98/635/ECSC: Commission Decision of 3 June 1998 on additional financial measures by Spain in respect of the coal industry in 1994, 1995 and 1996 [notified under document number C(1998) 2043] (Only the Spanish text is authentic) (Text with EEA relevance)
Date: 1998-06-03
Institutions: European Commission
Subjects: Spain, cessation of trading, coal industry, control of State aid, industrial restructuring, severance pay

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L 303/47

II

(Acts whose publication is not obligatory)

COMMISSION

COMMISSION DECISION

of 3 June 1998

on additional financial measures by Spain in respect of the coal industry in 1994,
1995 and 1996

(notified under document number C(1998) 2043)

(Only the Spanish text is authentic)

(Text with EEA relevance)

(98/635/ECSC)

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

Having regard to the Treaty establishing the European
Coal and Steel Community,

Hunosa, Minas de Figaredo SA and Mina de la Camocha
SA, as approved by Commission Decision 94/1072/
ECSC (3).

Having regard to Commission Decision No 3632/93/
ECSC of 28 December 1993 establishing Community
rules for State aid to the coal industry (1), and in particular
Article 2(1) and Articles 8 and 9 thereof,

By the same letter Spain also sent notification, in accord-
ance with Article 9(1) of Decision No 3632/93/ECSC, of
the additional aid which it proposed to grant
to the
abovementioned undertakings for 1994, 1995 and 1996.

Whereas:

I

By letter dated 22 March 1996 the Commission requested
Spain to inform it of the State aid elements contained in
the contract programme signed on 23 February 1996 with
Hunosa and in Royal Decree 12/1995 of 28 December
1995 on urgent budgetary and financial measures (2).

By letter of 22 July 1996 Spain notified the Commission,
in accordance with Article 8(4) of Decision No 3632/93/
ECSC, of its intention to amend the broad objectives,
relative to the objectives pursued by Decision No 3632/
the 1994-97 activity reduction plans for
93/ECSC, of

By letter dated 31 July 1996 the Commission asked Spain
to supply information on the proposed amendments to
the broad objectives of the plans previously approved and
of the aid to be paid under them, so as to enable the
Commission to rule on them. By letter dated 7 November
1996 the Commission reminded Spain of this request for
further information.

In the absence of any reply to the requests for the further
in its letters of 31 July and 7
information sought
November 1996, and in order to comply with the rights
of defence the Commission sent the Spanish Government
a letter of
formal notice under reference 97/C137/06
dated 23 April 1997 (4), giving Spain one month from
receipt of the letter to submit its observations.

(1) OJ L 329, 30. 12. 1993, p. 12.
(2) Bolet(cid:146)n Official del Estado No 312, p. 37519.

(3) OJ L 385, 31. 12. 1994, p. 31.
(4) OJ C 137, 3. 5. 1997, p. 6.

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By letter of 23 May 1997 Spain informed the Commission
of the amendments proposed to the broad objectives of
the activity reduction plans previously approved and of
the deviations occurring in the results for Hunosa, Minas
de Figaredo SA and Mina de la Camocha SA in 1994,
1995 and 1996.

down in Article 2 and the specific criteria set out in
Articles 3 and 4 of Decision No 3632/93/ECSC. In
accordance with Article 9(6) of
the
Commission must assess whether the measures are in
the
conformity with the activity reduction plans for
Spanish coal industry.

that Decision,

By letter of 13 June 1997, Spain proposed to the
Commission measures to correct the deviations in the
period 1994 to 1996, in accordance with Article 9(6) of
Decision No 3632/93/ECSC.

By letter of 8 November 1997, Spain announced that it
intended to send the Commission additional information
with the aim of reinforcing the corrective measures which
it proposed to adopt before Decision No 3632/93/ECSC
expired. This information was notified by letter of 20
February 1998.

Under Decision No 3632/93/ECSC,
must:

the Commission

(a) give an opinion as to the conformity with the general
and specific aims of Decision No 3632/93/ECSC of
the amendments to the broad objectives of the activity
reduction plans for 1994 to 1997 for Hunosa, Minas
de Figaredo SA and Mina de la Camocha SA;

(b) rule on the following financial measures:

— additional aid of ESP 3 363 million for 1994, ESP
11 577 million for 1995 and ESP 7 806 million for
1996 to cover operating losses by Hunosa and
Minas de Figaredo SA,

— additional aid of ESP 8 441 million for 1994, ESP
18 684 million for 1995 and ESP 16 180 million
for 1996 to cover exceptional welfare aid paid to
workers leaving Hunosa, Minas de Figaredo SA
and Mina de la Camocha SA,

— additional aid of ESP 1 162 million for 1994, ESP
l 241 million for 1995 and ESP 3 441 million for
1996 to cover the additional costs of closing down
plants belonging to Hunosa, Minas de Figaredo SA
and Mina de la Camocha SA.

The financial measures proposed by Spain for the coal
industry fall within the provisions of Article l of Decision
No 3632/93/ECSC and must be the subject of a Commis-
sion Decision, in accordance with Article 9, on the basis,
in particular, of the general criteria and objectives laid

II

In Decision 94/1072/ECSC the Commission gave a
favourable opinion on the conformity of the 1994-97
phase of the plans notified by Spain for modernisation,
rationalisation and restructuring (Article 3 of Decision No
3632/93/ECSC) and activity reduction (Article 4 of
Decision No 3632/93/ECSC).

The amendments notified by Spain on 23 May 1997, to
the broad objectives of the 1994-97 activity reduction
plan for Hunosa, Minas de Figaredo SA and Mina de la
Camocha SA relative to the objectives pursued by
Decision No 3632/93/ECSC must be measured against
the general criteria and aims laid down in Article 2(1) and
the specific criteria and aims under Article 4 of Decision
No 3632/93/ECSC.

In the light of those aims and criteria, the aid granted to
those undertakings must help to solve the social and
regional problems created by total or partial reductions in
the activity of production units and, pursuant to Article 4
of Decision No 3632/93/ECSC, must
form part of a
closure plan with a deadline falling before 23 July 2002.
The closure may be completed at a later date if the aid is
justified on exceptional social and regional grounds,
provided that it is part of a progressive and continuous
activity reduction plan entailing a significant reduction
before the abovementioned date.

According to the Spanish Government,
the 1994-97
activity reduction plan notified by Spain in 1994 was
intended to ‘reduce production capacity, which would
mean less activity in future and should lead to closures
job-shedding and lower
and mergers of
installations,
investment'. On analysis of
the information on the
amendments to the broad objectives and the corrective
measures proposed by Spain, the Commission confirms
that all three companies — Hunosa, Minas de Figaredo
SA and Mina de la Camocha SA — have shed staff, from a
total of 14 244 workers at the start of 1994 to 10 968 at

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the end of 1996, with production falling from 3,4 million
tonnes in 1993 to 2,9 million tonnes in 1996. Neverthe-
less, the Commission finds that those undertakings are
proposing to adopt measures contrary to the activity
reduction objective set in Decision No 3632/93/ECSC,
such as subcontracting production to third parties in
order to compensate, at least partly, for the abovemen-
tioned job losses or continuing operations beyond the
closure date announced for the mines. In its letters of 23
May 1997 and 13 June 1997 Spain announced plans to
increase
undertakings’ production in 1997,
compared with the 1995 and 1996 figures, and declared
its intent to continue investments designed to slow down
the reduction of activity in future.

those

average aid of ESP 28 891/tce (ECU 180/tce). The objec-
tive of this aid was to implement the activity reduction
plan for 1994 to 1997 approved by the Commission in
Decision 94/1072/ECSC.

The additional aid, amounting to ESP 3 363 million for
1994, ESP 11 577 million for 1995 and ESP 7 806 million
for 1996 which Spain plans to grant to Hunosa and Minas
de Figaredo SA is intended to compensate fully or partly
for operating losses which were higher than expected.

The amendments which Spain intends to make to the
broad objectives of the plans relative to the objectives of
Decision No 3632/93/ECSC aim at scaling down the
reduction in the undertakings’ production capacity by
means of
in new fields and
slowing down the progressive and continuous reduction
of activity provided for in the plans approved by the
Commission. Consequently,
they are contrary to the
objectives laid down in Article 4 of Decision 3632/93/
ECSC.

long-term investments

In accordance with Article 8(3) and (4) of Decision No
3632/93/ECSC, the Commission is unable to approve the
alterations which Spain intends to make to the objectives
of the 1994-97 phase of the activity reduction plans for
Hunosa, Minas de Figaredo SA and Mina de la Camocha
SA. Consequently, Spain must adhere to the broad objec-
tives of
the plans approved by the Commission in
Decision 94/1072/ECSC.

III

By Decisions 94/1072/ECSC, 96/591/ECSC (1) and 96/
575/ECSC (2), the Commission authorised, under Article 4
of Decision No 3632/93/ECSC, aid for Hunosa, Minas de
Figaredo SA and Mina de la Camocha SA totalling ESP
71 560 million for 1994, ESP 65 997 million for 1995 and
ESP 62 802 million for 1996, to cover operating losses on
production of 3 187 470 tonnes in 1994, 2 800 100 tonnes
in 1995 and 2 919 500 tonnes in 1996, equivalent to an

(1) OJ L 259, 12. 10. 1996, p. 14.
(2) OJ L 253, 5. 10. 1996, p. 15.

these measures,

In its assessment of
the Commission
must check whether they are in conformity with the
activity reduction plan referred to in Article 8 and with
the objectives set out in Article 2 of Decision No 3632/
93/ECSC.

Hunosa and Minas de Figaredo SA have reduced the
workforce as planned, from 13 153 workers at the start of
1994 to 10 146 at
the end of 1996 and have been
reducing production continuously, from 3 116 500 tonnes
in 1993 to 2 661 500 tonnes in 1996.

However, those reductions in production and workforce
have not produced the planned reduction in operating
losses, owing to the unfavourable productivity trend and
the changes which had to be made to operating methods
in response to the accidents in 1995.

Beyond those changes, both undertakings have taken
measures contrary to the goal of a progressive and contin-
uous reduction in activity as laid down in Article 4 of
Decision No 3632/93/ECSC if undertakings are to qualify
for aid for the reduction of activity.

Hunosa and Minas de Figaredo SA have subcontracted
operations with a view to restoring some of the activity
lost with the departure of their permanent staff. They
have made heavier
than
announced with a view to continuing activities having no
prospect of economic viability. In its letter dated 23 May
1997 Spain announced that the closure plan proposed for
Hunosa installations in the 1994-97 phase would be
extended beyond the approved deadlines.

infrastructure

investment

Moreover, Hunosa has reopened installations closed down
by Minas de Lieres SA as part of the 1991-93 restructuring
plan — closures for which aid was authorised. Production

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at those installations led to operating losses of ESP 487
million in 1994, ESP 791 million in 1995 and ESP 1 016
million in 1996. The Commission cannot approve aid to
cover these operating losses.

Figaredo SA and Mina de la Camocha SA who had to take
early retirement or were made redundant and to imple-
ment the 1994-97 phase of the activity reduction plans
for those companies.

By letter dated 20 February 1998 in reply to the request
from the Commission under Article 9(6) of Decision No
3632/93/ECSC, Spain informed the Commission that it
was prepared to abide by the broad objectives of the
1994-97 phase of the activity reduction plans approved by
the Commission in Decision 94/1072/ECSC and, conse-
quently, that it would proceed, before Decision No 3632/
93/ECSC expired, to correct the measures contrary to the
objective of reducing activity.

Following adoption of those measures the Commission
confirmed that the additional aid totalling ESP 2 876
million for 1994, ESP 10 786 million for 1995 and ESP
6 790 million for 1996 which Spain proposed to grant to
Hunosa and Minas de Figaredo was intended to allow
them to continue their activities in the context of the
progressive and continuous reduction provided for in the
plan approved by the Commission. An immediate end to
the companies’ activities would have grave social conse-
quences for the mining regions. The aid helps to solve
the social and regional problems created by developments
in the coal industry and, consequently, is in line with the
second indent of Article 2(1) of Decision No 3632/93/
ECSC.

In view of the above and on the basis of the information
provided by Spain, this aid is compatible with the objec-
tives of Decision No 3632/93/ECSC and with the proper
functioning of the common market.

IV

By Decisions 94/1072/ECSC, 96/591/ECSC and 96/575/
the Commission authorised aid totalling ESP
ECSC,
4 840 million for 1994, ESP 6 745 million for 1995 and
ESP 6 075 million for 1996 intended to cover compensa-
tion to be paid to employees of Hunosa, Minas de

Moreover, by Decision 93/145/ECSC (1), the Commission
approved the 1991-93 modernisation, rationalisation and
restructuring plan for Hunosa, Minas de Figaredo SA and
Mina de la Camocha SA. This provided for aid totalling
ESP 77 483 million for accompanying social measures to
continue throughout
the period from 1994 to 2002.
However, Spain has yet to send notification of the aid
instalment for 1994, 1995 and 1996.

The notified aid totalling ESP 42 395 million for Hunosa,
ESP 102 million for Minas de Figaredo SA and ESP 808
million for Mina de la Camocha SA for 1994, 1995 and
1996 is intended to cover the compensation paid to those
of the companies’ 6 400 employees who had to take early
retirement under the 1991-93 modernisation, rationalisa-
tion and restructuring plan and the — higher than
expected — compensation for their 4 400 employees who
took early retirement or lost their jobs under the 1994-97
phase of the activity reduction plan.

these measures,

In its assessment of
the Commission
must check whether they are in conformity with the
activity reduction plan provided for in Article 8 and with
the objectives set out in Article 2 of Decision No 3632/
93/ECSC.

the information provided by Spain,

In view of
the
Commission has no wish to penalise the workers affected
by the restructuring of these companies. The extra cost is
attributable to more early retirement than was envisaged
and to supplies of free coal to workers affected by restruc-
turing.

The Commission has found that the ESP l 377,70 million
for Hunosa, ESP 155,98 million for Minas de Figaredo SA
and ESP 41,1 million for Mina de la Camocha SA author-
ised by the Commission for 1994, 1995 and 1996 as aid
towards the retraining of workers, as provided for in para-
graphs 1(c) and 2(b) of Article 56 of the ECSC Treaty,
were deducted from the amounts notified by Spain.

This aid covers the costs arising from or having arisen
from the modernisation, rationalisation and restructuring
of the Spanish coal industry, as provided for by Article 5
of Decision No 3632/93/ECSC, and cannot therefore be
considered to be related to current production (inherited
liabilities).

(1) OJ L 57, 10. 3. 1993, p. 26.

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Pursuant to Article 5 of Decision No 3632/93/ECSC, the
aid mentioned explicitly in the Annex to the Decision,
namely the cost of paying social welfare benefits resulting
from the pensioning-off of workers before they reach
statutory retirement age, other exceptional expenditure on
workers who lose their jobs, and the supply of free coal to
workers who lose their jobs as a result of restructuring and
rationalisation, may be considered compatible with the
common market provided that the amount paid does not
exceed such costs.

In view of the above and on the basis of the information
provided by Spain, this aid is compatible with the objec-
tives of Decision No 3632/93/ECSC and with the proper
functioning of the common market.

V

In Decisions 94/1072/ECSC, 96/591/ECSC and 96/575/
ECSC the Commission authorised aid totalling ESP 2 504
million for 1994, ESP 1 574 million for 1995 and ESP
2 244 million for 1996 for Hunosa to cover the deprecia-
tion of its fixed assets and the exceptional costs occa-
sioned by the closures planned between 1994 and 1997.
The objective was to implement the 1994-97 phase of the
activity reduction plan notified to the Commission for
this undertaking.

Moreover, by Decision 93/145/ECSC the Commission
approved the 1991-93 modernisation, rationalisation and
restructuring plan for Hunosa, Minas de Figaredo SA and
Mina de la Camocha SA and approved a provision of ESP
8 734 million to cover the costs arising from exceptional
intrinsic depreciation and the cost of merging installa-
tions closed down during the period 1991 to 1993.

Article 8 and with the objectives set out in Article 2 of
Decision No 3632/93/ECSC.

The reductions in activity and the capacity closures made
by these undertakings between 1994 and 1996 were
smaller than expected. On analysis of the data supplied by
Spain, the Commission finds that some of the costs asso-
ciated with the installations closed down were higher than
expected and can be
considered compatible with
Decision No 3632/93/ECSC but that ESP l 865 million of
the additional aid notified for Hunosa and Minas de
Figaredo SA are for depreciation of assets and costs
incurred in abandoning installations at mines where
normal activities are continuing and, consequently, are
not a result of restructuring of the coal industry. This part
of the aid cannot be considered an inherited liability.

Mina de la Camocha SA has made investments supported
by State aid to prolong operations having no prospect of
economic viability. Such investments are contrary to the
progressive and continuous activity reduction plan noti-
fied by Spain for this company. The aid totalling ESP 665
million notified to cover ‘other financial needs' is, conse-
quently, not due to the restructuring of the coal industry
and cannot be considered an inherited liability. This aid
is not in line with the objectives of Decision No 3632/93/
ECSC.

Consequently, the Commission is unable to authorise aid
totalling ESP 2 530 million notified by Spain to cover
exceptional closure costs.

VI

The additional aid totalling ESP 1 162 million for 1994,
ESP 1 241 million for 1995 and ESP 3 441 million for
1996 is to compensate for higher closure costs than
expected for installations belonging to Hunosa, Minas de
Figaredo SA and Mina de la Camocha SA. These costs
break down as follows: ESP 4 576 million for Hunosa,
ESP 603 million for Minas de Figaredo and ESP 665
million for Mina de la Camocha.

In accordance with the second indent of Article 3(1) and
with Article 9(2) and (3) of Decision No 3632/93/ECSC,
the Commission must verify that aid authorised for
current production relates solely to the purposes set out in
Article 4 of
it must be
that Decision. To this end,
informed of the amounts involved and the distribution of
payments.

In its assessment of
the Commission
must check whether they are in conformity with the
activity reduction plan for 1994 to 1997 provided for in

these measures,

The Commission must remind Spain that it is under an
obligation to comply with Article 9(5) of Decision No
3632/93/ECSC concerning the repayment of any amounts
in excess of the amounts authorised by the Commission,

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HAS ADOPTED THIS DECISION:

Article 1

The amendments which Spain proposes to make to the
broad objectives of the activity reduction plans for 1994 to
1997 for the companies Hunosa, Minas de Figaredo SA
and Mina de la Camocha SA are not in line with the
general and specific objectives of Decision No 3632/93/
ECSC. Consequently, the Commission issues a negative
opinion on those amendments.

Article 2

Spain is hereby authorised to grant to the companies
Hunosa, Minas de Figaredo SA and Mina de la Camocha
SA the following additional aid for 1994, 1995 and 1996:

(a) aid for the reduction of activity of ESP 20 452 million
to cover the operating losses of Hunosa and Minas de
Figaredo SA under Article 4 of Decision No 3632/93/
ECSC;

(b) aid of ESP 43 305 million to cover exceptional welfare
aid paid to workers who lose their jobs as a result of
the measures to restructure, rationalise, modernise and
reduce the activity of the Spanish coal industry, under
Article 5 of Decision No 3632/93/ECSC;

(c) aid of ESP 3 296 million to cover exceptional addi-
tional costs of closing installations as a result of the
measures to restructure, rationalise, modernise and
reduce the activity of the Spanish coal industry, under
Article 5 of Decision No 3632/93/ECSC.

Article 3

Spain shall notify the Commission, by 30 September
1998 at the latest, of the amount of aid actually paid to
Hunosa, Minas de Figaredo SA and Mina de la Camocha
SA in respect of 1994, 1995 and 1996.

Article 4

This Decision is addressed to the Kingdom of Spain.

Done at Brussels, 3 June 1998.

For the Commission

Christos PAPOUTSIS

Member of the Commission