

renegotiation of Kem One's main contracts for the supply of key raw materials,

| — | internal restructuring accompanied by a performance and productivity plan, and |
| --- | --- |

—

internal restructuring accompanied by a performance and productivity plan, and

| — | a review of commercial policy. |
| --- | --- |

—

a review of commercial policy.

| (188) | In the base-case scenario, the restructuring plan would allow Kem One to return to a level of gross margin of [25-35] % of turnover from 2017 and an EBITDA of [5-15] % from 2018, in line with average profitability in the commodity chemicals sector. Moreover, the hypotheses in the restructuring plan and the business plan were based on relatively stable turnover figures (and not necessarily a significant increase in S-PVC sales) and production figures close to historic levels for the undertaking. |
| --- | --- |

(188)

In the base-case scenario, the restructuring plan would allow Kem One to return to a level of gross margin of [25-35] % of turnover from 2017 and an EBITDA of [5-15] % from 2018, in line with average profitability in the commodity chemicals sector. Moreover, the hypotheses in the restructuring plan and the business plan were based on relatively stable turnover figures (and not necessarily a significant increase in S-PVC sales) and production figures close to historic levels for the undertaking.

| (189) | In any event, FIDES data (S-PVC industry statistics) showed that Kem One's share of the S-PVC market in western Europe was [10-20] % in 2014, which was similar to its share in 2011 and 2012 and higher than in 2013 ([10-20] %). In addition, Kem One had seen a rise in its sales and export margins to the Turkish market in the last six months, where it had opportunely picked up the market shares of North American producers owing to the significant fall in the euro against the dollar and the drop in oil prices. |
| --- | --- |

(189)

In any event, FIDES data (S-PVC industry statistics) showed that Kem One's share of the S-PVC market in western Europe was [10-20] % in 2014, which was similar to its share in 2011 and 2012 and higher than in 2013 ([10-20] %). In addition, Kem One had seen a rise in its sales and export margins to the Turkish market in the last six months, where it had opportunely picked up the market shares of North American producers owing to the significant fall in the euro against the dollar and the drop in oil prices.

| (190) | The French authorities also pointed out that the assertions by Ineos to the effect that Kem One had a poor reputation among consumers on the S-PVC market in north-western Europe contradicted the argument made elsewhere to justify the requirement for compensatory measures, namely: ‘Kem One is a significant player in the S-PVC market’. |
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(190)

The French authorities also pointed out that the assertions by Ineos to the effect that Kem One had a poor reputation among consumers on the S-PVC market in north-western Europe contradicted the argument made elsewhere to justify the requirement for compensatory measures, namely: ‘Kem One is a significant player in the S-PVC market’.

| (191) | France also took the view that the part of the restructuring plan involving the reorientation of Kem One's commercial policy towards markets other than S-PVC was based on prudent and realistic hypotheses and was merely a minor component of the plan compared with the industrial part. |
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(191)

France also took the view that the part of the restructuring plan involving the reorientation of Kem One's commercial policy towards markets other than S-PVC was based on prudent and realistic hypotheses and was merely a minor component of the plan compared with the industrial part.

| (192) | According to France, the undertaking was well aware that the biggest margins would be gained not from the commercial policy side but from the renegotiation of the contracts for access to raw materials and platforms, and from infrastructure modernisation. |
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(192)

According to France, the undertaking was well aware that the biggest margins would be gained not from the commercial policy side but from the renegotiation of the contracts for access to raw materials and platforms, and from infrastructure modernisation.

| (193) | Prevention of any excessive distortion of competition. France commented on the following points:






  — | the structural overcapacity in the S-PVC market, |
| --- | --- | --- |

(193)

Prevention of any excessive distortion of competition. France commented on the following points:

—

the structural overcapacity in the S-PVC market,

| — | the size of Kem One's share of the S-PVC market, |
| --- | --- |

—

the size of Kem One's share of the S-PVC market,

| — | the credibility of the counterfactual scenario, and |
| --- | --- |

—

the credibility of the counterfactual scenario, and

| — | the proposal of disproportionate compensatory measures by the third parties. |
| --- | --- |

—

the proposal of disproportionate compensatory measures by the third parties.

| (194) | While it could not be denied that there was structural overcapacity, its portrayal by Ineos, in France's view, needed to be significantly qualified in a number of respects. First, producers' unused capacity generally ranged between 8 % and 10 % to take account of the irregular distribution of supply and demand. In addition, the market situation, as pointed out by the Commission in its decision in Ineos/Solvay/JV, varied considerably from one geographic area to another. In the S-PVC market, transport and logistics costs played a significant part in defining the regional limits of the geographic market. Prices and margins varied across regions. |
| --- | --- |

(194)

While it could not be denied that there was structural overcapacity, its portrayal by Ineos, in France's view, needed to be significantly qualified in a number of respects. First, producers' unused capacity generally ranged between 8 % and 10 % to take account of the irregular distribution of supply and demand. In addition, the market situation, as pointed out by the Commission in its decision in Ineos/Solvay/JV, varied considerably from one geographic area to another. In the S-PVC market, transport and logistics costs played a significant part in defining the regional limits of the geographic market. Prices and margins varied across regions.

| (195) | France took the view that Kem One's positions in the main markets in which it operated were far weaker than those of Ineos and Solvay. It pointed out in this connection that the Commission had found in its decision in Ineos/Solvay/JV that ‘Ineos [was] the largest supplier of commodity S-PVC in NWE with merchant market shares in 2012 of [30-40] %’ and ‘Solvay [was] the second largest player in the NWE market for commodity S-PVC’. As for Kem One, the Commission had stated that ‘Kem One [was] currently the number five player by sales volume and number three by capacity in NWE ([5-10]* % and [10-20]* % market shares, respectively)’. Moreover, Ineos and Solvay were the only two undertakings to concentrate their business so intensely on the north-western European market, unlike Kem One. |
| --- | --- |

(195)

France took the view that Kem One's positions in the main markets in which it operated were far weaker than those of Ineos and Solvay. It pointed out in this connection that the Commission had found in its decision in Ineos/Solvay/JV that ‘Ineos [was] the largest supplier of commodity S-PVC in NWE with merchant market shares in 2012 of [30-40] %’ and ‘Solvay [was] the second largest player in the NWE market for commodity S-PVC’. As for Kem One, the Commission had stated that ‘Kem One [was] currently the number five player by sales volume and number three by capacity in NWE ([5-10]* % and [10-20]* % market shares, respectively)’. Moreover, Ineos and Solvay were the only two undertakings to concentrate their business so intensely on the north-western European market, unlike Kem One.

| (196) | Ineos and anonymous undertaking 1 had questioned the credibility of the counterfactual scenario proposed by the French authorities, according to which a reduction in Kem One's production capacity in the PVC market would result in a reduction in the competitive pressure on the other market players. However, France insisted that the S-PVC market did possess oligopolistic features, as pointed out by the Commission in its decision in Ineos/Solvay/JV. Contrary to what was argued by the interested third parties, France stressed that Ineos, Solvay and Kem One were currently the only market players with spare production capacity in north-western Europe. France therefore took the view that imposing compensatory measures would not only threaten Kem One's return to viability but would also affect the structure of competition in the market, to the detriment of customers. |
| --- | --- |

(196)

Ineos and anonymous undertaking 1 had questioned the credibility of the counterfactual scenario proposed by the French authorities, according to which a reduction in Kem One's production capacity in the PVC market would result in a reduction in the competitive pressure on the other market players. However, France insisted that the S-PVC market did possess oligopolistic features, as pointed out by the Commission in its decision in Ineos/Solvay/JV. Contrary to what was argued by the interested third parties, France stressed that Ineos, Solvay and Kem One were currently the only market players with spare production capacity in north-western Europe. France therefore took the view that imposing compensatory measures would not only threaten Kem One's return to viability but would also affect the structure of competition in the market, to the detriment of customers.

| (197) | France regarded the compensatory measures proposed by the interested third parties as disproportionate. First, they were incompatible with the proposed restructuring plan. In France's view, for Kem One to remain in business and return to viability in the long term, a vertically integrated production chain had to be maintained, with, as at present, an economic balance between the capacity of the two upstream sites for chlorine and VCM on the one hand and the five downstream PVC production sites on the other. Closing a site or reducing Kem One's capacity would threaten the industrial balance of its business. By contrast, the French authorities confirmed that the commitment finally proposed to the effect that the nominal chlorine and caustic soda production capacity at Fos-sur-Mer and Lavéra would not be increased for [...] constituted an appropriate compensatory measure. This commitment had the advantage of keeping competition in the PVC market at the same intensity and ensuring that Kem One could return to viability, while also safeguarding the jobs that could be maintained under the restructuring plan. Lastly, France pointed out that Kem One's decision to withdraw from the ECVM was quite justified for reasons connected with its governance and operating costs, and this in no way prevented Kem One from conducting a pro-active environmental policy. |
| --- | --- |

(197)

France regarded the compensatory measures proposed by the interested third parties as disproportionate. First, they were incompatible with the proposed restructuring plan. In France's view, for Kem One to remain in business and return to viability in the long term, a vertically integrated production chain had to be maintained, with, as at present, an economic balance between the capacity of the two upstream sites for chlorine and VCM on the one hand and the five downstream PVC production sites on the other. Closing a site or reducing Kem One's capacity would threaten the industrial balance of its business. By contrast, the French authorities confirmed that the commitment finally proposed to the effect that the nominal chlorine and caustic soda production capacity at Fos-sur-Mer and Lavéra would not be increased for [...] constituted an appropriate compensatory measure. This commitment had the advantage of keeping competition in the PVC market at the same intensity and ensuring that Kem One could return to viability, while also safeguarding the jobs that could be maintained under the restructuring plan. Lastly, France pointed out that Kem One's decision to withdraw from the ECVM was quite justified for reasons connected with its governance and operating costs, and this in no way prevented Kem One from conducting a pro-active environmental policy.

| (198) | Aid limited to the minimum (own contribution). France pointed out that it had valued the amount of private contributions at EUR 356,3 million, or 68,6 % of all contributions. |
| --- | --- |

(198)

Aid limited to the minimum (own contribution). France pointed out that it had valued the amount of private contributions at EUR 356,3 million, or 68,6 % of all contributions.

| (199) | France responded to the objections raised by the interested third parties in respect of the bank loan of EUR [55-65], the debt write-off by private partners and the necessity of the SAM project. |
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(199)

France responded to the objections raised by the interested third parties in respect of the bank loan of EUR [55-65], the debt write-off by private partners and the necessity of the SAM project.

| (200) | France stressed that the comments by the third parties in respect of the bank loan were irrelevant, as it had not included the amount of the loan in the undertaking's own contribution. This loan was not one of the factors considered indispensable for financing the investments specific to the SAM project. Even without the bank loan, Kem One's own contribution represented more than 50 % of the total contributions to the restructuring. |
| --- | --- |

(200)

France stressed that the comments by the third parties in respect of the bank loan were irrelevant, as it had not included the amount of the loan in the undertaking's own contribution. This loan was not one of the factors considered indispensable for financing the investments specific to the SAM project. Even without the bank loan, Kem One's own contribution represented more than 50 % of the total contributions to the restructuring.

| (201) | France wished to point out that the Commission had, in previous decisions, already included debt write-off in the calculation of own contribution by the beneficiary. Taking account of debt write-off was also provided for in the new Guidelines on State aid for rescuing and restructuring non-financial undertakings in difficulty (16) (‘the new Guidelines’), which entered into force on 1 August 2014. France took the view that, by improving own funds (and thus freeing up liquidity that Kem One could then use for its restructuring), this measure had the same effect as a positive financial flow. Like Arkema, France remarked moreover that the debt write-off was an indicator of the confidence that the private partners had in the undertaking's continuing in business. In any event, even if the private debt write-off were not included in the calculation of own contribution, the latter would still account for more than 50 % of the restructuring costs. |
| --- | --- |

(201)

France wished to point out that the Commission had, in previous decisions, already included debt write-off in the calculation of own contribution by the beneficiary. Taking account of debt write-off was also provided for in the new Guidelines on State aid for rescuing and restructuring non-financial undertakings in difficulty (16) (‘the new Guidelines’), which entered into force on 1 August 2014. France took the view that, by improving own funds (and thus freeing up liquidity that Kem One could then use for its restructuring), this measure had the same effect as a positive financial flow. Like Arkema, France remarked moreover that the debt write-off was an indicator of the confidence that the private partners had in the undertaking's continuing in business. In any event, even if the private debt write-off were not included in the calculation of own contribution, the latter would still account for more than 50 % of the restructuring costs.

16

| (202) | Vestolit took the view that the aid measures would allow Kem One to maintain non-viable assets, while its competitors had had to modernise their assets using their own resources. However, France pointed out that numerous competitors of Kem One had already benefited from State aid authorised by the Commission in order to carry out technological conversion measures similar to that put in place by Kem One. This was justified in the light of the low returns on investment in conversion projects of this kind. In response to the comments by anonymous undertaking 1 to the effect that Kem One would be obliged in any event to carry out the work under the SAM project in order to comply with Directive 2010/75/EU of the European Parliament and of the Council (17), France stated that the investment was already committed and was expected to be carried out before the end of 2016, in other words a year before the date required by the Directive. Moreover, the SAM project did not concern the mercury electrolysis unit(s) alone. It also involved the modernisation of the diaphragm cell unit at Lavéra, which is why it was so central to the restructuring plan and why it allowed the undertaking to maintain a balance between its upstream (chlorine) and downstream (vinyl) production capacities, while at the same time considerably reducing costs. |
| --- | --- |

(202)

Vestolit took the view that the aid measures would allow Kem One to maintain non-viable assets, while its competitors had had to modernise their assets using their own resources. However, France pointed out that numerous competitors of Kem One had already benefited from State aid authorised by the Commission in order to carry out technological conversion measures similar to that put in place by Kem One. This was justified in the light of the low returns on investment in conversion projects of this kind. In response to the comments by anonymous undertaking 1 to the effect that Kem One would be obliged in any event to carry out the work under the SAM project in order to comply with Directive 2010/75/EU of the European Parliament and of the Council (17), France stated that the investment was already committed and was expected to be carried out before the end of 2016, in other words a year before the date required by the Directive. Moreover, the SAM project did not concern the mercury electrolysis unit(s) alone. It also involved the modernisation of the diaphragm cell unit at Lavéra, which is why it was so central to the restructuring plan and why it allowed the undertaking to maintain a balance between its upstream (chlorine) and downstream (vinyl) production capacities, while at the same time considerably reducing costs.

17

6.   ASSESSMENT OF THE AID MEASURES

ASSESSMENT OF THE AID MEASURES

| (203) | France notified the following three measures: (i) the FDES loan (EUR 30 million); (ii) a grant (EUR 15 million) and repayable advances (EUR 80 million); and (iii) the possible write-off of tax and social security debts (EUR 42 million, finally corrected to EUR [...]). |
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(203)

France notified the following three measures: (i) the FDES loan (EUR 30 million); (ii) a grant (EUR 15 million) and repayable advances (EUR 80 million); and (iii) the possible write-off of tax and social security debts (EUR 42 million, finally corrected to EUR [...]).

6.1.   ASSESSMENT OF THE PRESENCE OF AID WITHIN THE MEANING OF ARTICLE 107(1) TFEU

| (204) | The Commission must ascertain whether the notified measures could constitute State aid within the meaning of Article 107(1) TFEU. |
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(204)

The Commission must ascertain whether the notified measures could constitute State aid within the meaning of Article 107(1) TFEU.

| (205) | Article 107(1) TFEU lays down that ‘any aid granted by a Member State or through state resources in any form whatsoever, which distorts or threatens to distort competition by favouring certain undertakings or the production of certain goods shall, in so far as it affects trade between Member States, be incompatible with the internal market’. |
| --- | --- |

(205)

Article 107(1) TFEU lays down that ‘any aid granted by a Member State or through state resources in any form whatsoever, which distorts or threatens to distort competition by favouring certain undertakings or the production of certain goods shall, in so far as it affects trade between Member States, be incompatible with the internal market’.

| (206) | This means that a public measure can be classed as State aid if all of the following tests are met: (i) the measure must confer an economic advantage on the beneficiary; (ii) the advantage must be imputable to the state; (iii) the advantage must be selective; and (iv) the measure must distort or threaten to distort competition and be likely to affect trade between Member States. |
| --- | --- |

(206)

This means that a public measure can be classed as State aid if all of the following tests are met: (i) the measure must confer an economic advantage on the beneficiary; (ii) the advantage must be imputable to the state; (iii) the advantage must be selective; and (iv) the measure must distort or threaten to distort competition and be likely to affect trade between Member States.

6.1.1.   Involvement of State resources and imputability to the State

Involvement of State resources and imputability to the State

| (207) | The FDES loan was granted by order of the Minister for Economic and Financial Affairs and its implementation was entrusted to the Director-General of the Treasury. The Budget Act 2014 awarded the FDES a budget of EUR 300 million. It should be noted that the FDES has its own legal personality independently of the state and cannot be compared to a fund managed subject to an obligation to balance capital reimbursements and their use for new projects. FDES loans are made through a specific Treasury account and constitute expenditure on that account. Interest on the loans, however, is paid into the general budget of the state. The guidelines for using the FDES are still based on the circular of 26 November 2004 referred to in recital 28. FDES loans are always subject to a case-by-case assessment. They are not awarded automatically in accordance with pre-established criteria. |
| --- | --- |

(207)

The FDES loan was granted by order of the Minister for Economic and Financial Affairs and its implementation was entrusted to the Director-General of the Treasury. The Budget Act 2014 awarded the FDES a budget of EUR 300 million. It should be noted that the FDES has its own legal personality independently of the state and cannot be compared to a fund managed subject to an obligation to balance capital reimbursements and their use for new projects. FDES loans are made through a specific Treasury account and constitute expenditure on that account. Interest on the loans, however, is paid into the general budget of the state. The guidelines for using the FDES are still based on the circular of 26 November 2004 referred to in recital 28. FDES loans are always subject to a case-by-case assessment. They are not awarded automatically in accordance with pre-established criteria.

| (208) | The grant and repayable advances are to be provided under the ‘Support for re-industrialisation’ mechanism, as part of an agreement concluded with Bpifrance on behalf of the state. |
| --- | --- |

(208)

The grant and repayable advances are to be provided under the ‘Support for re-industrialisation’ mechanism, as part of an agreement concluded with Bpifrance on behalf of the state.

| (209) | The tax and social security write-offs will be decided by the CCSF. This Committee is chaired by the Director of the Departmental Tax Office. |
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(209)

The tax and social security write-offs will be decided by the CCSF. This Committee is chaired by the Director of the Departmental Tax Office.

| (210) | The FDES loan, the grant, the repayable advances and the write-off of tax and social security debts are therefore provided through public resources and granted by way of decisions taken by the state. |
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(210)

The FDES loan, the grant, the repayable advances and the write-off of tax and social security debts are therefore provided through public resources and granted by way of decisions taken by the state.

6.1.2.   Selectivity

Selectivity

| (211) | The measures under investigation are one-off measures granted exclusively to Kem One for the purposes of its recovery. |
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(211)

The measures under investigation are one-off measures granted exclusively to Kem One for the purposes of its recovery.

6.1.3.   Presence of an economic advantage

Presence of an economic advantage

| (212) | Whenever the financial situation of an undertaking is improved as a result of state intervention, an economic advantage is present. However, intervention by a public authority does not confer an advantage on the beneficiary, and as such does not constitute aid, if it is carried out under normal market conditions, in other words, if the public authority has acted as an operator in a market economy would have done in similar circumstances. |
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(212)

Whenever the financial situation of an undertaking is improved as a result of state intervention, an economic advantage is present. However, intervention by a public authority does not confer an advantage on the beneficiary, and as such does not constitute aid, if it is carried out under normal market conditions, in other words, if the public authority has acted as an operator in a market economy would have done in similar circumstances.

6.1.3.1.   The FDES loan (EUR 30 million)

The FDES loan (EUR 30 million)

| (213) | Value of collateral. Following the launch of proceedings, France sent the Commission a list of the assets constituting France's first-rank collateral. |
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(213)

Value of collateral. Following the launch of proceedings, France sent the Commission a list of the assets constituting France's first-rank collateral.

| (214) | It provided a report evaluating these assets, which had been drawn up by independent experts. The report calls for three remarks. First, the Commission would point out that the report contains an evaluation of Kem One's real estate and not of the plant and equipment it had pledged. Next, the experts evaluated the assets at EUR [110-120] million, which is EUR [20-30] million less than the net book value put forward by France, confirming the Commission's doubts about whether the net book value actually reflects the real value of the assets. Lastly, the report dates from July 2012, i.e. before the opening of the court-supervised administration procedure in March 2013. The asset value which should be taken into account is not the book value but the value at which the assets would be exchanged if the creditor, in this instance the state, were to exercise its right of pledge. When an undertaking is in difficulty and finds itself forced to sell its assets, its weak position and the urgency of the situation generally result in the assets being sold at below market price. |
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(214)

It provided a report evaluating these assets, which had been drawn up by independent experts. The report calls for three remarks. First, the Commission would point out that the report contains an evaluation of Kem One's real estate and not of the plant and equipment it had pledged. Next, the experts evaluated the assets at EUR [110-120] million, which is EUR [20-30] million less than the net book value put forward by France, confirming the Commission's doubts about whether the net book value actually reflects the real value of the assets. Lastly, the report dates from July 2012, i.e. before the opening of the court-supervised administration procedure in March 2013. The asset value which should be taken into account is not the book value but the value at which the assets would be exchanged if the creditor, in this instance the state, were to exercise its right of pledge. When an undertaking is in difficulty and finds itself forced to sell its assets, its weak position and the urgency of the situation generally result in the assets being sold at below market price.

| (215) | In its reply, France incidentally referred to the value of transactions that took place in 2014 in the PVC sector. While this type of comparison may have some value in a broad sense, neither Vestolit nor Vinnolit were undertakings in difficulty at the time of their acquisition, unlike Kem One. Moreover, the transactions involved the entire undertakings and not just plant and equipment. Accordingly, the comparison is not relevant here. |
| --- | --- |

(215)

In its reply, France incidentally referred to the value of transactions that took place in 2014 in the PVC sector. While this type of comparison may have some value in a broad sense, neither Vestolit nor Vinnolit were undertakings in difficulty at the time of their acquisition, unlike Kem One. Moreover, the transactions involved the entire undertakings and not just plant and equipment. Accordingly, the comparison is not relevant here.

| (216) | The Commission had asked France to provide an estimate of the value of the pledged assets in terms of the net revenue that their use could bring in. However, France provided an evaluation of the undertaking as a whole, and not of the pledged assets alone. What is more, to determine the future value of the undertaking in 2014, 2015 and 2016, it took into account the very same investments to convert the electrolysis units at Lavéra which were to be financed by the FDES loan. In sum, to calculate the amount of the collateral securing the FDES loan, France included the value of an asset modernised thanks to that very loan. Accordingly the evaluation cannot be considered. |
| --- | --- |

(216)

The Commission had asked France to provide an estimate of the value of the pledged assets in terms of the net revenue that their use could bring in. However, France provided an evaluation of the undertaking as a whole, and not of the pledged assets alone. What is more, to determine the future value of the undertaking in 2014, 2015 and 2016, it took into account the very same investments to convert the electrolysis units at Lavéra which were to be financed by the FDES loan. In sum, to calculate the amount of the collateral securing the FDES loan, France included the value of an asset modernised thanks to that very loan. Accordingly the evaluation cannot be considered.

| (217) | Lastly, in its reply to the opening decision, France did not provide any evidence that could allay the Commission's doubts about certain outdated and underperforming, or even obsolete, plant pledged by France. |
| --- | --- |

(217)

Lastly, in its reply to the opening decision, France did not provide any evidence that could allay the Commission's doubts about certain outdated and underperforming, or even obsolete, plant pledged by France.

| (218) | Accordingly, a conservative approach should be adopted and the collateral regarded as ‘weak’ within the meaning of the 2008 Reference Rate Communication for the purposes of determining a level of remuneration for the FDES loan in accordance with market conditions. |
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(218)

Accordingly, a conservative approach should be adopted and the collateral regarded as ‘weak’ within the meaning of the 2008 Reference Rate Communication for the purposes of determining a level of remuneration for the FDES loan in accordance with market conditions.

| (219) | Level of remuneration. The Commission accepts that the level of remuneration calculated using the methodology based on Bloomberg and Capital IQ data (resulting in a rate of 20,95 %) does not reflect real market rates, given that collateral and guarantees are not taken into account. Moreover, no bank has granted a loan to Kem One on the same terms as the state. |
| --- | --- |

(219)

Level of remuneration. The Commission accepts that the level of remuneration calculated using the methodology based on Bloomberg and Capital IQ data (resulting in a rate of 20,95 %) does not reflect real market rates, given that collateral and guarantees are not taken into account. Moreover, no bank has granted a loan to Kem One on the same terms as the state.

| (220) | Accordingly, and as indicated in paragraph 92 of the opening decision, in the absence of available and satisfactory real market data, the Commission should determine the applicable rate pursuant to the 2008 Reference Rate Communication, which states: ‘The reference and discount rates are applied as a proxy for the market rate and to measure the grant equivalent of aid’. |
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(220)

Accordingly, and as indicated in paragraph 92 of the opening decision, in the absence of available and satisfactory real market data, the Commission should determine the applicable rate pursuant to the 2008 Reference Rate Communication, which states: ‘The reference and discount rates are applied as a proxy for the market rate and to measure the grant equivalent of aid’.

| (221) | As has been demonstrated, the collateral constituted to secure the FDES loan cannot be classed as strong, and therefore does not justify application of the 400 basis points, as advocated by France. |
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(221)

As has been demonstrated, the collateral constituted to secure the FDES loan cannot be classed as strong, and therefore does not justify application of the 400 basis points, as advocated by France.

| (222) | Moreover, France has not provided any new evidence to support the view that the effective implementation of the recovery plan and Kem One's commitment to sound financial management, rather than constituting habitual obligations and compensations accompanying a restructuring measure, justify a remuneration below market rate. |
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(222)

Moreover, France has not provided any new evidence to support the view that the effective implementation of the recovery plan and Kem One's commitment to sound financial management, rather than constituting habitual obligations and compensations accompanying a restructuring measure, justify a remuneration below market rate.

| (223) | Lastly, the comparison with [private operator 2]‘s factoring agreement is irrelevant, as the debtor is not Kem One, but its debtors. |
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(223)

Lastly, the comparison with [private operator 2]‘s factoring agreement is irrelevant, as the debtor is not Kem One, but its debtors.

| (224) | In view of its financial difficulties, Kem One must be regarded as a CCC-rated undertaking within the meaning of the 2008 Reference Rate Communication. Likewise, the collateral must be classed as 'weak’ within the meaning of the same Communication. In the absence of any evidence that would call into question the interest rates set out in the 2008 Reference Rate Communication, the Commission takes the view that the market rate can be calculated in accordance with it, giving a rate of 10,53 % (0,53 % for the reference rate for France at the time the loan was granted + 1 000 basis points). |
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(224)

In view of its financial difficulties, Kem One must be regarded as a CCC-rated undertaking within the meaning of the 2008 Reference Rate Communication. Likewise, the collateral must be classed as 'weak’ within the meaning of the same Communication. In the absence of any evidence that would call into question the interest rates set out in the 2008 Reference Rate Communication, the Commission takes the view that the market rate can be calculated in accordance with it, giving a rate of 10,53 % (0,53 % for the reference rate for France at the time the loan was granted + 1 000 basis points).

| (225) | Amount of aid. In line with its previous decision-making practice, the Commission considers that the amount of aid is equivalent to the difference between the interest rate calculated in accordance with the 2008 Reference Rate Communication (10,53 %) and the interest rate applied by France (3,5 %). For each due date (each year), the difference has been calculated between the return from the actual interest rate (3,5 %) on the remaining capital and the return from the interest rate applied by the Commission (10,53 %) on the remaining capital. The amounts obtained (seven in total, for the seven-year loan repayment period) have then been discounted and added up to arrive at a figure of EUR [...]. |
| --- | --- |

(225)

Amount of aid. In line with its previous decision-making practice, the Commission considers that the amount of aid is equivalent to the difference between the interest rate calculated in accordance with the 2008 Reference Rate Communication (10,53 %) and the interest rate applied by France (3,5 %). For each due date (each year), the difference has been calculated between the return from the actual interest rate (3,5 %) on the remaining capital and the return from the interest rate applied by the Commission (10,53 %) on the remaining capital. The amounts obtained (seven in total, for the seven-year loan repayment period) have then been discounted and added up to arrive at a figure of EUR [...].

6.1.3.2.   The grant (EUR 15 million) and repayable advances (EUR 80 million)

The grant (EUR 15 million) and repayable advances (EUR 80 million)

| (226) | The grant. The Commission is of the opinion that a grant constitutes an economic advantage that the beneficiary would not obtain under market conditions. A grant is a financial instrument whose capital is not repayable and which does not generate interest to be paid by the beneficiary. A private lender, which has a cost of financing and has to remunerate its capital, would not agree to finance a company by grants. The aid amount is therefore equivalent to the grant in its entirety, namely EUR 15 million. |
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(226)

The grant. The Commission is of the opinion that a grant constitutes an economic advantage that the beneficiary would not obtain under market conditions. A grant is a financial instrument whose capital is not repayable and which does not generate interest to be paid by the beneficiary. A private lender, which has a cost of financing and has to remunerate its capital, would not agree to finance a company by grants. The aid amount is therefore equivalent to the grant in its entirety, namely EUR 15 million.

| (227) | The repayable advances. The Commission notes the presence of certain conditions relating to the granting of the advances that a private lender would probably not have required. These include in particular the condition relating to maintaining activity and jobs at the Lavéra site for five years after project completion, the sustainability of Kem One permitting, and with the prior agreement of the state. However, the obligation to repay confirms that these repayable advances can be regarded as a loan for the purposes of this Decision. |
| --- | --- |

(227)

The repayable advances. The Commission notes the presence of certain conditions relating to the granting of the advances that a private lender would probably not have required. These include in particular the condition relating to maintaining activity and jobs at the Lavéra site for five years after project completion, the sustainability of Kem One permitting, and with the prior agreement of the state. However, the obligation to repay confirms that these repayable advances can be regarded as a loan for the purposes of this Decision.

| (228) | As for the amount of aid, in the absence of available and satisfactory real market data (such as a bank loan actually granted to Kem One on the same terms as the repayable advances), the Commission should determine the applicable rate in accordance with the 2008 Reference Rate Communication. As it is an undertaking in difficulty, Kem One must be regarded as CCC-rated for the purposes of the Communication. Moreover, the advances are not secured by any collateral. Accordingly, the market interest rate calculated in accordance with the 2008 Reference Rate Communication is 10,53 % (0,53 % for the reference rate for France at the time the loan was granted + 1 000 basis points). |
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(228)

As for the amount of aid, in the absence of available and satisfactory real market data (such as a bank loan actually granted to Kem One on the same terms as the repayable advances), the Commission should determine the applicable rate in accordance with the 2008 Reference Rate Communication. As it is an undertaking in difficulty, Kem One must be regarded as CCC-rated for the purposes of the Communication. Moreover, the advances are not secured by any collateral. Accordingly, the market interest rate calculated in accordance with the 2008 Reference Rate Communication is 10,53 % (0,53 % for the reference rate for France at the time the loan was granted + 1 000 basis points).

| (229) | For the first tranche (EUR 65 million) the amount of aid is therefore equal to the difference between the interest rate calculated in accordance with the 2008 Reference Rate Communication (10,53 %) and the interest rate applied by France (3,5 %), namely EUR 21,77 million. The repayable advances have been regarded as loans for the purposes of calculating the discounted amount of aid, resulting in a calculation method similar to that used for the FDES loan. On each due date (each year), the difference is calculated between the return from the actual interest rate (3,5 %) on the remaining capital and the return from the interest rate applied by the Commission (10,53 %) on the remaining capital. The amounts obtained (seven in total, for the seven-year ‘loan’ repayment period) have then been discounted and added up to arrive at a figure of EUR 21,77 million. Likewise, for the second tranche (EUR 15 million) the amount of aid is equal to the difference between the interest rate calculated in accordance with the 2008 Reference Rate Communication (10,53 %) and the interest rate applied by France (10 %), namely EUR 1,64 million. |
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(229)

For the first tranche (EUR 65 million) the amount of aid is therefore equal to the difference between the interest rate calculated in accordance with the 2008 Reference Rate Communication (10,53 %) and the interest rate applied by France (3,5 %), namely EUR 21,77 million. The repayable advances have been regarded as loans for the purposes of calculating the discounted amount of aid, resulting in a calculation method similar to that used for the FDES loan. On each due date (each year), the difference is calculated between the return from the actual interest rate (3,5 %) on the remaining capital and the return from the interest rate applied by the Commission (10,53 %) on the remaining capital. The amounts obtained (seven in total, for the seven-year ‘loan’ repayment period) have then been discounted and added up to arrive at a figure of EUR 21,77 million. Likewise, for the second tranche (EUR 15 million) the amount of aid is equal to the difference between the interest rate calculated in accordance with the 2008 Reference Rate Communication (10,53 %) and the interest rate applied by France (10 %), namely EUR 1,64 million.

| (230) | The total economic advantage granted under this measure therefore comes to EUR [...]. |
| --- | --- |

(230)

The total economic advantage granted under this measure therefore comes to EUR [...].

6.1.3.3.   Possible write-off of tax and social security debts

Possible write-off of tax and social security debts

| (231) | It should first be observed that in its reply to the opening decision, France clarified that the tax and social security debts came not to EUR 42 million as indicated in the notification but to EUR [...]. The amount of EUR 42 million was a very broad estimate by the tax and social security authorities and had been declared provisionally as part of the administration procedure initiated by Lyon Commercial Court, before a detailed list of actual debts had been drawn up. |
| --- | --- |

(231)

It should first be observed that in its reply to the opening decision, France clarified that the tax and social security debts came not to EUR 42 million as indicated in the notification but to EUR [...]. The amount of EUR 42 million was a very broad estimate by the tax and social security authorities and had been declared provisionally as part of the administration procedure initiated by Lyon Commercial Court, before a detailed list of actual debts had been drawn up.

| (232) | As for debts to private creditors, most of them have been written off at least up to 70 %. |
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(232)

As for debts to private creditors, most of them have been written off at least up to 70 %.

| (233) | In this connection, the debt write-offs accorded by [private operator 3] and [private operator 1] should be analysed separately. These debtors are both close commercial partners of Kem One. [...] and certain Lavéra products (VCM, chlorinated residues, chloroform) are vital for [private operator 1] because of the vertical integration of the fluorinated gases production chain involving the Lavéra, Saint-Aubain and Pierre-Bénite sites, all in southern France. These products are very difficult to replace by sources further afield. As regards [private operator 3], its facilities are connected to those of Kem One by pipeline. Moreover, there is no alternative outlet for [private operator 3]‘s production of ethylene by steam cracker at Lavéra that can be subject to an equivalent evaluation. |
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(233)

In this connection, the debt write-offs accorded by [private operator 3] and [private operator 1] should be analysed separately. These debtors are both close commercial partners of Kem One. [...] and certain Lavéra products (VCM, chlorinated residues, chloroform) are vital for [private operator 1] because of the vertical integration of the fluorinated gases production chain involving the Lavéra, Saint-Aubain and Pierre-Bénite sites, all in southern France. These products are very difficult to replace by sources further afield. As regards [private operator 3], its facilities are connected to those of Kem One by pipeline. Moreover, there is no alternative outlet for [private operator 3]‘s production of ethylene by steam cracker at Lavéra that can be subject to an equivalent evaluation.

| (234) | The industrial partners know their customer and are vital to the undertaking's continued operation. It is therefore in their interest to remain involved in the undertaking and to accept a debt write-off, unlike a purely financial creditor whose sole objective would be to recover the debt. Bearing in mind the particular situation of these two creditors, it is not admissible to estimate the average rate of debt write-off at [...] %. |
| --- | --- |

(234)

The industrial partners know their customer and are vital to the undertaking's continued operation. It is therefore in their interest to remain involved in the undertaking and to accept a debt write-off, unlike a purely financial creditor whose sole objective would be to recover the debt. Bearing in mind the particular situation of these two creditors, it is not admissible to estimate the average rate of debt write-off at [...] %.

| (235) | Nevertheless, all the other creditors who agreed to write off their debts did so at 70 % (368 creditors for a total amount of EUR 33,4 million). These creditors had no priority or collateral and were not in a comparable situation to the tax and social security creditors. Consequently, by agreeing to write off [...] % of the remittable debts, France went beyond what the private creditors accepted. |
| --- | --- |

(235)

Nevertheless, all the other creditors who agreed to write off their debts did so at 70 % (368 creditors for a total amount of EUR 33,4 million). These creditors had no priority or collateral and were not in a comparable situation to the tax and social security creditors. Consequently, by agreeing to write off [...] % of the remittable debts, France went beyond what the private creditors accepted.

| (236) | France argued that agreeing to a debt write-off of EUR [...] allowed it to avoid possible losses of EUR [...]. However, the difference of EUR [...] is low compared with the amounts irreparably lost (EUR [...]), in particular given the uncertainty of the loss of EUR [...]. This solution is not one that a private creditor in a market economy would have adopted. |
| --- | --- |

(236)

France argued that agreeing to a debt write-off of EUR [...] allowed it to avoid possible losses of EUR [...]. However, the difference of EUR [...] is low compared with the amounts irreparably lost (EUR [...]), in particular given the uncertainty of the loss of EUR [...]. This solution is not one that a private creditor in a market economy would have adopted.

| (237) | Accordingly, the amount of aid is equivalent to the difference between the rate of debt write-off applied by France ([...] % or EUR [...]) and the rate of debt write-off by the private investors (70 % or EUR [...]), namely EUR [...]. |
| --- | --- |

(237)

Accordingly, the amount of aid is equivalent to the difference between the rate of debt write-off applied by France ([...] % or EUR [...]) and the rate of debt write-off by the private investors (70 % or EUR [...]), namely EUR [...].

6.1.4.   Effect on competition and trade between Member States

Effect on competition and trade between Member States

| (238) | The public support measures favour Kem One by providing it with additional financial resources and preventing it from having to cease operations. The measures allow it to maintain a stronger competitive position than it would have had if the aid had not been provided. They therefore threaten to distort competition between the operators in the PVC sector and in the market for chlorine and caustic soda production. |
| --- | --- |

(238)

The public support measures favour Kem One by providing it with additional financial resources and preventing it from having to cease operations. The measures allow it to maintain a stronger competitive position than it would have had if the aid had not been provided. They therefore threaten to distort competition between the operators in the PVC sector and in the market for chlorine and caustic soda production.

| (239) | Furthermore, there is a significant volume of trade between Member States in these sectors in European territory. The PVC market is relatively concentrated: five operators, including Kem One, account for 90 % of the market and Kem One is third among European S-PVC producers. The Commission has already had cause to regard the geographical scope of this market as covering at least north-western Europe, implying that competitive conditions are relatively homogeneous within this area (18). The advantage afforded by the measures at issue to an undertaking that operates in a competitive and relatively concentrated market is likely to distort competition and affect trade between Member States. |
| --- | --- |

(239)

Furthermore, there is a significant volume of trade between Member States in these sectors in European territory. The PVC market is relatively concentrated: five operators, including Kem One, account for 90 % of the market and Kem One is third among European S-PVC producers. The Commission has already had cause to regard the geographical scope of this market as covering at least north-western Europe, implying that competitive conditions are relatively homogeneous within this area (18). The advantage afforded by the measures at issue to an undertaking that operates in a competitive and relatively concentrated market is likely to distort competition and affect trade between Member States.

18

6.1.5.   Conclusion with regard to the presence of aid within the meaning of Article 107(1) TFEU

Conclusion with regard to the presence of aid within the meaning of Article 107(1) TFEU

| (240) | In the light of the above, the Commission concludes that all the measures under scrutiny constitute State aid within the meaning of Article 107(1) TFEU, giving a total aid amount equivalent to EUR 49,27 million. |
| --- | --- |

(240)

In the light of the above, the Commission concludes that all the measures under scrutiny constitute State aid within the meaning of Article 107(1) TFEU, giving a total aid amount equivalent to EUR 49,27 million.

6.2.   ASSESSMENT OF THE COMPATIBILITY OF THE MEASURES WITH THE APPLICABLE STATE AID RULES

6.2.1.   Applicable legal basis

Applicable legal basis

| (241) | The prohibition on State aid laid down in Article 107(1) TFEU is neither absolute nor unconditional. In particular, paragraphs 2 and 3 of Article 107 TFEU constitute legal bases allowing some aid measures to be considered compatible with the internal market. In the case at hand, the Commission regards the notified aid for the sole benefit of Kem One as serving to restore the long-term viability of an undertaking in difficulty. |
| --- | --- |

(241)

The prohibition on State aid laid down in Article 107(1) TFEU is neither absolute nor unconditional. In particular, paragraphs 2 and 3 of Article 107 TFEU constitute legal bases allowing some aid measures to be considered compatible with the internal market. In the case at hand, the Commission regards the notified aid for the sole benefit of Kem One as serving to restore the long-term viability of an undertaking in difficulty.

| (242) | Even though the new Guidelines entered into force on 1 August 2014, the aid at issue will be examined in the light of the 2004 Guidelines. Point 136 of the new Guidelines provides that notifications registered by the Commission prior to 1 August 2014 will be examined in the light of the criteria in force at the time of notification. Since the measures at issue were notified on 30 July 2014 and registered before 1 August 2014, they will be examined in the light of the 2004 Guidelines. |
| --- | --- |

(242)

Even though the new Guidelines entered into force on 1 August 2014, the aid at issue will be examined in the light of the 2004 Guidelines. Point 136 of the new Guidelines provides that notifications registered by the Commission prior to 1 August 2014 will be examined in the light of the criteria in force at the time of notification. Since the measures at issue were notified on 30 July 2014 and registered before 1 August 2014, they will be examined in the light of the 2004 Guidelines.

| (243) | The assessment must therefore establish whether the measures at issue could be found compatible with the internal market on the basis of Article 107(3) TFEU, in the light of the criteria laid down in the 2004 Guidelines. |
| --- | --- |

(243)

The assessment must therefore establish whether the measures at issue could be found compatible with the internal market on the basis of Article 107(3) TFEU, in the light of the criteria laid down in the 2004 Guidelines.

6.2.2.   Kem One's eligibility for restructuring aid

Kem One's eligibility for restructuring aid

| (244) | A new company, K1, was set up to acquire and hold the shares in Kem One in accordance with the recovery and business continuity plan approved by Lyon Commercial Court. There is therefore economic continuity between K1 and Kem One. |
| --- | --- |

(244)

A new company, K1, was set up to acquire and hold the shares in Kem One in accordance with the recovery and business continuity plan approved by Lyon Commercial Court. There is therefore economic continuity between K1 and Kem One.

| (245) | The Commission does not contest Kem One's eligibility for application of the 2004 Guidelines cited by the French authorities. In court-supervised administration since 27 March 2013, Kem One meets the criteria set out in point 10(c) of the 2004 Guidelines. |
| --- | --- |

(245)

The Commission does not contest Kem One's eligibility for application of the 2004 Guidelines cited by the French authorities. In court-supervised administration since 27 March 2013, Kem One meets the criteria set out in point 10(c) of the 2004 Guidelines.

6.2.3.   Restoration of long-term viability

Restoration of long-term viability

| (246) | Point 17 of the 2004 Guidelines provides that 'Restructuring, on the other hand, will be based on a feasible, coherent and far-reaching plan to restore a firm's long-term viability. Restructuring usually involves one or more of the following elements: the reorganisation and rationalisation of the firm's activities on to a more efficient basis, typically involving the withdrawal from loss-making activities, the restructuring of those existing activities that can be made competitive again and, possibly, diversification in the direction of new and viable activities. Financial restructuring (capital injections, debt reduction) usually has to accompany the physical restructuring. Restructuring operations within the scope of these Guidelines cannot, however, be limited to financial aid designed to make good past losses without tackling the reasons for those losses.’ |
| --- | --- |

(246)

Point 17 of the 2004 Guidelines provides that 'Restructuring, on the other hand, will be based on a feasible, coherent and far-reaching plan to restore a firm's long-term viability. Restructuring usually involves one or more of the following elements: the reorganisation and rationalisation of the firm's activities on to a more efficient basis, typically involving the withdrawal from loss-making activities, the restructuring of those existing activities that can be made competitive again and, possibly, diversification in the direction of new and viable activities. Financial restructuring (capital injections, debt reduction) usually has to accompany the physical restructuring. Restructuring operations within the scope of these Guidelines cannot, however, be limited to financial aid designed to make good past losses without tackling the reasons for those losses.’

| (247) | Points 34 et seq. of the 2004 Guidelines set out the features that a restructuring plan must have in order for the aid to be regarded as compatible with the State aid rules. |
| --- | --- |

(247)

Points 34 et seq. of the 2004 Guidelines set out the features that a restructuring plan must have in order for the aid to be regarded as compatible with the State aid rules.

6.2.3.1.   On the restructuring costs

On the restructuring costs

| (248) | During its in-depth investigation, the Commission examined the arguments put forward by France in its reply to the opening decision, in particular as regards the absence of costs linked to staff restructuring. France clarified that, of the [90-110] jobs that were to go, there would be only [35-45] actual departures from the firm. Arkema had confirmed that it would take [25-35] employees without compensation and only [1-15] staff had had to be compensated by Kem One, for a total of EUR [...] million. This sum had been included in the projected deductions from the income statement at the start of the restructuring period. The other job losses were taken from posts that had been vacant up to that point. |
| --- | --- |

(248)

During its in-depth investigation, the Commission examined the arguments put forward by France in its reply to the opening decision, in particular as regards the absence of costs linked to staff restructuring. France clarified that, of the [90-110] jobs that were to go, there would be only [35-45] actual departures from the firm. Arkema had confirmed that it would take [25-35] employees without compensation and only [1-15] staff had had to be compensated by Kem One, for a total of EUR [...] million. This sum had been included in the projected deductions from the income statement at the start of the restructuring period. The other job losses were taken from posts that had been vacant up to that point.

| (249) | Both France and Kem One also confirmed that the restructuring would not entail any additional costs. |
| --- | --- |

(249)

Both France and Kem One also confirmed that the restructuring would not entail any additional costs.

6.2.3.2.   On the duration of the restructuring plan

On the duration of the restructuring plan

| (250) | In response to the doubts expressed in the opening decision, France explained that the start date for the restructuring period was 5 February 2014, i.e. the day on which Kem One's activities were taken over by the new shareholder (transfer of shares held by Kem One Holding, former parent company of Kem One, to K1, holding company holding the shares in Kem One). The end date for the restructuring period is 31 December 2016, the completion date for the SAM project. By that date, all actions under the restructuring plan will have been carried out. |
| --- | --- |

(250)

In response to the doubts expressed in the opening decision, France explained that the start date for the restructuring period was 5 February 2014, i.e. the day on which Kem One's activities were taken over by the new shareholder (transfer of shares held by Kem One Holding, former parent company of Kem One, to K1, holding company holding the shares in Kem One). The end date for the restructuring period is 31 December 2016, the completion date for the SAM project. By that date, all actions under the restructuring plan will have been carried out.

| (251) | The duration of the restructuring plan is therefore less than three years, in compliance with point 35 of the 2004 Guidelines, which requires the duration of the restructuring plan to be ‘as short as possible’. The restructuring plan is therefore likely to restore the viability of Kem One within a reasonable time-scale. |
| --- | --- |

(251)

The duration of the restructuring plan is therefore less than three years, in compliance with point 35 of the 2004 Guidelines, which requires the duration of the restructuring plan to be ‘as short as possible’. The restructuring plan is therefore likely to restore the viability of Kem One within a reasonable time-scale.

6.2.3.3.   On whether the scenarios for the return to viability are realistic

On whether the scenarios for the return to viability are realistic

| (252) | In the opening decision, the Commission expressed doubts about the credibility of certain aspects of the scenarios for the restoration of long-term viability presented by the French authorities. It remarked in particular, in relation to the restoration of the cash position, that the base-case scenario left only a small cash surplus at the end of the period in 2020. The cash outcome was even worse under the pessimistic scenario, with a negative amount of EUR [100-150] million in 2020. |
| --- | --- |

(252)

In the opening decision, the Commission expressed doubts about the credibility of certain aspects of the scenarios for the restoration of long-term viability presented by the French authorities. It remarked in particular, in relation to the restoration of the cash position, that the base-case scenario left only a small cash surplus at the end of the period in 2020. The cash outcome was even worse under the pessimistic scenario, with a negative amount of EUR [100-150] million in 2020.

| (253) | The third parties generally shared the doubts expressed by the Commission in the opening decision. |
| --- | --- |

(253)

The third parties generally shared the doubts expressed by the Commission in the opening decision.

| (254) | The Commission notes the necessary clarifications and updates provided by the French authorities in their reply to the opening decision in respect of the initial business-plan hypotheses. |
| --- | --- |

(254)

The Commission notes the necessary clarifications and updates provided by the French authorities in their reply to the opening decision in respect of the initial business-plan hypotheses.

| (255) | First, France, confirmed that the need for and obtention of the bank loan of EUR [60-70] million were hypothetical and that such a loan would in any event not be called for before 2016. Given the uncertainty surrounding the obtention of the loan and its timing and terms, the Commission considers that it is not appropriate to take account of the EUR [60-70] million provided by this hypothetical loan in the assessment of the restoration of viability. At the Commission's request, the French authorities therefore provided accounting projections based on pessimistic, base-case and optimistic hypotheses that did not include the bank loan. |
| --- | --- |

(255)

First, France, confirmed that the need for and obtention of the bank loan of EUR [60-70] million were hypothetical and that such a loan would in any event not be called for before 2016. Given the uncertainty surrounding the obtention of the loan and its timing and terms, the Commission considers that it is not appropriate to take account of the EUR [60-70] million provided by this hypothetical loan in the assessment of the restoration of viability. At the Commission's request, the French authorities therefore provided accounting projections based on pessimistic, base-case and optimistic hypotheses that did not include the bank loan.

| (256) | The Commission also takes note of the fact that the investment project linked to the restructuring is progressing better than the initial forecasts suggested. The planned investment amount of EUR [150-250] million has been cut to EUR [15-25] million. Completion has also been brought forward and is scheduled for the fourth quarter of 2016, which is four to five months earlier than the date originally planned. The earlier completion generates estimated savings of EUR [10-20] million. As a result the cash position in the base-case scenario has improved by EUR [30-40] million. In the pessimistic scenario, the cash position has shifted to the same degree and now stands at EUR – [70-80] million. |
| --- | --- |

(256)

The Commission also takes note of the fact that the investment project linked to the restructuring is progressing better than the initial forecasts suggested. The planned investment amount of EUR [150-250] million has been cut to EUR [15-25] million. Completion has also been brought forward and is scheduled for the fourth quarter of 2016, which is four to five months earlier than the date originally planned. The earlier completion generates estimated savings of EUR [10-20] million. As a result the cash position in the base-case scenario has improved by EUR [30-40] million. In the pessimistic scenario, the cash position has shifted to the same degree and now stands at EUR – [70-80] million.

| (257) | The Commission notes further that Kem One recorded an overall growth in production and sales of [...] % in 2014 compared with 2013 to reach the historic production levels of 2007/2008 and the target set by the restructuring plan for the 2017/2018 financial years. This increase in PVC and caustic soda production volumes is a result of the gradual implementation of the restructuring plan coupled with an absence of technical incidents at the production sites. |
| --- | --- |

(257)

The Commission notes further that Kem One recorded an overall growth in production and sales of [...] % in 2014 compared with 2013 to reach the historic production levels of 2007/2008 and the target set by the restructuring plan for the 2017/2018 financial years. This increase in PVC and caustic soda production volumes is a result of the gradual implementation of the restructuring plan coupled with an absence of technical incidents at the production sites.

| (258) | Otherwise, owing to the continued downward trend in 2014 of the price of oil and therefore of ethylene, and of the price of caustic soda, Kem One recorded a higher than expected drop in turnover. However, the Commission observes that this drop in turnover has not had a negative impact on the undertaking's margins in so far as the prices of the raw materials required to produce PVC have fallen in the same, or even greater, proportions. |
| --- | --- |

(258)

Otherwise, owing to the continued downward trend in 2014 of the price of oil and therefore of ethylene, and of the price of caustic soda, Kem One recorded a higher than expected drop in turnover. However, the Commission observes that this drop in turnover has not had a negative impact on the undertaking's margins in so far as the prices of the raw materials required to produce PVC have fallen in the same, or even greater, proportions.

| (259) | The Commission accordingly concludes that the clarifications provided by the French authorities in response to the opening decision serve to confirm the credibility of Kem One's return to viability in the long term. The restructuring measures are designed, in compliance with the 2004 Guidelines, to allow Kem One to make the necessary transition to a more vertically integrated industrial structure, which will be more efficient in terms of profitability, thanks to the SAM project and to the containment of production costs relating to the supply of raw materials. |
| --- | --- |

(259)

The Commission accordingly concludes that the clarifications provided by the French authorities in response to the opening decision serve to confirm the credibility of Kem One's return to viability in the long term. The restructuring measures are designed, in compliance with the 2004 Guidelines, to allow Kem One to make the necessary transition to a more vertically integrated industrial structure, which will be more efficient in terms of profitability, thanks to the SAM project and to the containment of production costs relating to the supply of raw materials.

6.2.4.   Avoidance of undue distortions of competition

Avoidance of undue distortions of competition

| (260) | Point 38 of the 2004 Guidelines provides that ‘In order to ensure that the adverse effects on trading conditions are minimised as much as possible, so that the positive effects pursued outweigh the adverse ones, compensatory measures must be taken. Otherwise, the aid will be regarded as “contrary to the common interest” and therefore incompatible with the common market’. Point 39 of the 2004 Guidelines states that ‘these measures may comprise divestment of assets, reductions in capacity or market presence and reduction of entry barriers on the markets concerned’. |
| --- | --- |

(260)

Point 38 of the 2004 Guidelines provides that ‘In order to ensure that the adverse effects on trading conditions are minimised as much as possible, so that the positive effects pursued outweigh the adverse ones, compensatory measures must be taken. Otherwise, the aid will be regarded as “contrary to the common interest” and therefore incompatible with the common market’. Point 39 of the 2004 Guidelines states that ‘these measures may comprise divestment of assets, reductions in capacity or market presence and reduction of entry barriers on the markets concerned’.

| (261) | The purpose of the compensatory measures is therefore to limit the effects of the aid in the markets in which the beneficiary is present, without undermining the structure of competition in these markets or the ultimate viability of the beneficiary. |
| --- | --- |

(261)

The purpose of the compensatory measures is therefore to limit the effects of the aid in the markets in which the beneficiary is present, without undermining the structure of competition in these markets or the ultimate viability of the beneficiary.

6.2.4.1.   Divestment of assets is not an appropriate compensatory measure in this instance

Divestment of assets is not an appropriate compensatory measure in this instance

| (262) | Point 40 of the 2004 Guidelines provides that the compensatory measures ‘should take place in particular in the market where the firm will have a significant market position after restructuring’. As set out in Section 2.1 of this Decision, Kem One is active primarily in the PVC market, particularly commodity S-PVC and E-PVC, and it has a relatively significant market position in France and Italy. |
| --- | --- |

(262)

Point 40 of the 2004 Guidelines provides that the compensatory measures ‘should take place in particular in the market where the firm will have a significant market position after restructuring’. As set out in Section 2.1 of this Decision, Kem One is active primarily in the PVC market, particularly commodity S-PVC and E-PVC, and it has a relatively significant market position in France and Italy.

| (263) | However, under point 39 of the 2004 Guidelines, ‘when assessing whether the compensatory measures are appropriate the Commission will take account of the market structure and the conditions of competition to ensure that any such measure does not lead to a deterioration in the structure of the market, for example by having the indirect effect of creating a monopoly or a tight oligopolistic situation. If a Member State is able to prove that such a situation would arise, the compensatory measures should be construed in such a way to avoid this situation’. |
| --- | --- |

(263)

However, under point 39 of the 2004 Guidelines, ‘when assessing whether the compensatory measures are appropriate the Commission will take account of the market structure and the conditions of competition to ensure that any such measure does not lead to a deterioration in the structure of the market, for example by having the indirect effect of creating a monopoly or a tight oligopolistic situation. If a Member State is able to prove that such a situation would arise, the compensatory measures should be construed in such a way to avoid this situation’.

| (264) | As regards the structure of the market, a general feature of the PVC market is the need for operators to be vertically integrated in order to control the whole value chain and to be competitive. The need for operators to have an autonomous and integrated production structure was described by the Commission in its decision in Ineos/Solvay/JV. |
| --- | --- |

(264)

As regards the structure of the market, a general feature of the PVC market is the need for operators to be vertically integrated in order to control the whole value chain and to be competitive. The need for operators to have an autonomous and integrated production structure was described by the Commission in its decision in Ineos/Solvay/JV.

| (265) | In that decision the Commission examined a number of business models with varying degrees of integration in the PVC sector. It pointed out that models without vertical integration of PVC up to chlorine were the exception in Europe and that ‘the current competitive landscape indicates that full vertical integration is the general trend in the industry’. |
| --- | --- |

(265)

In that decision the Commission examined a number of business models with varying degrees of integration in the PVC sector. It pointed out that models without vertical integration of PVC up to chlorine were the exception in Europe and that ‘the current competitive landscape indicates that full vertical integration is the general trend in the industry’.

| (266) | As for the model of ‘virtual integration’ by way of supply contracts between two players, past examples, some involving Kem One, have demonstrated the risks associated with this kind of structure, based on the external supply of key raw materials. |
| --- | --- |

(266)

As for the model of ‘virtual integration’ by way of supply contracts between two players, past examples, some involving Kem One, have demonstrated the risks associated with this kind of structure, based on the external supply of key raw materials.

| (267) | The importance of vertical integration for the players in the PVC market was confirmed by the commitments offered by the notifying parties and accepted by the Commission in the Ineos/Solvay/JV case. The parties committed to divesting a vertically integrated asset in order to ensure its viability in the market and to resolve the competition concerns identified by the Commission in the S-PVC market. |
| --- | --- |

(267)

The importance of vertical integration for the players in the PVC market was confirmed by the commitments offered by the notifying parties and accepted by the Commission in the Ineos/Solvay/JV case. The parties committed to divesting a vertically integrated asset in order to ensure its viability in the market and to resolve the competition concerns identified by the Commission in the S-PVC market.

| (268) | Moreover, in the past some stand-alone, non-vertically-integrated PVC producers have tried to boost their presence in the PVC market, without success. |
| --- | --- |

(268)

Moreover, in the past some stand-alone, non-vertically-integrated PVC producers have tried to boost their presence in the PVC market, without success.

| (269) | Lastly, as soon as there is a geographical separation between plants in the vertical chain, the costs of transporting VCM are particularly high owing to the nature of the product (extremely toxic liquefied gas), whichever mode of transport is used (rail, road or sea). These high transport costs (some 10 % of the value of the product) make matters considerably more difficult in situations of low margins, as the Commission pointed out in paragraph 1452 of its decision in Ineos/Solvay/JV: ‘As regards imports from other areas, VCM transport costs seem to constitute a major hurdle. IHS, a global information company that provides, among other things, monthly and annual indexes, reports and news related to the vinyl industry, talks about’ prohibitive freight rates‘. This is not surprising, as VCM is a chemical product that is hazardous and difficult to transport, as acknowledged by the Notifying Parties’. |
| --- | --- |

(269)

Lastly, as soon as there is a geographical separation between plants in the vertical chain, the costs of transporting VCM are particularly high owing to the nature of the product (extremely toxic liquefied gas), whichever mode of transport is used (rail, road or sea). These high transport costs (some 10 % of the value of the product) make matters considerably more difficult in situations of low margins, as the Commission pointed out in paragraph 1452 of its decision in Ineos/Solvay/JV: ‘As regards imports from other areas, VCM transport costs seem to constitute a major hurdle. IHS, a global information company that provides, among other things, monthly and annual indexes, reports and news related to the vinyl industry, talks about’ prohibitive freight rates‘. This is not surprising, as VCM is a chemical product that is hazardous and difficult to transport, as acknowledged by the Notifying Parties’.

| (270) | Moreover, it is worth noting that the principal compensatory measure suggested by Ineos is the divestment of the entire Lavéra production chain, including the downstream sites. This is an indication that all the market players, including Kem One's competitors, recognise that viability in the market depends on vertical integration. |
| --- | --- |

(270)

Moreover, it is worth noting that the principal compensatory measure suggested by Ineos is the divestment of the entire Lavéra production chain, including the downstream sites. This is an indication that all the market players, including Kem One's competitors, recognise that viability in the market depends on vertical integration.

| (271) | Consequently, a compensatory measure consisting in the divestment of one of Kem One's PVC production sites (such as Balan or Berre) is not a viable solution. Since it would not have internal access to upstream inputs (chlorine, ethylene), the purchaser would be obliged to conclude supply contracts with Kem One, which would place it in an untenable position from the point of view of its commercial independence and ability to exert genuine competitive pressure. Furthermore, cutting Kem One off from one of its downstream sites would destabilise its entire production chain, by depriving its upstream chlorine and ethylene production sites of internal sales outlets. |
| --- | --- |

(271)

Consequently, a compensatory measure consisting in the divestment of one of Kem One's PVC production sites (such as Balan or Berre) is not a viable solution. Since it would not have internal access to upstream inputs (chlorine, ethylene), the purchaser would be obliged to conclude supply contracts with Kem One, which would place it in an untenable position from the point of view of its commercial independence and ability to exert genuine competitive pressure. Furthermore, cutting Kem One off from one of its downstream sites would destabilise its entire production chain, by depriving its upstream chlorine and ethylene production sites of internal sales outlets.

| (272) | In the Ineos/Solvay/JV case, the Commission stressed the uncertainty surrounding the question whether Kem One could be an aggressive competitor to the Ineos and Solvay joint venture, given its difficulties and the uncertainty about whether the restructuring plan would be implemented successfully. However, the Commission found that a reduction in Kem One's production capacity would result in an increased market share for the Ineos and Solvay joint venture, while implementation of the restructuring plan might further reduce Kem One's incentives to expand output significantly as a reaction to a price increase by the joint venture. Moreover, in its assessment of the competitive situation in the market post-transaction, the Commission adopted a conservative approach and took into account Kem One as a full competitive force (19). |
| --- | --- |

(272)

In the Ineos/Solvay/JV case, the Commission stressed the uncertainty surrounding the question whether Kem One could be an aggressive competitor to the Ineos and Solvay joint venture, given its difficulties and the uncertainty about whether the restructuring plan would be implemented successfully. However, the Commission found that a reduction in Kem One's production capacity would result in an increased market share for the Ineos and Solvay joint venture, while implementation of the restructuring plan might further reduce Kem One's incentives to expand output significantly as a reaction to a price increase by the joint venture. Moreover, in its assessment of the competitive situation in the market post-transaction, the Commission adopted a conservative approach and took into account Kem One as a full competitive force (19).

19

| (273) | Accordingly, transforming the structure of Kem One by reducing its sales in the PVC market or substantially modifying the scope of its activity would undermine the equilibrium in the PVC market that has emerged following the creation of the Ineos and Solvay joint venture and the implementation of the commitments made by the parties during the investigation in that case (20). |
| --- | --- |

(273)

Accordingly, transforming the structure of Kem One by reducing its sales in the PVC market or substantially modifying the scope of its activity would undermine the equilibrium in the PVC market that has emerged following the creation of the Ineos and Solvay joint venture and the implementation of the commitments made by the parties during the investigation in that case (20).

20

| (274) | Despite the implementation of the commitments in the Ineos/Solvay/JV decision, which has had the effect of removing the horizontal overlaps between Ineos and Solvay in the S-PVC market in north-western Europe, the Ineos and Solvay joint venture remains by far the biggest player in the market with a market share of [30-40] % in 2012. Imposing a divestment on Kem One would significantly weaken its position and would reduce the competitive pressure it is capable of exerting on the Ineos/Solvay joint venture. |
| --- | --- |

(274)

Despite the implementation of the commitments in the Ineos/Solvay/JV decision, which has had the effect of removing the horizontal overlaps between Ineos and Solvay in the S-PVC market in north-western Europe, the Ineos and Solvay joint venture remains by far the biggest player in the market with a market share of [30-40] % in 2012. Imposing a divestment on Kem One would significantly weaken its position and would reduce the competitive pressure it is capable of exerting on the Ineos/Solvay joint venture.

| (275) | A compensatory measure consisting in dividing Kem One's S-PVC business into two vertically integrated entities by selling one of the S-PVC production sites (Balan or Berre) together with an input production site (Fos-sur-Mer) would have the advantage of keeping the S-PVC production chain vertically integrated. However, such a solution would cut Kem One's S-PVC business by around [...] % and would weaken its potential to compete with the Ineos/Solvay joint venture. The scope of this solution would have the effect of destabilising the structure of the market for S-PVC as it stands following the creation of the Ineos/Solvay joint venture and of rendering inadequate the commitments put in place to resolve the competition concerns raised by that transaction and to ensure effective competition in the S-PVC market. |
| --- | --- |

(275)

A compensatory measure consisting in dividing Kem One's S-PVC business into two vertically integrated entities by selling one of the S-PVC production sites (Balan or Berre) together with an input production site (Fos-sur-Mer) would have the advantage of keeping the S-PVC production chain vertically integrated. However, such a solution would cut Kem One's S-PVC business by around [...] % and would weaken its potential to compete with the Ineos/Solvay joint venture. The scope of this solution would have the effect of destabilising the structure of the market for S-PVC as it stands following the creation of the Ineos/Solvay joint venture and of rendering inadequate the commitments put in place to resolve the competition concerns raised by that transaction and to ensure effective competition in the S-PVC market.

| (276) | A compensatory measure of this kind would incidentally undermine Kem One's return to viability. Lastly, such a measure would appear to be disproportionate in the light of the amount of aid received by the undertaking (some 10 times smaller) and the restructuring costs (some EUR 100 million less). |
| --- | --- |

(276)

A compensatory measure of this kind would incidentally undermine Kem One's return to viability. Lastly, such a measure would appear to be disproportionate in the light of the amount of aid received by the undertaking (some 10 times smaller) and the restructuring costs (some EUR 100 million less).

6.2.4.2.   No long-term structural overcapacity in the relevant market

No long-term structural overcapacity in the relevant market

| (277) | The interested third parties stressed the overcapacity in the European PVC market. They referred in this connection to point 42 of the 2004 Guidelines, which states: ‘When the beneficiary is active in a market suffering from long-term structural overcapacity, as defined in the context of the multisectoral framework on regional aid for large investments, the reduction in the company's capacity or market presence may have to be as high as 100 %.’ |
| --- | --- |

(277)

The interested third parties stressed the overcapacity in the European PVC market. They referred in this connection to point 42 of the 2004 Guidelines, which states: ‘When the beneficiary is active in a market suffering from long-term structural overcapacity, as defined in the context of the multisectoral framework on regional aid for large investments, the reduction in the company's capacity or market presence may have to be as high as 100 %.’

| (278) | In its decision in Ineos/Solvay/JV, the Commission did indeed observe a situation of overcapacity in the European PVC market. However, it would stress two points:






  — | it has not used the method for calculating overcapacity used by Ineos and anonymous undertaking 1, where the definition of overcapacity presupposes that industrial plants are operating constantly at 100 % of their technical capacity, |
| --- | --- | --- |

(278)

In its decision in Ineos/Solvay/JV, the Commission did indeed observe a situation of overcapacity in the European PVC market. However, it would stress two points:

—

it has not used the method for calculating overcapacity used by Ineos and anonymous undertaking 1, where the definition of overcapacity presupposes that industrial plants are operating constantly at 100 % of their technical capacity,

| — | the Ineos/Solvay/JV decision was based on 2012 data. |
| --- | --- |

—

the Ineos/Solvay/JV decision was based on 2012 data.

| (279) | The Commission notes that since 2012 several factors clearly indicate that the situation of overcapacity in the European PVC market has evolved. |
| --- | --- |

(279)

The Commission notes that since 2012 several factors clearly indicate that the situation of overcapacity in the European PVC market has evolved.

| (280) | Calculation of overcapacity. First, the Commission would stress that, while there has been overcapacity in the past, its extent would seem to have been overestimated by the interested third parties. The actual production capacity of an operator in the market depends ultimately on the seasonality of sales (S-PVC sales in Europe are down in August and December). In addition, shutdowns scheduled for maintenance, the slowdown in chlorine production in winter and the high cost of electricity mean that production capacity is rarely used 100 %. Industrial PVC production is also affected by episodic incidents and gaps in the supply of raw materials. Lastly, free capacity cannot be added in, given the geographical distances involved and the not insignificant transport costs even within Europe. |
| --- | --- |

(280)

Calculation of overcapacity. First, the Commission would stress that, while there has been overcapacity in the past, its extent would seem to have been overestimated by the interested third parties. The actual production capacity of an operator in the market depends ultimately on the seasonality of sales (S-PVC sales in Europe are down in August and December). In addition, shutdowns scheduled for maintenance, the slowdown in chlorine production in winter and the high cost of electricity mean that production capacity is rarely used 100 %. Industrial PVC production is also affected by episodic incidents and gaps in the supply of raw materials. Lastly, free capacity cannot be added in, given the geographical distances involved and the not insignificant transport costs even within Europe.

| (281) | In reality, actual PVC production on an annual basis rarely exceeds 90 % of the declared capacity of all producers. |
| --- | --- |

(281)

In reality, actual PVC production on an annual basis rarely exceeds 90 % of the declared capacity of all producers.

| (282) | According to FIDES data (internal industry statistics), in 2014, nominal PVC production capacity for western and central Europe was [6 000-7 000] kt and actual production was [5 000-6 000] kt, giving a nominal capacity utilisation rate of [80-90] %, so real overcapacity in this market in 2014 was limited. The Commission would also observe that the utilisation rate of S-PVC production capacity is also around 84,3 % in the US (according to data from IHS, one of the main specialist market analysts, together with ICIS (Independent Chemical Information Services)). |
| --- | --- |

(282)

According to FIDES data (internal industry statistics), in 2014, nominal PVC production capacity for western and central Europe was [6 000-7 000] kt and actual production was [5 000-6 000] kt, giving a nominal capacity utilisation rate of [80-90] %, so real overcapacity in this market in 2014 was limited. The Commission would also observe that the utilisation rate of S-PVC production capacity is also around 84,3 % in the US (according to data from IHS, one of the main specialist market analysts, together with ICIS (Independent Chemical Information Services)).

| (283) | Overcapacity in the S-PVC market. Since the summer of 2014, several factors have affected supply in the European market. First, the fall in the euro, combined with a sharp drop in oil prices, significantly boosted export sales (to Turkey, India and North Africa). These export markets are easily accessible for European producers: so, for Kem One, the cost of transporting S-PVC from its Berre plant to Turkey is around EUR [...]/t, compared with EUR [...]/t to Germany and northern Europe. As a result, Kem One's total exports in the first quarter of 2015 came to [...] kt, up from the same period one year earlier ([...] kt). An IHS report dating from March 2015 emphasises this development in the European PVC market. It indicates that in 2009 exports by S-PVC producers based in western Europe represented 19 % of production, compared with 30 % at the end of 2014. This trend is behind the increasing pressure on availability (the exact opposite of a situation of overcapacity in a market) without this resulting in competitive pressure on the Ineos/Solvay joint venture. This pressure pushed up sales prices at the start of 2015. In addition, the drop in supply in the European market increases the bargaining power of PVC producers. An ICIS article dated 10 April 2015 makes this observation, based on contacts with customers in the market: ‘One buyer said that with European market seeing low imports, production difficulties and an increase in demand, April will be a month in which producers potentially can break long standing records for margin improvements’. This situation has led producers to impose quotas on major customers and increase sales prices. In these circumstances, dismembering Kem One and/or imposing a long-term reduction in its sales would only strengthen the competitive position of the Ineos/Solvay joint venture to the detriment of competition in non-European markets. |
| --- | --- |

(283)

Overcapacity in the S-PVC market. Since the summer of 2014, several factors have affected supply in the European market. First, the fall in the euro, combined with a sharp drop in oil prices, significantly boosted export sales (to Turkey, India and North Africa). These export markets are easily accessible for European producers: so, for Kem One, the cost of transporting S-PVC from its Berre plant to Turkey is around EUR [...]/t, compared with EUR [...]/t to Germany and northern Europe. As a result, Kem One's total exports in the first quarter of 2015 came to [...] kt, up from the same period one year earlier ([...] kt). An IHS report dating from March 2015 emphasises this development in the European PVC market. It indicates that in 2009 exports by S-PVC producers based in western Europe represented 19 % of production, compared with 30 % at the end of 2014. This trend is behind the increasing pressure on availability (the exact opposite of a situation of overcapacity in a market) without this resulting in competitive pressure on the Ineos/Solvay joint venture. This pressure pushed up sales prices at the start of 2015. In addition, the drop in supply in the European market increases the bargaining power of PVC producers. An ICIS article dated 10 April 2015 makes this observation, based on contacts with customers in the market: ‘One buyer said that with European market seeing low imports, production difficulties and an increase in demand, April will be a month in which producers potentially can break long standing records for margin improvements’. This situation has led producers to impose quotas on major customers and increase sales prices. In these circumstances, dismembering Kem One and/or imposing a long-term reduction in its sales would only strengthen the competitive position of the Ineos/Solvay joint venture to the detriment of competition in non-European markets.

| (284) | The Commission therefore concludes that the interested third parties, in their analysis of overcapacity in the market, did not take sufficient account of developments in the PVC market since the Ineos/Solvay/JV decision, although these very developments can give rise to a situation in which strategically targeted exports to countries outside the EU and the reorientation of production could, with competition weakened, result in price rises to the detriment of customers located in western Europe. |
| --- | --- |

(284)

The Commission therefore concludes that the interested third parties, in their analysis of overcapacity in the market, did not take sufficient account of developments in the PVC market since the Ineos/Solvay/JV decision, although these very developments can give rise to a situation in which strategically targeted exports to countries outside the EU and the reorientation of production could, with competition weakened, result in price rises to the detriment of customers located in western Europe.

6.2.4.3.   Compensatory measures deemed appropriate by the Commission

Compensatory measures deemed appropriate by the Commission

| (285) | By way of a preliminary remark, it should be observed that point 39 of the 2004 Guidelines does not give an exhaustive list of possible compensatory measures, but merely indicates a number of solutions that are acceptable in principle, without restricting the Commission's freedom to opt for compensatory measures not listed there. |
| --- | --- |

(285)

By way of a preliminary remark, it should be observed that point 39 of the 2004 Guidelines does not give an exhaustive list of possible compensatory measures, but merely indicates a number of solutions that are acceptable in principle, without restricting the Commission's freedom to opt for compensatory measures not listed there.

| (286) | Following its investigation, the Commission has reached the conclusion that the following constitute appropriate compensatory measures:






  — | cap on nominal production capacity for chlorine ([600-700] kt/year) and caustic soda ([600-700] kt/year other than for internal use) at the Fos-sur-Mer and Lavéra sites for a period of [...] from the date of adoption of this Decision, |
| --- | --- | --- |

(286)

Following its investigation, the Commission has reached the conclusion that the following constitute appropriate compensatory measures:

—

cap on nominal production capacity for chlorine ([600-700] kt/year) and caustic soda ([600-700] kt/year other than for internal use) at the Fos-sur-Mer and Lavéra sites for a period of [...] from the date of adoption of this Decision,

| — | cap on Kem One's share of the S-PVC market in north-western Europe (Belgium, Denmark, France, Germany, Ireland, Luxembourg, the Netherlands, Norway, Sweden and the United Kingdom taken together) (21), at [10-20] % in volume terms for a period of [...] from the date of adoption of this Decision, |
| --- | --- |

—

cap on Kem One's share of the S-PVC market in north-western Europe (Belgium, Denmark, France, Germany, Ireland, Luxembourg, the Netherlands, Norway, Sweden and the United Kingdom taken together) (21), at [10-20] % in volume terms for a period of [...] from the date of adoption of this Decision,

21

| — | ban on acquiring shares or assets in undertakings in EEA product markets in which Kem One is present for a period of [...] from the date of adoption of this Decision; this ban extends to Kem One and to any natural or legal person exercising control over Kem One now or in the next [...] within the meaning of Article 3(2) of Council Regulation (EC) No 139/2004 (22). |
| --- | --- |

—

ban on acquiring shares or assets in undertakings in EEA product markets in which Kem One is present for a period of [...] from the date of adoption of this Decision; this ban extends to Kem One and to any natural or legal person exercising control over Kem One now or in the next [...] within the meaning of Article 3(2) of Council Regulation (EC) No 139/2004 (22).

22

| (287) | These three compensatory measures are capable of counterbalancing the adverse effects of the aid measures on trading conditions by preventing Kem One from using the aid to increase its presence in the PVC market and the other markets in which it operates. |
| --- | --- |

(287)

These three compensatory measures are capable of counterbalancing the adverse effects of the aid measures on trading conditions by preventing Kem One from using the aid to increase its presence in the PVC market and the other markets in which it operates.

| (288) | Cap for a period of [...] from the date of adoption of this Decision on nominal production capacity for chlorine ([600-700] kt/year) and caustic soda ([600-700] kt/year other than for internal use) at the Fos-sur-Mer and Lavéra sites. This measure already amounts to ‘reducing’ effective production of chlorine by [...] kt compared with Kem One's effective production capacity as planned after completion of the SAM project. The current rate of utilisation of production capacities for chlorine and caustic soda is [80-90] % (a habitual utilisation rate of [85-95] % cut by some [5-15] % as a result of an exceptional incident at the Fos-sur-Mer site in June 2014). The production capacity utilisation rate of [90-100] % in 2015 and 2016 corresponds to [...] kt/year. Once the conversion of the chlorine/caustic soda electrolysis facilities at Lavéra is complete, their intrinsically greater reliability should push this rate up to [85-95] % to reach the target for effective chlorine production included in the business plan, namely [...] kt/year. However, it must be noted that the new membrane electrolysis facility should be capable of producing [5-15] % more than the ‘nominal’ production of [...] kt/year, by increasing the electrical current density from [...] to [...] kA/m2. This is the technical solution that Kem One has opted for, and the acquisition of the necessary equipment has been negotiated with the supplier, with a view to facilitating a future increase in production, in line with the growth in the chlorine market expected in 2017 and subsequently. |
| --- | --- |

(288)

Cap for a period of [...] from the date of adoption of this Decision on nominal production capacity for chlorine ([600-700] kt/year) and caustic soda ([600-700] kt/year other than for internal use) at the Fos-sur-Mer and Lavéra sites. This measure already amounts to ‘reducing’ effective production of chlorine by [...] kt compared with Kem One's effective production capacity as planned after completion of the SAM project. The current rate of utilisation of production capacities for chlorine and caustic soda is [80-90] % (a habitual utilisation rate of [85-95] % cut by some [5-15] % as a result of an exceptional incident at the Fos-sur-Mer site in June 2014). The production capacity utilisation rate of [90-100] % in 2015 and 2016 corresponds to [...] kt/year. Once the conversion of the chlorine/caustic soda electrolysis facilities at Lavéra is complete, their intrinsically greater reliability should push this rate up to [85-95] % to reach the target for effective chlorine production included in the business plan, namely [...] kt/year. However, it must be noted that the new membrane electrolysis facility should be capable of producing [5-15] % more than the ‘nominal’ production of [...] kt/year, by increasing the electrical current density from [...] to [...] kA/m2. This is the technical solution that Kem One has opted for, and the acquisition of the necessary equipment has been negotiated with the supplier, with a view to facilitating a future increase in production, in line with the growth in the chlorine market expected in 2017 and subsequently.

2

| (289) | If all of Kem One's chlorine outlets are considered together (its downstream production plants for S-PVC, paste PVC, chlorinated PVC and chloromethanes), it has sufficient capacity to absorb a chlorine production of [...] kt/year. Moreover, Kem One forecasts growth in demand in western Europe of [...] % per year for chlorine and [...] % per year for caustic soda (23). Capping production capacity will therefore prevent Kem One from growing its chlorine production to [600-700] kt/year of actual production, which would have brought it close to saturating all of its potential outlets, in other words, maximising the utilisation rates of its downstream chlorine assets. Ultimately, capping nominal capacity at [600-700] kt/year of chlorine, or an expected actual production of [...] kt/year, prevents Kem One from keeping in step with the growth in the caustic soda market, resulting in a lost opportunity of around [...] % of growing sales in [...]. Kem One's share of the caustic soda market in western Europe, estimated at [5-15] %, would therefore fall to [5-15] %. |
| --- | --- |

(289)

If all of Kem One's chlorine outlets are considered together (its downstream production plants for S-PVC, paste PVC, chlorinated PVC and chloromethanes), it has sufficient capacity to absorb a chlorine production of [...] kt/year. Moreover, Kem One forecasts growth in demand in western Europe of [...] % per year for chlorine and [...] % per year for caustic soda (23). Capping production capacity will therefore prevent Kem One from growing its chlorine production to [600-700] kt/year of actual production, which would have brought it close to saturating all of its potential outlets, in other words, maximising the utilisation rates of its downstream chlorine assets. Ultimately, capping nominal capacity at [600-700] kt/year of chlorine, or an expected actual production of [...] kt/year, prevents Kem One from keeping in step with the growth in the caustic soda market, resulting in a lost opportunity of around [...] % of growing sales in [...]. Kem One's share of the caustic soda market in western Europe, estimated at [5-15] %, would therefore fall to [5-15] %.

23

| (290) | Moreover, this measure would make it impossible for Kem One to increase its own outlets and shares of the European and/or export market for the chlorine derivatives of S-PVC, E-PVC (or PVC paste), C-PVC (or chlorinated PVC), chloromethanes and, to a lesser extent, liquid chlorine. The lost opportunity is calculated at around [...] kt of chlorine over [...]. By way of illustration, [...] kt of chlorine can be used for example to produce [...] kt of S-PVC, allowing Kem One to increase its market share from [10-20] % to [10-20] %, calculated with reference to Kem One's PVC sales ([...] kt/year) and the size of the S-PVC market that can be accessed by European producers ([...] Mt). |
| --- | --- |

(290)

Moreover, this measure would make it impossible for Kem One to increase its own outlets and shares of the European and/or export market for the chlorine derivatives of S-PVC, E-PVC (or PVC paste), C-PVC (or chlorinated PVC), chloromethanes and, to a lesser extent, liquid chlorine. The lost opportunity is calculated at around [...] kt of chlorine over [...]. By way of illustration, [...] kt of chlorine can be used for example to produce [...] kt of S-PVC, allowing Kem One to increase its market share from [10-20] % to [10-20] %, calculated with reference to Kem One's PVC sales ([...] kt/year) and the size of the S-PVC market that can be accessed by European producers ([...] Mt).

| (291) | Cap for a period of [...] from the date of adoption of this Decision on the share by Kem One and its present or future subsidiaries of the S-PVC market in north-western Europe (Belgium, Denmark, France, Germany, Ireland, Luxembourg, the Netherlands, Norway, Sweden and the United Kingdom taken together), at [10-20] % in volume terms (24). As regards S-PVC (including the M-PVC or ‘mass PVC’ produced at Saint-Fons, which is treated like it in the market), Kem One has a nominal production capacity of [...] kt/year, representing almost [...] % of total western European production capacity ([...] Mt/year). |
| --- | --- |

(291)

Cap for a period of [...] from the date of adoption of this Decision on the share by Kem One and its present or future subsidiaries of the S-PVC market in north-western Europe (Belgium, Denmark, France, Germany, Ireland, Luxembourg, the Netherlands, Norway, Sweden and the United Kingdom taken together), at [10-20] % in volume terms (24). As regards S-PVC (including the M-PVC or ‘mass PVC’ produced at Saint-Fons, which is treated like it in the market), Kem One has a nominal production capacity of [...] kt/year, representing almost [...] % of total western European production capacity ([...] Mt/year).

24

| (292) | [...] |
| --- | --- |

(292)

[...]

| (293) | The combination of these industrial and commercial measures should result in a significant increase in volumes sold in this geographical area (around [...] Kt), bringing the undertaking's share of the S-PVC market in this area to [10-20] %. |
| --- | --- |

(293)

The combination of these industrial and commercial measures should result in a significant increase in volumes sold in this geographical area (around [...] Kt), bringing the undertaking's share of the S-PVC market in this area to [10-20] %.

| (294) | The Commission accordingly takes the view that capping Kem One's share of the S-PVC market at [10-20] % (in volume terms) [...] as of the date of adoption of this Decision in the north-western Europe area would ensure that the aid measures are not used by Kem One for the purposes of its commercial activity in this area. The cap would also mitigate the effects of the aid and preclude the risk of any excessive distortion of competition. Moreover, the fact that France, where Kem One has its main industrial and commercial S-PVC base, is part of this geographical area ensures that the requirements of the case-law on compensatory measures (25) are met. This option also has the benefit of maintaining the competitive pressure on the Ineos/Solvay joint venture, the main player in the S-PVC market in north-western Europe (26), without freezing the competitive situation for an unreasonable length of time. |
| --- | --- |

(294)

The Commission accordingly takes the view that capping Kem One's share of the S-PVC market at [10-20] % (in volume terms) [...] as of the date of adoption of this Decision in the north-western Europe area would ensure that the aid measures are not used by Kem One for the purposes of its commercial activity in this area. The cap would also mitigate the effects of the aid and preclude the risk of any excessive distortion of competition. Moreover, the fact that France, where Kem One has its main industrial and commercial S-PVC base, is part of this geographical area ensures that the requirements of the case-law on compensatory measures (25) are met. This option also has the benefit of maintaining the competitive pressure on the Ineos/Solvay joint venture, the main player in the S-PVC market in north-western Europe (26), without freezing the competitive situation for an unreasonable length of time.

25

26

| (295) | The Commission accordingly regards these temporary caps as more appropriate than a divestment of assets for the purposes of preventing an excessive distortion of competition by the aid in question, while ensuring that competitive pressure is maintained on the S-PVC market in north-western Europe. |
| --- | --- |

(295)

The Commission accordingly regards these temporary caps as more appropriate than a divestment of assets for the purposes of preventing an excessive distortion of competition by the aid in question, while ensuring that competitive pressure is maintained on the S-PVC market in north-western Europe.

| (296) | Acquisition ban. This ban will extend not only to Kem One but also to any natural or legal person exercising control over Kem One now or in the next [...] within the meaning of Article 3(2) of the EC Merger Regulation, which provides that ‘control shall be constituted by rights, contracts or any other means which, either separately or in combination and having regard to the considerations of fact or law involved, confer the possibility of exercising decisive influence on an undertaking, in particular by: (a) ownership or the right to use all or part of the assets of an undertaking; (b) rights or contracts which confer decisive influence on the composition, voting or decisions of the organs of an undertaking.’ Accordingly, neither Kem One nor the entities controlling it will be in a position to divert the aid paid by France and to use it to increase their market power to the detriment of operators that have not received public subsidies. |
| --- | --- |

(296)

Acquisition ban. This ban will extend not only to Kem One but also to any natural or legal person exercising control over Kem One now or in the next [...] within the meaning of Article 3(2) of the EC Merger Regulation, which provides that ‘control shall be constituted by rights, contracts or any other means which, either separately or in combination and having regard to the considerations of fact or law involved, confer the possibility of exercising decisive influence on an undertaking, in particular by: (a) ownership or the right to use all or part of the assets of an undertaking; (b) rights or contracts which confer decisive influence on the composition, voting or decisions of the organs of an undertaking.’ Accordingly, neither Kem One nor the entities controlling it will be in a position to divert the aid paid by France and to use it to increase their market power to the detriment of operators that have not received public subsidies.

| (297) | The ban will not cover acquisitions that (i) are necessary for the restoration of Kem One's viability; and (ii) do not constitute a means of circumventing the obligation to limit the effects of the aid to the strict minimum required to achieve the objectives of Kem One's restructuring plan. No acquisition may take place unless the Commission finds that the conditions at (i) and (ii) are met. Any acquisition plans and information enabling the Commission to assess whether the conditions are met must be communicated to the Commission within a reasonable time-frame. |
| --- | --- |

(297)

The ban will not cover acquisitions that (i) are necessary for the restoration of Kem One's viability; and (ii) do not constitute a means of circumventing the obligation to limit the effects of the aid to the strict minimum required to achieve the objectives of Kem One's restructuring plan. No acquisition may take place unless the Commission finds that the conditions at (i) and (ii) are met. Any acquisition plans and information enabling the Commission to assess whether the conditions are met must be communicated to the Commission within a reasonable time-frame.

6.2.4.4.   Monitoring and six-monthly reports

Monitoring and six-monthly reports

| (298) | Point 49 of the 2004 Guidelines provides: ‘The Commission must be put in a position to make certain that the restructuring plan is being implemented properly, through regular detailed reports communicated by the Member State concerned’. |
| --- | --- |

(298)

Point 49 of the 2004 Guidelines provides: ‘The Commission must be put in a position to make certain that the restructuring plan is being implemented properly, through regular detailed reports communicated by the Member State concerned’.

| (299) | In this instance, given the amount of aid involved, the nature of the compensatory measures required to ensure compatibility of the aid with the State aid rules, the objective of ensuring Kem One's return to viability and the competitive situation in the market concerned, the Commission takes the view that France should send it six-monthly reports with information on the following:






  — | the proper implementation of the restructuring plan, with an assessment as to whether the objective of Kem One's return to viability is being achieved, |
| --- | --- | --- |

(299)

In this instance, given the amount of aid involved, the nature of the compensatory measures required to ensure compatibility of the aid with the State aid rules, the objective of ensuring Kem One's return to viability and the competitive situation in the market concerned, the Commission takes the view that France should send it six-monthly reports with information on the following:

—

the proper implementation of the restructuring plan, with an assessment as to whether the objective of Kem One's return to viability is being achieved,

| — | the achievement in practice of the cap on nominal capacity for production of chlorine and caustic soda at Fos-sur-Mer and Lavéra, |
| --- | --- |

—

the achievement in practice of the cap on nominal capacity for production of chlorine and caustic soda at Fos-sur-Mer and Lavéra,

| — | the achievement in practice of the [10-20] % cap on Kem One's share of the S-PVC market in north-western Europe (Belgium, Denmark, France, Germany, Ireland, Luxembourg, the Netherlands, Norway, Sweden and the United Kingdom taken together), |
| --- | --- |

—

the achievement in practice of the [10-20] % cap on Kem One's share of the S-PVC market in north-western Europe (Belgium, Denmark, France, Germany, Ireland, Luxembourg, the Netherlands, Norway, Sweden and the United Kingdom taken together),

| — | the absence of any acquisitions of shares or assets in undertakings in the EEA product markets in which Kem One operates, |
| --- | --- |

—

the absence of any acquisitions of shares or assets in undertakings in the EEA product markets in which Kem One operates,

| — | an assessment of the competitive situation in the PVC market and the upstream and downstream markets in the EEA, including in particular market shares and capacities of the market players, changes in market structure, price trends and any other element that may aid the Commission's understanding. |
| --- | --- |

—

an assessment of the competitive situation in the PVC market and the upstream and downstream markets in the EEA, including in particular market shares and capacities of the market players, changes in market structure, price trends and any other element that may aid the Commission's understanding.

| (300) | These reports must be provided for a period of [...] from the date of adoption of this Decision. The first report must reach the Commission six months after the date of adoption of this Decision. |
| --- | --- |

(300)

These reports must be provided for a period of [...] from the date of adoption of this Decision. The first report must reach the Commission six months after the date of adoption of this Decision.

| (301) | In conclusion, as regards the avoidance of any excessive distortion of competition as a result of the aid measures, given the presence of the Ineos/Solvay joint venture, which is a far stronger player in the S-PVC market, given that more drastic compensatory measures in the form of a divestment of assets as set out in point 39 of the 2004 Guidelines would threaten Kem One's viability and weaken its competitive power, something which would be detrimental to the structure and effect of competition in the market, and given that the compensatory measures examined here in Section 6.2.4 of this Decision are likely to mitigate sufficiently the effects of the aid and provide an appropriate remedy in the circumstances to the distortion of competition caused by the aid and that they will be assessed together with the competitive situation in the market in the regular reports, the Commission finds the compensatory measures concerned to be appropriate. |
| --- | --- |

(301)

In conclusion, as regards the avoidance of any excessive distortion of competition as a result of the aid measures, given the presence of the Ineos/Solvay joint venture, which is a far stronger player in the S-PVC market, given that more drastic compensatory measures in the form of a divestment of assets as set out in point 39 of the 2004 Guidelines would threaten Kem One's viability and weaken its competitive power, something which would be detrimental to the structure and effect of competition in the market, and given that the compensatory measures examined here in Section 6.2.4 of this Decision are likely to mitigate sufficiently the effects of the aid and provide an appropriate remedy in the circumstances to the distortion of competition caused by the aid and that they will be assessed together with the competitive situation in the market in the regular reports, the Commission finds the compensatory measures concerned to be appropriate.

6.2.5.   Aid limited to the minimum: real contribution, free of aid

Aid limited to the minimum: real contribution, free of aid

| (302) | Point 43 of the 2004 Guidelines stipulates that the ‘amount and intensity of the aid must be limited to the strict minimum of the restructuring costs necessary to enable restructuring to be undertaken in the light of the existing financial resources of the company, its shareholders or the business group to which it belongs’. Point 44 of the Guidelines provides that ‘the Commission will normally consider the following contributions to the restructuring to be appropriate: ... 50 % for large firms.’ |
| --- | --- |

(302)

Point 43 of the 2004 Guidelines stipulates that the ‘amount and intensity of the aid must be limited to the strict minimum of the restructuring costs necessary to enable restructuring to be undertaken in the light of the existing financial resources of the company, its shareholders or the business group to which it belongs’. Point 44 of the Guidelines provides that ‘the Commission will normally consider the following contributions to the restructuring to be appropriate: ... 50 % for large firms.’

| (303) | First, the information obtained following the opening of proceedings did not justify the inclusion of the loan of EUR [60-70] million in Kem One's own contribution. France confirmed the hypothetical and uncertain character of the loan, stressing that in any event it would not come into play before 2016. This loan does not therefore satisfy the condition set out in the 2004 Guidelines to the effect that the beneficiary's own contribution must be real. The Commission accordingly finds that it cannot be included in the calculation. |
| --- | --- |

(303)

First, the information obtained following the opening of proceedings did not justify the inclusion of the loan of EUR [60-70] million in Kem One's own contribution. France confirmed the hypothetical and uncertain character of the loan, stressing that in any event it would not come into play before 2016. This loan does not therefore satisfy the condition set out in the 2004 Guidelines to the effect that the beneficiary's own contribution must be real. The Commission accordingly finds that it cannot be included in the calculation.

| (304) | The Commission's investigation has shown that the resources that can be taken into account for the purposes of calculating Kem One's own contribution to the restructuring costs are:

  Table 4


  Sources of the private contributions included in the restructuring plan, according to the Commission







  Source of contribution | Amount (EUR m) |
| --- | --- | --- |
| Kem One self-financing | [10-20] |
| Financing [private operator 1] | [35-45] |
| Financing [private operator 2] | [55-65] |
| Capital injection by the buyers | 10 |
| Satisfaction of debts [private operator 6] | [0-10] |
| Total | 133,4 |
| Source: Commission |

(304)

The Commission's investigation has shown that the resources that can be taken into account for the purposes of calculating Kem One's own contribution to the restructuring costs are:

Table 4

Table 4

Sources of the private contributions included in the restructuring plan, according to the Commission

Sources of the private contributions included in the restructuring plan, according to the Commission

Source of contribution

Amount (EUR m)

Kem One self-financing

[10-20]

Financing [private operator 1]

[35-45]

Financing [private operator 2]

[55-65]

Capital injection by the buyers

10

Satisfaction of debts [private operator 6]

[0-10]

Total

Total

133,4

133,4

Source: Commission

Source:

| (305) | A number of new elements came to light during the investigation. First, regarding self-financing by Kem One, only EUR 18 million has been injected by Kem One into the modernisation project to date. The hypothetical character of the payment of the balance means that this amount cannot be classed as an own contribution. The factoring by [private operator 2] came in the end to EUR [55-65] million (instead of the EUR [40-50] million initially planned) following negotiations between Kem One and [private operator 2]. |
| --- | --- |

(305)

A number of new elements came to light during the investigation. First, regarding self-financing by Kem One, only EUR 18 million has been injected by Kem One into the modernisation project to date. The hypothetical character of the payment of the balance means that this amount cannot be classed as an own contribution. The factoring by [private operator 2] came in the end to EUR [55-65] million (instead of the EUR [40-50] million initially planned) following negotiations between Kem One and [private operator 2].

| (306) | The restructuring costs are estimated at EUR 222 million. Kem One's own contribution to the restructuring therefore covers 60 % of the restructuring costs. |
| --- | --- |

(306)

The restructuring costs are estimated at EUR 222 million. Kem One's own contribution to the restructuring therefore covers 60 % of the restructuring costs.

| (307) | It can therefore be concluded that the aid is limited to the minimum, without it being necessary to assess the nature of the debt write-offs granted by the private creditors. |
| --- | --- |

(307)

It can therefore be concluded that the aid is limited to the minimum, without it being necessary to assess the nature of the debt write-offs granted by the private creditors.

6.2.6.   
  ‘One time, last time’ principle

‘One time, last time’ principle

| (308) | In accordance with points 72 et seq. of the 2004 Guidelines, restructuring aid can be granted to an undertaking only once in a 10-year period. |
| --- | --- |

(308)

In accordance with points 72 et seq. of the 2004 Guidelines, restructuring aid can be granted to an undertaking only once in a 10-year period.

| (309) | France stated in its notification that neither Kem One nor the group to which it belongs had already benefited from rescue or restructuring aid in the past. |
| --- | --- |

(309)

France stated in its notification that neither Kem One nor the group to which it belongs had already benefited from rescue or restructuring aid in the past.

| (310) | The ‘one time, last time’ principle has therefore been complied with. |
| --- | --- |

(310)

The ‘one time, last time’ principle has therefore been complied with.

7.   CONCLUSION

CONCLUSION

| (311) | The Commission finds that the aid measures in question can be declared compatible with the internal market in accordance with Article 107(3)(c) TFEU, provided that the compensatory measures set out in Section 6.2.4.3 of this Decision are complied with and that the reports provided for in Section 6.2.4.4 of this Decision are submitted to the Commission within the deadlines laid down, |
| --- | --- |

(311)

The Commission finds that the aid measures in question can be declared compatible with the internal market in accordance with Article 107(3)(c) TFEU, provided that the compensatory measures set out in Section 6.2.4.3 of this Decision are complied with and that the reports provided for in Section 6.2.4.4 of this Decision are submitted to the Commission within the deadlines laid down,

HAS ADOPTED THIS DECISION:

Article 1

The aid that France plans to implement in favour of Kem One SAS (‘Kem One’) in the form of: (i) a loan from the Economic and Social Development Fund; (ii) a grant and repayable advances; and (iii) possible write-offs of tax and social security debts; is compatible with the internal market on the conditions laid down in Article 2.

Article 2

1.   France shall ensure that nominal production capacity for chlorine ([600-700] kt/year) and caustic soda ([600-700] kt/year other than for internal use) by Kem One at the Fos-sur-Mer and Lavéra sites remains unchanged for a period of [...] from the date of adoption of this Decision.

2.   France shall ensure that Kem One's share of the S-PVC market in north-western Europe (Belgium, Denmark, France, Germany, Ireland, Luxembourg, the Netherlands, Norway, Sweden and the United Kingdom taken together) does not exceed [10-20] % for a period of [...] from the date of adoption of this Decision.

3.   France shall ensure that Kem One and any natural or legal person exercising control over Kem One now or in the [...] following the date of adoption of this Decision refrains from acquiring shares or assets in undertakings in product markets in the European Economic Area (EEA) in which Kem One is present for a period of [...] from the date of adoption of this Decision.

The prohibition set out in this paragraph shall not apply to acquisitions that:

| (a) | are necessary for the restoration of Kem One's viability; and |
| --- | --- |

(a)

are necessary for the restoration of Kem One's viability; and

| (b) | do not constitute a means of circumventing the obligation to limit the effects of the aid to the strict minimum required to achieve the objectives of Kem One's restructuring plan. |
| --- | --- |

(b)

do not constitute a means of circumventing the obligation to limit the effects of the aid to the strict minimum required to achieve the objectives of Kem One's restructuring plan.

Plans to make acquisitions covered by this paragraph and information enabling the Commission to assess whether the conditions laid down at (a) and (b) are met shall be communicated to the Commission within a reasonable time-frame. An acquisition may not take place until the Commission establishes that the said conditions are met.

Article 3

France shall send the Commission six-monthly reports providing information on:

| (a) | the proper implementation of the restructuring plan, with an assessment as to whether the objective of Kem One's return to viability is being achieved; |
| --- | --- |

(a)

the proper implementation of the restructuring plan, with an assessment as to whether the objective of Kem One's return to viability is being achieved;

| (b) | any useful information on compliance with the conditions laid down in Article 2, and in particular the trend in Kem One's share of the market referred to in Article 2(2); |
| --- | --- |

(b)

any useful information on compliance with the conditions laid down in Article 2, and in particular the trend in Kem One's share of the market referred to in Article 2(2);

| (c) | an assessment of the competitive situation in the PVC market and the upstream and downstream markets in the EEA, including in particular market shares and capacities of the market players, changes in market structure, price trends and any other element that may aid the Commission's understanding. |
| --- | --- |

(c)

an assessment of the competitive situation in the PVC market and the upstream and downstream markets in the EEA, including in particular market shares and capacities of the market players, changes in market structure, price trends and any other element that may aid the Commission's understanding.

These reports shall be provided for a period of [...] from the date of adoption of this Decision. The first report shall reach the Commission six months after the date of adoption of this Decision.

Article 4

France shall inform the Commission within two months of the date of notification of this Decision of the measures it has taken to comply with it.

Article 5

This Decision is addressed to the French Republic.

Done at Brussels, 28 July 2015.

For the Commission

Margrethe VESTAGER

Member of the Commission

---

(1)  
  OJ C 460, 19.12.2014, p. 40.

1

(2)  See footnote 1.

2

(*1)  Confidential information

*1

(3)  See, in particular, the Commission Decision of 8 May 2014 in Case M.6905 — INEOS/Solvay/JV (‘INEOS/Solvay/JV Decision’).

3

(4)  Chlorine is used to produce vinyl chloride monomer (VCM), which is then used in the manufacture of PVC.

4

(5)  [...]

5

(6)  
  Official Journal of the French Republic (JORF) No 279, 1.12.2004, p. 20468.

6

Official Journal of the French Republic

(7)  According to the definition used by the National Institute of Statistics and Economic Studies (INSEE), an intermediate-sized enterprise is a company with between 250 and 4 999 employees, and a turnover not exceeding EUR 1,5 billion or a balance-sheet total not exceeding EUR 2 billion. A company with fewer than 250 employees but a turnover above EUR 50 million and a balance sheet exceeding EUR 43 million is also considered to be of intermediate size.

7

(8)  
  ‘Substantial modifications of the goals or means of the plan may be made only by the court, on request of the debtor and based on the report of the plan performance supervisor. Where the debtor allows a substantial modification of the plan to creditors, referral to the Court may be made by the Commissioner in execution of the plan’.

8

(9)  The decision to take out this loan will depend on the cash-flow generated by Kem One in 2014 and 2015.

9

(10)  
  ‘When an authorisation application concerns a classified facility to be implanted on a new site and likely to create, by danger of explosion or emanation of harmful products, very serious risks for the health and safety of neighbouring populations and for the environment, easements of public interest may be established concerning use of the land and the performance of works subject to planning permission’.

10

(11)  
  OJ C 14, 19.1.2008, p. 2.

11

(12)  Application of the increase of 650 basis points for a level of collateral considered normal and 1 000 basis points for a level of collateral considered low.

12

(13)  
  OJ C 244, 1.10.2004, p. 2.

13

(14)  EUR [...] in employer's contribution + EUR [...] in taxes and charges + EUR [...] in contributions under the compulsory scheme owed to the Malakoff Médéric Group.

14

(15)  Proportion of [...] % of the debts not written off, i.e. EUR [...], plus the non-remissible debts, i.e. EUR [...], plus the social security debts contracted before the administration procedure, i.e. EUR 13 million.

15

(16)  
  OJ C 249, 31.7.2014, p. 1.

16

(17)  Directive 2010/75/EU of the European Parliament and of the Council of 24 November 2010 on industrial emissions (integrated pollution prevention and control) (OJ L 334, 17.12.2010, p. 17).

17

(18)  Commission Decision of 26 July 2011 in Case M.6218 — Ineos/Tessenderlo Group S-PVC Assets. See also decision in Ineos/Solvay/JV.

18

(19)  See paragraphs 805, 828 and 838 of the Ineos/Solvay/JV decision.

19

(20)  On 9 June 2015 the Commission cleared the acquisition of certain Ineos chlorovinyls businesses by ICIG and approved ICIG as buyer of divested assets linked to the creation of the joint venture (IP/15/5147).

20

(21)  See paragraph 403 of the decision in Ineos/Solvay/JV.

21

(22)  Council Regulation (EC) No 139/2004 of 20 January 2004 on the control of concentrations between undertakings (the EC Merger Regulation) (OJ L 24, 29.1.2004, p. 1).

22

(23)  The pattern of the last 10 years indicates that demand for caustic soda, the uses of which are extremely varied, grows at a rate very close to GDP, while demand for chlorine grows at a very slightly lower rate.

23

(24)  As sales volumes for the geographical area are published in the industrial statistics with a certain time-lag and do not depend solely on Kem One, and as compliance with the threshold may require adapting commercial policy relatively quickly by redeploying sales within the relevant geographical area, a framework has to be set for the market share threshold. So, if the market share exceeds the ceiling set by this Decision by 10 %, the ceiling will be deemed not to have been exceeded if the beneficiary restores the market share to 11 % within a maximum of one year from the first quarterly report recording the excess.

24

(25)  T-115/09 and T-116/09 Electrolux and Whirlpool v Commission, EU:T:2012:76, paragraphs 50 to 58.

25

Electrolux and Whirlpool

Commission

(26)  See paragraphs 403 et seq. of the Ineos/Solvay/JV decision.

26

---

GUIDELINES

| 1.4.2016 | EN | Official Journal of the European Union | L 86/42 |
| --- | --- | --- | --- |

1.4.2016

EN

Official Journal of the European Union

L 86/42

---

GUIDELINE (EU) 2016/450 OF THE EUROPEAN CENTRAL BANK

of 4 December 2015

amending Guideline ECB/2014/15 on monetary and financial statistics (ECB/2015/44)

THE GOVERNING COUNCIL OF THE EUROPEAN CENTRAL BANK,

Having regard to the Statute of the European System of Central Banks and of the European Central Bank, and in particular Articles 5.1, 12.1 and 14.3 thereof,

Having regard to Council Regulation (EC) No 2533/98 of 23 November 1998 concerning the collection of statistical information by the European Central Bank (1),

Whereas:

| (1) | It is necessary to update the compilation of monetary and financial statistics in view of the fact that, pursuant to Regulation (EU) No 1374/2014 of the European Central Bank (ECB/2014/50) (2), insurance corporations will be subject to statistical reporting requirements starting with the reference period Q1 of 2016. It is therefore necessary to start compiling statistics on insurance corporations (ICs) within the framework set out in Guideline ECB/2014/15 (3). |
| --- | --- |

(1)

It is necessary to update the compilation of monetary and financial statistics in view of the fact that, pursuant to Regulation (EU) No 1374/2014 of the European Central Bank (ECB/2014/50) (2), insurance corporations will be subject to statistical reporting requirements starting with the reference period Q1 of 2016. It is therefore necessary to start compiling statistics on insurance corporations (ICs) within the framework set out in Guideline ECB/2014/15 (3).

| (2) | Guideline ECB/2014/15 should be amended accordingly, |
| --- | --- |

(2)

Guideline ECB/2014/15 should be amended accordingly,

HAS ADOPTED THIS GUIDELINE:

Article 1

Amendments

Guideline ECB/2014/15 is amended as follows:

| 1. | in Article 1, paragraph 2 is replaced by the following: |
| --- | --- |

1.

in Article 1, paragraph 2 is replaced by the following:

2.

| 2. | in Article 25 the following paragraph is added to paragraph 1:
  ‘To enable the establishment and maintenance of the list of ICs for statistical purposes referred to in Article 3 of Regulation (EU) No 1374/2014 of the European Central Bank (ECB/2014/50) (*1), the variables specified in Parts 1 and 2 of Annex V need to be collected in RIAD at the intervals prescribed. NCBs shall report any updates of these variables, in particular when an institution joins or leaves the IC population. NCBs shall transmit complete reference data as specified in Parts 1 and 2 of Annex V on resident parent insurance undertakings and subsidiaries, on all resident branches irrespective of where their parent undertakings are located, as well as on branches of resident parent insurance undertakings and subsidiaries which are resident outside the economic territory of the Union. This set of information shall be complemented by complete reference data as specified in Parts 1 and 2 of Annex V on branches of resident parent insurance undertakings and subsidiaries which are resident in non-reporting, non-participating Member States. This reporting may be based on wider data collection covering all branches of resident parent insurance undertakings and subsidiaries, irrespective of their country of residence.

  (*1)  Regulation (EU) No 1374/2014 of the European Central Bank of 28 November 2014 on statistical reporting requirements for insurance corporations (ECB/2014/50) (OJ L 366, 20.12.2014, p. 36)’;" |
| --- | --- |

in Article 25 the following paragraph is added to paragraph 1:

‘To enable the establishment and maintenance of the list of ICs for statistical purposes referred to in Article 3 of Regulation (EU) No 1374/2014 of the European Central Bank (ECB/2014/50) (*1), the variables specified in Parts 1 and 2 of Annex V need to be collected in RIAD at the intervals prescribed. NCBs shall report any updates of these variables, in particular when an institution joins or leaves the IC population. NCBs shall transmit complete reference data as specified in Parts 1 and 2 of Annex V on resident parent insurance undertakings and subsidiaries, on all resident branches irrespective of where their parent undertakings are located, as well as on branches of resident parent insurance undertakings and subsidiaries which are resident outside the economic territory of the Union. This set of information shall be complemented by complete reference data as specified in Parts 1 and 2 of Annex V on branches of resident parent insurance undertakings and subsidiaries which are resident in non-reporting, non-participating Member States. This reporting may be based on wider data collection covering all branches of resident parent insurance undertakings and subsidiaries, irrespective of their country of residence.

*1

(*1)  Regulation (EU) No 1374/2014 of the European Central Bank of 28 November 2014 on statistical reporting requirements for insurance corporations (ECB/2014/50) (OJ L 366, 20.12.2014, p. 36)’;"

*1

| 3. | in Article 25 the following paragraph is added to paragraph 2:
  ‘In the first submission of the list of ICs, NCBs shall transmit to the ECB complete quarterly reference data as specified in Part 1 of Annex V on resident parent insurance undertakings and subsidiaries not later than 31 March 2016. However, NCBs are encouraged to transmit this information by 31 December 2015. NCBs shall transmit to the ECB complete reference data as specified in Parts 1 and 2 of Annex V on all resident branches irrespective of where their parent undertakings are located, as well as on branches of resident parent insurance undertakings and subsidiaries which are resident outside the economic territory of the Union and in non-reporting, non-participating Member States not later than 31 July 2016. Attributes required on an annual basis shall be reported for all institutions by 31 July 2016.
  In the subsequent transmissions, NCBs shall transmit to the ECB updates of the quarterly variables specified for ICs on at least a quarterly basis, within two months following the reference date. The annual variables shall be updated for all ICs on an annual basis, with a maximum lag of six months following the reference date of 31 December.’; |
| --- | --- |

3.

in Article 25 the following paragraph is added to paragraph 2:

‘In the first submission of the list of ICs, NCBs shall transmit to the ECB complete quarterly reference data as specified in Part 1 of Annex V on resident parent insurance undertakings and subsidiaries not later than 31 March 2016. However, NCBs are encouraged to transmit this information by 31 December 2015. NCBs shall transmit to the ECB complete reference data as specified in Parts 1 and 2 of Annex V on all resident branches irrespective of where their parent undertakings are located, as well as on branches of resident parent insurance undertakings and subsidiaries which are resident outside the economic territory of the Union and in non-reporting, non-participating Member States not later than 31 July 2016. Attributes required on an annual basis shall be reported for all institutions by 31 July 2016.

In the subsequent transmissions, NCBs shall transmit to the ECB updates of the quarterly variables specified for ICs on at least a quarterly basis, within two months following the reference date. The annual variables shall be updated for all ICs on an annual basis, with a maximum lag of six months following the reference date of 31 December.’;

| 4. | in Article 25, the following paragraph is added to paragraph 3:
  ‘By 18.00 CET on the fourth working day following the deadline for transmitting updates, the ECB shall take a copy of the IC dataset and make it available to the NCBs. The ECB shall then make the list of ICs available on its website.’; |
| --- | --- |

4.

in Article 25, the following paragraph is added to paragraph 3:

‘By 18.00 CET on the fourth working day following the deadline for transmitting updates, the ECB shall take a copy of the IC dataset and make it available to the NCBs. The ECB shall then make the list of ICs available on its website.’;

| 5. | in Article 26, paragraph 2 is replaced by the following: |
| --- | --- |

5.

in Article 26, paragraph 2 is replaced by the following:

6.

| 6. | the following Article 26a is inserted:

  ‘Article 26a
  Statistics on ICs
  1.   
  Scope of reporting


  2.   
  Reporting frequency and deadline


  NCBs shall report to the ECB quarterly IC data by close of business on the 10th working day following the deadline specified for quarterly data in Article 8 of Regulation (EU) No 1374/2014 (ECB/2014/50). For a transitional period covering the reporting of the first three quarters of 2016, this deadline is extended to the 30th working day following the abovementioned deadline for reference period Q1 of 2016, to the 25th working day following the abovementioned deadline for reference period Q2 of 2016 and to the 20th working day following the abovementioned deadline for reference period Q3 of 2016.
  NCBs shall report to the ECB annual IC data by close of business on the 10th working day following the deadline specified for annual data in Article 8 of Regulation (EU) No 1374/2014 (ECB/2014/50).
  The exact transmission dates shall be communicated to NCBs in advance in the form of a reporting calendar provided by the ECB by September of each year.
  In the first reporting of the quarterly IC data to the ECB, NCBs shall be required to submit data on outstanding amounts. Flow adjustments shall be transmitted on a best efforts basis.
  3.   
  Revision policy


  The following general rules shall apply to revisions of quarterly and annual data:






  (a) | during the regular quarterly production periods, i.e. for a given reference period, from the deadline specified in paragraph 2 to the day the data are disseminated back to the NCBs, NCBs may revise the data covering the previous reference quarter; |
| --- | --- | --- |

the following Article 26a is inserted:

‘Article 26a

Statistics on ICs

1.   
  Scope of reporting

2.   
  Reporting frequency and deadline

NCBs shall report to the ECB quarterly IC data by close of business on the 10th working day following the deadline specified for quarterly data in Article 8 of Regulation (EU) No 1374/2014 (ECB/2014/50). For a transitional period covering the reporting of the first three quarters of 2016, this deadline is extended to the 30th working day following the abovementioned deadline for reference period Q1 of 2016, to the 25th working day following the abovementioned deadline for reference period Q2 of 2016 and to the 20th working day following the abovementioned deadline for reference period Q3 of 2016.

NCBs shall report to the ECB annual IC data by close of business on the 10th working day following the deadline specified for annual data in Article 8 of Regulation (EU) No 1374/2014 (ECB/2014/50).

The exact transmission dates shall be communicated to NCBs in advance in the form of a reporting calendar provided by the ECB by September of each year.

In the first reporting of the quarterly IC data to the ECB, NCBs shall be required to submit data on outstanding amounts. Flow adjustments shall be transmitted on a best efforts basis.

3.   
  Revision policy

The following general rules shall apply to revisions of quarterly and annual data:

(a)

during the regular quarterly production periods, i.e. for a given reference period, from the deadline specified in paragraph 2 to the day the data are disseminated back to the NCBs, NCBs may revise the data covering the previous reference quarter;

| (b) | during the regular annual production periods, i.e. for a given reference year, from the deadline specified in paragraph 2 to the day the data are disseminated back to the NCBs, NCBs may revise the data covering the previous reference year; |
| --- | --- |

(b)

during the regular annual production periods, i.e. for a given reference year, from the deadline specified in paragraph 2 to the day the data are disseminated back to the NCBs, NCBs may revise the data covering the previous reference year;

| (c) | outside the regular production periods, NCBs may also revise data covering previous reference periods. |
| --- | --- |

(c)

outside the regular production periods, NCBs may also revise data covering previous reference periods.

4.   
  Derogations and grossing-up

To ensure the quality of the euro area IC statistics, where NCBs grant derogations to the smallest ICs in accordance with Article 7(1)(a) of Regulation (EU) No 1374/2014 (ECB/2014/50), they shall gross up the quarterly IC data reported to the ECB to 100 % coverage.

NCBs may choose the procedure for grossing-up to 100 % coverage based on the data collected in accordance with Article 7(1)(b) and 7(1)(c) of Regulation (EU) No 1374/2014 (ECB/2014/50) provided that estimates are based on the corresponding type of IC (i.e. life, non-life, reinsurance, composite).

NCBs shall also ensure that, for the reference quarters of 2016, the data reported to the ECB represent 100 % of the reporting population. NCBs who intend to grant derogations to the smallest ICs under Article 7(1)(a) of Regulation (EU) No 1374/2014 (ECB/2014/50), shall collect all necessary information to ensure that data transmitted to the ECB is of high quality. NCBs who derive the required data from data collected for supervisory purposes under Directive 2009/138/EC of the European Parliament and of the Council (*2) may, for this purpose: (i) extend the data collected for the opening day as of reference date 1 January 2016 (see paragraph 5); (ii) increase the coverage of the reporting population of the first reference quarter(s); or (iii) use alternative data sources from which grossed-up data of equally high quality can be derived.

5.   
  One-off reporting for reference period Q4 2015

NCBs shall transmit to the ECB end-2015 stock data, which may include approximations if needed, for the main aggregates as set out in Part 23 of Annex II. NCBs may, for this purpose, use the data referring to 1 January 2016 collected for supervisory purposes under Directive 2009/138/EC. These data shall be transmitted to the ECB together with the data for Q1 of 2016.

6.   
  Derivation of aggregated data for securities

NCBs shall derive the aggregated quarterly data on assets and liabilities for each type of IC in accordance with Tables 2a and 2b of Part 23 of Annex II as follows:

| (a) | For securities with ISIN codes, the NCBs shall map the information provided on a security-by-security (s-b-s) basis to the information derived from the Centralised Securities Database (CSDB) as the reference database. The mapped s-b-s information shall be used to compile the value of assets and liabilities in euro and to derive the necessary breakdowns for each individual security held or issued by the IC. If the security identifiers are not found in the CSDB, or the information necessary to compile the assets and liabilities in accordance with Tables 2a and 2b of Part 23 of Annex II is not available from the CSDB, the NCBs shall estimate the missing data. |
| --- | --- |

(a)

For securities with ISIN codes, the NCBs shall map the information provided on a security-by-security (s-b-s) basis to the information derived from the Centralised Securities Database (CSDB) as the reference database. The mapped s-b-s information shall be used to compile the value of assets and liabilities in euro and to derive the necessary breakdowns for each individual security held or issued by the IC. If the security identifiers are not found in the CSDB, or the information necessary to compile the assets and liabilities in accordance with Tables 2a and 2b of Part 23 of Annex II is not available from the CSDB, the NCBs shall estimate the missing data.

| (b) | NCBs shall aggregate the data on securities derived under paragraph (a) and add them to the information reported for securities without ISIN codes to produce aggregates for: (i) debt securities broken down by maturity (original and remaining) and counterparty (sector and residency); (ii) equity broken down by instrument and counterparty (sector and residency); and (iii) investment fund shares/units broken down by type of investment fund and residency of counterparty. |
| --- | --- |

(b)

NCBs shall aggregate the data on securities derived under paragraph (a) and add them to the information reported for securities without ISIN codes to produce aggregates for: (i) debt securities broken down by maturity (original and remaining) and counterparty (sector and residency); (ii) equity broken down by instrument and counterparty (sector and residency); and (iii) investment fund shares/units broken down by type of investment fund and residency of counterparty.

7.   
  Breakdown of holdings of IF shares/units by main investment objective

NCBs shall transmit to the ECB best estimates on the IC holdings of IF shares/units broken down by main investment objective (i.e. bond funds, equity funds, mixed funds, real estate funds, hedge funds and other funds). These data may be derived by mapping the information provided on an s-b-s basis in accordance with Regulation (EU) No 1374/2014 (ECB/2014/50) to the information derived from the CSDB as the reference database.

If the IF shares/units held are not found in the CSDB, the NCBs shall estimate the missing data or use alternative sources to derive the data.

As a transitional measure, NCBs may transmit these data to the ECB for the first time when transmitting data for Q2 2016, covering also the data for Q1 2016.

8.   
  Estimation of quarterly data for non-life insurance technical reserves

In accordance with Article 4(1)(c) of Regulation (EU) No 1374/2014 (ECB/2014/50), NCBs shall collect data on non-life insurance technical reserves broken down by line of business and geographical area on an annual basis. NCBs shall transmit quarterly data to the ECB which may be estimated based on the data collected annually.

9.   
  Valuation methods and/or accounting rules

The valuation and/or accounting rules in Regulation (EU) No 1374/2014 (ECB/2014/50) shall also apply when the NCBs report IC data to the ECB.

10.   
  Explanatory notes

NCBs shall submit explanatory notes explaining the reasons for significant revisions and revisions provided outside regular production periods in line with Article 26a(3)(c). In addition, the NCBs shall provide the ECB with explanatory notes concerning reclassification adjustments.

11.   
  Compilation approach

NCBs may collect data from all insurance corporations resident in the country (‘host approach’), in accordance with Article 2(1) of Regulation (EU) No 1374/2014 (ECB/2014/50) or they may derive the data required for ESCB purposes from data collected for supervisory purposes under Directive 2009/138/EC, in accordance with Article 2(2) of Regulation (EU) No 1374/2014 (ECB/2014/50) (‘home approach’).

In principle, data transmitted to the ECB in accordance with this Guideline shall represent the host approach. However, NCBs who derive the data required for ESCB purposes from the supervisory data collection may transmit the data following the home approach as long as the difference between the host approach and home approach data is not deemed significant.

The issue of whether or not the difference between the host and the home approach is significant shall be assessed on the basis of data on premiums reported in accordance with Table 3 of Part 23 of Annex II to this Guideline. Following this assessment, the ECB, in close cooperation with NCBs, will define the approach to be followed regarding the transmission of host approach data to the ECB. Until this approach is defined, NCBs are exempted from adjusting their data.

NCBs who wish to adjust their data may, on a voluntary and best efforts basis, derive host approach data from data collected in accordance with the home approach. For this purpose, bilateral contacts and exchanges of data may take place between the NCBs concerned.

(*2)  Directive 2009/138/EC of the European Parliament and of the Council of 25 November 2009 on the taking-up and pursuit of the business of Insurance and Reinsurance (Solvency II) (OJ L 335, 17.12.2009, p. 1).’
  "

*2

| 7. | Annexes II, III, IV and V are amended in accordance with the Annex to this Guideline. |
| --- | --- |

7.

Annexes II, III, IV and V are amended in accordance with the Annex to this Guideline.

Article 2

Taking effect and implementation

This Guideline shall take effect on the day of its notification to the NCBs of the Member States. The NCBs of the Member States whose currency is the euro shall comply with this Guideline from 1 January 2016.

Article 3

Addressees

This Guideline is addressed to the NCBs of the Member States whose currency is the euro.

Done at Frankfurt am Main, 4 December 2015.

The President of the ECB

Mario DRAGHI

---

(1)  
  OJ L 318, 27.11.1998, p. 8.

1

(2)  Regulation (EU) No 1374/2014 of the European Central Bank of 28 November 2014 on statistical reporting requirements for insurance corporations (ECB/2014/50) (OJ L 366, 20.12.2014, p. 36).

2

(3)  Guideline ECB/2014/15 of 4 April 2014 on monetary and financial statistics (OJ L 340, 26.11.2014, p. 1).

3

---

ANNEX

Annexes II, III, IV and V are amended as follows:

| 1. | in Annex II, the table on pension funds statistics in part 22 is replaced by the following table:
  ‘
  Assets Pension Funds | Total | | Domestic |
| --- | --- | --- | --- | --- |
| Total | MFIs (S.121+S.122+ S.123) | | Non-MFIs |
| Total | General government (S.13) | | Non-MFIs excluding general government |
| Total | Non-MMF investment funds (S.124) | OFIs+financial auxiliaries+captive financial institutions and money lenders(S.125+S.126+S.127) | ICs (S.128) | PFs (S.129) | NFCs (S.11) | Households and non-profit institutions serving households (S.14 & S.15) |
| Currency and deposits | | | | | | | | | | | | |
| Up to 1 year | | | | | | | | | | | | |
| Over 1 year and up to 2 years | | | | | | | | | | | | |
| Over 2 years | | | | | | | | | | | | |
| of which: Transferable deposits | | | | | | | | | | | | |
| Debt securities | | | | | | | | | | | | |
| Up to 1 year | | | | | | | | | | | | |
| Over 1 year and up to 2 years | | | | | | | | | | | | |
| Over 2 years | | | | | | | | | | | | |
| Financial derivatives | | | | | | | | | | | | |
| Loans | | | | | | | | | | | | |
| Up to 1 year | | | | | | | | | | | | |
| Over 1 year and up to 5 years | | | | | | | | | | | | |
| Over 5 years | | | | | | | | | | | | |
| Equity | | | | | | | | | | | | |
| o/w listed shares | | | | | | | | | | | | |
| Investment funds shares/units | | | | | | | | | | | | |
| MMF shares/units | | | | | | | | | | | | |
| Non-MMF investment fund shares/units | | | | | | | | | | | | |
| Insurance technical reserves and related claims
   (1) | | | | | | | | | | | | |
| Remaining assets | | | | | | | | | | | | |
| Total non-financial assets | | | | | | | | | | | | |

1.

in Annex II, the table on pension funds statistics in part 22 is replaced by the following table:

Assets Pension Funds

Total

Domestic

Total

MFIs (S.121+S.122+ S.123)

Non-MFIs

Total

General government (S.13)

Non-MFIs excluding general government

Total

Non-MMF investment funds (S.124)

OFIs+financial auxiliaries+captive financial institutions and money lenders(S.125+S.126+S.127)

ICs (S.128)

PFs (S.129)

NFCs (S.11)

Households and non-profit institutions serving households (S.14 & S.15)

Currency and deposits

Up to 1 year

Over 1 year and up to 2 years

Over 2 years

of which: Transferable deposits

Debt securities

Up to 1 year

Over 1 year and up to 2 years

Over 2 years

Financial derivatives

Loans

Up to 1 year

Over 1 year and up to 5 years

Over 5 years

Equity

o/w listed shares

Investment funds shares/units

MMF shares/units

Non-MMF investment fund shares/units

Insurance technical reserves and related claims
   (1)

Remaining assets

Total non-financial assets

| | | Euro area Member States other than domestic | Rest of the world |
| --- | --- | --- | --- |
| Total | MFIs (S.121+S.122+ S.123) | | Non-MFIs |
| Total | General government (S.13) | | Non-MFIs excluding general government |
| Total | Non-MMF investment funds (S.124) | OFIs+financial auxiliaries+captive financial institutions and money lenders(S.125+S.126+S.127) | ICs (S.128) | PFs (S.129) | NFCs (S.11) | Households and non-profit institutions serving households (S.14 & S.15) |
| Currency and deposits | | | | | | | | | | | | |
| Up to 1 year | | | | | | | | | | | | |
| Over 1 year and up to 2 years | | | | | | | | | | | | |
| Over 2 years | | | | | | | | | | | | |
| of which: Transferable deposits | | | | | | | | | | | | |
| Debt securities | | | | | | | | | | | | |
| Up to 1 year | | | | | | | | | | | | |
| Over 1 year and up to 2 years | | | | | | | | | | | | |
| Over 2 years | | | | | | | | | | | | |
| Financial derivatives | | | | | | | | | | | | |
| Loans | | | | | | | | | | | | |
| Up to 1 year | | | | | | | | | | | | |
| Over 1 year and up to 5 years | | | | | | | | | | | | |
| Over 5 years | | | | | | | | | | | | |
| Equity | | | | | | | | | | | | |
| o/w listed shares | | | | | | | | | | | | |
| Investment funds shares/units | | | | | | | | | | | | |
| MMF shares/units | | | | | | | | | | | | |
| Non-MMF investment fund shares/units | | | | | | | | | | | | |
| Insurance technical reserves and related claims
   (1) | | | | | | | | | | | | |
| Remaining assets | | | | | | | | | | | | |
| Total non-financial assets | | | | | | | | | | | | |

Euro area Member States other than domestic

Rest of the world

Total

MFIs (S.121+S.122+ S.123)

Non-MFIs

Total

General government (S.13)

Non-MFIs excluding general government

Total

Non-MMF investment funds (S.124)

OFIs+financial auxiliaries+captive financial institutions and money lenders(S.125+S.126+S.127)

ICs (S.128)

PFs (S.129)

NFCs (S.11)

Households and non-profit institutions serving households (S.14 & S.15)

Currency and deposits

Up to 1 year

Over 1 year and up to 2 years

Over 2 years

of which: Transferable deposits

Debt securities

Up to 1 year

Over 1 year and up to 2 years

Over 2 years

Financial derivatives

Loans

Up to 1 year

Over 1 year and up to 5 years

Over 5 years

Equity

o/w listed shares

Investment funds shares/units

MMF shares/units

Non-MMF investment fund shares/units

Insurance technical reserves and related claims
   (1)

Remaining assets

Total non-financial assets

Liabilities Pension Funds

| | Total | | Domestic |
| --- | --- | --- | --- |
| Total | MFIs (S.121+S.122+S.123) | | Non-MFIs |
| Total | General government (S.13) | | Non-MFIs excluding general government |
| Total | Non-MMF investment funds (S.124) | OFIs (S.125+S.126+S.127) | ICs (S.128) | PFs (S.129) | NFCs (S.11) | Households and non-profit institutions serving households (S.14 & S.15) |
| Debt securities issued | | | | | | | | | | | | |
| Financial derivatives | | | | | | | | | | | | |
| Loans | | | | | | | | | | | | |
| Up to 1 year | | | | | | | | | | | | |
| Over 1 and up to 5 years | | | | | | | | | | | | |
| Over 5 years | | | | | | | | | | | | |
| Equity | | | | | | | | | | | | |
| o/w listed shares | | | | | | | | | | | | |
| Insurance technical reserves | | | | | | | | | | | | |
| of which: Pension entitlements (2) | | | | | | | | | | | | |
| Defined Contribution | | | | | | | | | | | | |
| Defined Benefit | | | | | | | | | | | | |
| Hybrid schemes | | | | | | | | | | | | |
| Remaining liabilities | | | | | | | | | | | | |

Total

Domestic

Total

MFIs (S.121+S.122+S.123)

Non-MFIs

Total

General government (S.13)

Non-MFIs excluding general government

Total

Non-MMF investment funds (S.124)

OFIs (S.125+S.126+S.127)

ICs (S.128)

PFs (S.129)

NFCs (S.11)

Households and non-profit institutions serving households (S.14 & S.15)

Debt securities issued

Financial derivatives

Loans

Up to 1 year

Over 1 and up to 5 years

Over 5 years

Equity

o/w listed shares

Insurance technical reserves

of which: Pension entitlements (2)

Defined Contribution

Defined Benefit

Hybrid schemes

Remaining liabilities

| | | Euro area Member States other than domestic | Rest of the world |
| --- | --- | --- | --- |
| Total | MFIs (S.121+S.122+S.123) | | Non-MFIs |
| Total | General government (S.13) | | Non-MFIs excluding general government |
| Total | Non-MMF investment funds (S.124) | OFIs (S.125+S.126+S.127) | ICs (S.128) | PFs (S.129) | NFCs (S.11) | Households and non-profit institutions serving households (S.14 & S.15) |
| Debt securities issued | | | | | | | | | | | | |
| Financial derivatives | | | | | | | | | | | | |
| Loans | | | | | | | | | | | | |
| Up to 1 year | | | | | | | | | | | | |
| Over 1 and up to 5 years | | | | | | | | | | | | |
| Over 5 years | | | | | | | | | | | | |
| Equity | | | | | | | | | | | | |
| o/w listed shares | | | | | | | | | | | | |
| Insurance technical reserves | | | | | | | | | | | | |
| of which: Pension entitlements (2) | | | | | | | | | | | | |
| Defined Contribution | | | | | | | | | | | | |
| Defined Benefit | | | | | | | | | | | | |
| Hybrid schemes | | | | | | | | | | | | |
| Remaining liabilities | | | | | | | | | | | | |

Euro area Member States other than domestic

Rest of the world

Total

MFIs (S.121+S.122+S.123)

Non-MFIs

Total

General government (S.13)

Non-MFIs excluding general government

Total

Non-MMF investment funds (S.124)

OFIs (S.125+S.126+S.127)

ICs (S.128)

PFs (S.129)

NFCs (S.11)

Households and non-profit institutions serving households (S.14 & S.15)

Debt securities issued

Financial derivatives

Loans

Up to 1 year

Over 1 and up to 5 years

Over 5 years

Equity

o/w listed shares

Insurance technical reserves

of which: Pension entitlements (2)

Defined Contribution

Defined Benefit

Hybrid schemes

Remaining liabilities

| 2. | in Annex II, the following Part 23 is added:

  ‘PART 23

  Statistics on ICs


  Table 1


  Data on assets and liabilities to be provided for Q4 2015: stocks
   (3) | Total |
| --- | --- | --- |
| ASSETS (F) |
| 1. | Currency and deposits (ESA 2010: F.21+F.22+F.29) — fair value |

2.

in Annex II, the following Part 23 is added:

‘PART 23

Statistics on ICs

Table 1

Data on assets and liabilities to be provided for Q4 2015: stocks
   (3)

Total

ASSETS (F)

1.

| 1x. | Currency and deposits of which transferable deposits (F.22) |
| --- | --- |

1x.

| 2. | Debt securities (ESA 2010: F.3) |
| --- | --- |

2.

| 3. | Loans (ESA 2010: F.4) — fair value |
| --- | --- |

3.

| 3x. | Loans of which deposit guarantees in connection with reinsurance business — fair value |
| --- | --- |

3x.

| 4. | Equity (ESA 2010: F.51) |
| --- | --- |

4.

| 4a. | Equity of which listed shares |
| --- | --- |

4a.

| 5. | Investment funds shares/units (ESA 2010: F.52) |
| --- | --- |

5.

| 6. | Financial derivatives (ESA 2010: F.7) |
| --- | --- |

6.

| 7. | Non-life insurance technical reserves (ESA 2010: F.61) |
| --- | --- |

7.

| 8. | Non-financial assets (ESA 2010: AN) |
| --- | --- |

8.

| 9. | Remaining assets |
| --- | --- |

9.

LIABILITIES (F)

| 1. | Debt securities issued and loans (ESA 2010: F.3 + F.4) |
| --- | --- |

1.

| 1.x. | of which deposit guarantees in connection with reinsurance business |
| --- | --- |

1.x.

| 2. | Equity (ESA 2010: F.51) |
| --- | --- |

2.

| 2a. | Equity of which listed shares |
| --- | --- |

2a.

| 2b. | Equity of which unlisted shares |
| --- | --- |

2b.

| 2c. | Equity of which other equity |
| --- | --- |

2c.

| 3 | Insurance technical reserves (ESA 2010: F.6) |
| --- | --- |

3

| 3.1 | Life insurance technical reserves |
| --- | --- |

3.1

of which unit-linked

of which non-unit linked

| 3.2 | Non-life insurance technical reserves |
| --- | --- |

3.2

| 4 | Financial derivatives (ESA 2010: F.7) |
| --- | --- |

4

| 5 | Remaining liabilities |
| --- | --- |

5

Table 2a

Data on assets to be provided on a quarterly basis: stocks and flow adjustments

| | Total | Euro area | Rest of the world |
| --- | --- | --- | --- |
| Domestic | Euro area Member States other than domestic | Euro area Member States other than domestic
  (country-by-country information) | Total | Non-participating Member States
  (country-by-country information) | Main counterparties outside the European Union (country-by-country information for Brazil, Canada, China, Hong Kong, India, Japan, Russia, Switzerland, USA) |
| ASSETS (F) |
| 1. | Currency and deposits (ESA 2010: F.21+F.22+F.29) — fair value |

Total

Euro area

Rest of the world

Domestic

Euro area Member States other than domestic

Euro area Member States other than domestic

(country-by-country information)

Total

Non-participating Member States

(country-by-country information)

Main counterparties outside the European Union (country-by-country information for Brazil, Canada, China, Hong Kong, India, Japan, Russia, Switzerland, USA)

ASSETS (F)

1.

up to 1 year (remaining until maturity)

over 1 year (remaining until maturity)

| 1x. | Currency and deposits o/w transferable deposits (F.22) |
| --- | --- |

1x.

| 1. | Currency and deposits (ESA 2010: F.21+F.22+F.29) — nominal value |
| --- | --- |

1.

| 2. | Debt securities (ESA 2010: F.3) |
| --- | --- |

2.

issued by MFIs

issued by GG

issued by OFIs

issued by ICs

issued by PFs

issued by NFCs

issued by HHs & NPISHs

up to 1 year (original maturity)

issued by MFIs

issued by GG

issued by OFIs

issued by ICs

issued by PFs

issued by NFCs

issued by HHs & NPISHs

1-2 years (original maturity)

issued by MFIs

issued by GG

issued by OFIs

issued by ICs

issued by PFs

issued by NFCs

issued by HHs & NPISHs

over 2 years (original maturity)

issued by MFIs

issued by GG

issued by OFIs

issued by ICs

issued by PFs

issued by NFCs

issued by HHs & NPISHs

up to 1 year (remaining until maturity)

issued by MFIs

issued by GG

issued by OFIs

issued by ICs

issued by PFs

issued by NFCs

issued by HHs & NPISHs

1-2 years (remaining until maturity)

issued by MFIs

issued by GG

issued by OFIs

issued by ICs

issued by PFs

issued by NFCs

issued by HHs & NPISHs

2-5 years (remaining until maturity)

issued by MFIs

issued by GG

issued by OFIs

issued by ICs

issued by PFs

issued by NFCs

issued by HHs & NPISHs

Over 5 years (remaining until maturity)

issued by MFIs

issued by GG

issued by OFIs

issued by ICs

issued by PFs

issued by NFCs

issued by HHs & NPISHs

| 3. | Loans (ESA 2010: F.4) — fair value |
| --- | --- |

3.

original maturity up to 1 year — fair value

to MFIs

to GG

to IFs

to OFIs

to ICs

to PFs

to NFCs

to HHs & NPISHs

original maturity 1-5 years — fair value

to MFIs

to GG

to IFs

to OFIs

to ICs

to PFs

to NFCs

to HHs & NPISHs

original maturity over 5 years — fair value

to MFIs

to GG

to IFs

to OFIs

to ICs

to PFs

to NFCs

to HHs & NPISHs

up to 1 year remaining until maturity — fair value

1-2 years remaining until maturity — fair value

2-5 years remaining until maturity — fair value

over 5 years remaining until maturity — fair value

| 3x. | Loans o/w deposit guarantees in connection with reinsurance business — fair value |
| --- | --- |

3x.

| 3. | Loans (ESA 2010: F.4) — nominal value |
| --- | --- |

3.

original maturity up to 1 year — nominal value

original maturity 1-5 years — nominal value

original maturity over 5 years — nominal value

| 4. | Equity (ESA 2010: F.51) |
| --- | --- |

4.

| 4a. | Equity of which listed shares |
| --- | --- |

4a.

issued by MFIs

issued by GG

issued by OFIs

issued by ICs

issued by PFs

issued by NFCs

| 4b. | Equity of which unlisted shares |
| --- | --- |

4b.

issued by MFIs

issued by GG

issued by OFIs

issued by ICs

issued by PFs

issued by NFCs

| 4c. | Equity of which other equity |
| --- | --- |

4c.

issued by MFIs

issued by GG

issued by OFIs

issued by ICs

issued by PFs

issued by NFCs

| 5. | Investment funds shares/units (ESA 2010: F.52) |
| --- | --- |

5.

| 5a. | MMF shares/units |
| --- | --- |

5a.

| 5b. | Non-MMF shares/units |
| --- | --- |

5b.

Equity funds

Bond funds

Mixed funds

Real estate funds

Hedge funds

Other funds

| 6. | Financial derivatives (ESA 2010: F.7) |
| --- | --- |

6.

| 7. | Insurance technical reserves and related claims
   (4) |
| --- | --- |

7.

| 8. | Non-financial assets (ESA 2010: AN) |
| --- | --- |

8.

| 9. | Remaining assets |
| --- | --- |

9.

| 10. | Total assets |
| --- | --- |

10.

Abbreviations used in this table: o/w=of which, MFI=monetary financial institution, GG=general government, IF=investment fund, OFI=other financial intermediary, IC=insurance corporation, PF=pension fund, NFC=non-financial corporation, HH=household, NPISH=non-profit institution serving households, MMF=money market fund

Table 2b

Data on liabilities to be provided on a quarterly basis: stocks and flow adjustments

| | Total | Euro area | Rest of the world |
| --- | --- | --- | --- |
| Domestic | Euro area Member States other than domestic | Euro area Member States other than domestic (country-by-country information) | Total | Non-participating Member States (country-by-country information) | Main counterparties outside the European Union (country-by-country information for Brazil, Canada, China, Hong Kong, India, Japan, Russia, Switzerland, USA) |
| LIABILITIES (F) |
| 1. | Debt securities issued (ESA 2010: F.3) |

Total

Euro area

Rest of the world

Domestic

Euro area Member States other than domestic

Euro area Member States other than domestic (country-by-country information)

Total

Non-participating Member States (country-by-country information)

Main counterparties outside the European Union (country-by-country information for Brazil, Canada, China, Hong Kong, India, Japan, Russia, Switzerland, USA)

LIABILITIES (F)

1.

| 2. | Loans (ESA 2010: F.4) |
| --- | --- |

2.

issued by monetary financial institutions (MFIs) (5)

issued by non-MFIs (5)

| 2.x. | Loans o/w deposit guarantees in connection with reinsurance business |
| --- | --- |

2.x.

| 3. | Equity (ESA 2010: F.51) |
| --- | --- |

3.

Listed shares

Unlisted shares

Other equity

| 4 | Insurance technical reserves (ESA 2010: F.6) |
| --- | --- |

4

| 4.1 | Life insurance technical reserves |
| --- | --- |

4.1

Unit-linked

Non-unit-linked (6)

| 4.1.a | Life insurance technical reserves o/w Pension entitlements
   (7) |
| --- | --- |

4.1.a

Defined contribution schemes

Defined benefit schemes

Hybrid schemes

| 4.1.b | Life insurance technical reserves o/w accepted reinsurance |
| --- | --- |

4.1.b

| 4.2 | Non-life insurance technical reserves
   (8) |
| --- | --- |

4.2

by line of business

Medical expense insurance

Income protection insurance

Workers' compensation insurance

Motor vehicle liability insurance

Other motor insurance

Marine, aviation and transport insurance

Fire and other damage to property insurance

General liability insurance

Credit and suretyship insurance

Legal expenses insurance

Assistance

Miscellaneous financial loss

Reinsurance

| 5 | Financial derivatives (ESA 2010: F.7) |
| --- | --- |

5

| 6 | Remaining liabilities |
| --- | --- |

6

Abbreviation used in this table: o/w=of which.

| | Requirements addressed to ICs by Regulation (EU) No 1374/2014 (ECB/2014/50). |
| --- | --- |
| | Requirements to be reported for ICs if available at NCBs (memo items). |

Requirements addressed to ICs by Regulation (EU) No 1374/2014 (ECB/2014/50).

Requirements to be reported for ICs if available at NCBs (memo items).

Table 3

Data on premiums, claims and commissions to be provided on an annual basis

| | Total | |
| --- | --- | --- |
| Domestic | Branches inside the EEA (country-by-country information) | Branches outside the EEA (total) |
| 1. | Premiums |

Total

Domestic

Branches inside the EEA (country-by-country information)

Branches outside the EEA (total)

1.

| 2. | Claims |
| --- | --- |

2.

| 3. | Commissions’ |
| --- | --- |

3.

| 3. | in Annex III, Parts 2, 3 and 4 are replaced by the following:

  ‘PART 2

  DSDs and datasets

  1.   In the SDMX messages exchanged, statistical concepts can be used either as dimensions (in composing the ‘keys’ identifying the time series) or as attributes (providing information about the data). Coded dimensions and attributes take their values from predefined code lists. The DSDs define the structure of the exchanged series keys, in terms of concepts and associated code lists. In addition, they define their relationship with the relevant attributes. The same structure can be used for several data flows, which are differentiated by the data set information.
  2.   In the context of monetary and financial statistics, the ECB has defined 12 DSDs currently used for the exchange of statistics with the ESCB and other international organisations. For the majority of those DSDs, one data set using that structure is exchanged and as a consequence the DSD identifier and the associated data set identifier (DSI) used in the SDMX data messages are the same. For treatment, timeliness and responsibility purposes, two different data sets following the ‘ECB_BSI1’ DSD have been defined and are distinguished at the DSI level. Similarly, two different data sets following the ‘ECB_ICPF1’ DSD have been defined and are distinguished at the DSI level. The following data flows characteristics are in production:






  — | balance sheet items (BSI), DSD identifier and DSI ‘ECB_BSI1’, |
| --- | --- | --- |

3.

in Annex III, Parts 2, 3 and 4 are replaced by the following:

‘PART 2

DSDs and datasets

1.   In the SDMX messages exchanged, statistical concepts can be used either as dimensions (in composing the ‘keys’ identifying the time series) or as attributes (providing information about the data). Coded dimensions and attributes take their values from predefined code lists. The DSDs define the structure of the exchanged series keys, in terms of concepts and associated code lists. In addition, they define their relationship with the relevant attributes. The same structure can be used for several data flows, which are differentiated by the data set information.

2.   In the context of monetary and financial statistics, the ECB has defined 12 DSDs currently used for the exchange of statistics with the ESCB and other international organisations. For the majority of those DSDs, one data set using that structure is exchanged and as a consequence the DSD identifier and the associated data set identifier (DSI) used in the SDMX data messages are the same. For treatment, timeliness and responsibility purposes, two different data sets following the ‘ECB_BSI1’ DSD have been defined and are distinguished at the DSI level. Similarly, two different data sets following the ‘ECB_ICPF1’ DSD have been defined and are distinguished at the DSI level. The following data flows characteristics are in production:

—

balance sheet items (BSI), DSD identifier and DSI ‘ECB_BSI1’,

| — | balance sheet items in the context of the Blue Book (BSP), DSD identifier ‘ECB_BSI1’ and DSI ‘ECB_BSP’, |
| --- | --- |

—

balance sheet items in the context of the Blue Book (BSP), DSD identifier ‘ECB_BSI1’ and DSI ‘ECB_BSP’,

| — | banking structural financial indicators (SSI), DSD identifier and DSI ‘ECB_SSI1’, |
| --- | --- |

—

banking structural financial indicators (SSI), DSD identifier and DSI ‘ECB_SSI1’,

| — | banking structural financial indicators in the context of the Blue Book (SSP), DSD identifier ‘ECB_SS1’ and DSI ‘ECB_SSP’, |
| --- | --- |

—

banking structural financial indicators in the context of the Blue Book (SSP), DSD identifier ‘ECB_SS1’ and DSI ‘ECB_SSP’,

| — | MFI interest rates (MIR), DSD identifier and DSI ‘ECB_MIR1’, |
| --- | --- |

—

MFI interest rates (MIR), DSD identifier and DSI ‘ECB_MIR1’,

| — | other financial intermediaries (OFI), DSD identifier and DSI ‘ECB_OFI1’, |
| --- | --- |

—

other financial intermediaries (OFI), DSD identifier and DSI ‘ECB_OFI1’,

| — | securities issues (SEC), DSD identifier and DSI ‘ECB_SEC1’, |
| --- | --- |

—

securities issues (SEC), DSD identifier and DSI ‘ECB_SEC1’,

| — | payment and settlement systems (PSS), DSD identifier and DSI ‘ECB_PSS1’, |
| --- | --- |

—

payment and settlement systems (PSS), DSD identifier and DSI ‘ECB_PSS1’,

| — | investment funds (IVF), DSD identifier and DSI ‘ECB_IVF1’, |
| --- | --- |

—

investment funds (IVF), DSD identifier and DSI ‘ECB_IVF1’,

| — | financial vehicle corporations (FVC), DSD identifier and DSI ‘ECB_FVC1’, |
| --- | --- |

—

financial vehicle corporations (FVC), DSD identifier and DSI ‘ECB_FVC1’,

| — | consolidated banking data (CBD), DSD identifier and DSI ‘ECB_CBD1’, |
| --- | --- |

—

consolidated banking data (CBD), DSD identifier and DSI ‘ECB_CBD1’,

| — | international consolidated banking statistics (CBS), DSD identifier and DSI ‘BIS_CBS’, |
| --- | --- |

—

international consolidated banking statistics (CBS), DSD identifier and DSI ‘BIS_CBS’,

| — | insurance corporations' assets and liabilities (ICB), DSD identifier ‘ECB_ICPF1’ and DSI ‘ECB_ICB’, |
| --- | --- |

—

insurance corporations' assets and liabilities (ICB), DSD identifier ‘ECB_ICPF1’ and DSI ‘ECB_ICB’,

| — | insurance corporations' operations (premiums, claims, commissions) (ICO), DSD identifier and DSI ‘ECB_ICO1’, |
| --- | --- |

—

insurance corporations' operations (premiums, claims, commissions) (ICO), DSD identifier and DSI ‘ECB_ICO1’,

| — | pension funds' assets and liabilities (PFB), DSD identifier ‘ECB_ICPF1’ and DSI ‘ECB_PFB’. |
| --- | --- |

—

pension funds' assets and liabilities (PFB), DSD identifier ‘ECB_ICPF1’ and DSI ‘ECB_PFB’.

2.1.   The DSI ‘ECB_BSI1’ is used to define the series keys for data on:

| — | MFI balance sheet statistics, |
| --- | --- |

—

MFI balance sheet statistics,

| — | e-money, |
| --- | --- |

—

e-money,

| — | credit institutions balance sheet statistics, |
| --- | --- |

—

credit institutions balance sheet statistics,

| — | MMF balance sheet statistics, |
| --- | --- |

—

MMF balance sheet statistics,

| — | central government deposit liabilities and holdings of cash and securities, |
| --- | --- |

—

central government deposit liabilities and holdings of cash and securities,

| — | memorandum items, |
| --- | --- |

—

memorandum items,

| — | supplementary BSI data reported by the NCBs to the International Monetary Fund using the ECB gateway services, |
| --- | --- |

—

supplementary BSI data reported by the NCBs to the International Monetary Fund using the ECB gateway services,

| — | securitised and sold MFI loans to third parties, |
| --- | --- |

—

securitised and sold MFI loans to third parties,

| — | reserve base statistics, |
| --- | --- |

—

reserve base statistics,

| — | macro ratio, |
| --- | --- |

—

macro ratio,

| — | loans to non-financial corporations broken down by branch of activity, |
| --- | --- |

—

loans to non-financial corporations broken down by branch of activity,

| — | credit lines. |
| --- | --- |

—

credit lines.

2.2.   For the purposes of insurance corporations and pension funds (ICPF), the DSI ‘ECB_ICPF1’ is used to define the series keys for data on insurance corporations' assets and liabilities and on pension funds' assets and liabilities.

PART 3

Dimensions

The table below identifies the dimensions composing the series keys of the specific monetary and financial statistics listed in Part 2, their format and the code lists from which they take their code values.

| Data structure definition (DSD) | Concept | Concept name | Value | Code list | Code list name |
| --- | --- | --- | --- | --- | --- |
| BSI | SSI | MIR | OFI | SEC | PSS | IVF | FVC | CBD | CBS (9) | ICPF | ICO | (identifier) | | format (10) | | |
| DIMENSION ORDER IN THE KEY | DIMENSIONS |
| 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | FREQ | Frequency | AN1 | CL_FREQ | Frequency code list |
| 2 | 2 | 2 | 2 | 2 | 2 | 2 | 2 | 2 | | | | REF_AREA | Reference area | AN2 | CL_AREA_EE | Area code list |
| | | | | | | | | | | 2 | 2 | REF_AREA | Reference area | AN2 | CL_AREA (11) | Area code list |
| 3 | | | 3 | | | 3 | 3 | | | | | ADJUSTMENT | Adjustment indicator | AN1 | CL_ADJUSTMENT | Adjustment indicator code list |
| 4 | | 3 | | | | | | | | | | BS_REP_SECTOR | Balance sheet reference sector breakdown | AN..2 | CL_BS_REP_SECTOR | Balance sheet reference sector breakdown code list |
| | 3 | | | | | | | | | | | REF_SECTOR | Reference sector breakdown | AN4 | CL_ESA95_SECTOR | ESA 95 reference sectoral breakdown code list |
| | | | | 3 | | | | | | | | SEC_ISSUING SECTOR | Securities issuing sector | AN4 | CL_ESA95_SECTOR | ESA 95 reference sectoral breakdown code list |
| | | | | | 3 | | | | | | | PSS_INFO_TYPE | PSS information type | AN4 | CL_PSS_INFO_TYPE | Payment and settlement system information type code list |
| | | | | | 4 | | | | | | | PSS_INSTRUMENT | PSS instrument | AN4 | CL_PSS_INSTRUMENT | Payment and settlement system instrument code list |
| | | | | | 5 | | | | | | | PSS_SYSTEM | PSS entry point | AN4 | CL_PSS_SYSTEM | Payment and settlement system entry point code list |
| | | | | | 6 | | | | | | | DATA_TYPE_PSS | PSS data type | AN2 | CL_DATA_TYPE_PSS | Payment and settlement system data type code list |
| | | | | | | | | | | 3 | | COMP_APPROACH | Compilation approach indicator | AN1 | CL_COMP_APPROACH | Compilation approach indicator code list |
| | | | 4 | | | | | | | | | OFI_REP_SECTOR | Other financial intermediaries reporting sector | AN2 | CL_OFI_REP_SECTOR | Other financial intermediaries reference sectoral breakdown code list |
| | | | | | | 4 | | | | | | IVF_REP_SECTOR | Investment funds reporting sector | AN2 | CL_IVF_REP_SECTOR | Investment funds reference sectoral breakdown code list |
| | | | | | | | 4 | | | | | FVC_REP_SECTOR | Financial vehicle corporations reporting sector | AN1 | CL_FVC_REP_SECTOR | Financial vehicle corporations reference sectoral breakdown code list |
| | | | | | | | | | | 4 | 3 | REPORTING_SECTOR | Reporting sector | AN..6 | CL_SECTOR (11) | Institutional sector code list |
| | | | | | | | | 3 | | | | CB_REP_SECTOR | CBD reference sector breakdown | AN2 | CL_CB_REP_SECTOR | Consolidated banking data reference sector breakdown code list |
| | | | | | | | | 4 | | | | CB_SECTOR_SIZE | CBD reference sector size | AN1 | CL_CB_SECTOR_SIZE | Consolidated banking data reference sector size code list |
| | 4 | | | | | | | | | | | SSI_INDICATOR | Structural financial indicator | AN3 | CL_SSI_INDICATOR | Structural financial indicator's code list |
| 5 | | 4 | | | | | | | | | | BS_ITEM | Balance sheet item | AN..7 | CL_BS_ITEM | Balance sheet item code list |
| | | | 5 | | | | | | | | | OFI_ITEM | Other financial intermediaries balance sheet item | AN3 | CL_OFI_ITEM | Other financial intermediaries balance sheet item code list |
| | | | | 4 | | | | | | | | SEC_ITEM | Securities item | AN6 | CL_ESA95_ACCOUNT | ESA 95 account code list |
| | | | | | | 5 | | | | | | IF_ITEM | Investment funds assets and liabilities | AN3 | CL_IF_ITEM | IF balance sheet item code list |
| | | | | | | | 5 | | | | | FVC_ITEM | Financial vehicle corporations assets and liabilities | AN3 | CL_FVC_ITEM | Financial vehicle corporations balance sheet item code list |
| | | | | | | | | | | 5 | | ICPF_ITEM | Insurance corporations and pension funds assets and liabilities | AN..4 | CL_ICPF_ITEM | Insurance corporations and pension funds assets and liabilities code list |
| | | | | | | | | | | | 4 | ICO_PAY_ITEM | Insurance corporations operations item | AN1 | CL_ICO_PAY | Insurance corporations operations item code list |
| | | | | | | | | 5 | | | | CB_ITEM | Consolidated banking data item | AN5 | CL_CB_ITEM | Consolidated banking data item code list |
| 6 | | 5 | 6 | | | 6 | 6 | 6 | | | | MATURITY_ORIG | Original maturity | AN..3 | CL_MATURITY_ORIG | Original maturity code list |
| | | | | | | | | | | 6 | | MATURITY | Maturity | AN..6 | CL_MATURITY (11) | Maturity code list |
| | | | | 5 | | | | | | | | SEC_VALUATION | Securities valuation | AN1 | CL_MUFA_VALUATION | Valuation in MUFA context code list |
| 7 | 5 | | 7 | | | 7 | 7 | 7 | | 7 | | DATA_TYPE | Data type | AN1 | CL_DATA_TYPE | Money and banking type of data, flow and position code list |
| | | 6 | | | | | | | | | | DATA_TYPE_MIR | MIR data type | AN1 | CL_DATA_TYPE_MIR | MFI interest rates data type code list |
| | | | | 6 | | | | | | | | DATA_TYPE_SEC | Securities data type | AN1 | CL_DATA_TYPE_SEC | Securities data type code list |
| | | | | | | | | | 2 | | | L_MEASURE | Stock, flow | AN1 | CL_STOCK_FLOW | Stock, flow |
| | | | | | | | | | 3 | | | L_REP_CTY | Reference area code for BIS international financial statistics (BIS-IFS) | AN2 | CL_BIS_IF_REF_AREA | Reference area code for BIS-IFS |
| | | | | | | | | | 4 | | | CBS_BANK_TYPE | CBS bank type | AN2 | CL_BIS_IF_REF_AREA | CBS bank type |
| | | | | | | | | | 5 | | | CBS_BASIS | CBS reporting basis | AN1 | CL_CBS_BASIS | CBS reporting basis |
| | | | | | | | | | 6 | | | L_POSITION | CBS position type | AN1 | CL_L_POSITION | Position type |
| | | | | | | | | | 7 | | | L_INSTR | CBS instrument type | AN1 | CL_L_INSTR | Instrument type |
| | | | | | | | | | 8 | | | REM_MATURITY | CBS remaining maturities | AN1 | CL_ISSUE_MAT | Issue maturity code list |
| | | | | | | | | | 9 | | | CURR_TYPE_BOOK | CBS currency type of booking location | AN3 | CL_CURRENCY_3POS | Currency type of booking location |
| | | | | | | | | | 10 | | | L_CP_SECTOR | CBS counterparty sector | AN1 | CL_L_SECTOR | CBS counterparty sector |
| | | | | | | | | | 11 | | | L_CP_COUNTRY | CBS counterparty area | AN2 | CL_BIS_IF_REF_AREA | Reference area code for BIS-IFS |
| 8 | 6 | | 8 | | 7 | 8 | 8 | 8 | | | | COUNT_AREA | Counterpart area | AN2 | CL_AREA_EE | Area code list |
| | | | | | | | | | | 8 | 5 | COUNTERPART_AREA | Counterpart area | AN2 | CL_AREA | Area code list |
| | | 7 | | | | | | | | | | AMOUNT_CAT | Amount category | AN1 | CL_AMOUNT_CAT | Amount category code list |
| 9 | | 8 | 9 | | | 9 | 9 | 9 | | | | BS_COUNT_SECTOR | Balance sheet counterpart sector | AN..7 | CL_BS_COUNT_SECTOR | Balance sheet counterpart sector code list |
| | | | | | | | | | | 9 | | COUNTERPART_SECTOR | Counterpart sector | AN..6 | CL_SECTOR | Institutional sector code list |
| | | | | | 8 | | | | | | | COUNTERPART_SECTOR | Counterpart sector | AN2 | CL_PS_COUNT_SECTOR | Payment and settlement system receiving/acquiring sector |
| | | | | | | | 10 | | | | | FVC_ORI_SECTOR | Financial vehicle corporations originator sector | AN2 | CL_FVC_ORI_SECTOR | Financial vehicle corporations originator sector code list |
| | | | | | | | | | | | 6 | ICO_UNIT | Insurance corporations unit | AN1 | CL_ICO_UNIT | Insurance corporations unit code list |
| 10 | 7 | 9 | 10 | 7 | 9 | 10 | 11 | 10 | | 10 | | CURRENCY_TRANS | Currency of transaction | AN3 | CL_CURRENCY | Currency code list |
| | 8 | | 11 | 8 | 10 | 11 | | 11 | | | | SERIES_DENOM | Denomination of the series or special calculation | AN1 | CL_SERIES_DENOM | Denomination of the series or special calculation code list |
| | | | | | | | | | | 11 | 7 | CURRENCY_DENOM | Currency denominator | AN..15 | CL_UNIT | Unit code list |
| 11 | | | | | | | 12 | | | | | BS_SUFFIX | Balance sheet suffix | AN..3 | CL_BS_SUFFIX | Balance sheet suffix code list |
| | | | | 9 | | | | | | | | SEC_SUFFIX | Series suffix in securities context | AN1 | CL_SEC_SUFFIX | Securities suffix code list |
| | | 10 | | | | | | | | | | IR_BUS_COV | Interest rates business coverage | AN1 | CL_IR_BUS_COV | Interest rates business coverage code list |

Data structure definition (DSD)

Concept

Concept name

Value

Code list

Code list name

BSI

SSI

MIR

OFI

SEC

PSS

IVF

FVC

CBD

CBS (9)

ICPF

ICO

(identifier)

format (10)

DIMENSION ORDER IN THE KEY

DIMENSIONS

1

1

1

1

1

1

1

1

1

1

1

1

FREQ

Frequency

AN1

CL_FREQ

Frequency code list

2

2

2

2

2

2

2

2

2

REF_AREA

Reference area

AN2

CL_AREA_EE

Area code list

2

2

REF_AREA

Reference area

AN2

CL_AREA (11)

Area code list

3

3

3

3

ADJUSTMENT

Adjustment indicator

AN1

CL_ADJUSTMENT

Adjustment indicator code list

4

3

BS_REP_SECTOR

Balance sheet reference sector breakdown

AN..2

CL_BS_REP_SECTOR

Balance sheet reference sector breakdown code list

3

REF_SECTOR

Reference sector breakdown

AN4

CL_ESA95_SECTOR

ESA 95 reference sectoral breakdown code list

3

SEC_ISSUING SECTOR

Securities issuing sector

AN4

CL_ESA95_SECTOR

ESA 95 reference sectoral breakdown code list

3

PSS_INFO_TYPE

PSS information type

AN4

CL_PSS_INFO_TYPE

Payment and settlement system information type code list

4

PSS_INSTRUMENT

PSS instrument

AN4

CL_PSS_INSTRUMENT

Payment and settlement system instrument code list

5

PSS_SYSTEM

PSS entry point

AN4

CL_PSS_SYSTEM

Payment and settlement system entry point code list

6

DATA_TYPE_PSS

PSS data type

AN2

CL_DATA_TYPE_PSS

Payment and settlement system data type code list

3

COMP_APPROACH

Compilation approach indicator

AN1

CL_COMP_APPROACH

Compilation approach indicator code list

4

OFI_REP_SECTOR

Other financial intermediaries reporting sector

AN2

CL_OFI_REP_SECTOR

Other financial intermediaries reference sectoral breakdown code list

4

IVF_REP_SECTOR

Investment funds reporting sector

AN2

CL_IVF_REP_SECTOR

Investment funds reference sectoral breakdown code list

4

FVC_REP_SECTOR

Financial vehicle corporations reporting sector

AN1

CL_FVC_REP_SECTOR

Financial vehicle corporations reference sectoral breakdown code list

4

3

REPORTING_SECTOR

Reporting sector

AN..6

CL_SECTOR (11)

Institutional sector code list

3

CB_REP_SECTOR

CBD reference sector breakdown

AN2

CL_CB_REP_SECTOR

Consolidated banking data reference sector breakdown code list

4

CB_SECTOR_SIZE

CBD reference sector size

AN1

CL_CB_SECTOR_SIZE

Consolidated banking data reference sector size code list

4

SSI_INDICATOR

Structural financial indicator

AN3

CL_SSI_INDICATOR

Structural financial indicator's code list

5

4

BS_ITEM

Balance sheet item

AN..7

CL_BS_ITEM

Balance sheet item code list

5

OFI_ITEM

Other financial intermediaries balance sheet item

AN3

CL_OFI_ITEM

Other financial intermediaries balance sheet item code list

4

SEC_ITEM

Securities item

AN6

CL_ESA95_ACCOUNT

ESA 95 account code list

5

IF_ITEM

Investment funds assets and liabilities

AN3

CL_IF_ITEM

IF balance sheet item code list

5

FVC_ITEM

Financial vehicle corporations assets and liabilities

AN3

CL_FVC_ITEM

Financial vehicle corporations balance sheet item code list

5

ICPF_ITEM

Insurance corporations and pension funds assets and liabilities

AN..4

CL_ICPF_ITEM

Insurance corporations and pension funds assets and liabilities code list

4

ICO_PAY_ITEM

Insurance corporations operations item

AN1

CL_ICO_PAY

Insurance corporations operations item code list

5

CB_ITEM

Consolidated banking data item

AN5

CL_CB_ITEM

Consolidated banking data item code list

6

5

6

6

6

6

MATURITY_ORIG

Original maturity

AN..3

CL_MATURITY_ORIG

Original maturity code list

6

MATURITY

Maturity

AN..6

CL_MATURITY (11)

Maturity code list

5

SEC_VALUATION

Securities valuation

AN1

CL_MUFA_VALUATION

Valuation in MUFA context code list

7

5

7

7

7

7

7

DATA_TYPE

Data type

AN1

CL_DATA_TYPE

Money and banking type of data, flow and position code list

6

DATA_TYPE_MIR

MIR data type

AN1

CL_DATA_TYPE_MIR

MFI interest rates data type code list

6

DATA_TYPE_SEC

Securities data type

AN1

CL_DATA_TYPE_SEC

Securities data type code list

2

L_MEASURE

Stock, flow

AN1

CL_STOCK_FLOW

Stock, flow

3

L_REP_CTY

Reference area code for BIS international financial statistics (BIS-IFS)

AN2

CL_BIS_IF_REF_AREA

Reference area code for BIS-IFS

4

CBS_BANK_TYPE

CBS bank type

AN2

CL_BIS_IF_REF_AREA

CBS bank type

5

CBS_BASIS

CBS reporting basis

AN1

CL_CBS_BASIS

CBS reporting basis

6

L_POSITION

CBS position type

AN1

CL_L_POSITION

Position type

7

L_INSTR

CBS instrument type

AN1

CL_L_INSTR

Instrument type

8

REM_MATURITY

CBS remaining maturities

AN1

CL_ISSUE_MAT

Issue maturity code list

9

CURR_TYPE_BOOK

CBS currency type of booking location

AN3

CL_CURRENCY_3POS

Currency type of booking location

10

L_CP_SECTOR

CBS counterparty sector

AN1

CL_L_SECTOR

CBS counterparty sector

11

L_CP_COUNTRY

CBS counterparty area

AN2

CL_BIS_IF_REF_AREA

Reference area code for BIS-IFS

8

6

8

7

8

8

8

COUNT_AREA

Counterpart area

AN2

CL_AREA_EE

Area code list

8

5

COUNTERPART_AREA

Counterpart area

AN2

CL_AREA

Area code list

7

AMOUNT_CAT

Amount category

AN1

CL_AMOUNT_CAT

Amount category code list

9

8

9

9

9

9

BS_COUNT_SECTOR

Balance sheet counterpart sector

AN..7

CL_BS_COUNT_SECTOR

Balance sheet counterpart sector code list

9

COUNTERPART_SECTOR

Counterpart sector

AN..6

CL_SECTOR

Institutional sector code list

8

COUNTERPART_SECTOR

Counterpart sector

AN2

CL_PS_COUNT_SECTOR

Payment and settlement system receiving/acquiring sector

10

FVC_ORI_SECTOR

Financial vehicle corporations originator sector

AN2

CL_FVC_ORI_SECTOR

Financial vehicle corporations originator sector code list

6

ICO_UNIT

Insurance corporations unit

AN1

CL_ICO_UNIT

Insurance corporations unit code list

10

7

9

10

7

9

10

11

10

10

CURRENCY_TRANS

Currency of transaction

AN3

CL_CURRENCY

Currency code list

8

11

8

10

11

11

SERIES_DENOM

Denomination of the series or special calculation

AN1

CL_SERIES_DENOM

Denomination of the series or special calculation code list

11

7

CURRENCY_DENOM

Currency denominator

AN..15

CL_UNIT

Unit code list

11

12

BS_SUFFIX

Balance sheet suffix

AN..3

CL_BS_SUFFIX

Balance sheet suffix code list

9

SEC_SUFFIX

Series suffix in securities context

AN1

CL_SEC_SUFFIX

Securities suffix code list

10

IR_BUS_COV

Interest rates business coverage

AN1

CL_IR_BUS_COV

Interest rates business coverage code list

Frequency.
  This dimension indicates the frequency of the reported time series. The specific data exchange requirements are as follows:

| — | for the ‘ECB_OFI1’ DSD: when national data are only available at a lower frequency, i.e. biannually or annually, NCBs estimate quarterly data. When quarterly estimates are not feasible, data are nevertheless provided as quarterly time series, i.e. annual data are provided as yyyyQ4 and biannual data are provided as yyyyQ2 and yyyyQ4 with the remaining quarters either not reported or reported as missing with the observation status ‘L’, |
| --- | --- |

—

for the ‘ECB_OFI1’ DSD: when national data are only available at a lower frequency, i.e. biannually or annually, NCBs estimate quarterly data. When quarterly estimates are not feasible, data are nevertheless provided as quarterly time series, i.e. annual data are provided as yyyyQ4 and biannual data are provided as yyyyQ2 and yyyyQ4 with the remaining quarters either not reported or reported as missing with the observation status ‘L’,

| — | for the ‘ECB_SEC1’ DSD: if the required monthly data are not available and no estimates can be made, then quarterly or annual data can be sent. |
| --- | --- |

—

for the ‘ECB_SEC1’ DSD: if the required monthly data are not available and no estimates can be made, then quarterly or annual data can be sent.

Reference area.

  This dimension relates to the country of residence of the reporting institution. In the ‘ECB_SEC1’ DSD, it indicates the country of residence of the issuing sector (*1).

Adjustment indicator.

  This dimension indicates whether a seasonal adjustment and/or a working day adjustment are applied.

Balance sheet reference sector breakdown.

  This dimension refers to the reporting sector according to the breakdown defined in the associated code list.

Reference sector breakdown.

  This dimension indicates the reference sector for the structural financial indicators (in the ‘ECB_SSI1’ DSD).

Securities issuing sector.

  This dimension refers to the sector of the securities issuers (in the ‘ECB_SEC1’ DSD).

PSS information type.

  This dimension represents the general type of information to be provided in the context of the ‘ECB_PSS1’ DSD.

PSS instrument.

  This dimension, used in the ‘ECB_PSS1’ DSD, indicates the particular type of instrument/device used for the payment transactions, e.g. cards with a cash function or credit transfers, etc.

PSS entry point.

  This dimension is linked to the type of terminal or system through which the underlying payments transaction was done. For the correspondence of payment systems and PSS entry point code values, see Part 16 of Annex II.

PSS data type.

  In the PSS context, this dimension gives the unit of measurement for the observation, i.e. whether a number or a value should be reported for the item (e.g. number of transactions per card, value of transactions per card, etc.).

Compilation approach.

  This dimension indicates whether data represent the home or the host approach.

Other financial intermediaries reporting sector.

  This dimension indicates the sector of the reporting institution within the OFI sector.

Investment funds reporting sector.

  This dimension indicates the sector of the reporting institution within the IF sector.

Financial vehicle corporations reporting sector.

  This dimension indicates the sector of the reporting institution within the FVC sector.

Reporting sector.

  This dimension indicates whether the reporting institution is a PF or a type of IC.

CBD reference sector breakdown.

  This dimension indicates the ownership and type of the reporting institution (domestic credit institutions versus foreign controlled subsidiaries or branches).

CBD sector size.

  This dimension indicates the size of the reporting institution with respect to its total assets. It only applies to the domestic credit institutions.

Structural financial indicator.

  This dimension is ‘ECB_SSI1’ DSD specific and represents the type of structural financial indicator.

Balance sheet item.

  This dimension indicates the item of the MFI balance sheet as defined in Regulation (EU) No 1071/2013 (ECB/2013/33).

Other financial intermediaries balance sheet item.

  This dimension indicates an item of the OFI balance sheet. OFIs concentrate on different financial activities depending on the type of institution, and not all balance sheet items apply to all types of intermediaries. Therefore, while most of the balance sheet items are common to all types of other financial intermediaries, ‘other assets’ and ‘other liabilities’ can have different definitions for different types of intermediaries. On the asset side, two different definitions are adopted for the ‘other assets’ item: (a) for security and derivative dealers (SDDs) this item includes loans; and (b) for financial corporations engaged in lending (FCLs) the item includes deposits, cash, investment fund shares, fixed assets and financial derivatives. With regard to the ‘other liabilities’ item: (a) for SDDs this item excludes debt securities, capital and reserves and financial derivatives; and (b) for FCLs this item includes financial derivatives.

Securities item.

  This dimension refers to the items taken from the list of items set up for the monetary union financial accounts (MUFA) in line with the European System of Accounts concepts. It is only used for the ‘ECB_SEC1’ DSD.

Investment funds assets and liabilities.

  This dimension relates to the item of the IF's assets and liabilities as defined in Regulation (EU) No 1073/2013 (ECB/2013/38).

Financial vehicle corporations assets and liabilities.

  This dimension relates to the item of the FVC's assets and liabilities as defined in Regulation (EU) No 1075/2013 (ECB/2013/40).

Insurance corporations and pension funds assets and liabilities.

  This dimension indicates an item of the IC and PF assets and liabilities. In the case of ICs, the items are defined in Regulation (EU) No 1374/2014 (ECB/2014/50). In the case of PFs, the items are defined in the ESA 2010.

Insurance corporations operations item.

  This dimension relates to the items of operations of ICs, i.e. premiums, claims and commissions, as defined in Regulation (EU) No 1374/2014 (ECB/2014/50).

Consolidated banking data item.

  This dimension indicates the item of the CBD reporting scheme to be reported (from the banks' income statement, balance sheet and capital adequacy reports).

Original maturity.

  For the ‘ECB_BSI1’, ‘ECB_FVC1’, ‘ECB_IVF1’, ‘ECB_CBD1’ and ‘ECB_OFI1’ DSDs, this dimension indicates the original maturity of the BSI. For the ‘ECB_MIR1’ DSD, this dimension indicates, for items on outstanding amounts, the breakdown by original maturity or period of notice of the deposits or loans; for items on new business, it indicates the breakdown by original maturity or period of notice in the case of deposits and the initial period of fixation in the case of loans.

Maturity.

  This dimension indicates the original and the remaining maturity of the instrument in the ‘ECB_ICPF1’ DSD.

Securities valuation.

  This dimension identifies the valuation method used for securities issues statistics in the ‘ECB_SEC1’ DSD.

Data type.

  This dimension describes the type of data reported in the ‘ECB_BSI1’, ‘ECB_SSI1’, ‘ECB_OFI1’, ‘ECB_IVF1’, ‘ECB_FVC1’, ‘ECB_CBD1’, ‘ECB_ICPF1’ and ‘ECB_ICO1’ DSDs.

MIR data type.

  In the ‘ECB_MIR1’ DSD, this dimension distinguishes MFI interest rate statistics from those relating to the volumes of new business or outstanding amounts.

Securities data type.

  This dimension indicates the type of data contained within the securities issues statistics in the ‘ECB_SEC1’ DSD. Net issues are only provided if issues and redemptions cannot be separately identified.

Stock, flow.

  This dimension, which is ‘BIS_CBS’ specific, indicates the data type stock or flow of the data that is reported.

Reference area code for BIS-IFS.

  This dimension, which is ‘BIS_CBS’ specific, represents the area of residence of the reporting institutions.

CBS bank type.

  This dimension, which is ‘BIS_CBS’ specific, refers to the group of the corresponding reporting sector. For transmission to the ECB the code ‘4P’ should be used, namely, data should be reported only for domestic bank offices referring to CBD large banking groups.

CBS reporting basis.

  This dimension, which is ‘BIS_CBS’ specific, represents the recording basis of a claim or exposure.

CBS position type.

  This dimension, which is ‘BIS_CBS’ specific, represents the type of financial position recorded by the data.

CBS remaining maturity.

  This dimension, which is ‘BIS_CBS’ specific, represents the remaining maturity of the claims or exposures recorded.

CBS currency type of booking location.

  This dimension, which is ‘BIS_CBS’ specific, represents the currency type of the claims recorded.

CBS counterparty sector.

  This dimension, which is ‘BIS_CBS’ specific, is linked to the sectoral breakdown of the counterpart for the claims or exposures recorded.

CBS counterparty area.

  This dimension, which is ‘BIS_CBS’ specific, gives the country of residence of the counterpart of the relevant item.

Counterpart area.

  This dimension gives the area of residence of the counterpart of the relevant item.

Amount category.

  This dimension gives the category of the amount of new loans to non-financial corporations; new loans are also reported according to their size. It is only relevant for the ‘ECB_MIR1’ DSD.

Balance sheet counterpart sector.

  This dimension is linked to the sectoral breakdown of the counterpart of BSIs. In the ‘ECB_ICPF1’ DSD, it indicates the sector of the counterpart of the relevant item.

Counterpart sector.

  This dimension, defined in the ‘ECB_PSS1’ DSD, represents the sector breakdown of the type of beneficiary (counterpart) involved in the payment transaction.

Financial vehicle corporations originator sector.

  This dimension, defined in the ‘ECB_FVC1’ DSD, represents the sector of the transferor (originator) of the assets, or a pool of assets, and/or the credit risk of the asset or pool of assets to the securitisation structure.

Insurance corporations unit.

  This dimension indicates the relevant business unit of the IC.

Currency of transaction.

  This dimension describes the currency in which the securities are issued (for the ‘ECB_SEC1’ DSD), or in which the following are denominated: (a) the MFI balance sheet items (for the ‘ECB_BSI1’ DSD); (b) the structural financial indicators (for the ‘ECB_SSI1’ DSD); (c) the deposits and loans (for the ‘ECB_MIR1’ DSD); (d) the IF assets and liabilities (for the ‘ECB_IVF1’ DSD); (e) the payment transactions (for the ‘ECB_PSS1’ DSD); (f) the FVC assets and liabilities (for the ‘ECB_FVC1’ DSD); (g) the OFI balance sheet items (for the ‘ECB_OFI1’ DSD); (h) the CBD items (for the ‘ECB_CBD1’ DSD); and (i) the transactions in IC and PF assets and liabilities (for the ‘ECB_ICPF1’ DSD).

Currency denominator.

  This dimension describes the currency in which (a) the IC and PF assets and liabilities (for the ‘ECB_ICPF1’ DSD); and (b) the operations of ICs (for the ‘ECB_ICO1’ DSD) are denominated.

Denomination of the series or special calculation.

  This dimension indicates the currency denominator in which the observations within a time series are expressed, or specifies the underlying calculation.

Balance sheet suffix.

  This dimension, present in the ‘ECB_BSI1’ DSD, gives the currency denominator in which the observations within a time series are expressed, or specifies the underlying calculation.

Series suffix in securities context.

  This dimension contains supplementary data types for derived series. It is only used for the ‘ECB_SEC1’ DSD.

Interest rates business coverage.

  This dimension, which is ‘ECB_MIR1’ DSD specific, indicates whether the MFI interest rates statistics refer to outstanding amounts or to a new business.

PART 4

Attributes

The sections below explain in detail the attributes associated with the exchanged data. Section 1 defines the attributes per DSD including their format and attachment level. Section 2 sets out the responsibility of the ESCB data exchange partners in the creation of attributes and their maintenance, as well as the status of the attributes. Sections 3, 4 and 5 focus on the content of the attributes sorted by attachment level, respectively the sibling, time series and observation level.

Section 1: Coded and uncoded attributes defined in the ECB_BSI1, ECB_SSI1, ECB_MIR1, ECB_OFI1, ECB_SEC1, ECB_PSS1, ECB_IVF1, ECB_FVC1, ECB_CBD1, BIS_CBS, ECB_ICPF1 and ECB_ICO1 DSDs

In addition to the dimensions defining the series keys, a set of attributes is defined. The attributes are attached at various levels of the exchanged information: at sibling, time series or observation level. As illustrated below, they either take their value from pre-defined lists of codes or are uncoded, and are used to add textual explanations on relevant data aspects.

Attribute values are exchanged only when they are set for the first time and whenever they change with the exception of the mandatory attributes attached at observation level, which are attached to each observation and reported at every data transmission.

The table below provides information on the attributes defined for each DSD under consideration, on the level at which they are attached, their format and the name of the code lists from which coded attributes take their values.

| | | | | | | | | | | | | Statistical concept | Format (12) | Code list |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| BSI | SSI | MIR | OFI | SEC | PSS | IVF | FVC | CBD | CBS | ICPF | ICO | ATTRIBUTES AT SIBLING LEVEL | (exchanged using the FNS group) |
| √ | √ | | √ | √ | | | √ | √ | | √ | √ | TITLE | Title | AN..70 | uncoded | |
| √ | √ | √ | √ | √ | √ | √ | √ | √ | √ | √ | √ | UNIT | Unit | AN..12 | CL_UNIT | Unit code list |
| √ | √ | √ | √ | √ | √ | √ | √ | √ | √ | √ | √ | UNIT_MULT | Unit multiplier | AN..2 | CL_UNIT_MULT | Unit multiplier code list |
| √ | √ | √ | √ | √ | √ | √ | √ | √ | √ | √ | √ | DECIMALS | Decimals | N1 | CL_DECIMALS | Decimals code list |
| √ | √ | √ | √ | √ | √ | √ | √ | √ | √ | √ | √ | TITLE_COMPL | Title complement | AN..1050 | uncoded | |
| √ | √ | √ | √ | √ | √ | | | √ | | | | NAT_TITLE | National language title | AN..350 | uncoded | |
| √ | √ | √ | √ | √ | √ | √ | √ | √ | √ | √ | √ | COMPILATION | Compilation | AN..1050 | uncoded | |
| | √ | √ | √ | √ | | | | √ | √ | | | COVERAGE | Coverage | AN..350 | uncoded | |
| √ | √ | √ | √ | √ | √ | √ | √ | √ | √ | √ | √ | SOURCE_AGENCY | Source agency | AN3 | CL_ORGANISATION | Organisation code list |
| | | | | | √ | | | | | | | METHOD_REF | Methodology reference | AN..1050 | uncoded | |
| | | | | | | | | | | | | ATTRIBUTES AT TIME SERIES LEVEL | (exchanged using the FNS group) |
| √ | √ | √ | √ | √ | √ | √ | √ | √ | √ | √ | √ | COLLECTION | Collection indicator | AN1 | CL_COLLECTION | Collection indicator code list |
| √ | √ | √ | √ | √ | √ | √ | √ | √ | | √ | √ | DOM_SER_IDS | Domestic series identifier | AN..70 | uncoded | |
| √ | √ | √ | √ | √ | √ | | | √ | √ | | | BREAKS | Breaks | AN..350 | uncoded | |
| √ | | √ | | √ | | √ | √ | | | √ | √ | UNIT_INDEX_BASE | Unit index base | AN..35 | uncoded | |
| | | | | | | | | | √ | | | AVAILABILITY | Availability | AN1 | CL_AVAILABILITY | Availability code list |
| √ | √ | √ | √ | √ | √ | √ | | | | √ | √ | PUBL_PUBLIC | Source publication | AN..1050 | uncoded | |
| √ | √ | √ | √ | √ | √ | √ | √ | | | √ | √ | PUBL_MU | Source publication (euro area only) | AN..1050 | uncoded | |
| √ | √ | √ | √ | √ | √ | | | | | | | PUBL_ECB | Source publication (ECB only) | AN..1050 | uncoded | |
| | | | | | | | | | | | | ATTRIBUTES AT OBSERVATION LEVEL | (exchanged together with the data in the main ARR segment except for OBS_COM which is exchanged within the FNS group) |
| √ | √ | √ | √ | √ | √ | √ | √ | √ | √ | √ | √ | OBS_STATUS | Observation status | AN1 | CL_OBS_STATUS | Observation status code list |
| √ | √ | √ | √ | √ | √ | √ | √ | √ | √ | √ | √ | OBS_CONF | Observation confidentiality | AN1 | CL_OBS_CONF | Observation confidentiality code list |
| √ | √ | √ | √ | √ | √ | √ | √ | √ | √ | √ | √ | OBS_PRE_BREAK | Pre-break observation value | AN..15 | uncoded | |
| √ | √ | √ | √ | √ | √ | √ | √ | √ | √ | √ | √ | OBS_COM | Observation comment | AN..1050 | uncoded | |

Statistical concept

Format (12)

Code list

BSI

SSI

MIR

OFI

SEC

PSS

IVF

FVC

CBD

CBS

ICPF

ICO

ATTRIBUTES AT SIBLING LEVEL

(exchanged using the FNS group)

√

√

√

√

√

√

√

√

TITLE

Title

AN..70

uncoded

√

√

√

√

√

√

√

√

√

√

√

√

UNIT

Unit

AN..12

CL_UNIT

Unit code list

√

√

√

√

√

√

√

√

√

√

√

√

UNIT_MULT

Unit multiplier

AN..2

CL_UNIT_MULT

Unit multiplier code list

√

√

√

√

√

√

√

√

√

√

√

√

DECIMALS

Decimals

N1

CL_DECIMALS

Decimals code list

√

√

√

√

√

√

√

√

√

√

√

√

TITLE_COMPL

Title complement

AN..1050

uncoded

√

√

√

√

√

√

√

NAT_TITLE

National language title

AN..350

uncoded

√

√

√

√

√

√

√

√

√

√

√

√

COMPILATION

Compilation

AN..1050

uncoded

√

√

√

√

√

√

COVERAGE

Coverage

AN..350

uncoded

√

√

√

√

√

√

√

√

√

√

√

√

SOURCE_AGENCY

Source agency

AN3

CL_ORGANISATION

Organisation code list

√

METHOD_REF

Methodology reference

AN..1050

uncoded

ATTRIBUTES AT TIME SERIES LEVEL

(exchanged using the FNS group)

√

√

√

√

√

√

√

√

√

√

√

√

COLLECTION

Collection indicator

AN1

CL_COLLECTION

Collection indicator code list

√

√

√

√

√

√

√

√

√

√

√

DOM_SER_IDS

Domestic series identifier

AN..70

uncoded

√

√

√

√

√

√

√

√

BREAKS

Breaks

AN..350

uncoded

√

√

√

√

√

√

√

UNIT_INDEX_BASE

Unit index base

AN..35

uncoded

√

AVAILABILITY

Availability

AN1

CL_AVAILABILITY

Availability code list

√

√

√

√

√

√

√

√

√

PUBL_PUBLIC

Source publication

AN..1050

uncoded

√

√

√

√

√

√

√

√

√

√

PUBL_MU

Source publication (euro area only)

AN..1050

uncoded

√

√

√

√

√

√

PUBL_ECB

Source publication (ECB only)

AN..1050

uncoded

ATTRIBUTES AT OBSERVATION LEVEL

(exchanged together with the data in the main ARR segment except for OBS_COM which is exchanged within the FNS group)

√

√

√

√

√

√

√

√

√

√

√

√

OBS_STATUS

Observation status

AN1

CL_OBS_STATUS

Observation status code list

√

√

√

√

√

√

√

√

√

√

√

√

OBS_CONF

Observation confidentiality

AN1

CL_OBS_CONF

Observation confidentiality code list

√

√

√

√

√

√

√

√

√

√

√

√

OBS_PRE_BREAK

Pre-break observation value

AN..15

uncoded

√

√

√

√

√

√

√

√

√

√

√

√

OBS_COM

Observation comment

AN..1050

uncoded

Section 2: Common attributes properties for the ECB_BSI1, ECB_SSI1, ECB_MIR1, ECB_OFI1, ECB_SEC1, ECB_PSS1, ECB_IVF1, ECB_FVC1, ECB_CBD1, BIS_CBS, ECB_ICPF1 and ECB_ICO1 DSDs: NCBs reporting to the ECB
   (15)

Each attribute is characterised by certain technical properties, which are listed in the table below.

| | Status | First value set, stored and disseminated by... (13) | Modifiable by NCBs |
| --- | --- | --- | --- |
| TITLE_COMPL | M | ECB | No (*2) |
| NAT_TITLE | C | NCB | Yes |
| COMPILATION | C | NCB | Yes (*3) |
| COVERAGE | C | NCB | Yes (*3) |
| METHOD_REF | M | NCB | Yes |
| DOM_SER_IDS (14) | C | NCB | Yes |
| BREAKS | C | NCB | Yes |
| OBS_STATUS | M | NCB | Yes |
| OBS_CONF | C | NCB | Yes |
| OBS_PRE_BREAK | C | NCB | Yes |
| OBS_COM | C | NCB | Yes |
| M | : | mandatory. |
| C | : | conditional. |

Status

First value set, stored and disseminated by... (13)

Modifiable by NCBs

TITLE_COMPL

M

ECB

No (*2)

NAT_TITLE

C

NCB

Yes

COMPILATION

C

NCB

Yes (*3)

COVERAGE

C

NCB

Yes (*3)

METHOD_REF

M

NCB

Yes

DOM_SER_IDS (14)

C

NCB

Yes

BREAKS

C

NCB

Yes

OBS_STATUS

M

NCB

Yes

OBS_CONF

C

NCB

Yes

OBS_PRE_BREAK

C

NCB

Yes

OBS_COM

C

NCB

Yes

M

:

mandatory.

C

:

conditional.

The definition of a set of attributes to be exchanged together with the data allows for additional information on the time series exchanged to be provided. Details of the information provided by the attributes for the ECB statistical datasets under consideration are reported below.

Section 3: Attributes at sibling level

Mandatory

TITLE_COMPL (title complement).

  This attribute allows a larger number of characters than the attribute TITLE and for this reason replaces TITLE as the mandatory attribute to store the title of the series.

UNIT (unit)

| BSI | For euro area Member States: EUR |
| --- | --- |
| SSI | For euro area Member States: EUR
  For series reported as absolute values and for indices: PURE_NUMB
  For series reported as percentages: PCT |
| OFI | For euro area Member States: EUR |
| MIR | For business volumes: EUR
  For interest rates: PCPA |
| SEC | For euro area Member States: EUR |
| PSS | For series on original units (Table 5 of Part 16 of Annex II), number of transactions (Tables 3, 4, 6 and 7 Part 16 of Annex II) and series on concentration ratios (Table 6 of Part 16 of Annex II): PURE_NUMB
  For series on value of transactions (Tables 3, 4, 6 and 7 of Part 16 of Annex II): EUR |
| IVF | For euro area Member States: EUR |
| FVC | For euro area Member States: EUR |
| CBD | For euro area Member States: EUR or PURE_NUMB (where no currency denomination is relevant) |
| CBS | For the data reported by all countries in US dollars: USD; for the data for which no currency denomination is relevant: PURE_NUMB. |
| ICPF | For euro area Member States: EUR |
| ICO | For euro area Member States: EUR |

BSI

For euro area Member States: EUR

SSI

For euro area Member States: EUR

For series reported as absolute values and for indices: PURE_NUMB

For series reported as percentages: PCT

OFI

For euro area Member States: EUR

MIR

For business volumes: EUR

For interest rates: PCPA

SEC

For euro area Member States: EUR

PSS

For series on original units (Table 5 of Part 16 of Annex II), number of transactions (Tables 3, 4, 6 and 7 Part 16 of Annex II) and series on concentration ratios (Table 6 of Part 16 of Annex II): PURE_NUMB

For series on value of transactions (Tables 3, 4, 6 and 7 of Part 16 of Annex II): EUR

IVF

For euro area Member States: EUR

FVC

For euro area Member States: EUR

CBD

For euro area Member States: EUR or PURE_NUMB (where no currency denomination is relevant)

CBS

For the data reported by all countries in US dollars: USD; for the data for which no currency denomination is relevant: PURE_NUMB.

ICPF

For euro area Member States: EUR

ICO

For euro area Member States: EUR

UNIT_MULT (unit multiplier)

| BSI | 6 |
| --- | --- |
| SSI | 0 |
| OFI | 6 |
| MIR (16) | For business volumes: 6
  For interest rates: 0 |
| SEC | 6 |
| PSS | For series on original units except series on transactions (Table 5 of Part 16 of Annex II): 0
  For series on transactions (Tables 3, 4, 6, and 7 of Part 16 of Annex II, except concentration ratios): 6
  For series on concentration ratios (Table 6 of Part 16 of Annex II): 0 |
| IVF | 6 |
| FVC | 6 |
| CBD | 3 |
| CBS | 6 |
| ICPF | 6 |
| ICO | 6 |

BSI

6

SSI

0

OFI

6

MIR (16)

For business volumes: 6

For interest rates: 0

SEC

6

PSS

For series on original units except series on transactions (Table 5 of Part 16 of Annex II): 0

For series on transactions (Tables 3, 4, 6, and 7 of Part 16 of Annex II, except concentration ratios): 6

For series on concentration ratios (Table 6 of Part 16 of Annex II): 0

IVF

6

FVC

6

CBD

3

CBS

6

ICPF

6

ICO

6

DECIMALS (decimals)

| BSI | 0 |
| --- | --- |
| SSI | For absolute values: 0
  For index series and percentages: 4 |
| OFI | 0 |
| MIR | For business volumes: 0
  For interest rates: 4 |
| SEC | 0 |
| PSS | Series on original units, except on transactions and concentration ratios (Table 5 of Part 16 of Annex II): 0
  Series on transactions and concentration ratios (Tables 3, 4, 6, and 7 of Part 16 of Annex II): 3 |
| IVF | 0 |
| FVC | 0 |
| CBD | 0 |
| CBS | 0 |
| ICPF | 0 |
| ICO | 0 |

BSI

0

SSI

For absolute values: 0

For index series and percentages: 4

OFI

0

MIR

For business volumes: 0

For interest rates: 4

SEC

0

PSS

Series on original units, except on transactions and concentration ratios (Table 5 of Part 16 of Annex II): 0

Series on transactions and concentration ratios (Tables 3, 4, 6, and 7 of Part 16 of Annex II): 3

IVF

0

FVC

0

CBD

0

CBS

0

ICPF

0

ICO

0

METHOD_REF (methodology reference).
  This attribute is only used for the PSS dataset and indicates whether, for each time series or for part of it, the 2005 ‘enhanced’ definition or a previous definition is used. Two values are defined:

| PSS | The ‘enhanced’ definitions implemented in the year 2005 are used: ‘2005’.
  Definitions implemented in previous years (2004 or earlier) are used: ‘Previous’. |
| --- | --- |

PSS

The ‘enhanced’ definitions implemented in the year 2005 are used: ‘2005’.

Definitions implemented in previous years (2004 or earlier) are used: ‘Previous’.

The attribute should also indicate the period for which each definition applies. For example ‘2005 definitions for the whole series’, ‘2005 definitions as from data referring to 2003, previous definitions for the rest’, or ‘previous definitions up to data referring to 2004’.

Conditional

TITLE (title).

  NCBs may use the TITLE attribute for the construction of short titles.

NAT_TITLE (national language title).

  NCBs may use the NAT_TITLE attribute to provide a precise description and other supplementary or distinguishing specifications in their national language. Although the use of upper and lower case letters does not cause problems, NCBs are asked to limit themselves to the Latin-1 character set. In general, the exchange of accented characters and extended alphanumeric symbols needs to be tested before regular use.

COMPILATION (compilation).
  For the BSI, IVF, FVC, ICPF, ICO and MIR datasets this attribute may be used for further textual explanation of the compilation methods, weighting schemes and statistical procedures used to compile the underlying series, particularly if they diverge from the ECB rules and standards. In general, the structure of the required national explanatory notes is the following:

| — | data sources/data collection system, |
| --- | --- |

—

data sources/data collection system,

| — | compilation procedures (including description of estimates/assumptions made), |
| --- | --- |

—

compilation procedures (including description of estimates/assumptions made),

| — | deviations from the ECB's reporting instructions (geographical/sectoral classification and/or valuation methods), |
| --- | --- |

—

deviations from the ECB's reporting instructions (geographical/sectoral classification and/or valuation methods),

| — | information relating to the national legal framework. |
| --- | --- |

—

information relating to the national legal framework.

For the SSI dataset, the attribute ‘compilation’ includes information on links to the Union regulatory framework for intermediaries other than credit institutions.

For the OFI dataset, a detailed description of the information to be included under this attribute is provided in points 1-5 of the national explanatory notes (see Part 11 of Annex II).

Similarly, for the SEC dataset, a detailed description of the information to be included under this attribute is provided in points 1, 2, 4, 5, 8, 9 and 10 of the national explanatory notes (see Part 12 of Annex II).

COVERAGE (coverage)

| Information on | Notes |
| --- | --- |
| SSI | — | coverage of different categories of intermediaries |

Information on

Notes

SSI

—

coverage of different categories of intermediaries

| — | type of intermediary for the different indicators |
| --- | --- |

—

type of intermediary for the different indicators

| — | whether estimation was used in the case of partial coverage |
| --- | --- |

—

whether estimation was used in the case of partial coverage

| — | indication of grossing-up (if any) |
| --- | --- |

—

indication of grossing-up (if any)

OFI

| — | coverage of total assets/liabilities series |
| --- | --- |

—

coverage of total assets/liabilities series

| — | type of OFIs covered in the main categories |
| --- | --- |

—

type of OFIs covered in the main categories

| — | whether estimation was used in the case of partial coverage |
| --- | --- |

—

whether estimation was used in the case of partial coverage

| — | indication of grossing-up (if any) |
| --- | --- |

—

indication of grossing-up (if any)

| — | refer also to Part 11 of Annex II (see national explanatory notes, point (6) |
| --- | --- |

—

refer also to Part 11 of Annex II (see national explanatory notes, point (6)

MIR

| — | stratification criteria, selection procedure (equal probability/probability proportional to size/selection of biggest institutions) in the case of sampling |
| --- | --- |

—

stratification criteria, selection procedure (equal probability/probability proportional to size/selection of biggest institutions) in the case of sampling

SEC

| — | classification of issues |
| --- | --- |

—

classification of issues

| — | refer also to Part 12 of Annex II (Section 2 (point 4) and Section 3 (point 6)) |
| --- | --- |

—

refer also to Part 12 of Annex II (Section 2 (point 4) and Section 3 (point 6))

CBD

| — | description of the reporting population |
| --- | --- |

—

description of the reporting population

| — | whether particular institutions were excluded from the collection |
| --- | --- |

—

whether particular institutions were excluded from the collection

| — | the reasons for the exclusion |
| --- | --- |

—

the reasons for the exclusion

SOURCE_AGENCY (source agency).

  This attribute will be set by the ECB to a value representing the name of the NCB providing the data.

Section 4: Attributes at time series level

Mandatory

COLLECTION (collection indicator).
  This attribute provides information on the period or the point in time at which a time series is measured (e.g. beginning, middle or end of period) or an indication of whether data are averages.

| BSI | For outstanding amounts: end-of-period (E)
  For flows series: sum of observations throughout the period (S) |
| --- | --- |
| SSI | End-of-period (E) |
| OFI | For outstanding amounts: end-of-period (E)
  For flows series: sum of observations throughout the period (S) |
| MIR | For interest rates on outstanding amounts: end-of-period (E)
  For interest rates on new business: average of observations through the period (A)
  For business volumes on outstanding amounts: end-of-period (E)
  For new business volumes: sum of (grossed up) observations through the period (S) |
| SEC: | For outstanding amounts: end-of-period (E)
  For flows series: sum of observations through the period (S) |
| PSS | For number of participants and concentration ratios (Tables 5 and 6 of Part 16 of Annex II): end-of-period (E)
  For transactions except concentration ratios (Tables 3, 4, 6 and 7 of Part 16 of Annex II): sum of observations through the period (S) |
| IVF | For outstanding amounts: end-of-period (E)
  For flows series: sum of observations through the period (S) |
| FVC | For outstanding amounts: end-of-period (E)
  For flows series: sum of observations through the period (S) |
| CBD | end-of-period (E) |
| CBS | end-of-period (E) |
| ICPF | For outstanding amounts: end-of-period (E)
  For flows series: sum of observations through the period (S) |
| ICO | For flows series: sum of observations through the period (S) |

BSI

For outstanding amounts: end-of-period (E)

For flows series: sum of observations throughout the period (S)

SSI

End-of-period (E)

OFI

For outstanding amounts: end-of-period (E)

For flows series: sum of observations throughout the period (S)

MIR

For interest rates on outstanding amounts: end-of-period (E)

For interest rates on new business: average of observations through the period (A)

For business volumes on outstanding amounts: end-of-period (E)

For new business volumes: sum of (grossed up) observations through the period (S)

SEC:

For outstanding amounts: end-of-period (E)

For flows series: sum of observations through the period (S)

PSS

For number of participants and concentration ratios (Tables 5 and 6 of Part 16 of Annex II): end-of-period (E)

For transactions except concentration ratios (Tables 3, 4, 6 and 7 of Part 16 of Annex II): sum of observations through the period (S)

IVF

For outstanding amounts: end-of-period (E)

For flows series: sum of observations through the period (S)

FVC

For outstanding amounts: end-of-period (E)

For flows series: sum of observations through the period (S)

CBD

end-of-period (E)

CBS

end-of-period (E)

ICPF

For outstanding amounts: end-of-period (E)

For flows series: sum of observations through the period (S)

ICO

For flows series: sum of observations through the period (S)

Conditional

DOM_SER_IDS (domestic series identifier).

  This attribute makes it possible to refer to the code used in national databases to identify the corresponding series (formulae using national reference codes can also be specified).

UNIT_INDEX_BASE (unit index base).

  This attribute is mandatory when associated to a series key that expresses an index. It indicates the base reference and the base value for the indices and is only used for the series of the index of notional stocks derived by the ECB and disseminated to the ESCB.

BREAKS (breaks).

  This attribute provides a description of breaks and major changes over time in the collection, reporting coverage and compilation of the series. In the case of breaks, state the extent to which old and new data may be considered comparable, where possible.

PUBL_PUBLIC, PUBL_MU, PUBL_ECB (source publication, source publication (euro area only), source publication (ECB only)).

  These attributes will be set by the ECB if the data are published in ECB publications, in either ECB public or ECB confidential publications. They give a reference (i.e. publications, items, etc.) to published data.

Section 5: Attributes at observation level

If an NCB wishes to revise an attribute assigned at the observation level, the relevant observation(s) must be re-submitted at the same time. If an NCB revises an observation without also providing the relevant attribute value, the existing values will be replaced by the default values.

Mandatory

OBS_STATUS (observation status).
  NCBs report an observation status value attached to each exchanged observation. This attribute is mandatory and must be provided with every data transmission for each individual observation. When NCBs revise the value of this attribute, both the observation value (even if unchanged) and the new observation status flag should be retransmitted.

The list below specifies the expected values for this attribute, according to the agreed hierarchy, for the purpose of these statistics:

‘A’= normal value (default for non-missing observations),

‘B’= break value for the following datasets: SSI, MIR, CBD and PSS (*4),

‘M’= missing value, data do not exist,

‘L’= missing value, data exist but were not collected,

‘E’= estimated value (*5),

‘P’= provisional value (this value can be used, in each data transmission, with reference to the last available observation, if this is considered provisional).

In normal circumstances, numeric values should be reported with the observation status ‘A’ (normal value) attached. Otherwise, a value different from ‘A’ is given in accordance with the list above. If an observation is qualified by two characteristics, the most important is reported, in accordance with the hierarchy shown above.

In each data transmission, the most recent available observations can be reported as provisional, and flagged with the observation status value ‘P’. These observations take definite values and are reported with the observation status flag ‘A’ at a later stage when the new revised values and observation status flags overwrite the provisional ones.

Missing values (‘-’) are reported when it is not possible to report a numeric value (e.g. owing to non-existent data or because data are not collected). A missing observation should never be reported as a ‘zero’, since zero is a normal numeric value that indicates a precise and valid amount. If NCBs are unable to identify the reason for a missing value, or if they cannot use the whole range of values presented in the CL_OBS_STATUS code list for reporting missing observations (‘L’ or ‘M’), the value ‘M’ should be used.

When, due to local statistical conditions, data for a time series are not collected either on specific dates or for the total length of the time series (the underlying economic phenomenon exists, but is not monitored statistically), a missing value is reported (‘-’) with observation status ‘L’ for each period.

When, due to local market practices or to the legal/economic framework, a time series (or part of it) is not applicable (the underlying phenomenon does not exist), a missing value is reported (‘-’) with observation status ‘M’.

Conditional

OBS_CONF (observation confidentiality).
  NCBs report an observation confidentiality value attached to each exchanged observation. While this attribute is defined as conditional in the ECB structural definition file, it should be provided at every data transmission for each individual observation, as each confidential observation must be appropriately flagged. When NCBs revise the value of this attribute, both the associated observation value and the observation status flag (even if unchanged) should be retransmitted.

The list below specifies the expected values for this attribute for the purpose of these statistics:

‘F’= free for publication,

‘N’= not for publication, restricted to internal use only,

‘C’= confidential statistical information in the sense of Article 8 of Regulation (EC) No 2533/98,

‘S’= secondary confidentiality set and managed by the receiver, not for publication,

‘D’= secondary confidentiality set by the sender, not for publication. This code can be used by the NCBs that already differentiate between primary and secondary confidentiality in their reporting systems. If not, the reporting NCB must use ‘C’ for flagging the secondary confidentiality.

OBS_PRE_BREAK (pre-break observation value).
  This attribute contains the pre-break observation value, which is a numeric field like the observation (*6). In general, it is provided when a break occurs; in this case the observation status must be set to ‘B’ (break value).

For the purpose of the BSI, IVF, FVC, OFI, ICPF and ICO datasets, this attribute is not requested since the relevant information is already available from the reclassification series or the series expressing financial transactions. It has been added to the list of attributes since it is part of the common subset of attributes for all datasets.

OBS_COM(observation comment).

  This attribute can be used to provide textual comments at the observation level (e.g. describing the estimate made for a specific observation due to lack of data, explaining the reason for a possible abnormal observation or giving details of a change in the reported time series).

(*1)  For NCBs, the country of residence of the issuing sector is the NCB's country of residence"

(*4)  If OBS_STATUS is reported as ‘B’ a value has to be reported under the attribute OBS_PRE_BREAK."

(*5)  The observation status ‘E’ is to be used for all observations or periods of data that are the result of estimates and cannot be considered as normal values."

(*6)  The four objects observation value plus OBS_STATUS, OBS_CONF and OBS_PRE_BREAK are treated as one entity. This means that NCBs are obliged to send all complementary information for an observation. (When attributes are not reported, their previous values are overwritten by default values.)’;"

| 4. | Annex IV is amended as follows:






  (a) | the heading is replaced by the following:


  ‘DERIVATION OF TRANSACTIONS IN THE CONTEXT OF MONETARY FINANCIAL INSTITUTIONS' BALANCE SHEET ITEMS, INVESTMENT FUNDS', FINANCIAL VEHICLE CORPORATIONS' AND INSURANCE CORPORATIONS' STATISTICS’; |
| --- | --- | --- |

4.

Annex IV is amended as follows:

(a)

the heading is replaced by the following:

‘DERIVATION OF TRANSACTIONS IN THE CONTEXT OF MONETARY FINANCIAL INSTITUTIONS' BALANCE SHEET ITEMS, INVESTMENT FUNDS', FINANCIAL VEHICLE CORPORATIONS' AND INSURANCE CORPORATIONS' STATISTICS’;

| (b) | Part 1 is replaced by the following:

  ‘PART 1

  General description of the procedure for deriving transactions


  Section 1: Framework









  1. | The framework for deriving transactions for monetary financial institutions (MFI) balance sheet items (BSI), investment funds (IF), financial vehicle corporations (FVC) and insurance corporations (IC) assets and liabilities statistics is based on the European system of accounts (hereinafter the ‘ESA 2010’). Deviations from this international standard are made concerning both the data content and statistical concept denominations, where necessary. This Annex is interpreted in accordance with the ESA 2010, unless Regulation (EU) No 1071/2013 (ECB/2013/33), Regulation (EU) No 1073/2013 (ECB/2013/38), Regulation (EU) No 1075/2013 (ECB/2013/40), Regulation (EU) No 1374/2014 (ECB/2014/50), or this Guideline, explicitly or implicitly override its provisions. |
| --- | --- | --- |

(b)

Part 1 is replaced by the following:

‘PART 1

General description of the procedure for deriving transactions

Section 1: Framework

1.

| 2. | In accordance with the ESA 2010, financial transactions are defined as the net acquisition of financial assets or the net incurrence of liabilities for each type of financial instrument, i.e. the sum of all financial transactions that occur during the relevant reporting period (*7). Transactions covering each item specified in Regulation (EU) No 1071/2013 (ECB/2013/33), Regulation (EU) No 1073/2013 (ECB/2013/38), Regulation (EU) No 1075/2013 (ECB/2013/40) and Regulation (EU) No 1374/2014 (ECB/2014/50) are calculated on a net basis, i.e. there is no requirement to identify gross financial transactions or turnover (*8). The method of valuation for each transaction is to take the value at which assets are acquired/disposed of and/or liabilities are created, liquidated or exchanged. Nevertheless, deviations from the ESA 2010 are permitted. |
| --- | --- |

2.

| 3. | This Annex reviews the methodology for deriving transactions in the context of BSI, IF, FVC and IC statistics. This part focuses on the calculation of transactions data at the European Central Bank (ECB) and the reporting of the underlying information by NCBs, while Part 2 focuses on the concepts of flow adjustments. Parts 3, 4, 5 and 6 then provide specific information relating to the compilation frameworks for BSI, IF, FVC and IC statistics respectively.
  Further details and numerical examples are provided in the manuals on these statistics published on the ECB's website. |
| --- | --- |

3.

Further details and numerical examples are provided in the manuals on these statistics published on the ECB's website.

Section 2: Calculation of transactions data by the ECB and reporting from the NCBs to the ECB

1.   Introduction

| 1. | For BSI, IF and IC statistics, the ECB calculates transactions by taking, for each asset and liability item, the difference between stock positions at end-period reporting dates and then removing the effect of developments that are not the result of transactions, i.e. ‘other changes’. ‘Other changes’ are grouped into two main categories ‘reclassifications and other adjustments’ and ‘revaluation adjustments’, with the latter covering revaluations due to changes in both prices and exchange rates (*9). National central banks (NCBs) report ‘reclassification and other adjustments’ and ‘revaluation adjustments’ to the ECB so that these non-transaction effects can be removed in the calculation of flow statistics.
  In the case of BSI statistics, NCBs report adjustment data to the ECB in accordance with Part 1 of Annex II. The ‘revaluation adjustments’ reported by the NCBs consist of write-offs/write-downs of loans and revaluation adjustments due to price changes. Revaluation adjustments due to changes in exchange rates are normally calculated by the ECB, but when NCBs are in a position to compile more accurate adjustments, they may also transmit these adjustments to the ECB directly (*10).
  In the case of IF statistics, NCBs report adjustment data to the ECB in accordance with Part 17 of Annex II. The ‘revaluations adjustments’ reported by the NCBs consist of revaluation adjustments due to price and exchange rate changes.
  In the case of IC statistics, NCBs report adjustment data to the ECB in accordance with Part 23 of Annex II. The ‘revaluations adjustments’ reported by the NCBs consist of revaluation adjustments due to price and exchange rate changes. |
| --- | --- |

1.

In the case of BSI statistics, NCBs report adjustment data to the ECB in accordance with Part 1 of Annex II. The ‘revaluation adjustments’ reported by the NCBs consist of write-offs/write-downs of loans and revaluation adjustments due to price changes. Revaluation adjustments due to changes in exchange rates are normally calculated by the ECB, but when NCBs are in a position to compile more accurate adjustments, they may also transmit these adjustments to the ECB directly (*10).

In the case of IF statistics, NCBs report adjustment data to the ECB in accordance with Part 17 of Annex II. The ‘revaluations adjustments’ reported by the NCBs consist of revaluation adjustments due to price and exchange rate changes.

In the case of IC statistics, NCBs report adjustment data to the ECB in accordance with Part 23 of Annex II. The ‘revaluations adjustments’ reported by the NCBs consist of revaluation adjustments due to price and exchange rate changes.

| 2. | In the context of FVC statistics, transactions are reported directly by NCBs to the ECB, rather than the flow adjustments. The calculation of the transactions (either directly by reporting agents, or by NCBs) should be consistent with the general approach to reclassifications and other adjustments and revaluations provided in this Annex. |
| --- | --- |

2.

2.   Reclassifications and other adjustments

| 1. | NCBs compile data on ‘reclassifications and other adjustments’, as requested by this Guideline, using supervisory information, plausibility checks, ad hoc enquiries (e.g. related to outliers), national statistical requirements, information on joiners and leavers of the reporting population and any other source available to them. The ECB is not expected to make ex post adjustments unless the NCBs identify sharp changes in the final data. |
| --- | --- |

1.

| 2. | NCBs identify changes in stocks that are due to reclassifications and enter the net amount identified under ‘reclassifications and other adjustments’. A net increase in stocks due to reclassifications is entered with a positive sign, a net decrease in stocks with a negative sign. |
| --- | --- |

2.

| 3. | In principle, the NCBs fulfil all requirements relating to ‘reclassifications and other adjustments’ specified in this Guideline. As a minimum, the NCBs send all ‘reclassifications and other adjustments’ above EUR 50 million. This threshold is intended to help the NCBs decide whether to make an adjustment or not. However, when information is not readily available or of poor quality, a decision can be made either to do nothing or to make estimates. For this reason, flexibility is needed in the operation of such a threshold, not least because of the heterogeneity of existing procedures for calculating adjustments. For example, where relatively detailed information is collected regardless of the threshold, it may be counterproductive to try to apply such a threshold. |
| --- | --- |

3.

3.   Revaluation adjustments

| 1. | In order to fulfil the requirements relating to ‘revaluation adjustments’ specified in this Guideline, NCBs may need to calculate the adjustments from transactions, security-by-security data or other data reported by the reporting population and/or estimate the adjustments in respect of some of the breakdowns not reported by the reporting population because they are not considered as ‘minimum requirements’. |
| --- | --- |

1.

| 2. | The ‘revaluation adjustments’ are normally compiled by NCBs on the basis of data directly reported by the reporting population. NCBs, however, may also cover these reporting requirements indirectly (e.g. by collecting data on transactions directly) and in any case are permitted to collect additional data from reporting agents. Whichever approach is used at national level, the NCBs are required to submit a full set of data to the ECB in accordance with Part 1 of Annex II for BSI statistics, Part 17 of Annex II for IF statistics, and Part 23 of Annex II for IC statistics. |
| --- | --- |

2.

(*7)  This is in accordance with the ESA 2010 and other international statistical standards."

(*8)  Nevertheless, in the case of IF statistics, Regulation (EU) No 1073/2013 (ECB/2013/38) requests separate reporting of new issuance and redemptions of IF shares/units during the reporting month"

(*9)  The definition and classification of ‘other changes’ is largely consistent with the ESA 2010. ‘Reclassifications and other adjustments’ is broadly equivalent to ‘other changes in the volume of assets and liabilities’ (K.1-K.6, see paragraphs 6.03-25), whereas ‘revaluations’ may be transferred to ‘nominal holding gains and losses’ (K.7, see paragraphs 6.26-64). For BSI statistics, an important deviation concerns the inclusion of ‘loan write-offs’ within ‘revaluations’ (and specifically as revaluations due to changes in prices), whereas in the ESA 2010 they are generally regarded as ‘other changes in volume’ (paragraph 6.14) — with the exception of losses realised at the sale of loans; these losses, which equal the difference between the transaction price and the balance sheet carrying amount of the loans, should be recorded as a revaluation (paragraph 6.58). The inclusion of ‘loan write-offs’ within ‘revaluations’ also deviates from the international investment position (i.i.p.) rules. In the i.i.p. these are treated as ‘other adjustments’ and not as ‘price or exchange rate changes’. For IF statistics, loans ‘write-offs/write-downs’ are not requested."

(*10)  The adjustments corresponding to the ECB's own balance sheet are reported by the ECB Directorate-General Administration.’;"

| (c) | the following part 6 is added:

  ‘PART 6

  Flow adjustments: special features in IC statistics


  Section 1: Introduction









  1. | For IC statistics, NCBs submit revaluations adjustments, covering both revaluations due to price and exchange rate changes and reclassification adjustments for all items on the IC balance sheet, in accordance with Article 26a. In this process, NCBs may need to calculate and/or estimate the adjustments not reported by the ICs. This includes those data where the corresponding stock series are reported on an item-by-item basis, those which are not considered ‘minimum requirements’ in Table 3a and 3b of Annex III to Regulation (EU) No 1374/2014 (ECB/2014/50) and data on insurance technical reserves. |
| --- | --- | --- |

(c)

the following part 6 is added:

‘PART 6

Flow adjustments: special features in IC statistics

Section 1: Introduction

1.

Section 2: Revaluation adjustments

| 1. | Regulation (EU) No 1374/2014 (ECB/2014/50) allows flexibility in terms of the type of data needed to calculate the revaluation adjustments of assets and liabilities and the form in which these data are collected and compiled. The decision on the method is left to the NCBs. |
| --- | --- |

1.

| 2. | The following two options exist for deriving revaluation adjustments for securities collected on a security-by-security basis. NCBs may follow a similar approach for assets other than securities when they collect item-by-item data.






  — | ICs report security-by-security information that allows NCBs to derive revaluation adjustments: ICs report to NCBs the information required by paragraphs 1, 2 and 4 of Tables 2.1 and 2.2 of Part 3 of Annex I to Regulation (EU) No 1374/2014 (ECB/2014/50) on a security-by-security basis. This information permits NCBs to obtain accurate information on the ‘revaluation adjustments’ to be submitted to the ECB. When this option is followed, NCBs may derive the ‘revaluation adjustments’ in accordance with the common Eurosystem method, i.e. the ‘flow-derivation method’, as described in the IC manual accompanying the Regulation and this Guideline, |
| --- | --- | --- |

2.

—

ICs report security-by-security information that allows NCBs to derive revaluation adjustments: ICs report to NCBs the information required by paragraphs 1, 2 and 4 of Tables 2.1 and 2.2 of Part 3 of Annex I to Regulation (EU) No 1374/2014 (ECB/2014/50) on a security-by-security basis. This information permits NCBs to obtain accurate information on the ‘revaluation adjustments’ to be submitted to the ECB. When this option is followed, NCBs may derive the ‘revaluation adjustments’ in accordance with the common Eurosystem method, i.e. the ‘flow-derivation method’, as described in the IC manual accompanying the Regulation and this Guideline,

| — | ICs directly report transactions on a security-by-security basis to the NCB: ICs report the cumulated amounts of purchases and sales of securities which have occurred during the reference period as set out in paragraphs 1 and 3 of Tables 2.1 and 2.2 of Part 3 of Annex I to Regulation (EU) No 1374/2014 (ECB/2014/50) on a security-by-security basis. NCBs calculate the ‘revaluation adjustments’ by taking the difference between end-period stocks and removing the transactions, and submit the revaluation adjustments to the ECB in accordance with this Guideline. |
| --- | --- |

—

ICs directly report transactions on a security-by-security basis to the NCB: ICs report the cumulated amounts of purchases and sales of securities which have occurred during the reference period as set out in paragraphs 1 and 3 of Tables 2.1 and 2.2 of Part 3 of Annex I to Regulation (EU) No 1374/2014 (ECB/2014/50) on a security-by-security basis. NCBs calculate the ‘revaluation adjustments’ by taking the difference between end-period stocks and removing the transactions, and submit the revaluation adjustments to the ECB in accordance with this Guideline.

| 3. | For insurance technical reserves maintained by ICs, the following two options exist for deriving approximations of revaluation adjustments:






  — | ICs report aggregated adjustments or transactions according to the NCBs' instructions. NCBs that choose this method aggregate the adjustments reported by ICs for the submission of data to the ECB, |
| --- | --- | --- |

3.

—

ICs report aggregated adjustments or transactions according to the NCBs' instructions. NCBs that choose this method aggregate the adjustments reported by ICs for the submission of data to the ECB,

| — | NCBs derive approximations based on data provided by ICs. |
| --- | --- |

—

NCBs derive approximations based on data provided by ICs.

| 4. | For assets and liabilities other than those collected on an item-by-item basis and insurance technical reserves maintained by ICs, the following three options exist for deriving revaluation adjustments:






  — | ICs report aggregated adjustments: ICs report the adjustments applicable to each item, reflecting the valuation changes due to price and exchange rate changes. NCBs that choose this method aggregate the adjustments reported by ICs for the submission of data to the ECB, |
| --- | --- | --- |

4.

—

ICs report aggregated adjustments: ICs report the adjustments applicable to each item, reflecting the valuation changes due to price and exchange rate changes. NCBs that choose this method aggregate the adjustments reported by ICs for the submission of data to the ECB,

| — | ICs report aggregated transactions: ICs accumulate transactions during the quarter and transmit the value of purchases and sales to the NCB. NCBs that receive transactions data calculate the ‘revaluation adjustments’ as a residual from the difference between the stocks and the transactions, and submit the revaluation adjustment to the ECB in accordance with this Guideline, or |
| --- | --- |

—

ICs report aggregated transactions: ICs accumulate transactions during the quarter and transmit the value of purchases and sales to the NCB. NCBs that receive transactions data calculate the ‘revaluation adjustments’ as a residual from the difference between the stocks and the transactions, and submit the revaluation adjustment to the ECB in accordance with this Guideline, or

| — | NCBs derive approximations based on data provided by ICs.’; |
| --- | --- |

—

NCBs derive approximations based on data provided by ICs.’;

| 5. | Annex V is replaced by the following:



  ‘ANNEX V

  LIST OF INSTITUTIONAL UNITS FOR STATISTICAL PURPOSES

  PART 1

  Mapping of Register of Institutions and Affiliates Database (RIAD) attribute list against specific data sets maintained for statistical purposes
















  Attribute name (1) | Relevant in the context of the list of |
| --- | --- | --- |
| MFIs | IFs | FVCs | PSRIs (2) | ICs |
| Type | Update frequency | Type | Update frequency | Type | Update frequency | Type | Update frequency | Type | Update frequency |
| ‘Non-industry’ IDs |
| — | RIAD code |

5.

Annex V is replaced by the following:

‘ANNEX V

LIST OF INSTITUTIONAL UNITS FOR STATISTICAL PURPOSES

PART 1

Mapping of Register of Institutions and Affiliates Database (RIAD) attribute list against specific data sets maintained for statistical purposes

Attribute name (1)

Relevant in the context of the list of

MFIs

IFs

FVCs

PSRIs (2)

ICs

Type

Update frequency

Type

Update frequency

Type

Update frequency

Type

Update frequency

Type

Update frequency

‘Non-industry’ IDs

—

RIAD code

M

d

M

q

M

q

M

a

M

q

| — | Nationals business register |
| --- | --- |

—

Nationals business register

E

d

E

q

E

q

O

a

E

q

| — | EGR code |
| --- | --- |

—

EGR code

E

d

E

q

| — | LEI (as available) |
| --- | --- |

—

LEI (as available)

M

d

M

q

M

q

M

a

M

q

‘Industry’ IDs

| — | BIC |
| --- | --- |

—

BIC

E

d

| — | ISINs |
| --- | --- |

—

ISINs

E

d

M

q

M

q

E

q

Name

M

d

M

q

M

q

M

a

M

q

Country of residence

M

d

M

q

M

q

M

a

M

q

Address

M

d

M

q

M

q

M

a

M

q

Area code

M

d

M

q

M

q

M

a

M

q

Legal form

E

d

E

q

E

q

E

a

E

q

Flag Listed

M

d

M

q

M

q

O

a

M

q

Flag Supervised

M

d

M

q

M

q

M

a

M

q

Flag Subject to Directive 2009/138/EC

M

q

Reporting requirements

E

d

E

q

E

q

E

a

E

q

Type of licence

M

d

M

q

M

q

O

a

E

q

Capital variability

M

q

UCITS compliance

M

q

Legal set-up

M

q

Flag Sub-fund

M

q

Nature of securitisation

M

q

Flag E-money issuer — licence

M

a

Flag E-money issuer — business

M

a

Flag Payment service provider — licence

M

a

Flag Payment service provider — business

M

a

Flag Payment system operator

M

a

Comment

O

d

O

q

O

q

O

a

O

q

NACE code

M

d

M

q

M

q

E

a

M

q

Total employment

E

a

O

a

E

a

O

a

E

a

Total solo balance sheet (ECB Regulation)

M

a

E

a

E

a

E

a

Net assets, net asset value

E

a

M

a

Gross premiums written

M

a

ESA 2010

M

d

M

q

M

q

M

a

M

q

Subsector type

M

d

M

q

M

q

M

a

M

q

Birth date

O

d

O

q

O

q

O

a

O

q

Closure date

M

d

M

q

M

q

M

a

M

Q

Flag Activity status

M

d

M

q

M

q

M

a

M

Q

Minimum reference data (1) requested for

Originator of FVC

M

q

Management company

M

q

M

q

Head of branch

M

d

M

Q

M (mandatory), E (encouraged), O (optional), blank (not applicable)

Frequency: a (annual), q (quarterly), m (monthly) d (daily/as soon as a change occurs).

Timeliness: for annual data is (if not specified elsewhere) one month following the reference date.

PART 2

Types of relationships between organisational units

| | Type | Update frequency |
| --- | --- | --- |
| 1.   Organisational relationships within an enterprise |
| Relationship between a legal unit(s) and an enterprise. | O | — |
| 2.   Relationships within an enterprise group |
| Control relationship | E (c) | Q |
| Ownership relationship | E (c) | Q |
| 3.   Other relationships |
| Link between an ‘originator’ and its FVC | M | Q |
| Link between a ‘management company’ and its FVC/IF | M | Q |
| Link between a ‘non-resident branch’ and its resident ‘head’ | M | Q |
| Link between a ‘resident branch’ and its non-resident ‘head’ | M | Q |
| Link between a ‘sub-fund’ and an ‘umbrella fund’ | M | Q |
| |
| Link to predecessor/successor in the event of an absorption/break-up | M | d/q |

Type

Update frequency

Organisational relationships within an enterprise

Relationship between a legal unit(s) and an enterprise.

O

—

Relationships within an enterprise group

Control relationship

E (c)

Q

Ownership relationship

E (c)

Q

Other relationships

Link between an ‘originator’ and its FVC

M

Q

Link between a ‘management company’ and its FVC/IF

M

Q

Link between a ‘non-resident branch’ and its resident ‘head’

M

Q

Link between a ‘resident branch’ and its non-resident ‘head’

M

Q

Link between a ‘sub-fund’ and an ‘umbrella fund’

M

Q

Link to predecessor/successor in the event of an absorption/break-up

M

d/q

PART 3

Definitions and refinement of reporting instructions

| RIAD code | The unique identification code for any organisational unit in RIAD comprised of two parts: ‘host’ and ‘id’.
  The values for the two parts combined ensure that this primary key is unique:






  — | 2-digit country ISO-3166 country codes, |
| --- | --- | --- |

RIAD code

The unique identification code for any organisational unit in RIAD comprised of two parts: ‘host’ and ‘id’.

The values for the two parts combined ensure that this primary key is unique:

—

2-digit country ISO-3166 country codes,

| — | free string. |
| --- | --- |

—

free string.

[compulsory item for creating an entity in RIAD]

Alias identifiers

Open list of a multitude of identification codes consisting of identifiers that may or may not adhere to any (semi) industry standard. As it can include pure ‘national’ codes the entire list is not compulsory for all data-providing institutions. Examples are national business register codes, the EuroGroups Register code, the Legal Entity Identifier (as available) and the ‘BIC’ code.

In order to be operational in the data exchange between an NCB and RIAD the identifier must be registered in a specific code list of the system.

ISIN

‘International Securities Identifying Number’ as defined in the ISO 6166. In RIAD the ISIN code appears in two ways:

| — | in the case of IFs and FVCs the reporting requirements include the obligation to report (all) outstanding (not redeemed) securities issued by an financial corporation, |
| --- | --- |

—

in the case of IFs and FVCs the reporting requirements include the obligation to report (all) outstanding (not redeemed) securities issued by an financial corporation,

| — | as each security issued by a corporation is equally identifying the entity in an unique way, any single ISIN code of issued (and possibly) quoted shares or other outstanding debt securities can be used to identify the organisational unit itself. |
| --- | --- |

—

as each security issued by a corporation is equally identifying the entity in an unique way, any single ISIN code of issued (and possibly) quoted shares or other outstanding debt securities can be used to identify the organisational unit itself.

Name

Full registration name, including company designations (e.g. Plc, Ltd, SpA, AG, etc.).

Country of residence

Country of legal incorporation or registration.

[compulsory item for creating an entity in RIAD]

Address

The location details of an organisational unit; where applicable composed of four parts:

City

| — | the city of location, |
| --- | --- |

—

the city of location,

Address

| — | the street name and the number of the building, |
| --- | --- |

—

the street name and the number of the building,

Postal code

| — | the post code, using the national postal system conventions, |
| --- | --- |

—

the post code, using the national postal system conventions,

Postal box

| — | the post office box number, using national postal system conventions. |
| --- | --- |

—

the post office box number, using national postal system conventions.

Area code

Geographical classification required for statistical purposes.

Legal form

The domain of applicable legal forms follows individual national code lists, and needs to be registered in RIAD before it can be used in the data transfer by any data-providing NCBs.

Flag Listed (d)

Flag indicating if an organisational unit is listed at any stock exchange (domestic or abroad); can inversely be used to indicate the ‘delisting’ of an entity.

Flag Supervised (d)

Flag indicating whether an entity is subject to any supervisory regime entrusted to national and/or supranational authorities.

Flag Subject to Directive 2009/138/EC

Flag indicating whether an entity is subject to Directive 2009/138/EC or any other supervisory regime (possible values: ‘Directive 2009/138/EC’/‘other’). To be filled in only if the entity is supervised.

Reporting requirements

Open code lists that can be used to record in a central repository which national and/or supra-national reporting obligations an entity is subject to; one entity can be subject to multiple requirements.

The domain of applicable individual national code lists needs to be registered in RIAD before it can be used in the data transfer by any data-providing NCBs.

Type of licence

Attribute indicating if an entity is holding a (specific) licence as certified by national and/or supranational authorities.

Detailed national code lists can be registered in RIAD to allow the identification of specific licence regimes/frameworks.

Capital variability

This variable specifies any restrictions on the amount of shares the fund may issue, i.e. representing an ‘open-end’ or ‘closed-end’ fund.

UCITS compliance

Flag specifying if a fund is ‘UCITS’ compliant.

Legal set-up

This variable specifies the legal form which an IF can take.

Sub-fund

This variable specifies whether an IF is a sub-fund.

Nature of securitisation

This variable specifies the type of securitisation undertaken by an FVC.

Flag E-money issuer — licence (d)

Flag indicating whether an entity holds a specific ‘electronic money issuer’ licence (according to Article 2 of Directive 2009/110/EC of the European Parliament and of the Council) (17).

Flag E-money issuer — business (d)

Flag indicating whether an entity is actually carrying out the business of an ‘electronic money issuer’.

Flag Payment service provider — licence (d)

Flag indicating whether an entity holds a specific ‘payment service provider’ licence (according to Article 4 of Directive 2007/64/EC).

Flag Payment service provider — business (d)

Flag indicating if an entity is actually carrying out the business of a ‘payment service provider’.

Flag Payment system operator (d)

Flag indicating if an entity is a ‘payment system operator’ according to Article 1 of Regulation (EU) No 1409/2013 (ECB/2013/43)

Comment

Free text.

NACE

Principal activity in accordance with NACE Rev.2 (4 digits class).

Total employment

Number of employees; if possible measured in ‘full time equivalents’ (FTEs).

Total solo balance sheet (ECB Regulation)

Total balance sheet amount according to the respective BSI/IF/FVC/IC Regulation (denominated in EUR).

Net assets, NAV

For IFs the value of ‘shares/units’ (NAV); for credit institutions approximated by ‘capital and reserves’ (denominated in EUR).

Gross premiums written

For ICs the value of gross premiums written comprising all amounts due during the financial year in respect of insurance contracts, regardless of the fact that such amounts may relate in whole or in part to a later financial year.

ESA 2010

ESA 2010 institutional sectors (4-digit code); may include classification public/national private/foreign controlled.

Subsector type

Expansion of the ESA 2010 classification, allowing the identification of sub-categories of the standard National Accounts breakdown.

For ICs it indicates the type of insurance corporation according to its line of business. Can take the values: life insurance, non-life insurance, composite insurance, reinsurance.

Birth date

Date of legal incorporation of a legal unit or registration of an institutional unit; if this information cannot be derived (with reasonable effort) an approximation needs to be provided.

[compulsory item for creating an entity in RIAD; can be approximated]

Closure date

Date of de-registration of an entity. All entities stay in RIAD even beyond their ‘closure date’.

ad existence

Queries concerning whether an individual unit ‘exists’ at a specific point in time (or not) can be derived from the ‘closure date’.

Activity status (d)

Flag indicating if an entity is ‘active’, ‘not active’ or ‘in liquidation’;

this attribute is an addition to the information concerning whether an entity is (still) in existence.

ad liquidation

The validity start date of the value ‘in liquidation’ (see ‘activity status’) marks the date of the start of the liquidation process.

ad absorption

In RIAD corporate actions such as mergers and splits are mapped by registering the relevant deletions, modifications or creations plus the related predecessor/successor relationships.

Relationship between legal unit(s) and enterprise

Allows the recording of the relationship between a legal unit and the enterprise that it operates, reflecting the concept that an enterprise may correspond either to one legal unit or to a combination of legal units.

Control relationship

Link between legal units, based on the concept of ‘control’ as defined in Directive 2013/34/EU of the European Parliament and of the Council (18) (> 50 % ownership rule).

Ownership relationship

Link between legal units, based on the concept of percentage ‘capital share’, ‘voting rights’ etc. as for example represented by the > 10 % rule defined in the Organisation for Economic Cooperation and Development FDI benchmark.

Link between a ‘sub-fund’ and an ‘umbrella fund’

Allows the recording of the respective relationships if an umbrella fund segregates its assets into different sub-funds in such a way that shares/units relating to each sub-fund are independently backed by different assets (see Regulation (EU) No 1073/2013 (ECB/2013/38).

Management company

Description of the registered management company of a fund or financial vehicle corporation — name, residency, institutional sector code and RIAD code (for Union resident units).

Needs to be linked to any related IF(s) or FVC(s) that the entity is managing.

Head

Description of the registered head office of a branch operating in a Union Member State — name, residency, institutional sector code and RIAD code (for Union resident units).

Needs to be linked to the relevant branch established in a Union country.

Originator

Description of the registered company that established the FVC for the purpose of the securitisation and transferred the assets, or a pool of assets, and/or the credit risk of the asset or pool of assets to the securitisation structure — name, residency, institutional sector code and RIAD code (for Union resident units).

Needs to be linked to the relevant FVC(s) that the entity has established.

Resident branch

A branch which is resident within the territory of the reporting NCB, and whose head office is a non-resident entity, within the meaning of Article 1 of Regulation (EC) No 2533/98.

Non-resident branch

A branch which is resident outside the territory of the reporting NCB, and whose head office is a resident entity, within the meaning of Article 1 of Regulation (EC) No 2533/98.

PART 4

Data Transmission

NCBs can provide (updates of) reference data online or in batch mode via RIAD, in accordance with one of the formats presented in the document entitled ’Exchange Specification for the RIAD Data Exchange System’. The insertion of new entities in RIAD (as well as exceptional deletion from the database) is also possible in online or in batch mode.

RIAD takes a parsimonious approach to the management of reference data, which means that any change in the reference data of an individual entity can be applied for specific (single) attributes. Except in the case of material error, no unit registered in RIAD is erased; its lifespan is determined by entering a creation or closure date. Modifications of single attributes are implemented via the change (of the validity range) of specific values.’;

| 6. | in the Glossary, the following entries are added: | ‘
  Non-life insurance corporations are insurance corporations primarily providing non-life insurance policies. |
| --- | --- | --- |

6.

in the Glossary, the following entries are added:

‘
  Non-life insurance corporations are insurance corporations primarily providing non-life insurance policies.

Non-life insurance corporations

| | Life insurance corporations are insurance corporations primarily providing life insurance policies. |
| --- | --- |

Life insurance corporations are insurance corporations primarily providing life insurance policies.

Life insurance corporations

| | Composite insurance corporations are insurance corporations providing both life and non-life insurance policies, with no prevailing policy in favour of one or the other. |
| --- | --- |

Composite insurance corporations are insurance corporations providing both life and non-life insurance policies, with no prevailing policy in favour of one or the other.

Composite insurance corporations

| | Reinsurance corporations are insurance corporations primarily providing reinsurance policies. |
| --- | --- |

Reinsurance corporations are insurance corporations primarily providing reinsurance policies.

Reinsurance corporations

| | Life insurance technical reserves of which accepted reinsurance represent the amount of capital that the IC holds in order to meet future claims stemming from its life reinsurance obligations as defined in Commission Delegated Regulation (EU) 2015/35 (*11). |
| --- | --- |

Life insurance technical reserves of which accepted reinsurance represent the amount of capital that the IC holds in order to meet future claims stemming from its life reinsurance obligations as defined in Commission Delegated Regulation (EU) 2015/35 (*11).

Life insurance technical reserves of which accepted reinsurance

*11

(*11)  Commission Delegated Regulation (EU) 2015/35 of 10 October 2014 supplementing Directive 2009/138/EC of the European Parliament and of the Council on the taking-up and pursuit of the business of Insurance and Reinsurance (Solvency II) (OJ L 12, 17.1.2015, p. 1).’."

*11

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(*1)  For NCBs, the country of residence of the issuing sector is the NCB's country of residence

*1

(*4)  If OBS_STATUS is reported as ‘B’ a value has to be reported under the attribute OBS_PRE_BREAK.

*4

(*5)  The observation status ‘E’ is to be used for all observations or periods of data that are the result of estimates and cannot be considered as normal values.

*5

(*6)  The four objects observation value plus OBS_STATUS, OBS_CONF and OBS_PRE_BREAK are treated as one entity. This means that NCBs are obliged to send all complementary information for an observation. (When attributes are not reported, their previous values are overwritten by default values.)’;

*6

observation value

(*7)  This is in accordance with the ESA 2010 and other international statistical standards.

*7

(*8)  Nevertheless, in the case of IF statistics, Regulation (EU) No 1073/2013 (ECB/2013/38) requests separate reporting of new issuance and redemptions of IF shares/units during the reporting month

*8

(*9)  The definition and classification of ‘other changes’ is largely consistent with the ESA 2010. ‘Reclassifications and other adjustments’ is broadly equivalent to ‘other changes in the volume of assets and liabilities’ (K.1-K.6, see paragraphs 6.03-25), whereas ‘revaluations’ may be transferred to ‘nominal holding gains and losses’ (K.7, see paragraphs 6.26-64). For BSI statistics, an important deviation concerns the inclusion of ‘loan write-offs’ within ‘revaluations’ (and specifically as revaluations due to changes in prices), whereas in the ESA 2010 they are generally regarded as ‘other changes in volume’ (paragraph 6.14) — with the exception of losses realised at the sale of loans; these losses, which equal the difference between the transaction price and the balance sheet carrying amount of the loans, should be recorded as a revaluation (paragraph 6.58). The inclusion of ‘loan write-offs’ within ‘revaluations’ also deviates from the international investment position (i.i.p.) rules. In the i.i.p. these are treated as ‘other adjustments’ and not as ‘price or exchange rate changes’. For IF statistics, loans ‘write-offs/write-downs’ are not requested.

*9

(*10)  The adjustments corresponding to the ECB's own balance sheet are reported by the ECB Directorate-General Administration.’;

*10

(*11)  Commission Delegated Regulation (EU) 2015/35 of 10 October 2014 supplementing Directive 2009/138/EC of the European Parliament and of the Council on the taking-up and pursuit of the business of Insurance and Reinsurance (Solvency II) (OJ L 12, 17.1.2015, p. 1).’.’

*11

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(1)  This item may include non-life insurance technical reserves (ESA 2010: F.61), claims of insurance corporations on pension managers (in line with ESA 2010: F.64) and provisions for calls under standardised guarantees (ESA 2010: F.66).

1

(2)  This item, including the relevant breakdown, may include claims of managers on pension funds (in line with ESA 2010: F.64) and entitlements to non-pension benefits (ESA 2010: F.65).

2

(3)  Data reference 1 January 2016 may be used as a proxy.

3

(4)  This item may include non-life insurance technical reserves (ESA 2010: F.61), claims of insurance corporations on pension managers (in line with ESA 2010: F.64) and provisions for calls under standardised guarantees (ESA 2010: F.66)

4

(5)  In the case of non-euro-area Member States, ‘MFIs’ and ‘non-MFIs’ refer to ‘banks’ and ‘non-banks’.

5

(6)  This item may include entitlements to non-pension benefits (ESA 2010: F.65).

6

(7)  The relevant ‘of which’ position of this item may also include claims of pension managers on insurance corporations acting as pension administrators (in line with ESA 2010: F.64).

7

(8)  This item, including the relevant line of business, may include provisions for calls under standardised guarantees (ESA 2010: F.66).

8

(9)  The code structure and DSD of the International Consolidated Banking Statistics are common to all reporting countries and should be the same as those that are used to report the corresponding data to the Bank for International Settlements (BIS) (www.bis.org/statistics/dsd_cbs.pdf).

9

(10)  This indicates the number of letters/digits allowed for each element of the code lists (e.g. AN..7 means an alphanumeric string up to 7 characters long, AN1 means one alphanumeric character).

10

(11)  New SDMX DSD code list.

11

(12)  This indicates the number of letters/digits allowed for the transmission of each attribute (e.g. AN..1050 means an alphanumeric string up to 1 050 characters long, AN1 means one alphanumeric character, N1 means 1 digit).

12

(*2)  If an NCB would like to make a modification it consults with the ECB, which will then implement the change.

*2

(*3)  Changes are communicated to the responsible ECB business area by e-mail.

*3

(13)  ECB refers here to the ECB Directorate-General Statistics.

13

(14)  The ECB recommends that the NCBs deliver these values to ensure more transparent communication.

14

(15)  All attributes specified in the table in Section 1, which are set by the ECB, are not covered in this table.

15

(16)  Interest rate data are submitted as percentages.

16

(1)  For further description and metadata see Part 3.

1

(2)  PSRIs: payment statistics relevant institutions; please note that the list of PSRIs may overlap with the list of MFIs

2

(c)  only for ‘large banking groups’ with headquarters in the euro area (see Article 12)

c

(d)  For simple flags no specific validity ranges may need to be provided in the first go.

d

(17)  Directive 2009/110/EC of the European Parliament and of the Council of 16 September 2009 on the taking up, pursuit and prudential supervision of the business of electronic money institutions amending Directives 2005/60/EC and 2006/48/EC and repealing Directive 2000/46/EC (OJ L 267, 10.10.2009, p. 7).

17

(18)  Directive 2013/34/EU of the European Parliament and of the Council of 26 June 2013 on the annual financial statements, consolidated financial statements and related reports of certain types of undertakings, amending Directive 2006/43/EC of the European Parliament and of the Council and repealing Council Directives 78/660/EEC and 83/349/EEC (OJ L 182, 29.6.2013, p. 19).

18

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