2001/597/ECSC: Commission Decision of 11 April 2001 authorising the United Kingdom to grant aid to nine coal production units for the period from 17 April to 31 December 2000, and to amend the restructuring plan for the coal industry (Text with EEA relevance) (notified under document number C(2001) 1089)
Date: 2001-04-11
Institutions: European Commission
Subjects: State aid, United Kingdom, coal industry, control of State aid, industrial restructuring

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II

(Acts whose publication is not obligatory)

COMMISSION

COMMISSION DECISION

of 11 April 2001

authorising the United Kingdom to grant aid to nine coal production units for the period from 17
April to 31 December 2000, and to amend the restructuring plan for the coal industry

(notified under document number C(2001) 1089)

(Only the English text is authentic)

(Text with EEA relevance)

(2001/597/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
industry (1), and in particular Articles 8 and 9
to the coal
thereof,

Whereas:

I

(1)

(2)

(3)

By letter of 12 January 2001, the United Kingdom noti-
fied the Commission, in accordance with Article 9(1) of
Decision No 3632/93/ECSC, of financial aid which it
proposed to grant to a coal production unit for the year
2000, and more specifically for the period from 17
April to 31 December 2000. Following a request from
the Commission, the United Kingdom further notified
information on 19 February 2001.
additional

By letter of 19 February 2001, 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 to eight coal production units for the
year 2000, and more specifically for the period from 17
April to 31 December 2000.

In its notification of 19 February 2001 the United
Kingdom also informed the Commission, in accordance
with Article 8(4) of Decision No 3632/93/ECSC, of an

(4)

(5)

amendment to the modernisation, rationalisation and
restructuring plan for the period from 17 April 2000 to
23 July 2002 (hereinafter referred to as ‘the restructuring
plan’). This restructuring plan had been approved by the
Commission in its Decision 2001/114/ECSC (2).

Once the Commission has delivered a favourable
opinion on the conformity of the proposed amendment
with the general and specific objectives of the Decision,
it is required, in accordance with Decision No 3632/93/
to take a decision on the aid amounting to
ECSC,
GBP 10 402 000 to cover operating losses for
the
period from 17 April to 31 December 2000, incurred at
nine production units.

The financial measures are covered by Article 1 of
Decision 3632/93/ECSC, and the Commission must
therefore take a decision on the measures pursuant to
Article 9(4) of
that Decision. The Commission's
approval is subject to the general objectives and criteria
laid down in Article 2 of Decision No 3632/93/ECSC
and to the specific criteria set out in Article 3 thereof,
and must be compatible with the proper functioning of
the common market. In addition, in its assessment the
Commission checks, in accordance with Article 9(6) of
that Decision, whether the measures are in conformity
with the coal industry restructuring plan as amended by
the United Kingdom.

(1) OJ L 329, 30.12.1993, p. 12.

(2) OJ L 43, 14.2.2001, p. 27.

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II

The restructuring plan approved by the Commission by
its Decision 2001/114/ECSC provides for the granting of
operating aid to the coal industry for the period from 17
April 2000 to 23 July 2002. The plan provides that the
total amount of aid over the whole period is not to
exceed GBP 110 000 000 (see recital 6 of the Decision).
At the time, the United Kingdom had considered this
amount
for temporarily maintaining
production units which would be economically and
financially viable in the long term and should become
competitive with imported coal after 2002.

to be sufficient

(11)

(6)

(7)

(8)

(9)

In the light of the amount of aid to be granted for 2000,
however, the United Kingdom authorities consider the
estimated GBP 110 million to be insufficient to cover all
the requests for aid which might be submitted during
the period covered by the restructuring plan, namely 17
April 2000 to 23 July 2002. By its Decisions 2001/217/
ECSC (1) and 2001/340/ECSC (2) the Commission has
already authorised the granting of State aid amounting
to GBP 76 540 000. Also, according to the notifications
of 12 January and 19 February 2001 which are the
subject of this Decision, an additional GBP 10 402 000
should be granted to cover all of the aid requests for the
year 2000 which the United Kingdom authorities
consider eligible.

The amount which the United Kingdom should grant to
the coal industry is therefore GBP 86 942 000 for the
year 2000 alone. This is far in excess of the estimates
made by the United Kingdom authorities when they
were drawing up the restructuring plan, the reason being
that a very large number of firms have submitted aid
requests and that the amount of aid granted to certain
production units has been higher than planned.

According to the United Kingdom authorities it was not
possible to work out the exact amount of aid necessary
the time when the restructuring plan was being
at
prepared. The data then available to the United Kingdom
authorities as to the number and size of production
units, and the levels of their operating losses likely to
meet the restructuring plan criteria for the granting of
aid, allowed only a rough estimate to be made of how
much aid the United Kingdom might be called on to
grant during the period from 17 April 2000 to 23 July
2002.

(10)

In the dossiers which they submitted to the United
Kingdom authorities with a view to receiving aid for the
year 2000, the coal producers sent precise details of
production costs and revenue from coal production.
This information includes data relating to the year 2000
itself but also to subsequent years. The United Kingdom

(1) OJ L 81, 21.3.2001, p. 31.
(2) OJ L 122, 3.5.2001, p. 23.

authorities therefore now have at their disposal precise
estimates by firms which are likely to be submitting new
aid requests for 2001 and 2002. On the basis of these
data the United Kingdom considers that the amount of
aid which could be granted during the period from 17
April 2000 to 23 July 2002 should not exceed
GBP 170 million, instead of the GBP 110 million in the
original restructuring plan.

by

the

plan,

restructuring

The Commission considers that increasing the maximum
amount of aid which can be granted during the period
covered
from
GBP 110 000 000 to GBP 170 000 000, will not call
into question the terms of Decision 2001/114/ECSC.
The amendment does not change the basic factors which
led to the adoption of that Decision and, more precisely,
the objective of the restructuring plan. That objective is
to re-establish, before the expiry on 23 July 2002 of the
State aid regime provided for in Decision No 3632/93/
ECSC, a coal industry which is totally competitive with
imported coal, that is to say, competitive without State
aid. Moreover, the significance of the change of the
maximum amount of aid which can be granted,
covering the period from 17 April 2000 to 23 July
2002, must be examined in the light of the above objec-
tive. Accordingly, the Commission takes the view that
the amended restructuring plan is in conformity with
the objectives and criteria laid down in Decision No
3632/93/ECSC.

III

(12)

The sum of GBP 10,402 million which the United
Kingdom is proposing to grant to the coal
industry
under Article 3 of Decision No 3632/93/ECSC is
intended to cover the difference between the production
cost and the selling price of coal freely agreed between
the contracting parties in the light of the prevailing
conditions on the world market
for coal of similar
quality from non-member countries.

(13)

The amount of aid proposed is
following nine units:

intended for

the

(a) GBP 870 000 for the Betws colliery production unit

of Betws Anthracite Ltd;

(b) GBP 661 000 for the central surface mines produc-

tion unit of H.J. Banks & Company Ltd;

(c) GBP 703 000 for

the north-east

surface mines

production unit of H.J. Banks & Company Ltd;

(d) GBP 2 978 000 for the east pit extension produc-

tion unit of Celtic Energy Ltd;

(e) GBP 113 000 for the Blaentillery No 2 production

unit of Flynonau Duon Mines Ltd;

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(f) GBP 79 000 for the Hay Royds Colliery production

unit of J. Flack & Sons Ltd;

(g) GBP 88 000 for the Eckington Colliery production

unit of Moorside Mining Company Ltd;

(h) GBP 3 589 000 for the Tower colliery production

unit of Tower Colliery Ltd;

(i) GBP 1 321 000 for the Elwyn Complex production
unit of South Wales Anthracite Ltd/Ward Brothers
Ltd.

the new capacities

production capacities in time. The resulting drop in
production has meant an increase in production cost per
unit of coal extracted. Given their current state of devel-
opment,
should be going into
production during 2002. There should therefore be a
very significant reduction in production costs in subse-
quent years. According to the United Kingdom authori-
ties, costs should fall by [...] % between 2002 and 2004
and by about [...] % between the reference period and
2004. The production costs should therefore be below
the GBP 1,15/GJ threshold referred to in recital 15 as
from 2003, with a cost level of about GBP [...]GJ.

(14)

The aid proposed is intended to allow the production
units which receive it to improve their economic viabi-
lity by reducing their production costs. In accordance
with the restructuring plans adopted by the United
Kingdom, the effort made towards reducing production
costs should be evaluated over a reference period of
three consecutive years. This method should ensure that
the development of production costs is not evaluated by
reference to a period of activity that is not representative
the production units
of
concerned.
to prevent any discrimination
among coal producers, they may fix for themselves any
reference period falling between 1 January 1994 and 31
December 2000.

the operating conditions of
In order

(19) At the request of the United Kingdom authorities, a
technical report was drawn up by an independent expert
to assess whether the modernisation, rationalisation and
restructuring measures envisaged for the various produc-
tion units would enable them to improve their economic
viability and, specifically, to achieve the objectives set
out in recital 15. In drawing up this report, the expert
took into account the geological and technical condi-
tions in which the units operate and the quality of the
coal which they produce. The report concluded that the
various measures envisaged are consistent and realistic
enough to achieve the estimated production costs
worked out for each of the production units referred to
in recitals 16 to 18.

(15) According to the restructuring plan,

the production
units have prospects for improving their economic viabi-
lity if it can be estimated that their production costs will
not exceed a threshold of GBP 1,15/GJ (1) in 2002. This
cost level should enable the companies concerned to
continue operating without the need for any financial
support beyond 2002.

(20)

For these reasons, the United Kingdom considers that
the modernisation,
rationalisation and restructuring
measures of the various production units will lead to an
improvement of their economic viability.
It contends
that the units should be able to continue their activities
beyond 2002 without any further public subsidy.

(16)

It appears from the data communicated by the United
Kingdom authorities that the development of production
costs between the reference period determined in
accordance with point 14 and the year 2002 is as
follows, at constant 1999 prices: Betws colliery [...] (*);
central surface mines [...]; north-east surface mines [...];
East Pit Extension [...]; Hay Royds colliery [...]; Eckington
colliery [...]; Tower colliery [...]; Elwyn complex [...].
Moreover, the production costs, at constant 1999 prices,
should in 2002 be at a level equal
to or below
GBP 1,15/GJ as referred to in recital 15.

(17) Moreover, according to estimates for the period up to
2004 inclusive,
the above production units should
continue to improve their economic viability through
new reductions in production costs. In this regard, the
Commission notes that the costs of several production
units should by 2004 be less than GBP 1/GJ.

(18)

Production Costs at Blaentillery No 2 should be around
GBP [...]GJ in 2002; these costs are [...] % higher than
those calculated for the reference period. Certain finan-
cial difficulties have not allowed this production unit to
make the investments necessary to replace some of its

(1) 1 tonne of coal equivalent (tce) = 29,302 gigajoules (GJ).
(*) Confidential

information.

(21)

(22)

IV

In accordance with Article 3(2) of Decision No 3632/
93/ECSC, the aid which the United Kingdom proposes
to grant is intended to improve the economic viability of
the production units concerned by reducing their
production costs.

these reductions,

taken account of

The Commission considers the reductions in production
costs as set out in points 16 to 18 to be significant. In
order to assess the extent of
the
the difference
Commission has
between average production cost calculated for the refer-
ence period (see recital 14) and the target cost for 2002,
determined at GBP 1.15/GJ. While the cost reductions
calculated for the central surface mines and north-east
surface mines units ([...] % and [...] % respectively) are
less than the very large reductions recorded by other
production units,
level of central
the absolute cost
surface mines and north-east surface mines during the
reference period was already very close to the threshold
of competitiveness with imported coal.

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(23)

(24)

(25)

(26)

(27)

(28)

(29)

The aid should help to improve the viability of the
production units to enable them to continue their activi-
ties beyond 2002 without further public subsidy.
In
accordance with the restructuring plan approved by the
Commission in Decision 2001/114/ECSC, the produc-
tion costs of the Betws colliery, central surface mines,
north-east surface mines, East Pit extension, Hay Royds
Colliery, Eckington Colliery, Tower Colliery and Elwyn
complex units
exceed the
GBP 1,15/GJ threshold. The extent to which Blaentillery
No 2 exceeded this threshold in 2000 is not enough to
jeopardise the economic viability of
that production
unit. In fact the temporary operating difficulties which
have led to the high production costs at Blaentillery No
2 should be resolved some time in 2002, bringing
production costs down to below GBP 1,15/GJ
from
2003 onwards.

should in 2002 not

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 production costs and foreseeable
revenue, as calculated on the basis of the financial infor-
mation for the period covered by the aid, namely from
17 April to 31 December 2000.

for each production unit,

The modernisation,
rationalisation and restructuring
measures implemented by each production unit, and in
particular the temporary nature of the financial support
necessary to achieve these measures, will allow the aid to
be degressive,
in accordance with the first indent of
Article 2(1) of Decision No 3632/93/ECSC.

The Commission notes that for each production unit an
auditor has stated that the financial data notified by the
company's
United Kingdom accurately depict
accounts. The auditor also stated that the forecasts had
been drawn up using the accounting standards that were
in use before the period covered by the aid.

the

the above, and on the basis of

In the light of
the
information provided by the United Kingdom, the aid
proposed for the period from 17 April to 31 December
2000 for the production units listed in recital 13 is
compatible with Decision No 3632/93/ECSC, and in
particular with Articles 2 and 3 of that Decision.

V

The United Kingdom is required to ensure that this aid
does not cause any distortion of competition and does
not discriminate between coal producers, purchasers or
consumers in the Community.

for Community coal to be lower than those for coal of a
similar quality from non-member countries.

(30) Moreover, in accordance with Article 2(2) of Decision
No 3632/93/ECSC,
the aid must be entered in the
United Kingdom's national, regional or local public
budgets and must comply with strictly equivalent mech-
anisms.

(31)

(32)

the latest by 30 September 2001,

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 has to check that the aid authorised is
used only for the purposes stipulated in Article 3 of that
Decision. At
the
United Kingdom shall send notification of the amounts
of aid actually paid during the year 2000 and shall
declare any corrections made to the amounts originally
notified. Any information required to ascertain that the
criteria laid down in Article 3 of the Decision have been
complied with shall be provided along with this annual
breakdown.

The United Kingdom is required to justify any deviations
from the restructuring plan as modified by the United
Kingdom, and from the economic and financial forecasts
notified to the Commission on 12 January and 19
February 2001, to which points 1 and 2 refer. In partic-
ular, 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 corrective measures
required,

HAS ADOPTED THIS DECISION:

Article 1

The amendment proposed by the United Kingdom, to the
modernisation,
rationalisation and restructuring plan as
approved by the Commission in its Decision 2001/114/ECSC
is in conformity with the objectives and criteria laid down in
Decision No 3632/93/ECSC.

Article 2

The United Kingdom is authorised, subject to the conditions set
out in Article 3 of Decision No 3632/93/ECSC, to grant oper-
ating aid amounting to GBP 10 402 000 for Betws colliery,
central surface mines, north-east surface mines, East Pit exten-
sion, Hay Royds colliery, Eckington colliery, Tower colliery,
Elwyn complex and Blaentillery No 2 production units for the
period from 17 April to 31 December 2000.

Article 3

In accordance with the third indent of Article 3(1) of
Decision No 3632/93/ECSC and with the provisions
relating thereto of Commission Decision 2001/114/
ECSC, the United Kingdom will take all the necessary
measures to ensure that the amount of the aid granted
to each production unit does not cause delivered prices

The United Kingdom shall ensure that the authorised aid is
used only for the purposes which it has declared in its notifica-
tions of 12 January and 19 February 2001, and that any
expenditure relating to any of
the items covered by this
Decision which is cancelled, overestimated or misused, is reim-
bursed.

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Without prejudice to its obligations under Article 9(1), (2) and (3) of Decision No 3632/93/ECSC, the
United Kingdom shall, at the latest by 30 September 2001, communicate the amounts of aid actually paid
during the financial year 2000.

Article 4

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

Article 5

Done at Brussels, 11 April 2001.

For the Commission

Loyola DE PALACIO

Vice-President