Commission Decision of 13 December 2000 authorising the United Kingdom to grant aid to the coal industry, covering the period from 17 April to 31 December 2000 (Text with EEA relevance) (notified under document number C(2000) 4056)
Date: 2000-12-13
Institutions: European Commission
Subjects: State aid, United Kingdom, coal industry, industrial restructuring, severance pay

21.3.2001

EN

Official Journal of the European Communities

L 81/31

COMMISSION

COMMISSION DECISION

of 13 December 2000

authorising the United Kingdom to grant aid to the coal industry, covering the period from 17
April to 31 December 2000

(notified under document number C(2000) 4056)

(Only the English text is authentic)

(Text with EEA relevance)

(2001/217/ECSC)

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

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

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
Article 9 thereof,

Having regard to Commission Decision 2001/114/ECSC final
of 15 November 2000, approving the modernisation, rationali-
sation and restructuring plan for the United Kingdom coal
industry, covering the period from 17 April 2000 to 23 July
2002 (2),

Whereas:

Commission must therefore take a decision on them
pursuant to Article 9(4) of that Decision. The Commis-
sion's approval
is subject to the measures complying
with the general objectives and criteria laid down in
Article 2 and with the specific criteria set out in Article
3 of that Decision, and to their being compatible with
the proper functioning of the common market. In addi-
tion,
in
accordance with Article 9(6) of the Decision, whether
the measures are in conformity with the plan for the
modernisation, rationalisation and restructuring of the
United Kingdom coal industry which was approved by
the Commission by its Decision of 15 November 2000.

the Commission checks,

in its assessment

I

II

(1)

(2)

(3)

By letter of 15 November 2000, the United Kingdom
notified the Commission, in accordance with Article 9(1)
of Decision No 3632/93/ECSC, of financial aid which it
proposed to grant the coal industry for the year 2000,
and more specifically for the period from 17 April to 31
December 2000.

In the light of the information submitted by the United
Kingdom, the Commission is required to take a decision,
pursuant
to Decision No 3632/93/ECSC, on the
following financial measure:

— aid amounting to GBP 17,462 million to cover
operating losses at the Longannet Mine production
unit of the company Mining (Scotland) Ltd for the
period from 17 April to 31 December 2000.

(4)

(5)

financial measures

the United
The
Kingdom for the abovementioned plant are covered by
Article 1 of Decision No 3632/93/ECSC, and the

envisaged by

(1) OJ L 329, 30.12.1993, p. 12.
(2) OJ L 43, 14.2.2001, p. 27.

The sum of GBP 17,462 million which the United
Kingdom is proposing to grant the Longannet Mine
production unit under Article 3 of Decision No 3632/
93/ECSC is intended to cover part of the difference
between the production cost of coal and its selling price,
freely agreed between the contracting parties in the light
of the prevailing conditions on the world market for
coal of similar quality from third countries.

According to the information communicated by the
United Kingdom, the sum proposed is intended to allow
the production unit which receives it to improve its
economic viability by reducing its production costs. At
constant 1999 prices, production costs were GBP 43
per tonne coal equivalent (tce) in 1998, and should fall
to GBP 35 per tce in 2002. In addition, the economic
viability of the plant should continue to improve beyond
2002, as production costs at constant 1999 prices
should settle at GBP 31 per tce in 2004.

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Official Journal of the European Communities

21.3.2001

(6)

(7)

At the request of the British authorities, a technical
report was drawn up by an independent expert, to assess
whether the provisions contained in the restructuring
plan submitted by Longannet Mine would enable the
production unit to improve its economic viability, and
more specifically, to achieve the objectives set out in the
preceding paragraph.
the
expert took into account the geological and technical
conditions in which the plant operates, and above all the
quality of the coal which it produces.

In drawing up this report,

The report concluded that the Longannet Mine restruc-
turing plan was coherent and realistic, and should allow
the plant to achieve its estimated production costs.

According to the modernisation,
rationalisation and
restructuring plan adopted by the United Kingdom, to
which the Decision of 15 November 2000 refers, the
economic viability of a production unit shows potential
for improvement if production costs are forecast not to
exceed GBP 1,15 per GJ (1) in 2002. A unit may still be
eligible for aid even if forecast costs exceed this ceiling,
as long as it can demonstrate that it will be able to sell
the coal it produces, by virtue of, inter alia, its very good
quality, at a higher price than the standard price
obtained by other producers, and will thus be able to
cover its higher costs. This is the case with Longannet
Mine, where forecast production costs for 2002 should
be entirely covered by forecast revenues, even though
the costs are slightly above the ceiling that was fixed.
The coal produced at Longannet is of superior quality, in
particular thanks to its low sulphur content, and should
therefore command a very attractive price.

(8)

For these reasons, the United Kingdom considers that
the restructuring plan presented by Longannet Mine will
lead to an improvement in the unit's economic viability.
The forecast reduction in production costs,
together
with the level of anticipated revenues, should enable the
plant
to operate as from 2002 without any further
public subsidy.

According to the company's financial forecasts, Long-
annet Mine should receive very little, if any, public aid
during the year 2002. It is also estimated that produc-
tion costs should continue to fall beyond that date,
leading to a further reduction of GBP 4 per tce by 2004.

III

(10)

(11)

(12)

costs. The purpose of the aid is to make the plant more
competitive, so that by 2002 it will be able to continue
operations without any public subsidy.

In addition, the plan put forward by the company, and
in particular
the financial
the temporary nature of
support required by the proposed restructuring, will
allow degression of aids to be achieved, in accordance
with the first indent of Article 2(1) of the Decision.

In accordance with the first indent of Article 3(1) of
Decision No 3632/93/ECSC, the aid per tonne as noti-
fied does not exceed the difference between productions
costs and anticipated revenues, as calculated on the basis
information provided for the period
of the financial
covered by the aid,
to 31
December 2000.

from 17 April

that

is,

The Commission notes that Mining (Scotland) Ltd's audi-
tors have declared that the financial data notified by the
United Kingdom relating to the three financial years
covering the period from 1 April 1997 to 31 March
2000 fairly represent the company's accounts. The audi-
tors also stated that the forecasts had been drawn up
using the accounting standards that were in use in
March 2000.

In addition, according to the information notified by the
United Kingdom it appears that the amount of operating
aid per tonne should not cause delivered prices for
Community coal to be lower than those for coal of a
similar quality from third countries, in accordance with
the third indent of Article 3(1) of Decision No 3632/93/
ECSC.

In notifying to the Commission the modernisation,
rationalisation and restructuring plan which was the
subject of the Commission Decision of 15 November
2000, the United Kingdom authorities also indicated
that an overall budget forecast, covering the proposed
aid for Longannet Mine, was entered in the public
budgets, in accordance with Article 2(2) of Decision No
3632/93/ECSC.

(9)

In accordance with Article 3(2) of Decision No 3632/
93/ECSC, the aid which the United Kingdom proposes
to grant Longannet mine is intended to improve the
plant's economic viability by reducing its production

(1) 1 tce = 29,302 GJ.

(13)

In the light of the above and on the basis of the infor-
mation provided by the United Kingdom, the proposed
aid for Longannet Mine for the period from 17 April to
31 December 2000 is compatible with Decision No
3632/93/ECSC, and in particular with Articles 2 and 3
of that Decision.

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Official Journal of the European Communities

L 81/33

(14)

(15)

(16)

IV

the latest by 30 September 2001,

In accordance with the second indent of Article 3(1) and
Article (9)(2) and (3) of Decision No 3632/93/ECSC, the
Commission has to check that the aid authorised is used
only for the purposes stipulated in Article 3 of the
Decision. At
the
United Kingdom is required to send notification of the
amounts of aid actually paid during the year 2000 and
to declare any corrections made to the amounts origi-
nally notified. Any information needed to check that the
criteria laid down in the relevant article have been met
has to be provided along with this annual breakdown.

and financial

The United Kingdom is required to justify any deviations
rationalisation and restruc-
from the modernisation,
turing plan which was the subject of the Commission
Decision of 15 November 2000, and also from the
forecasts notified to the
economic
Commission on 15 November 2000.
In particular,
should it turn out that the conditions laid down in
Article 3(2) of Decision No 3632/93/ECSC cannot be
satisfied, the United Kingdom will be responsible for
proposing to the Commission the requested corrective
measures.

The United Kingdom has also to ensure that the aid does
not cause any distortion of competition, and does not
discriminate
between
coal
purchasers or between consumers in the Community,

producers,

between

HAS ADOPTED THIS DECISION:

Article 1

The United Kingdom is authorised, within the framework of
Article 3 of Decision No 3632/93/ECSC, to grant operating aid
amounting to GBP 17,462 million in favour of the Longannet

Mine production unit belonging to the company Mining (Scot-
land) Ltd, for the period from 17 April to 31 December 2000.

Article 2

In accordance with Article 86 of the ECSC Treaty, the United
Kingdom undertakes to take all appropriate measures, whether
general or particular, to ensure fulfilment of the obligations
arising from this Decision. It shall ensure that the aid granted is
used only for the specified purposes and that any unused,
overestimated or misused expenditure in relation to any items
referred to in this Decision is repaid to the United Kingdom.

Article 3

No later than 30 September 2001, the United Kingdom shall
communicate the amounts of aid actually paid during the 2000
financial year, as well as the specific information required
under Article 9 of Decision No 3632/93/ECSC.

Article 4

This Decision is addressed to the United Kingdom of Great
Britain and Northern Ireland.

Done at Brussels, 13 December 2000.

For the Commission

Loyola DE PALACIO

Vice-President