No C 198/2 Official Journal of the European Communities 7. 8. 90 
STATE AID 
C 26/86 and C 43/87 
(France) 
(Articles 92 to 94 of the Treaty establishing the European Economic Community) 
(90/C 198/02) 
Commission communication pursuant to Article 93 (2) of 
the EEC Treaty to other Member States and interested 
parties regarding aid which France has decided to grant 
to the chemical undertaking CDF-Chimie (Orkem). 
In the following letter, the Commission informed the 
French Government of its decision to close the 
procedures initiated on 7 May 1986 and 2 December 
1987 0). 
By letter dated 2 December 1985, the Commission 
requested the French Government to notify, pursuant to 
Article 93 (3) of the EEC Treaty, aid awarded to the 
public undertaking CDF-Chimie in the form of waivers 
of loans and debts amounting to FF 4,3664 thousand 
million and a capital increase of FF 2 000 million. The 
reply from the French authorities dated 27 January 1986 
provided some information, but most of the data 
requested was not sent to the Commission. 
As there is a considerable volume of intra-Community 
trade in the chemical industry, and in view of the 
economic and financial situation of the recipient, the 
Commission considered that the measures in question 
constituted aid within the meaning of Article 92 (1) of 
the EEC Treaty and that, on the basis of the information 
in its possession and the data furnished by the French 
authorities, the measures did not appear to fulfil the 
conditions of Article 92 (3) and did not therefore qualify 
for exemption under that Article. The Commission 
therefore opened the procedure provided for in Article 
93 (2) against the aid in question by decision dated 
7 May 1986. 
As part of that procedure, the Commission gave the 
French Government notice, by letter dated 23 May 1986, 
to submit its comments. In accordance with Article 93 
(2) of the EEC Treaty, the other Member States and 
interested parties were also invited to submit their 
comments. 
By letter dated 9 April 1987, the French authorities, 
pursuant to Commission Directive No 80/723/EEC on 
the transparency of financial relations between the State 
and public undertakings, informed the Commission of 
their decision to award a further capital contribution of 
FF 3 100 million to CDF-Chimie. 
O OJ No C 311, 5. 12. 1986 and OJ No C 69, 15. 3. 1988. By letter dated 29 April 1987, the Commission requested 
the French Government, under Article 93 (3), to notify 
the above-mentioned aid measure. 
By letter dated 3 June 1987, the French authorities, 
referring to the Commission letter of 29 April 1987, sent 
further details concerning the utilization of the capital 
contribution within the framework of the Directive 
referred to above. 
In view of the extent of intra-Community trading in the 
chemical sector, and the fact that the additional capital 
contribution was intended to finance further efforts to 
revive CDF-Chimie — then facing serious financial and 
economic difficulties — the Commission considered that 
the measure also constituted an aid within the meaning 
of Article 92 (1) of the EEC Treaty and that, on the 
basis of the information in its possession and that 
submitted by the French authorities, it did not appear to 
fulfil the conditions for exemption under Article 92 (3). 
Furthermore, the contribution had not been notified to 
the Commission pursuant to Article 93 (3). The 
Commission therefore opened the Article 93 (2) 
procedure against the aid by decision dated 2 December 
1987. 
As part of that procedure, the Commission invited the 
French Government by letter dated 11 December 1987 to 
submit its comments. In accordance with Article 93 (2) 
of the EEC Treaty, the other Member States and 
interested parties were also invited to present their 
comments. 
The French authorities submitted their comments by 
letter dated 18 July 1986. They indicated that the waiver 
of loans and debts and the capital contribution should 
not be regarded as caught by Article 92 (1) of the EEC 
Treaty but as the normal practice of a State shareholder. 
As regards the procedure initiated on 2 December 1987, 
the French authorities submitted their comments by letter 
dated 2 March 1988. They stated that the additional 
contribution was not an aid but a contribution 
comparable to that of a private shareholder and intended 
to finance exceptional costs incurred during the restruc­
turing of the undertaking. 
7. 8. 90 Official Journal of the European Communities No C 198/3 
In response to the Commission's request dated 21 April 
1988, the French authorities supplied further details in 
respect of the two procedures opened by letters dated 
6 July and 9 September 1988, and 27 February and 
15 November 1989, and discussed at the bilateral 
meetings held on 20 January and 17 April 1989. 
According to the French authorities, the reconstitution of 
capital by waiving loans and debts of FF 4,366 thousand 
million, and the first capital contribution of FF 2 000 
million, were carried out in accordance with the 
requirements of French law on limited liability 
companies, and were intended to finance restructuring 
costs and correct mistaken financial choices so that an 
industrially healthy and profitable company could return 
to normal operation. 
The further capital contribution of FF 3,100 million was 
part of a restructuring plan aimed at reducing the 
company's commitment in the bulk chemicals industry 
and at concentrating its efforts in the far more profitable 
growth area of speciality chemicals. 
As part of the above-mentioned procedures, three 
Member States, four interested parties and the under­
taking concerned submitted comments. By letter dated 1 
September 1989, the Commission forwarded the 
comments to the French authorities and invited them to 
submit their own, which it has not to date received. 
Although the aids in question — waiver of loans and 
debts and capital contributions — are the subject of two 
procedures, they have one objective, namely to restore 
the viability of CDF-Chimie by rescuing, reorganizing 
and developing it. 
Once it is established that a public authority has injected 
capital into an undertaking in conditions that are not 
those of a market economy, the case must be assessed in 
the light of Article 92 of the EEC Treaty. At the time of 
the award of the aid in question, CDF-Chimie had very 
little chance of obtaining sufficient capital from the 
private market to ensure its survival and long-term 
stability. 
The undertaking had been badly hit by the crisis in the 
chemicals industry in the early 1980s, chiefly because of 
its heavy commitments in the production of petro­
chemicals and fertilizers where the markets were experi­
encing serious structural difficulties. Despite a number of shareholders' loans, the undertaking 
since incurred heavy losses (FF 7 300 million from 1981 
to 1986), increasing its debts and financial charges, 
endangering its existence and preventing it from making 
the necessary changes without the assistance of aid. 
The Community chemicals market is extremely 
competitive and the subject of considerable intra-
Community trade. This applies particularly to petro­
chemicals and fertilizers, which are the chief products of 
the recipient. 
In 1987, the total turnover of the Community chemicals 
industry was ECU 236 000 million (1986: ECU 229 000 
million), intra-Community exports totalling ECU 65 580 
million or 27,77 % of turnover. 
Turnover in the Community petrochemicals industry in 
1987 totalled ECU 100 000 million. Intra-Community 
trade accounted for ECU 40 000 million or 40 % of 
turnover. 
The Community petrochemicals market is experiencing a 
certain amount of instability reflected in large cyclical 
fluctuations in supply and demand. Thus the sudden rise 
in capacity in the second half of the 1970s led to a crisis 
at the beginning of the 1980s, resulting in inadequate 
utilization of capacity and considerable losses. Although 
the sector is now profitable following some capacity cuts 
and a growth in demand, the capacity increases in 
certain sub-sectors such as propylene and ethylene, and 
the emergence of new, non-Community producers is 
liable to produce overcapacities once again. 
There is also considerable intra-Community trade in 
fertilizers: in 1986, trade in urea with a nitrogen content 
in excess of 45 %, and in ammonium nitrate, accounted 
for ECU 117 million and 172 million respectively, whilst 
fertilizers containing nitrogen, phosphorus and 
potassium with more than 10 % nitrogen accounted for 
ECU 412 million. 
The fertilizer sector is faced with similar problems to 
those of the petrochemicals industry. It has for several 
years suffered from depressed demand due, essentially, 
to the crisis in farming and to overcapacities. In addition, 
non-Community producers have upped their exports to 
the Community and are currently facing anti-dumping 
procedures. 
With a turnover of FF 21,538 thousand million in 1988, 
the CDF-Chimie Group is a leading manufacturer in the 
French chemicals sector and among the leading 20 
European producers. 
No C 198/4 Official Journal of the European Communities 7. 8. 90 
Petrochemicals account for 32 % of turnover (steam-
cracker products, large intermediates and petro­
chemicals, low-density polyethylene, linear polyethylene, 
polystyrene and expandable polystyrene), whilst 
fertilizers account for 30 °/o (ammonia, nitric and phos­
phoric acids, compound ammonitrate fertilizers, 
industrial gases, hot solutions). The other activities of the 
Group concern chemical specialities (acrylates, meth-
acrylates, resins, glues, etc.), paints, inks and oils, tars 
and other derivatives. 
The undertaking in question is extremely active in intra-
Community trade. In 1988, 45 % of turnover was 
achieved outside France — a large proportion being 
achieved on the Community market — through exports 
or the activities of foreign subsidiaries. 
In view of these considerations, the position of the 
markets in question and that of the recipient undertaking 
on those markets, the aid granted by the French 
Government affected trade between Member States and 
distorted competition within the meaning of Article 92 
(1) of the EEC Treaty by favouring the undertaking 
concerned and the production of chemicals in France. 
If aid is to contribute to economic development, it 
should help provide a lasting solution to the recipient's 
problems, avoid preserving the status quo and post­
poning unavoidable decisions and changes, and 
contribute to the development of the sector throughout 
the Community. For this reason, the award of aid should 
be tied to a plan designed to achieve those objectives. As 
regards the appropriate volume of aid, it should be 
sufficient to attain the objectives in question whilst at the 
same time being strictly adjusted to requirements so as to 
avoid affecting trading conditions to an extent contrary 
to the common interest. 
It can be considered that the aid in question, whilst 
satisfying these conditions, has contributed to the 
achieving of the objective referred to above by facili­
tating the financing of a recovery plan for the under­
taking. 
According to the plan, the waiver of loans and debts of 
FF 4,3664 thousand million and the first capital contri­
bution granted at the end of 1985, which are the subject 
of the first procedure, restored the net worth of the 
undertaking which had previously been negative, partly 
through the first reorganization undertaken in 1979 
which entailed costs of FF 2 400 million and the loss of 
6 400 jobs. Further restructuring was made possible by the capital 
contribution of FF 3 100 million granted in 1987 and 
paid in 1987/88, which constitutes the subject of the 
second procedure. The part of the plan assisted by this 
aid, currently underway at a cost of FF 6 400 million, 
entails the loss or reduction of certain activities, in 
particular in the 'commodity' chemicals sector which is 
particularly susceptible to market conditions and is faced 
with structural problems at Community level. Thus the 
share of basic petrochemicals in the activities of 
CDF-Chimie will drop from some 60 % to 45 % on 
completion of the plan. 
In particular, the undertaking plans to halt all production 
of industrial paints and make major cuts in petro­
chemical and fertilizer production. The reductions in 
petrochemicals will be approximately ... % of installed 
capacity, with the closure of a capacity of . . . for 
ethylenes and . . . for polystyrenes. In the area of 
fertilizers, capacity cuts will exceed . . . for phosphoric 
acid, representing a reduction of . . . %, and over . . . for 
ammonia. There will be virtually no production of phos-
phated fertilizers. 
As the fall in turnover shows (1985: FF 24,947 thousand 
million; 1988: FF 21,538 thousand million), and 
especially the shrinking market shares held by 
CDF-Chimie in various categories of products (a . . . % 
reduction of its share of the European petrochemical 
market, and cutback from . . . % to . . . % in its share of 
the French paint market), the undertaking is not 
reducing unused or under-used capacity but is actually 
diminishing production. 
The above-mentioned reductions are partially offset by 
intensified activity in the speciality chemicals sector 
aimed at the manufacture of high added-value products 
for markets where there is a strong growth in demand. 
The aid in question, however, is aimed only at facili­
tating the closure and reduction of activities in the petro­
chemicals, fertilizer and industrial paints sectors by 
covering the costs involved. The total cost of the closure 
operations, dismantling of workshops and workforce 
reductions amount to FF 3 160 million, of which FF . . . 
million, FF . . . million and FF . . . million for shutdown, 
demolition, readjustment and reorganization in the 
petrochemical, fertilizer and industrial paints sectors, FF 
. . . million to cover the social costs of closure and FF . . . 
million to terminate existing contracts and as exceptional 
depreciation costs. 
CDF-Chimie is itself providing the entire financing for 
its chemical specialities activities. 
7. 8. 90 Official Journal of the European Communities No C 198/5 
In view of the large reductions and the total closure of 
capacity for low added-value products in sectors that are 
extremely vulnerable to market conditions and increasing 
competition from non-Community manufacturers, 
CDF-Chimie — whose results have improved 
considerably since the plan was introduced — is making 
a major contribution to the rationalization of these 
chemical sectors at Community level and hence to the 
strengthening of the chemicals sector as a whole, at the 
price of substantial losses in market shares. I have the honour to inform you that the Commission 
has decided that the aid awards to CDF-Chimie in the 
form of waivers of loans and debts and two capital 
contributions totalling FF 9,4664 thousand million 
qualify for exemption under Article 93 (3) (c). It has 
therefore decided to close the procedures opened under 
Article 93 (2) of the EEC Treaty in respect of the aid 
referred to above. 
The Commission regrets that the information on which it 
based its decision was not sent to it before the opening 
of the procedures under Article 93 (2) of the EEC 
Treaty.