EN Official Journal of the European Union L 5/1

COMMISSION DECISION

of 6 November 2008

on State aid C 19/05 (ex N 203/05) granted by Poland to Stocznia Szczecińska

(notified under document C(2008) 6770)

(Only the Polish text is authentic)

(Text with EEA relevance)

(2010/3/EC)

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

Having regard to the Treaty establishing the European Community, and in particular the first subparagraph of Article 88(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 (1) pursuant to the provisions cited above,

Whereas:

1. PROCEDURE

(1) Pursuant to the provisions of Annex IV, point 3 of the Accession Treaty governing the interim mechanism procedure, Poland, by letter of 27 April 2004, registered on 28 April 2004, notified restructuring measures in favour of Stocznia Szczecińska Nowa Sp. z o.o. (New Szczecin Shipyard Ltd, hereinafter SSN). The case was registered under the number PL 31/2004.

(2) By letter of 19 May 2004 the Commission asked Poland to submit certain missing documents. These were provided on 16 June 2004. The Commission requested further information by letters of 12 August 2004, 18 November 2004 and 4 March 2005, to which Poland replied by letters of 24 September 2004, registered on that day, of 28 January 2005, registered on 2 February 2005, of 30 March 2005, registered on 1 April 2005 and of 18 April 2005, registered on 20 April 2005 respectively. Meetings with the Polish authorities took place on the following dates: 9 November 2004, 17 November 2004 and 3 March 2005.

(3) By letter of 22 April 2005, registered on the same day, Poland accepted that the Commission would also treat the notification of case PL 31/2004 of 27 April 2004 as a notification under Article 88(2) of the EC Treaty with regard to any measures which were found to constitute new aid. The case was allocated the new number N 203/05.

(4) On 1 June 2005 the Commission adopted the decision to initiate the procedure laid down in Article 88(2) of the EC Treaty in respect of the restructuring aid for SSN notified by the Polish authorities. The Commission published this decision in the Official Journal (2) and invited Poland and interested parties to submit comments.

(5) By letter of 24 June 2005 the Polish authorities indicated that the decision contained confidential information and asked for that information to be deleted from the public version of the decision. The Commission replied by letter of 15 July 2005. Poland asked for an extension of the deadline for submission of comments on the decision opening the procedure by letters of 30 June 2005, registered on 1 July 2005, 26 July, registered on 27 July 2005, and 30 August 2005, registered on 1 September 2005. The Commission replied by letters of 12 July, 2 August and 9 September 2005 respectively. By letter of 4 October 2005, registered on 7 October 2005, the Polish authorities submitted their comments on the decision to initiate the formal investigation procedure. In this letter Poland also submitted a restructuring plan for 2002-2004, dated December 2002 and modified in October 2003 (hereinafter 2003 restructuring plan). By letter of 10 October 2005, registered on the same day, a legal representative of SSN stated that its position and comments had been incorporated in the submission of the Polish authorities.

(6) Comments were submitted by the following third parties: Związek Pracodawców Forum Okrętowe (Association of Polish Maritime Industries) in a letter of 6 October 2005, registered on the same day, Towimor SA in a letter of 6 October 2005, registered on the same day, H. Cegielski — Poznań SA in a letter of 6 October 2005, registered on the same day, Spliethoff’s Bevrachtingskantoor BV in a letter of 6 October 2005, registered on the same day, Peter Dohle Shiffahrts-KG in a letter of 5 October 2005, registered on 6 October 2005, Odjefjell ASA, in a letter of 6 October 2005, registered on 11 October 2005, the trade unions of SSN (‘Solidarność’, ‘Solidarność 80’ and ‘Stoczniowiec’) in a letter of 7 October 2005, registered on 10 October 2005, the Mayor of Szczecin in a letter of 5 October, registered on 11 October 2005, Lubmor Sp. z o.o. in a letter of 6 October 2005, registered on 11 October 2005, and Business Club Szczecin in a letter of 12 October 2005, registered on the same day. The Commission forwarded these comments to Poland by letter of 27 October 2005. The Polish authorities replied by letter of 21 November 2005.

(7) The Commission sought the assistance of an external consultant for the evaluation of the 2003 restructuring plan. The consultant submitted his report to the Commission in March 2006.

(8) By letter of 13 January 2006 the Commission asked the Polish authorities to provide further information on the SSN restructuring process. Poland replied by letter of 20 February 2006, registered on the same day. On 22 February 2006, a meeting took place between the Polish authorities, representatives of the yard and Commission staff. Following the meeting, the Commission asked Poland for additional information by letters of 8 March 2006, 30 March 2006, 12 April 2006 and 28 April 2006. The Polish authorities replied by letters of 13 March 2006, registered on the same day, 29 March 2006, registered on 30 March 2006, 6 April 2006, registered on 10 April 2006, 19 April 2006, registered on 20 April 2006, and 26 May 2006, registered on 30 May 2006. By letter of 23 June 2006, registered on 26 June 2006, the yard’s consultant submitted a draft restructuring plan entitled ‘Development plan for Stocznia Szczecińska Nowa Sp. z o.o. for 2006-2011’ to the Commission for consultation purposes.

(9) On 12 July 2006 a meeting took place between the Polish authorities, the yard’s representatives and Commission staff. The Polish authorities submitted information concerning the SSN restructuring process in a letter of 13 July 2006, registered on 17 July 2006. By letter of 17 July 2006 the Commission asked the Polish authorities to submit additional information. The Polish authorities replied by letter of 1 September 2006, registered on the same day. On 4 September 2006 Poland submitted a modified restructuring plan for SSN entitled ‘Development plan for Stocznia Szczecińska Nowa Sp. z o.o. for 2006-2011’ (hereinafter 2006 restructuring plan).

(10) In letters of 26 September 2006, registered on 27 September 2006, and 21 November 2006, registered on 27 November 2006, the Polish authorities submitted additional information concerning the case.

(11) On 7 December 2006 a meeting took place between Commission Member Neelie Kroes and Polish Minister of the Economy Piotr Wozniak. Mr Wozniak stated that Poland was determined to relaunch the privatisation process for SSN by means of an open and transparent procedure, which was to be finalised by June 2007. Poland confirmed this statement by letter of 27 December 2006, registered on 4 January 2007, referring to the decision of the Polish Council of Ministers of 19 December 2006, which adopted a document entitled ‘Information on the state of the shipbuilding industry’. Poland asked the Commission to enter into talks on the issue of compensatory measures. Commission staff, together with the external consultant, visited the yard on 18 December 2006 in order to establish the facts and obtain the data needed to evaluate compensatory measures. The external consultant submitted his report evaluating the current capacity of the yard on 16 January 2007.

(12) The Commission replied to a letter of 27 December 2006 by letter of 29 January 2007, in which, among other things, it asked Poland to submit a proposal for compensatory measures for SSN by the end of February 2007.

(13) By letter of 28 February 2007, registered on the same day, Poland submitted some explanations concerning the privatisation of SSN and a proposal for compensatory measures. The Polish authorities proposed closing one of the yard’s three slipways from March 2010.

(14) On this basis, a technical meeting took place on 15 March 2007 between Commission staff, the Polish authorities and representatives of the yard, mainly concerning compensatory measures but also to discuss the on-going privatisation process. The Commission and the Polish authorities agreed that the Commission would discuss technical issues directly with SSN in order to gather all the data it needed for its assessment of Poland’s proposal for compensatory measures.

(15) Following the meeting, the Commission requested a range of data from SSN by letters of 29 March 2007, 27 April 2007 and 30 May 2007. The yard replied by letters of 18 April 2007, registered on 27 April 2007, 8 May 2007, registered on 10 May 2007, and 4 June 2007, registered on 5 June 2007. On 8 June a meeting took place between Commission staff, the Polish authorities and representatives of the yard. SSN provided additional information by letter of 15 June 2007, registered on the same day.

(16) By letter of 31 July 2007 the Commission informed Poland that it provisionally considered the closure of the Wulkan 1 slipway to be a sufficient compensatory measure under certain conditions. In their reply of 24 August 2007, registered on 28 August 2007, the Polish authorities confirmed their intention of implementing the capacity reductions specified in the Commission’s letter.

(17) The Polish authorities provided information concerning the privatisation and restructuring of SSN in letters of 5 January 2007, registered on the same day, and 9 January 2007, registered on 11 January 2007. The Commission replied by letter of 29 January 2007. In a letter of 28 February 2007, registered on the same day, the Polish authorities undertook to choose an investor for the yard and sign a privatisation agreement by the end of June 2007.

(18) The Commission requested further clarifications concerning the privatisation of SSN by letters of 29 May 2007, 28 June 2007 and 30 July 2007. Poland provided information in this respect by letter of 1 June 2007, registered on 4 June 2007, which contained a list of enterprises to which an invitation to submit offers for the purchase of SSN had been sent. Further information was submitted by letters of 25 June 2007, registered on the same day, and 11 July 2007, registered on the same day.

(19) By letter of 1 August 2007, registered on 6 August 2007, the Polish authorities submitted SSN’s first draft Information Memorandum. By letter of 13 August 2007 the Commission sent its comments on the Information Memorandum. By letter of 21 August 2007, registered on 27 August 2007, the Polish authorities informed the Commission that the financial situation of the yard had deteriorated significantly and that the public owners of the yard therefore planned to support it with capital injections. Poland also announced that the Information Memorandum would be updated accordingly.

(20) The Commission requested clarifications by letter of 4 September 2007. The Polish authorities replied by letters of 7 September 2007, registered on 10 September 2007, and 11 September 2007, in which Poland submitted the new version of the Information Memorandum and informed the Commission that invitations to submit offers had been sent to 221 potential investors.

(21) The Commission asked for additional information by letter of 12 September 2007. The Commission gave its comments on the Information Memorandum and asked for clarifications by letters of 14 September 2007 and 3 October 2007. The Polish authorities replied by letter of 12 October 2007, registered on 16 October 2007, stating that six potential investors had requested a copy of the yard’s Information Memorandum. By letter of 23 October 2007, registered on the same day, the Polish authorities submitted an updated privatisation schedule, which assumed that negotiations with potential investors would start in January 2008.

(22) By letter of 30 November 2007 the Commission requested that a draft restructuring plan drawn up by the new owner of the yard should be submitted by the end of February 2008. Poland provided further information on the privatisation process by letters of 11 December 2007, registered on 13 December 2007, and 19 December 2007, registered on 20 December 2007. By letter of 21 December 2007, registered on the same day, Poland informed the Commission that on 20 December 2007 Amber Sp. z o.o. (hereinafter ‘Amber’, a wholly owned subsidiary of a Polish steel trader, Złomrex) was the only bidder to have submitted a binding offer to purchase shares in SSN.

(23) On 10 January 2008 a meeting took place between the Polish authorities and the Commission. Following the meeting, the Commission asked the Polish authorities to submit additional information concerning the privatisation process by letters of 17 January 2008, 30 January 2008, 28 February 2008, 18 March 2008 and 2 April 2008. The Polish authorities answered the Commission’s requests by letters of 23 January 2008, registered on 24 January 2008, 25 January 2008, registered on 28 January 2008, and 30 January 2008, registered on 31 January 2008. By letter of 8 February 2008, registered on the same day, Poland submitted a copy of Amber’s binding offer.

(24) By letter of 14 February 2008, registered on 19 February 2008, Poland informed the Commission that it would not be possible to complete privatisation of the yard by the deadline of the end of February 2008 and that the Polish authorities undertook to complete the privatisation process and agree on the restructuring plan by the summer of 2008.

(25) By letter of 29 February 2008, registered on 3 March 2008, the Polish authorities submitted two documents by Amber: ‘Additional explanations, outline of the restructuring programme and declared commitments concerning the purchase of SSN submitted by Amber’ of 29 February 2008 and ‘First version of the restructuring plan for SSN with business plan for SSN for 2008-2012, taking into account the information obtained in the course of the due diligence process carried out in the shipyard’.

(26) By letter of 28 March 2008, registered on the same day, the Polish authorities stated that the exclusivity period granted to Amber for negotiations had been extended to 15 April 2008. Following an invitation from the Polish authorities in a letter of 4 April 2008, registered on 7 April 2008, a meeting took place on 10 April 2008 between the Polish authorities, representatives of SSN, Amber and Commission staff.

(27) By e-mail of 9 April 2008, registered on 24 April 2008, Amber’s consultant submitted preliminary financial projections for the yard. Amber also submitted information at the meeting of 10 April 2008, and that information was registered on 18 April 2008.

(28) Poland submitted information on the progress of the negotiations with Amber by letters of 7 April 2008, registered on 18 April 2008, 23 April 2008, registered on the same day, 25 April 2008, registered on the same day, 28 April 2008, registered on 29 April 2008 and 29 April 2008, registered on 5 May 2008. The Commission requested information by letter of 30 April 2008. On 8 May 2008 a meeting took place between the Polish authorities and the Commission.

(29) The Commission sent comments on the progress of the privatisation process by letters of 21 April 2008 and 30 April 2008.

(30) Finally, by letter of 12 May 2008, registered on the same day, Poland informed the Commission that Amber had withdrawn from the privatisation process.

(31) Poland also informed the Commission that the Polish authorities were taking action to relaunch the privatisation process with a view to signing privatisation agreements by the end of November 2008. Starting on 3 June 2008, Poland submitted daily reports to the Commission on the actions taken by interested parties in the relaunched privatisation process. The Commission met the Polish authorities on 13 June 2008.

(32) On 20 June 2008, at the request of the Polish authorities, Commission staff met the Polish authorities with the Norwegian company Ulstein and on 24 June 2008 it met the Polish authorities with the Polish company Mostostal Chojnice. These companies were introduced to the Commission as potential buyers of SSN. By letter of 26 June 2008, registered on the same day, Poland submitted a draft restructuring plan for SSN drawn up by Mostostal Chojnice. Additional information was submitted by letter of 7 July 2008, registered on 8 July 2008.

(33) By letter of 14 July 2008 Poland undertook to present a complete restructuring plan to the Commission by 12 September 2008.

(34) On 16 July 2008 the Commission provisionally set out an assessment and conclusions in a draft decision to conclude the formal investigation procedure, which found that the State aid granted to SSN was incompatible with the common market and had to be recovered. However, in the light of a letter from Poland of 14 July 2008 the Commission decided to postpone adoption of this decision so that it could assess whether the new restructuring plan to be submitted by the Polish authorities by 12 September 2008 would significantly improve the situation and make it possible to consider the aid compatible with the common market.

(35) Thereafter Poland informed the Commission on a weekly basis about the progress of the privatisation procedure (letters of 28 July, 4 August, 12 August, 21 August, 25 August, 1 September, 8 September, 16 September and 23 September 2008, registered on the same dates).

(36) By letter of 18 July 2008, registered on 21 July 2008, Poland asked for a round of consultations with Commission staff on the draft restructuring plan so that it could draw up a final version of the plan that took account of the Commission staff’s comments. The Commission agreed to the consultation schedule by letter of 31 July 2008.

(37) However, it was not until 3 September 2008 that the Commission informally received a draft restructuring plan for SSN. Following this submission, on 4 September 2008 a first meeting took place between the Polish authorities and Commission staff in the presence of Mostostal. On 8 September the Commission received a revised draft restructuring plan and on 10 September 2008 another meeting was organised with the Polish authorities, Mostostal and the potential co-investor Ulstein.

(38) By letter of 12 September 2008, registered on the same day, Poland submitted the final restructuring plan for SSN drawn up by Mostostal in cooperation with the Norwegian shipyard Ulstein.

(39) By letter of 16 September 2008, registered on 17 September 2008, Poland submitted a draft of the privatisation agreement between Mostostal and the public owners of SSN, namely the Industrial Development Agency and the Polish Shipyards Corporation.

(40) By letter of 22 September 2008, registered on the same day, Ulstein informed the Commission that it was withdrawing from the privatisation process and would not be participating in the restructuring of SSN.

(41) By letter of 22 September 2008, registered on 25 September 2008, Mostostal informed the Commission that in view of Ulstein’s decision Mostostal would be prepared to implement the full restructuring plan for SSN on its own. On 30 September 2008 a meeting took place between the Polish authorities, the Commission and Mostostal.

(42) By letter of 27 October 2008 the Commission told Poland the framework conditions for the implementation of this Decision. By letter of 3 November 2008, registered on 4 November 2008, Poland undertook to respect these conditions in full. The Commission accepted this commitment by letter of 6 November 2008.

(43) By letter of 14 June 2007 the Commission asked the Polish authorities to provide information concerning the State aid received by SSN after the initiation of the formal investigation procedure. The Polish authorities replied by letter of 11 July 2007, registered on the same day. The Commission asked for further explanations by letter of 13 November 2007. Poland replied by letter of 9 January 2008, registered on the same day. Poland submitted additional information concerning State aid granted to the yard by letter of 9 January 2008, registered on 10 January 2008. Poland informed the Commission about additional measures granted to SSN by letters of 6 December 2007, registered on the same day, 9 January 2008, registered on 10 January 2008, 12 February 2008, registered on 13 February 2008, 26 June 2008, registered on 27 June 2008 and 12 September 2008, registered on the same day.

2. DESCRIPTION

2.1. RELEVANT UNDERTAKING

(44) The beneficiary is situated in the Zachodniopomorskie (Western Pomerania) region, in north-western Poland. The Commission notes that, under the State aid rules, companies located in this region are eligible to receive help from the Structural Funds under the Convergence objective (3) and from the Cohesion fund (4). In particular, companies in this region are potentially eligible to receive help from the Regional Operational Programme for the Zachodniopomorskie region under the priority axes for support for small and medium-sized enterprises, innovation and technology transfer measures (aiming for job-creation in the long term) and for social infrastructure and educational infrastructure, focusing on vocational and lifelong training. Companies in this region are also eligible for the Innovative Economy Operational Programme.

(45) SSN was created on 25 June 2002 to take over the shipbuilding activities of Stocznia Szczecińska Porta Holding SA (hereinafter SSPH) and its main shipbuilding subsidiary Stocznia Szczecińska (hereinafter SS), which were declared bankrupt on 29 July 2002. SSN was established as an empty shell, free of the debts of SSPH and SS relating to their former activity.

(46) The new shipyard was taken over by the State-owned Agencja Rozwoju Przemysłu SA (Industrial Development Agency SA, hereinafter ARP) and the State Treasury with a view to completing current production and resuming shipbuilding activities while carrying out the necessary restructuring. Formally, the company which took over the former shipbuilding activity was a subsidiary of SSPH created in 1989, Allround Ship Services Sp. z o.o. (hereinafter ASS). In fact, as far back as 2001 the fully State-owned SSPH, which was facing a difficult financial situation, decided to concentrate shipbuilding activity in ASS, which was considered to be more open to restructuring than SS. In January 2002 ASS, originally a small subsidiary active in painting works, concluded a framework agreement with SSPH for the construction of hulls and leased production assets from SSPH for this purpose. Some weeks before SSPH filed for bankruptcy, it sold ASS to ARP for PLN 1. ASS was then renamed Stocznia Szczecińska Nowa (SSN — the beneficiary of the aid).

(47) At that time SSN did not take over the assets of SSPH and SS, but leased them instead from the receiver in bankruptcy until July 2004. On 20 July 2004 SSN signed agreements with the receivers of SSPH and SS under which it acquired these assets. SSN did not take over the debts of SSPH or SS, and so those debts stayed with those two companies and were dealt with under the bankruptcy procedure. SSN took over some ongoing works by concluding new contracts with the shipowners.

(48) ASS took over the employees of SSPH and SS, but the yard gradually reduced its workforce from 8 071 in 2001 to 5 322 at the end of 2006. In 2007 there were 4 700 employees on average.

(49) The volume of production increased from 158 000 CGT in 2003 to 213 000 CGT in 2005 but in 2006 it dropped to 167 000 CGT. The order book as of August 2007 included 30 ships of a total value of EUR 1 134 million. SSN ranks 32nd in the world and 6th in Europe in terms of the size of its order book.

(50) Its main customers are located in Germany, the Netherlands, Russia and Italy. Its main competitors in Europe are Spanish, German and Croatian shipyards.

(51) Currently 80 % of SSN is owned by Korporacja Polskie Stocznie SA (Polish Shipyards Corporation SA, hereinafter KPS) and 18 % is owned by ARP. 2 % of the shares are owned by the State Treasury. ARP is a limited company established by law and wholly owned by the State Treasury. ARP conducts activities entrusted to it by law, including participating in ownership-restructuring processes in State-owned enterprises, managing State Treasury assets and shares on behalf of State institutions and providing loans and guarantees for the restructuring of public enterprises. KPS is 100 % owned by ARP and was created to provide financing for shipbuilding companies in Poland.

(52) SSN is active in the production of ships, including container ships, chemical tankers, ro-ro ships and multipurpose vessels. 1 % of the company’s business is in producing metal structures and various shipbuilding-related services.

(53) SSN’s main production facilities are three slipways: Wulkan Nowy, Odra Nowa and Wulkan 1.

(54) Immediately after its creation in 2002, SSN started to carry out restructuring activities. It drew up the 2003 restructuring plan, which was first approved by its shareholders on 19 December 2002 and later modified in October 2003. The following factors were identified as the main reasons for the bankruptcy of the former shipbuilder in Szczecin: technological problems, design errors, low productivity, high costs and external factors such as the high exchange rate of the Polish zloty and Asian competition. Because of these problems the financial markets became reluctant to finance the shipbuilding, and this led to delays in deliveries and hence an accumulation of penalties and debts.

(55) The aim of the restructuring strategy was to achieve enduring profitability by focusing on the container ship market and becoming an important producer of chemical tankers, ro-ro and con-ro vessels and special-purpose vessels. The restructuring plan also included the possibility of finding a strategic investor. It was necessary to alter the original restructuring plan in 2003 because of the financial difficulties of the cooperating companies, employees and activities closely associated with SSN.

(56) The financial situation of SSN gradually deteriorated significantly. Table 1 SSN’s production (PLN million) 2002 2003 2004 2005 2006 30.9.2007 Turnover 424,88 1 114,44 1 303,46 1 416,04 1 199,38 655,87 Operating result –6,16 –39,64 – 119,80 –11,44 – 194,24 – 134,36 Equity 65,01 62,01 112,83 247,96 149,43 81,96 Source: 2006 Information Memorandum, submitted by the Polish authorities on 12 October 2007, and ‘Business plan for SSN for 2008-2012 taking into account the information obtained in the course of the due diligence process carried out in the shipyard’, submitted by letter of 29 February 2008.

(57) The external factors contributing to the difficult financial situation included the depreciation of the dollar (the currency of the yard’s revenues) and the appreciation of the zloty (the currency of the costs), rising steel prices and difficulty in obtaining ship financing following the bankruptcy of SSPH. As regards internal reasons for the yard’s difficulties, it has been recognised that the facilities were in poor condition and required significant upgrading. From 2006 the yard faced serious workforce problems: a high rate of absenteeism, rotation of employees and the outflow of qualified workers to other shipyards, in particular in Germany and Norway, where the wages offered were significantly higher.

2.2. DECISION TO INITIATE THE PROCEDURE UNDER ARTICLE 88(2) OF THE EC TREATY

(58) In its decision to initiate the formal investigation procedure, the Commission initially found that some of the measures notified to it constituted new aid under point 3 of Annex IV to the Accession Treaty because they were not granted at the time of accession. The Commission listed these measures in part B of the Annex to that decision.

(59) The Commission also decided that a number of measures, listed in part A of the Annex to the decision to initiate the formal investigation procedure, were granted to SSN prior to 1 May 2004 and were not applicable after accession within the meaning of point 3 of Annex IV to the Accession Treaty, and would not therefore be examined under the procedure laid down in Article 88(2) of the EC Treaty. Those measures are not therefore covered by the present Decision. None the less, they have to be taken into account when assessing the compatibility with the common market of the measures granted after accession.

(60) In essence, with regard to the measures listed in part B of the Annex to the decision to initiate the formal investigation procedure, the Commission argued that a legally binding decision on these measures had not been taken prior to accession, although it recognised that some preliminary steps towards such a decision had been taken.

(61) The first of these measures is a capital injection by ARP. The 2003 restructuring plan provided for a capital injection of PLN 241 752 900 but only a part of this capital injection (PLN 180 million) was implemented before accession. ARP was, however, unable to implement the entire capital increase of PLN 241 752 900 for budgetary reasons. According to Poland, the decision to implement the remaining capital increase (PLN 61 752 652) was taken on 21 December 2004.

(62) The second and third aid measures are performance guarantees provided by ARP (each corresponding to aid of PLN 1 935 000). These guarantees relate to ships contracted in 2002. The guarantees for the subsequent ships were to be issued as soon as the previous ships were delivered. Thus the guarantees for ships 7 and 8 were supposed to be granted when ships 4 and 5 were delivered (in 2005).

(63) The last set of measures which, according to the information available, were not granted before accession, are measures granted to SSN by the City of Szczecin in the form of write-offs and deferrals of payment of real estate tax. In total these measures represent PLN 12,5 million. These measures, according to the information provided by the Polish authorities (5), have not been granted to the yard to this day.

(64) The Commission decided to initiate the formal investigation because of the following doubts as to the compatibility of the restructuring aid with the common market.

(65) Firstly, the Commission had doubts concerning the eligibility of SSN to receive restructuring aid. It appeared that the company had been created to take over the activities of its bankrupt predecessor, without, however, taking over the debts of the latter. The Commission therefore considered that SSN was a new company within the meaning of the applicable Community guidelines.

(66) Secondly, the Commission had doubts as to whether the restructuring activities (already carried out and ongoing) would lead to the long-term viability of SSN. The restructuring undertaken by the yard mainly concerned reducing debt and improving liquidity in order to permit production to continue. The alleged costs of genuine restructuring activities included the costs of purchasing the means of production from the receiver in bankruptcy of SSPH and SS. The Commission noted that even at the end of the restructuring period the planned level of productivity would remain relatively low compared with that of competing European shipyards.

(67) Thirdly, based on the information available, the Commission had doubts as to whether appropriate compensatory measures had been adopted, as in fact no genuine reduction of production capacity had been implemented at the yard.

(68) Fourthly, the Commission had doubts as to whether some of the alleged restructuring costs, such as the costs of purchasing production assets, should be considered eligible as genuinely related to the restructuring.

(69) Finally, the Commission had doubts as to whether the beneficiary’s own contribution to the restructuring plan, either from its own resources or from external financing on market terms, was significant. In particular, the Commission doubted whether the use of cumulated profit constituted an own contribution. In addition, the Commission noted that 78 % of the alleged own contribution was made up of advance payments from shipowners, guaranteed by KUKE, the Polish export credit agency. Considering that SSN was a company in financial difficulties, the Commission had doubts as to whether the guarantee premiums charged appropriately reflected the risk involved, whether the collateral required by KUKE was sufficient, and, therefore, whether the proposed own contribution was free of State aid.

2.3. COMMENTS FROM INTERESTED PARTIES

2.3.1. COMMENTS FROM POLAND

(70) Following the Commission decision to initiate the formal investigation procedure, the Polish authorities submitted their comments on the decision. The beneficiary did not present any separate arguments but endorsed the submission of the Polish Government.

(71) The Polish authorities raised several issues. The main contested issue was whether certain aid measures were put into effect before the accession of Poland to the European Union, i.e. before 1 May 2004, and were not applicable after accession. Such measures cannot be examined by the Commission; only measures that were not granted before accession are assessed by the Commission as notified aid or as unlawful aid pursuant to the procedure laid down in Article 88(2) of the EC Treaty.

(72) The Polish authorities contested the Commission’s finding that the measures presented in part B of the Annex to the decision to initiate the formal investigation procedure constituted new aid. The Polish authorities argued that all the measures included in that table were granted before Poland’s accession and therefore no new aid was planned or granted to SSN.

(73) Firstly, the Polish authorities argued that SSN had had legitimate expectations that the aid envisaged in the 2003 restructuring plan was compatible with State aid law. The Polish authorities referred in particular to two documents: ‘Situation of the Polish shipbuilding industry, recommended actions and support for this sector’ (adopted by the Council of Ministers on 16 July 2002) and ‘Mid-term strategy of guarantees from the State Treasury up to 2010’ (adopted by the Council of Ministers on 10 June 2003). The Polish authorities argued that these and similar actions by the central, regional and municipal authorities had been part of a widespread programme to save the shipbuilding industry.

(74) Secondly, the Polish authorities claimed that the Commission, by requiring the adoption of a ‘legally binding act’, was applying the criteria of EC law to events and national law prior to accession. Poland asserted that Polish State aid legislation had applied prior to accession and that this legislation ‘did not provide for a formal decision granting the aid addressed to the beneficiary at any point of the procedure.’ All the Polish legislation required was approval of the restructuring plan and the aid measures contained therein by the President of the Office for Competition and Consumer Protection, which had indeed been given. The Polish authorities argued that ‘it is uncontested that each measure contained in the finally approved restructuring plan was agreed between SSN and the relevant aid-granting authority’. Furthermore, Poland submitted that the provisions of EC law were not applicable to events which took place before Poland’s accession and that the Fleuren case (6), to which the Commission referred in its decision to initiate the formal investigation, differed fundamentally from the present case.

(75) Thirdly, it was argued that the approval of the restructuring plan by the Supervisory Board of SSN should be considered an aid-granting event. In response to the Commission’s doubts as to whether the Supervisory Board was the entity entitled to adopt decisions with financial repercussions binding on shareholders, Poland submitted that the Supervisory Board represented the interests of the shareholders because it was appointed by them. The members of the Supervisory Board acted on instructions from the shareholders (ARP and the State Treasury) and their acts constituted a commitment of the ARP and the State Treasury to grant the aid.

(76) Fourthly, Poland argued that the approval of the 2003 restructuring plan by the ARP team for the shipbuilding industry had reinforced the legitimate expectations of the yard because the members of this team were all representatives of ARP on the Supervisory Board. Poland also confirmed that the real decisions were taken by the Supervisory Board and the ARP shareholders’ meeting.

(77) Finally, the Polish authorities claimed that the aid had been granted before accession because the exposure of the State had been specified in the 2003 restructuring plan and was therefore known before accession.

(78) The Polish authorities referred to the rollover system, under which a new guarantee is extended when a previous guarantee expires, and argued that this system, and thus all guarantees covered by it, had been approved by the Supervisory Board as part of the 2003 restructuring plan. They cited the criteria for assessing whether a guarantee was applicable after accession and considered these criteria to be decisive in determining whether the aid was granted.

(79) The Polish authorities did not react to the Commission’s argument that ARP had not taken the same procedural steps in the case of the two contested guarantees as it had done in the case of guarantees granted previously. The Polish authorities did not dispute the Commission’s understanding that the shipbuilding contracts concluded in 2002 contained a clause permitting the buyer to terminate the contract unilaterally if the yard did not provide a performance guarantee within a certain time-frame.

(80) Poland argued that the State’s precise economic exposure for these measures had been known before accession. It confirmed that the granting authority could not issue final decisions on deferral and write-off ex ante.

(81) In reply to the Commission’s doubts as to whether the shipyard, as a company created following the bankruptcy of the previous company which operated shipbuilding activities in Szczecin, was eligible for restructuring aid, Poland submitted that the beneficiary of the aid had existed under a different name (ASS) before the bankruptcy of the previous entity, and had been involved in shipbuilding.

(82) The Polish authorities also provided comments concerning other aspects of the Commission decision. In particular, Poland submitted that the restructuring of SSN had had an impact on many areas of its activity and was aimed at substantially improving the efficiency of the yard. The yard had adopted a more focused strategy, implemented employment restructuring, improved productivity, introduced a more effective management system and improved its financial situation. It was expecting profits in 2005.

(83) Poland also submitted that adequate compensatory measures had been implemented by the yard as SSN had acquired only part of both the land and the structures previously owned by SSPH, and these were directly linked to the yard’s shipbuilding capacity.

(84) The Polish authorities argued that the proposed own contribution was sufficient. In particular, the future profits with which the yard intended to finance part of the restructuring costs could not be considered State resources and therefore constituted an own contribution. The Polish authorities claimed that the advance payments guaranteed by the Polish export credits insurance agency KUKE, which financed the yard’s operation, should also be considered an own contribution. Poland described the conditions under which KUKE issued these guarantees (the premiums and the type of collateral required) and underlined that KUKE had not had to make any payments to shipowners under the guarantees provided.

(85) The Polish authorities noted that the adoption of restructuring measures had improved the yard’s financial standing and as a result it had been able to demonstrate its viability.

2.3.2. COMMENTS FROM OTHER INTERESTED PARTIES

(86) The Polish shipbuilding employers’ association Forum Okrętowe explained the reasons for the yard’s difficulties and stated that in its opinion the yard had survived only thanks to successful implementation of its restructuring plan and State aid received for restructuring.

(87) The yard’s supplier of deck cranes and anchor and mooring equipment, Towimor SA, stated that the yard had restored its shipbuilding capacities and survived the crises of 2002-2004 only because ARP had taken the lead in the restructuring process. The company emphasised that the restructuring plan was being successfully implemented and the improvements achieved were of a long-term nature.

(88) Lubmor Sp. z o.o., a supplier of interior equipment for vessels, stressed the importance of SSN’s existence for itself and for other companies cooperating with the yard.

(89) Another supplier, H. Cegielski, which mainly produces marine engines, emphasised that the successful restructuring of SSN had saved the whole shipbuilding sector in 2002-2004 and the yard’s systematically improving financial results indicated that the restructuring measures were leading to long-term improvements.

(90) Spliethoff’s Bevrachtingskantoor BV, a customer of SSN, highlighted the yard’s extensive know-how in various segments of shipbuilding and the quality of the vessels that it had built. The shipowner pointed out that SSN had constructed eight multipurpose vessels for it with high technical requirements and quality standards. The shipowner expressed the hope that the Commission would approve the aid granted to the yard. Other customers of the yard, Peter Dohle Schiffahrts–KG and Odfjell, expressed similar opinions.

(91) The trade union Solidarność emphasised the importance of the shipyard for employment and the economic situation of the whole region. It expressed the hope that the Commission would immediately end the investigation and approve the aid received by the yard.

(92) The Mayor of Szczecin underlined the importance of the yard’s existence for the region and noted that despite certain delays the restructuring that had been implemented had produced the expected results and the yard was able to compete on the market in the long term.

(93) Business Club Szczecin, an association of employers for the development of Szczecin and Western Pomerania, expressed its support for the restructuring of SSN. It described the difficulties facing the region following the bankruptcy of SSPH in 2002 and stated that the Polish authorities’ support for the yard had made it possible to overcome the crisis.

2.4. DEVELOPMENTS FOLLOWING THE COMMISSION DECISION TO START THE FORMAL INVESTIGATION PROCEDURE

(94) The Commission investigation and the relevant events are summarised below.

(95) In reply to the Commission’s decision to initiate the formal investigation procedure, in the autumn of 2005 the Polish authorities submitted two lines of argument: on the one hand they questioned the Commission’s competence to act in respect of the measures identified as new aid in the Commission’s decision, and on the other they argued that even if these measures constituted new aid, they were compatible with the common market as restructuring aid.

(96) In support of its argument that the aid was compatible, Poland submitted the 2003 restructuring plan to the Commission. The Commission studied the 2003 restructuring plan and sought the assistance of an external consultant. The Commission concluded that the 2003 restructuring plan did not fulfil any of the conditions for the approval of restructuring aid laid down in the applicable guidelines.

(97) In December 2005 the Commission learned from public sources (7) that KPS, a capital group under public ownership, had been created with the aim of integrating the three major Polish shipyards in Gdynia, Gdansk and Szczecin under one umbrella (hereinafter the consolidation plan). The main role of KPS was to provide financing for the shipyards’ production. Poland had not informed the Commission about the consolidation plan at any stage of the procedure, either before or after the decision to initiate the formal investigation procedure.

(98) At the Commission’s request, at the beginning of 2006 the Polish authorities explained that the consolidation plan had indeed been considered previously but had been abandoned and a new strategy for restructuring the Polish shipbuilding sector would be adopted shortly. Poland clarified that the role of KPS was to provide operational financing for the Polish shipyards, mainly in the form of short-term loans.

(99) At a meeting between the Polish authorities and Commission staff on 22 February 2006, the Commission informed Poland that, on the basis of the information at its disposal, it was unable to conclude that the 2003 restructuring plan was sufficient to restore the yard to long-term viability. The Commission stressed that the 2003 restructuring plan was a start-up plan, which mainly addressed the financial measures necessary to resume operation after the bankruptcy of SSPH, rather than a restructuring plan which guaranteed the restoration of long-term viability. In particular, the investments envisaged were insufficient in view of the poor condition of the yard’s equipment and installations. The Polish authorities and the yard maintained that the yard had already restored viability. Nevertheless, Poland acknowledged that the yard really did need substantial modernisation investment of at least PLN 200 million and would therefore be sold to a private investor in 2008-2009. At the meeting, the Polish authorities confirmed that a new restructuring plan or a revised version of the 2003 restructuring plan would be submitted to the Commission.

(100) Following the meeting the Polish authorities undertook (8) to submit an amended restructuring plan for SSN to the Commission by 22 May 2006.

(101) On 26 June 2006 the Commission received a first draft restructuring plan entitled ‘Development plan for Stocznia Szczecińska Nowa Sp. z o.o. for’ 2006-2011 drawn up with the assistance of the consultancy firm Deloitte Advisory.

(102) The Commission expressed strong concerns with regard to this draft during an on-site visit on 13 June 2006 and in writing on 17 July 2006, pointing out that the first draft restructuring plan did not appear to be sufficiently far-reaching to ensure that the yard would recover long-term viability. The Commission underlined that restructuring needed to be financed in significant part from own resources free of State aid, which was not envisaged in the draft plan submitted, and that meaningful compensatory measures needed to be implemented. Noting the continuing reliance on guarantees provided by KUKE, a government agency, the Commission warned the yard and the Polish authorities that these guarantees constituted State aid. The Commission urged Poland to revise the draft restructuring plan and submit a complete version of the plan by the end of August 2006.

(103) Despite these warnings, the 2006 restructuring plan eventually submitted by Poland in September 2006, two months late, did not differ substantially from the first draft. The main criticisms of the 2006 restructuring plan are described below.

(104) In September 2006 Poland informed the Commission that on 31 August 2006 the General Assembly of SSN had decided to increase the yard’s capital by PLN 95 million and to prepare by 15 October 2006 offers for potential investors interested in acquiring the newly issued shares. By 31 December 2006 only two companies had expressed an interest in acquiring shares in SSN: a Polish steel-trading company, Złomrex, and ISD Polska, a subsidiary of the Ukrainian steel producer Donbas.

(105) At a meeting on 7 December 2006 (and in writing by letter of 29 January 2007), the Commission explained to the Polish authorities that the 2006 restructuring plan did not fulfil any of the conditions for approval of restructuring aid under the applicable guidelines. At the meeting the Polish authorities undertook to privatise the yard in order to improve the prospects of restoring viability and secure a sufficient own contribution to the restructuring. The Polish authorities then confirmed the undertaking to privatise the yard by 30 June 2007 in a letter of 5 January 2007. While the privatisation documents were being drawn up, Poland asked the Commission to indicate what compensatory measures it considered necessary for SSN so that potential investors could be informed accordingly.

(106) Following an agreement between Commissioner Neelie Kroes and Minister Piotr Wozniak of December 2006, the Commission engaged in an intensive debate with the Polish authorities and SSN with a view to determining the compensatory measures necessary. Poland submitted a proposal for compensatory measures in SSN and undertook to close slipway Wulkan 1 once the shipbuilding contracts already signed had been implemented, i.e. in March 2010.

(107) The Commission requested a range of data from SSN. Eventually, Commission staff informed Poland by letter of 31 July 2007 that they provisionally considered the closure of the Wulkan 1 slipway to be a sufficient compensatory measure, provided that the facility was irreversibly disabled for the purposes of ship assembly and launching and that the closure was implemented by 1 June 2009, or earlier if construction of the 587-IV/09, the last of the vessels scheduled for assembly on that slipway, was completed earlier. Furthermore, in 2009 the Wulkan 1 slipway could only be used for assembly of the 587-IV/09. The basis for this conclusion of the Commission is described below. The Polish authorities confirmed their intention of implementing the capacity reductions as described in the Commission’s letter.

(108) In February 2007 the yard’s management sent invitations to purchase a majority stake in SSN to 57 potential investors. At that time the yard had already been negotiating for several months with Zlomrex, but in the end no decision was taken.

(109) A new privatisation effort commenced in autumn 2007. The Commission was consulted on a draft Information Memorandum in August and September 2007. In September the privatisation consultant of KPS and ARP sent invitations to submit offers to 221 potential investors.

(110) Six potential investors expressed an interest in acquiring shares in the yard and requested a copy of its Information Memorandum. The deadline for the submission of offers by potential investors had been postponed several times.

(111) Noting delays in the privatisation process, the Commission urged Poland by letter of 3 October 2007 to complete it without delay. By letter of 23 October 2007 Poland informed the Commission that the privatisation would not be completed as planned by the end of 2007. Instead Poland undertook to commence negotiations with selected investors as of January 2008. The Commission reiterated its concern about the delays by letter of 30 November 2007 and specified that it expected the new owner of SSN to submit the first draft of a new restructuring plan by the end of February 2008. This request was then repeated by the Commission on numerous occasions. The Commission repeatedly insisted on strict adherence to the privatisation schedule.

(112) After completing a due diligence process, on 20 December 2007 Amber, the only potential investor interested in acquiring SSN, submitted a conditional binding offer, which was assessed by the privatisation consultant of KPS and ARP.

(113) As of 20 March 2008 Amber was granted exclusive negotiating rights, which were then extended several times and finally expired on 12 May 2008.

(114) On 29 February 2008 Poland forwarded to the Commission a first draft restructuring plan for SSN drawn up by Amber (9). Amber submitted updated financial projections by e-mail of 9 April 2008. The Commission provided oral comments on this draft at a meeting in Warsaw on 10 April 2008 between Commission staff, the Polish authorities, the yard and Amber, and sent written comments in a letter of 21 April 2008.

(115) At a meeting with the Polish authorities on 12 May 2008, Amber announced that it was withdrawing from the SSN privatisation process. Poland informed the Commission about this development on the same day. In its explanation to the State Treasury, Amber explained that the principal reason for its withdrawal was the fact that after an in-depth due diligence investigation of the yard’s situation it had concluded that the yard would not become profitable even after implementation of the restructuring measures, including significant investment. Since Amber was the only bidder, its withdrawal meant that the privatisation process launched in 2007 had come to an end.

(116) On 26 May 2008 Poland informed the Commission that the privatisation process had been relaunched. In subsequent daily reports, Poland informed the Commission about the action taken by the Polish authorities to find a buyer for SSN. Poland sent the Commission several letters in which potential investors asked to be informed about the continuing privatisation process and to be sent the Information Memorandum when it was available.

(117) At a meeting of 13 June 2008 the Polish authorities informed the Commission that several companies intended to submit restructuring plans to the Commission by 26 June 2008. The Commission subsequently met, at the request of the Polish authorities and in their presence, two potential investors who had expressed an interest in purchasing SSN: the Norwegian company Ulstein and the Polish company Mostostal Chojnice. At these meetings both companies presented their restructuring strategies to the Commission.

(118) Poland subsequently submitted to the Commission a draft restructuring plan drawn up by Mostostal Chojnice, dated June 2008 and entitled ‘Draft restructuring programme for SSN for 2008-2018, work in progress’ (hereinafter June 2008 Restructuring Plan). On 7 July Poland informed the Commission that Mostostal and Ulstein had signed a letter of intent for possible cooperation should Mostostal become the owner of SSN. In connection with this letter of intent, Poland submitted to the Commission an updated restructuring plan drawn up by Mostostal.

(119) By letter of 14 July 2008 Poland informed the Commission that the SSN privatisation process was continuing and requested additional time for the potential investors to finalise the restructuring plan. Poland undertook to submit a complete restructuring plan for SSN to the Commission by 12 September 2008 at the latest.

(120) The Commission agreed to the proposed deadline for the full restructuring plan.

(121) On 12 September 2008 Poland submitted a final restructuring plan for the yard entitled ‘Restructuring programme for Stocznia Szczecińska Nowa for 2008-2012’ (hereinafter restructuring plan of 12 September 2008).

(122) On 22 September Ulstein informed the Commission that it was withdrawing from the privatisation process. In this situation, the Commission considers that the plan of September 2008 based on cooperation between Ulstein and Mostostal is no longer valid. Nevertheless, this plan will be described and assessed below, in particular since Mostostal announced in its letter of 22 September that it would implement the plan alone.

(123) At a meeting on 30 September 2008, Mostostal informed the Commission that it still intended to cooperate with Ulstein on the restructuring of SSN. Mostostal presented a draft agreement with Ulstein — not signed or even initialled — on the basis of which the two companies were to set up a preferential supplier-customer relationship. Ulstein was to subcontract to the Szczecin shipyard the production of hulls, and later complete off-shore vessels, for the Ulstein group on market terms. Again on market terms, Ulstein was also to share its know-how and experience in the shipbuilding sector with Mostostal. The new draft cooperation agreement did not envisage any financial contribution by Ulstein to the restructuring plan of 12 September 2008.

2.5. RESTRUCTURING PLAN OF SEPTEMBER 2006

(124) The amended restructuring plan covered the period 2006-2011. It had been drawn up in cooperation with the consultancy firm Deloitte and its objective was to complete the restructuring that had started in 2002 on the basis of a plan submitted to the Commission in October 2005, which had been deemed insufficient to restore the undertaking’s viability. Under the amended restructuring plan, the yard was to recover long-term viability in 2009.

(125) One of the core pillars of the new restructuring plan was the reorientation of SSN to the production of high-tech vessels. This reorientation was based on the following considerations: higher added value, growing price competition in lower technology segments, the technical incapacity of SSN to produce very large container vessels for which demand was currently growing and the existing know-how of SSN, in particular with regard to highly specialised duplex stainless steel chemical tankers.

(126) While the current order book (for delivery in 2008-2009) was composed mainly of container vessels (70 %), the yard was already producing higher-end chemical tankers and con-ro ships (30 %). The plan assumed that by 2010 the yard would expand its product range in three market segments, namely chemical tankers, ro-ro (including con-ro and ro-pax) and high-tech multipurpose ships.

(127) Implementation of the new strategy was to be accompanied by marketing and sales campaigns as well as organisational and technological changes in the yard. The total cost of the planned investments and initiatives was estimated at PLN 203,9 million. The investments and initiatives were to be implemented in the period 2006-2009.

(128) To address the problem of high absenteeism and the outflow of qualified workers, the plan included pay increases. These would mean that average pay in 2011 would be 28 % higher than average pay in 2006.

(129) The plan provided for a further reduction of the workforce to 4 298 employees by 2011, bringing the workforce down by approximately 20 % from its 2006 level (5 322) and 53 % in total from its 2001 level (8 071). Nevertheless, it was not clear from the plan whether this reduction involved redundancies or transfers to subsidiaries.

(130) Other measures designed to motivate the skilled workforce were formulated in a very general manner: a new human resources policy would be developed, the optimum employment level would be identified, the current evaluation system would be reviewed and an incentive plan would be developed. Similar projects were planned for middle management.

(131) The plan contained measures relating to financial policy optimisation, such as the plan to introduce contractual provisions lowering the risk of exposure to fluctuations in materials prices and exchange rates (natural hedging) and the plan to negotiate with banks to obtain forward contracts. There was no evidence of successful negotiation of forward contracts with private banks.

(132) At the end of the restructuring period in 2011, the yard’s production was expected to reach 211 682 CGT compared to 213 044 CGT in 2005.

(133) The reduction of the workforce would result in an increase of productivity from 34 CGT/employee in 2003 to 49,3 CGT/employee in 2011. In terms of man hours/CGT, productivity in 2003 had been 47. Target productivity for 2011 was 34 man hours/CGT.

(134) The plan forecast that the return on capital employed (ROCE), not taking pay increases into account, would be 19 % p.a. on average in 2007-2011, which, it was claimed, was the level of return expected by a private investor. The forecast taking pay increases into account was 1,45 % p.a.

(135) The plan also included a sensitivity analysis in respect of changes in the assumed exchange rates, labour costs and steel prices. The plan analysed the following factors: appreciation of the zloty by 5 % and 10 % over the restructuring period 2006-2011 (the underlying assumption being PLN 3,26/USD), annual pay increases of 7,5 % (the underlying assumption being 5 % per annum) and steel price increases of 20 %.

(136) The plan assumed that the existing model of financing operations from shipowners ‘advance payments guaranteed by KUKE, State Treasury guarantees and State loans would be replaced with shipowners’ advance payments guaranteed by KUKE and commercial loans.

(137) The plan referred to financing in the form of additional State Treasury guarantees on loans of USD 35 million for 2006 and 2007 and USD 25 million for 2008 and 2009. It also envisaged replacing KUKE guarantees with guarantees obtained on the market and obtaining commercial loans. The 2006 restructuring plan identified only one successful guarantee contract. The plan envisaged continuing to use KUKE guarantees with an average annual limit of USD 200 million.

(138) The plan assumed restructuring costs of PLN 374,7 million and operational costs during the restructuring period of PLN 11 120 million. Both these figures were for the period 2002-2009. The cost of planned initiatives and investments was estimated at PLN 203,9 million. The financial restructuring was declared to be finished, apart from a write-off of PLN 20,7 million.

(139) The restructuring was to be financed from external funds in the amount of PLN 190 million, including PLN 95 million from an increase in the share capital of the yard through the issue of new shares to be taken over by a private investor. A resolution on increasing share capital had been adopted by an extraordinary shareholders’ meeting. In September 2006, a subscription for new shares worth PLN 95 million would mean acquisition of a 21 % share in SSN, the remainder staying with the State.

(140) The remaining PLN 95 million was supposed to come from a long-term investment loan, also from a private source. According to the financial forecast, the capital increase as well as the long-term investment loan were supposed to be implemented over the period 2006-2009.

(141) In addition, the plan counted as an own contribution PLN 165,9 million of trade credit, which was not further described.

(142) The plan stated that additional payments from shipowners of PLN 628,7 million after the renegotiation of contracts should be considered an own contribution.

(143) The plan counted on financing ongoing operations from commercial loans and shipowners’ advance payments not guaranteed by KUKE, the total value of which throughout the restructuring period 2002-2009 was projected to be PLN 3 200 million.

(144) The plan assumed that the future cash flow of PLN 399 million would be used in part (PLN 14,5 million) for investments and in part for operational activity. However, the plan explicitly recognised that this did not constitute own funds within the meaning of the applicable Community guidelines.

(145) According to the restructuring plan, compensatory measures had been implemented by SSN in the form of a reduction of capacity resulting from the fact that SSN had not taken over a significant proportion of the assets and workforce of SSPH after its bankruptcy. In 2001, i.e. before the bankruptcy of SSPH, that company had allegedly had a maximum annual production capacity of 345 600 CGT, having had maximum production capacity of 322 000 CGT in 1995-1999 (average annual production in this period being 244 000 CGT). The restructuring plan stated that the current capacity of SSN was 255 720 CGT. Thus, according to the plan, the capacity reduction amounted to almost 100 000 CGT.

2.6. RESTRUCTURING PLAN OF JUNE 2008

(146) Mostostal is a company established in Poland, 100 % owned by the KEM group. The company produces steel structures of various types (bridges, cranes, buildings etc). Previously a State-owned company, it was privatised in 1992, and since 2003 has belonged to the family-owned industrial group KEM. KEM is active in processing and trading steel scrap and wholesale trading in metallurgical products, such as the ones produced by Mostostal. KEM’s turnover in 2007 was PLN 700 million (EUR 207 million), of which PLN 100 million (EUR 30 million) was generated by Mostostal.

(147) The core business strategy was diversification of the yard into two principal activities: steel construction and shipbuilding. This was to alleviate the yard’s vulnerability to fluctuations on the shipbuilding market. The product restructuring was to take place in two phases. In the first phase, up to the beginning of 2009, the yard would complete its existing order book of ships and commence work on steel construction. In the second phase, the steel construction business would expand, with the ultimate goal of using 50 % of production capacity, with the other 50 % to be used for shipbuilding.

(148) For the shipbuilding business, Mostostal based its plan on a partnership with the Norwegian shipbuilder Ulstein. On 7 July 2008 the two companies signed a letter of intent agreeing to negotiate over a possible cooperation agreement. The cooperation was to consist principally in Ulstein using part of SSN’s capacity.

(149) For the steel construction business, Mostostal intended to use the production facilities in Szczecin shipyard to expand its own production, and to exploit the access to maritime transport. The plan was optimistic about the development of the Polish market for steel structures, expecting in particular large-scale investment in infrastructure in Poland. As to the shipbuilding business, the plan envisaged the construction of ro-pax type vessels and multipurpose vessels, arguing that in these segments prices were on ‘an upward trend independently of the evolution of the shipbuilding markets’.

(150) The plan envisaged asset restructuring consisting in the hiving off of about 30 % of the current production surface to other than core activities, including leasing to a third party. One slipway, Wulkan 1, was to be taken out of shipbuilding production and used for steel construction for purposes other than shipbuilding. This was presented in the plan as a compensatory measure.

(151) The plan envisaged investment of PLN 264 million in 2008-2012 and additional investment of PLN 90 million in 2013-2018. The plan listed the investments and estimated savings in terms of man hours and operating costs. However, it also mentioned that on 12 June 2008 the yard had concluded an agreement with an external consultant to prepare a plan for the modernisation of the yard, including identification of the necessary investments.

(152) The restructuring plan envisaged increasing the workforce by 14 % to 5 010 employees in 2012.

(153) It assumed that shipbuilding would be financed from advance payments from shipowners of 80-90 % of the sale price.

(154) According to the plan, the success of the restructuring depended on the yard receiving additional State aid. It envisaged several capital injections and a debt-for-equity swap to be granted by the State Treasury or subordinate public bodies, worth a total of PLN 588 million. This included the capital injection of PLN 145 million by ARP decided upon in June 2008. In addition, the plan envisaged obtaining a loan of USD 32 million (PLN 68 million) from ARP. Finally, the plan envisaged further advance payment guarantees from KUKE of a nominal value of PLN 431 million.

(155) The investor had stated that it was willing to inject capital of PLN 149,5 million to finance part of the investment programme for 2008-2012. The remaining part of the investment programme for this period was to be financed from the yard’s cash flow.

(156) Finally, the plan presented financial projections for the restructuring period 2008-2012, showing a return to profitability as of 2010. The plan listed, in a general manner and unsupported by evidence, a series of assumptions on the basis of which the financial projections had been elaborated, but did not contain the financial model used to arrive at the estimates. The return on equity to be achieved in 2012 would be, according to the plan, in the region of 26 %, but the plan recognised that this apparently high profitability was the result of equity remaining low because of accumulated losses from previous years. A more realistic scenario, not taking accumulated losses into account, was that the return on equity should reach 7,6 % in 2011 and 9,8 % in 2012, which, according to the plan, would mean borderline profitability for the envisaged investment.

(157) The projected balance sheet showed that the value of fixed assets should increase from about PLN 100 million in 2008 to PLN 200 million in 2012.

2.7. RESTRUCTURING PLAN OF 12 SEPTEMBER 2008

(158) The restructuring plan of 12 September 2008 was based on assumptions similar to those of the plan of June 2008. Diversification of activities remained the most important strategic idea and the success of the restructuring was to be achieved through cooperation between Mostostal and Ulstein, combining their experience in the steel construction and shipbuilding sectors. Compared to the June version, the revised restructuring plan was more developed as regards some restructuring measures and practical implementation of the assumed diversification of activities; this is reflected in the planned organisational and corporate restructuring (see Table 2 below).

(159) The plan assumed that the existing yard, renamed ‘SSN Nowa’, would complete production of the loss-making vessels in the current order book and would then be wound up. The assets of the yard would be sold to three new companies: SSN Mostostal (wholly owned by Mostostal), SSN Ulstein (wholly owned by Ulstein) and SSN Wspólna (owned by Mostostal and Ulstein, each holding 50 % of the shares). Furthermore, the current design office would become a separate company called SSN Biuro Projektowe. The plan envisaged that in 2010 Mostostal would set up another new company, SSN Odra, which would continue the shipyard’s current shipbuilding and produce ro-pax, ro-ro, and con-ro vessels and chemical tankers. Table 2 Corporate restructuring of SSN envisaged in the restructuring plan of 12 September 2008 Ownership Activity Capital injections (PLN million) Turnover (PLN million) Workforce Investment programme (PLN million) SSN Nowa 100 % Mostostal Shipbuilding — current order book 434 (State aid) In 2009: 680 In 2010: 1 000 Later: 0 4 011 in 2009, target — 0 None SSN Mostostal 100 % Mostostal Steel construction 80 148 (10 %) 297 in 2009, target — 352 59 SSN Ulstein 100 % Ulstein Shipbuilding — offshore vessels 67,3 155 (11 %) 150 10 SSN Wspólna 50 % Mostostal, 50 % Ulstein Steel prefabrication 95 370-400 (28 %) 1 062 in 2009, target — 663 34,5 SSN Biuro Projektowe 50 % Mostostal, 50 % Ulstein Design 0,2 9 (0,6 %) 150 0,5 SSN Odra 100 % Mostostal Shipbuilding — ro-pax, ro-ro, chemical tankers 0,2 600-700 (49 %) 835 in 2010, target — 500 None Total 434 by the State and 242,7 by investors 1 412 1 815 104

(160) The plan assumed that SSN Nowa and SSN Odra, the companies which were supposed to continue the current shipbuilding activity of the yard, would have no assets and would subcontract steel prefabrication to SSN Wspólna and use the capacity of SSN Mostostal or SSN Ulstein for the assembly and outfitting of vessels. The plan did not describe how this sharing of capacities would be managed in practice or on what terms the capacity would be made available to SSN Nowa and later to SSN Odra.

(161) The two companies SSN Ulstein and SSN Mostostal were to enter new markets of which SSN had had no experience; nevertheless, the plan did not provide analyses of these markets.

(162) The plan explained that Ulstein currently subcontracted the production of hulls but intended to control the earlier stages of production too and thus, by acquiring capacity in Szczecin, achieve vertical integration of the production process. SSN Ulstein allowed for a reasonable learning curve and planned to build hulls at first and then semi-equipped and fully-equipped offshore vessels. The plan did not provide details concerning the planned volume of production, assumed prices of hulls/vessels, costs, profitability, etc.

(163) The reasons for Mostostal investing in the Szczecin shipyard remained the same as in the restructuring plan of June 2008. The investor’s aim was to expand its capacity in the production of steel structures and to obtain direct access to water transport, which would decrease its transport costs by allowing the transport of bigger fully assembled structures. The planned volume of production, assumed prices, costs, margins, etc. were not described.

(164) The plan did not envisage restructuring SSN Nowa, assuming that it would be wound up after completion of the loss-making vessels in the current order book. The plan contained a market analysis of the shipbuilding sector, which, however, to a large extent referred to market segments in which the yard did not plan to be active in the future.

(165) The plan did not contain a business plan for SSN Odra. As regards the strategy of SSN Odra, the plan assumed that that company would obtain profitable contracts from the State-owned Polska Żegluga Morska (Polish Steamship Company) for the production of ro-pax passenger vessels. In addition, SSN Odra might consider production of a military version of these vessels, but no further information on this subject was presented.

(166) Finally, SSN Wspólna was mainly to provide services to the other companies. The plan estimated that the steel processing capacity of SSN Wspólna would be 74 thousand tonnes. SSN Ulstein would need 15-20 thousand tonnes and SSN Mostostal 12-15 thousand tonnes. The plan envisaged that approximately 30 thousand tonnes of steel would be allocated to shipbuilding activity other than that of SSN Ulstein. In addition the plan suggested that the remaining capacity of SSN Wspólna (9-17 thousand tonnes of steel, i.e. 12-23 % of capacity) would be used for subcontracting for other companies, but it did not describe the target market, demand or what profitability could be achieved.

(167) In addition to organisational restructuring, the plan envisaged restructuring assets, financial restructuring and a significant reduction of the workforce.

(168) The plan envisaged total investment of PLN 104 million in SSN Ulstein, SSN Mostostal and SSN Wspólna. In addition, SSN Nowa would invest PLN […] (10) million in relocating some production assets in order to free up land, the sale of which was to generate cash for the restructuring.

(169) As regards the planned closure of one slipway, the plan of 12 September (like the June plan) stated that slipway Wulkan 1 would be used not for shipbuilding but for the production of steel structures by SSN Mostostal.

(170) In terms of employment, the plan envisaged a reduction of almost 60 %, down to 1 815 employees.

(171) The financial projections showed that SSN Ulstein would start activity in 2009 and start to make a profit in 2010. SSN Mostostal and SSN Wspólna were supposed to start operating in 2009 and begin making a profit at once. SSN Odra would start shipbuilding production in 2010 and, according to the financial projections, make profits immediately.

(172) The projected return on sales in the case of SSN Ulstein was 6 %, which the plan considered sufficient. For SSN Odra the return on sales in the first year of production would be 11 % (this would follow from two highly profitable contracts coinciding in that year) and would drop to 7-8 % in the following years. SSN Mostostal assumed a return on sales of 6-9 % in 2009-2011 and 11 % in 2012. The return on sales for SSN Wspólna and SSN Biuro Projektowe would be marginal: 0,4 % in the whole period for SSN Wspólna and 1,6 % for SSN Biuro Projektowe. According to the plan this low return on sales for these two companies would be the result of low margins and was justified because these were service companies working for the companies producing end products, to a large extent using materials provided by the principals.

(173) SSN Nowa was to complete production of the loss-making vessels in the yard’s current order book, which meant that it would continue to make losses over the whole period until it was wound up. Implementation of the plan therefore depended on additional State aid of PLN 430 million being granted to cover the future losses of SSN Nowa. Compared to the June plan, which envisaged a capital injection by the State of PLN 588 million and a loan of PLN 68 million, the required amount of State aid seemed to be less. However, the Commission noted that in the meantime a debt for equity swap by public bodies (ARP and KPS) in the amount of PLN 130 million had been implemented in August 2008.

2.8. COMPENSATORY MEASURES

(174) Following an agreement of December 2006 between the Polish authorities and the Commission, the Commission began intensive talks with the Polish authorities and SSN to determine the necessary compensatory measures.

(175) In cooperation with its external consultant and the yard, the Commission defined the following methodology for evaluating the capacity reduction proposed by Poland as a compensatory measure.

(176) For the compensatory measures to be meaningful, the capacity reduction needed to be sufficient to ensure that the future capacity of the yard after restructuring would be lower than its current capacity.

(177) The Commission first assessed the current technical capacity of the yard, assuming that the assembly of vessels on the slipways constituted one of the bottlenecks in the yard’s production process, which could not easily be overcome by outsourcing. Under the methodology used by the Commission, which was not contested by the Polish authorities or the yard, capacity is calculated using the duration of assembly on a slipway and a typical range of vessels (since vessels vary in CGT value but might take the same time to assemble).

(178) Calculation of current capacity took into account the time actually needed to assemble a (certain type of) ship on a slipway. This time had to reflect all the current deficiencies in the production process, e.g. low productivity, bottlenecks, obsolete assets, inefficient production flow and problems with the workforce. Only the effects of the financial constraints resulting from the yard’s difficult financial situation could be factored out of the assembly time. Irregular access or no access to working capital can seriously disrupt the production process. Since this is an external factor, inherent to all companies in financial difficulties and not linked to the inefficiency of the company itself, the Commission accepted that the actual performance of the yard could be adjusted by assuming smooth access to working capital.

(179) The estimate of future capacity took into account the time probably needed to assemble a (certain type of) ship on the slipway, on the assumption that the yard’s productivity was comparable to a benchmark set by other competing European shipyards. In other words, the effects of the necessary modernisation of facilities and optimisation of working conditions (organisation, finances, supplies, workforce) had to be taken into account.

(180) This modernisation was unavoidable if the yard wished to restore its long-term viability. The associated increase in productivity would allow the yard both to reduce input and to produce faster. As various aspects of production improved, capacity, in the sense of ability to produce a certain volume, would increase. It was therefore important to note that the closure of some facilities, such as the proposed closure of one slipway in the Szczecin shipyard, might be offset by an increase in the capacity of the remaining part of the dock. If the compensatory measures were to remain meaningful, the capacity reduction had to be such that the capacity of the yard at the end of restructuring, i.e. after investment and productivity improvement, was lower than its current capacity. Only in this way could the two goals be reconciled of achieving long-term viability, which entailed increasing productivity, and minimising as much as possible the adverse effects on trade.

(181) To ensure consistency in the calculation of both current capacity and future capacity, the same product mix should be used, i.e. the same types of vessels. Alternatively, one might use as a proxy an ‘average vessel’ (i.e. average CGT value, considering the order book of the yard).

(182) On the basis of information submitted by SSN, its current capacity when operating with financial constraints was estimated at between 177 thousand CGT and 202 thousand CGT, depending on whether the yard’s production was to include chemical tankers or not. The capacity of the yard without financial constraints was 208 thousand CGT (9,15 vessels) if its production was to include chemical tankers and 238 thousand CGT (10,7 vessels) if it was not to include chemical tankers.

(183) The yard stated that the investment envisaged in the 2006 restructuring plan would have no impact on assembly time but would rather translate into cost reduction. It also explained that while some of the investments could potentially reduce assembly time, this effect would be offset by an important change in the production method, consisting in earlier outfitting. The yard also explained that to significantly shorten assembly time it would be necessary to invest in the slipways themselves. The yard quantified this investment at EUR 200 million, an amount which is clearly beyond the yard’s reach.

(184) Therefore future capacity if no facilities were closed would be identical to current capacity with the scenario of no financial constraints, i.e. 208 thousand CGT if production was to include chemical tankers and 238 thousand CGT without chemical tankers.

(185) After the closure of the smallest slipway (Wulkan 1), the capacity of the yard would be between 149 thousand CGT (6,25 vessels) for the least CGT-intensive range (with chemical tankers) and 178 thousand CGT (7,8 vessels) for the most CGT intensive range (without chemical tankers).

(186) On the basis of these figures, the Commission found that the capacity reduction after closure of the small slipway would be between 25 % and 46 %, depending on what product mix was assumed. On this basis and taking into account that the closure of a further slipway would mean a capacity reduction of at least 59 %, the Commission provisionally concluded that the closure of the smallest slipway, Wulkan 1, proposed by Poland would be a sufficient compensatory measure.

2.9. AID MEASURES

(187) The Commission initiated the formal investigation procedure concerning the aid measures described in part B of the annex to the decision. This included a capital injection and two performance guarantees to be granted by ARP and several deferrals and write-offs of real estate tax by the City of Szczecin. The nominal value of these measures was PLN 126 524 652.

(188) Poland informed the Commission that the two performance guarantees listed as measures 62 and 63 in part B of the annex to the decision to initiate the formal investigation procedure were not granted (11). Poland also informed the Commission that the write-offs of real estate tax listed as measures 64 and 68 in part B of the annex to the decision to initiate the formal investigation procedure had been postponed (12).

(189) Table 3 below shows the measures granted between 1 May 2004, the date of Poland’s accession to the EU, and 30 June 2007. Poland notified these measures by letter of 11 July 2007. Their nominal value is PLN 259 560 990. Measure 1 corresponds to measure 61 in part B of the annex to the decision to initiate the formal investigation procedure.

(190) Table 3 includes loans from KPS used to finance the working capital needs of the yard. In letters of 11 July 2007 and 9 January 2008 Poland claimed that these loans did not constitute State aid because the interest charged corresponded to the risk assessment of the particular project for which the loan was sought.

(191) For these loans granted in 2005-2007, KPS charged an interest rate of just over 6 %. The reference rate for Poland in the period when the KPS loans were provided to the yard ranged from 5,56 % to 6,24 %. In addition, KPS charged a one-off fee of between 0,1 % and 0,4 %. According to the Polish authorities, KPS required collateral in the form of acceptance of enforcement, an agreement on cession of receivables, an unconditional payment order, a non-denominated bond or asset pledges (13).

(192) KPS was created in 2004 as a full subsidiary of ARP with the function of a risk capital fund for ARP. Its primary role was to serve as a vehicle for the consolidation of the three major shipyards in Poland, but this project was abandoned in 2006. According to the information provided by Poland in 2006 (14), KPS was to be financed by a capital injection from ARP, a contribution in kind (shares in third companies) provided by ARP and a revolving bank loan guaranteed by ARP, which was specifically designed to support the financing of shipyards. According to the information available on the Government’s website, KPS was also to support shipbuilding operations in Poland through the issue of bonds fully guaranteed by ARP. Indeed, the document ‘A strategy for the shipbuilding sector (maritime construction shipyards) in Poland 2006-2010’ (15) confirms that KPS was to generate resources from an issue of debt instruments worth approximately USD 100 million, secured on the assets earmarked for the restructuring of the shipbuilding industry in the form of funds transferred by the State Treasury to ARP.

(193) Table 4 shows the support provided by ARP and KPS between 30 June 2007 and 15 February 2008 and notified to the Commission after 11 July 2007, by letters of 6 December 2007 and 12 February 2008. It also shows additional loans from ARP and KPS about which the Commission learned from the SSN Information Memorandum of June 2008 (16), the restructuring plan of Mostostal submitted in June 2008 (17) and the restructuring plan submitted in September 2008. The nominal value of these measures is PLN 417 531 254.

(194) Table 5 shows unenforced public-law liabilities in the form of real estate tax arrears of PLN 12 402 000 for the period from July 2003 to December 2004. This measure corresponds to measures 64-68 in part B of the Annex to the decision to initiate the formal investigation procedure.

(195) Considering the precarious financial situation of the yard, the Commission cannot rule out the possibility that further State aid of a similar nature has been granted to SSN.

(196) Finally, SSN benefited from production guarantees from KUKE (hereinafter ‘advance payment guarantees’ or ‘KUKE guarantees’). Practically all the yard’s ship production from 1 May 2004 was financed thanks to these guarantees. In the period between 1 May 2004 and 30 May 2008 SSN received 96 guarantees of a total value of PLN 1 928 869 694 (18). In its submission of 11 July 2007 Poland informed the Commission that KUKE would continue to grant guarantees to SSN in the period up to the end of 2008. According to the restructuring plan submitted on 12 September 2008, another ten KUKE guarantees had been granted to SSN for a total amount of PLN 429 578 282 on 26 June.

(197) It is a common feature of the industry that shipyards typically do not have sufficient working capital for the construction of ships and rely on external financing, whether through borrowing (so-called production loans) or advance payments from shipowners, from which production is financed. Shipowners typically pay 80 % of the price upfront in instalments, coinciding with certain decisive stages in construction, with the remaining 20 % being paid on delivery. The participation of shipowners in the financing of construction is therefore crucial. The role of the KUKE advance payment guarantees provided to SSN was to secure the advance payments from shipowners against the risk of failure on the part of the yard to deliver the ship.

(198) According to the information provided by Poland, the KUKE guarantees were granted to SSN as follows. First, a contract was signed with the shipowner, and was typically conditional upon the yard showing within a certain period of time that the production financing would be guaranteed by KUKE. KUKE issued a decision to the effect that it would ensure financing of the whole ship by guaranteeing the advance payments. In subsequent individual agreements KUKE activated the guarantee for each individual advance payment (typically four). The overall exposure of KUKE to possible failure of the yard to deliver is usually 80 % of the full purchase price corresponding to the total advance payments paid by the shipowner prior to delivery. This overall exposure is known when KUKE issues the decision securing the advance payments made by the shipowner. The guarantee expires on delivery of the ship.

(199) KUKE’s operations as a Polish export credit agency are varied (19), and can essentially be divided into the commercial part of the business and the business conducted on behalf of, and guaranteed by, the State Treasury. The latter business is carried out through a separate bank account, ‘Interes Narodowy’. The guarantees extended to SSN fall within the business guaranteed by the State Treasury.

(200) According to the information provided by Poland, KUKE advance payment guarantees were granted to SSN against a guarantee premium which varied according to the value of the guarantee. The charge was 2 % per annum for guarantees not exceeding PLN 35 million and 1 % per annum for guarantees exceeding PLN 35 million. As collateral KUKE required the transfer of ownership of the ship, the ship under construction or the materials.

(201) It follows from Tables 3-5 and the above information that since 1 May 2004 SSN has benefited from measures of a total nominal value of PLN 3 047 943 120,5 (approximately EUR 896 million). Table 3 State aid granted to SSN between 1 May 2004 and 30 June 2007, data provided by the Polish authorities No Granting body Aid instrument Legal basis Number of decision or agreement Date of granting Date of effect Interest Period for which aid was granted Nominal value of aid (in PLN) 1 2 3 4 5 6 7 8 9 10 1. ARP Capital injection Act of 15.9.2000 Commercial Companies Code (Dz.U. No 94, 1037 as amended) Rep. A No 4528/2004 21.12.2004 20.6.2005 Not applicable One-off aid 61 752 652,83 2. KPS Loan Act of 23.4.1964 Civil code (Dz.U. No 16, 93 as amended) Agreement No 1/10/2005 13.10.2005 14.10.2005 1M WIBOR + 2 % 13.4.2006 20 000 000,00 3. KPS Loan Act of 23.4.1964 Civil Code (Dz.U. No 16, 93 as amended) Agreement No 1/2/2006 15.2.2006 (annexes: 27.4.2006, 24.8.2006, 26.9.2006, 27.11.2006, 21.12.2006, 31.1.2007) 21.2.2006 27.4.2006 27.9.2006 16.2.2007 21.2.2007 30.3.2007 1.5.2007 31.5.2007 No data 31.8.2009 68 405 400,00 (USD 18 000 000,00) 4. KPS Loan Act of 23.4.1964 Civil Code (Dz.U. No 16, 93 as amended) Agreement of 12.1.2007 12.1.2007 3.4.2007 5.4.2007 16.4.2007 26.4.2007 30.4.2007 16.5.2007 31.5.2007 No data 31.1.2009 82 902 937,50 (USD 21 375 000,00) 5. KPS Loan Act of 23.4.1964 Civil Code (Dz.U. No 16, 93 as amended) Agreement No 1/2/2007 9.2.2007 (annexes: 29.3.2007, 4.4.2007) 9.2.2007 WIBOR 1M + 2,25 % 27.4.2007 12 200 000,00 6. KPS Loan Act of 23.4.1964 Civil Code (Dz.U. No 16, 93 as amended) Agreement No 2/2/2007 12.2.2007 12.2.2007 WIBOR 1M + 2,25 % 12.8.2007 14 300 000,00 Total 259 560 990,33 Table 4 Additional State aid granted to SSN from 30 June 2007 to 12 September 2008, data provided by the Polish authorities No Granting body Aid instrument Legal basis Date of granting Nominal value of aid (in PLN) 1 2 3 4 5 6 7. KPS Capital injection Agreement 7.8.2007 9 999 954,69 8. KPS Capital injection 7.8.2007 33 999 919,80 9. ARP Capital injection Agreement between SSN and ARP on State aid in the form of a capital injection 19.9.2008 86 000 151,93 10. ARP Loan Act of 30.8.1996 on commercialisation and privatisation (Dz. U. 02.171.1397 as amended) 5.12.2007 49 000 000,00 11. ARP Loan Agreement OPP/3/08 6.2.2008 41 000 000,00 12. KPS Loan Agreement 1.11.2007 23.11.2007 9 000 000,00 13. KPS Loan Agreement 1.3.2008 5.3.2008 20 000 000,00 14. ARP Loan Agreement OPP/5/08 30.9.2009 32 250 000,00 15. KPS Loan 12.8.2007 4 709 380,37 16. ARP Debt for equity swap Rep. A. No 6603/2008, 8014/2008 20.6.2008 110 999 077,11 17. KPS Debt for equity swap Rep. A. No 6603/2008, 8014/2008 20.6.2008 20 572 770,24 Total 417 531 254,1 Table 5 Public-law liabilities not enforced after 1 May 2004 No Granting body Aid instrument Liability Amount outstanding (in PLN) 12. City of Szczecin Deferral Real estate tax debt accrued between July 2003 and December 2004 12 402 000,00

3. ASSESSMENT

3.1. COMPETENCE OF THE COMMISSION

(202) Point 3 of Annex IV to the Accession Treaty sets out the so-called interim mechanism procedure. It constitutes a legal framework for the assessment of aid schemes and individual aid measures put into effect in a new Member State before the date of its accession to the EU and still applicable after accession.

(203) Aid measures that were put into effect before accession and are not applicable after accession cannot be examined by the Commission, either under the interim mechanism procedure or under the procedure laid down in Article 88(2) of the EC Treaty.

(204) On the other hand, measures that were not put into effect until after accession will be assessed by the Commission as notified aid or as unlawful aid pursuant to the procedure laid down in Article 88(2) of the EC Treaty.

(205) In order to establish the date on which a certain measure was put into effect, the relevant criterion is the legally binding act by which the competent national authority undertakes to grant the aid (20). Whether an administrative act is legally binding is a matter of national law. However, the Commission must, especially in borderline cases, be able to review these administrative acts and to assess on the basis of their form and content whether they could have given rise to legitimate expectations on the part of the beneficiaries enforceable before a Polish court of law. This capacity to review national administrative acts is indispensable for the exercise of the Commission’s exclusive competence to approve derogations from the general prohibition of State aid with regard to measures put into effect in Poland after 1 May 2004.

(206) A measure is applicable after accession if it was put into effect before accession but can still give rise, after accession, to the granting of additional aid or to an increase in the amount of aid already granted, i.e. if the precise economic exposure of the State is not known on the date on which the measure was put into effect and still not known on the date of accession.

(207) In its decision to initiate the formal investigation procedure, the Commission concluded, on the basis of the information provided by Poland, that a series of measures notified to the Commission in fact constituted new aid, to be granted after 1 May 2004, the day of Poland’s accession to the EU. Specifically, the Commission considered that a capital injection, two performance guarantees and a real estate tax liability write-off and deferral constituted new aid.

(208) Firstly, Poland informed the Commission that the two contested performance guarantees (measures 62 and 63 in part B of the Annex to the decision to initiate the formal investigation procedure) had not in the end been granted at all. They are therefore not covered by this Decision.

(209) Secondly, Poland confirmed that the real estate tax debt to the City of Szczecin accrued in the period between July 2003 and December 2004 (measures 64-68 in part B of the Annex to the decision to initiate the formal investigation procedure) had not been enforced or written off so far. This means that the liability was carried forward and not enforced well beyond the date of accession. It is established case-law (21) that continuous non-enforcement of public-law debts can constitute State aid, as will be discussed in more detail below. Such non-enforcement clearly falls within the competence of the Commission under Article 88 of the EC Treaty in so far as it concerns the period after accession. These measures are therefore covered by this Decision.

(210) Thirdly, with regard to the capital injection from ARP (measure 61 in part B of the Annex to the decision to initiate the formal investigation procedure), the comments provided by Poland and third parties on the decision to initiate the formal investigation procedure have not convinced the Commission that this measure does not constitute new aid. This measure is therefore covered by this Decision.

(211) The Commission explains below the reasons why it cannot accept the arguments submitted by Poland and the interested parties.

(212) With regard to Poland’s argument that the capital injection should be seen in the context of the Polish Government’s far-reaching rescue programme for the shipbuilding industry in Poland, the Commission considers that such a general government programme cannot give rise to a legitimate claim on the part of SSN that one of its shareholders, ARP, must implement the full capital injection. Indeed, for budgetary reasons ARP was originally unable to implement the capital injection declared in the 2003 restructuring plan in full.

(213) With regard to Poland’s argument that the Commission is applying the criteria of EC law to events and national law prior to accession, the competence of the Commission to act in respect of measures granted before accession is defined by the Act of Accession, which is binding upon the Communities and Poland. The Commission has interpreted the concept ‘put into effect before accession’ by analogy with the concept of the granting of aid (22).

(214) Poland argues that only approval of the restructuring plan and the aid measures contained therein by the President of the Office for Competition and Consumer Protection was required under national law. The Commission does not consider that this approval can in itself be qualified as ‘putting the measure into effect before accession’. The national competition office checked the compatibility of the aid with national State aid legislation but, just as when the Commission reviews State aid under Article 88 of the EC Treaty, its approval did not create legitimate expectations under national law that the aid was actually going to be granted.

(215) Poland also considers it an undisputed fact that the capital injection provided for in the 2003 restructuring plan was agreed between SSN and ARP. As the Commission stated in its decision to initiate the formal investigation procedure, the aid is considered to be put into effect if the competent authority adopts an act which, under national law, can give rise to legitimate expectations, enforceable before a national court, that the aid will be granted. Naturally, to exercise its competence under the Act of Accession and the EC Treaty, the Commission has to be able to verify whether this is the case. Neither Poland nor the interested third parties have provided any evidence that SSN would be able to claim legitimate expectations before the national court on the grounds that a total capital injection of PLN 241 million was included in the 2003 restructuring plan agreed with ARP. In fact