2002/345/EC: Commission Decision of 25 April 2001 on the aid granted by Italy to Istituto Poligrafico e Zecca dello Stato and its subsidiaries (Text with EEA relevance) (Notified under document number C(2001) 1177)
Date: 2001-04-25
Institutions: European Commission
Subjects: Italy, State aid, control of State aid, money, public service

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II

(Acts whose publication is not obligatory)

COMMISSION

COMMISSION DECISION

of 25 April 2001

on the aid granted by Italy to Istituto Poligrafico e Zecca dello Stato and its subsidiaries

(Notified under document number C(2001) 1177)

(Only the Italian text is authentic)

(Text with EEA relevance)

(2002/345/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) thereof,

Having called on interested parties to submit their comments
pursuant to the provisions cited above (1) and having regard to
their comments,

Whereas:

(1)

(2)

I. PROCEDURE

By letter dated 4 August 1998,
the Commission
informed Italy of its decision to initiate the procedure
laid down in Article 88(2) of the EC Treaty in respect of
the aid granted to Istituto Poligrafico e Zecca dello Stato
(hereinafter (cid:145)Poligrafico(cid:146)) and to some of the companies
controlled by it.

The Commission decision to initiate the procedure was
the European
published in the Official
Communities The Commission called on interested
parties to submit their comments on the aid in question.

Journal

of

(1) OJ C 133, 13.5.1999, p. 1; OJ C 272, 23.9.2000, p. 17.

(3)

(4)

(5)

(6)

(7)

The Commission received
from three
interested parties. It forwarded them to Italy, which was
given the opportunity to react.

comments

The Italian authorities submitted their observations by
letter of 1 February 1999. The Commission requested
additional information by letters of 9 February and 27
August 1999.

the

Italian

provided

authorities

requested
The
information by letters of 26 March, 27 May, 20 August
and 29 November 1999 and by letter of 13 March
2000. Meetings were held with the Italian authorities on
several occasions. In particular, detailed information was
provided during the meeting held in Rome on 21
January 2000.

During the course of the procedure, the Commission
was informed of a new aid measure granted by Italy in
the context of a larger restructuring plan. On 3 May
2000 it decided to extend the procedure to this new aid
measure. This decision was communicated to Italy by
letter of 5 July 2000.

The Commission decision to extend the procedure was
published in the Official
the European
Communities. The Commission called on interested
parties to submit their comments on the aid in question.

Journal

of

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Official Journal of the European Communities

13.5.2002

(8)

(9)

(10)

The Commission received no comments from third
parties.

(12)

Law No 154 of 1978 assigned the following additional
objectives (among others) to Poligrafico:

The Italian authorities submitted their observations by
letter of 3 August 2000.

(cid:151) minting of coins to serve as legal tender (both in

Italy and abroad),

II. DESCRIPTION OF THE MEASURES

Poligrafico was set up under Law No 2744 of 1928 in
order
to bring together under a single body the
production of banknote paper and normal paper
destined for use by the State. It was defined in Article 1
that Law as an ente pubblico economico (public
of
undertaking) under
the Ministry of
the control of
Finance. Law No 559 of 1966 redefined its nature and
its financial structure,
from the
Ministry of Finance to the Ministry of the Treasury; its
objectives were set as follows:

transferring control

(cid:151) production of paper (normal and for banknotes),

(cid:151) publication of all the official documentation of the

State,

(cid:151) publication of cultural and literary works of national

interest,

(cid:151) management of paper production plants.

(13)

(14)

(cid:151) minting of artistic and collectors’ coins.

In 1980 Poligrafico was authorised to acquire a majority
shareholding in Cartiere Miliani di Fabriano SpA.
(hereinafter (cid:145)CMF(cid:146)), a large pulp and paper producing
firm.

Lastly, Law No 266 of 1988 confirmed Poligrafico as an
ente pubblico economico. Being a public undertaking
it
under the control of the Ministry of the Treasury,
Its
the State.
enjoys
management is appointed by the Italian Government.

autonomy vis-(cid:224)-vis

financial

(15) At the time the procedure was initiated, the Poligrafico
group was headed by Istituto Poligrafico e Zecca dello
Stato, operating both as a commercial company and as
a financial holding. It controlled directly CMF (97,3 %),
Verres SpA (hereinafter (cid:145)Verres(cid:146))
(55 %), Editalia SpA
(hereinafter
(71,8 %) and Editalia Film Srl
(cid:145)Editalia(cid:146))
(71,4 %). In addition, it held minority shares in Istituto
Enciclopedia Italiana Treccani SpA (10 %) and Meccano
SpA (0,6 %). As a whole,
the group comprised 27
controlled companies and 7 affiliated companies.

(11)

From the financial point of view, Poligrafico was
entrusted with ownership of the properties, plants and
goods which had been used by the previous undertaking
and received ITL 3 billion in new capital; the rent which
it was obliged to pay to the State for the use of these
assets (4 % of their value) was abolished. At the same
time,
its annual
profits to the State as dividends.

it was required to transfer 90 % of

(16) At the time the procedure was initiated, CMF in turn
controlled several undertakings including among others
Cellulosa Calabra SpA (hereinafter (cid:145)Cellulosa Calabra(cid:146)),
Naco International SpA (hereinafter (cid:145)Naco(cid:146)), NWT SpA
(hereinafter (cid:145)NWT(cid:146)) and FAD SpA. The structure of the
Poligrafico group at the time the procedure was initiated
is shown in Figure 1.

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Figure 1

Poligrafico group

(main companies) as at 31 December 1996

Poligrafico (IPZS)

CMF

Editalia
Film

Editalia

Verres

Ist. Treccani

Meccano

Bimospa

Polimoore

Conial

NWT

Sipleda

Naco Intl.

Cargest

FAD

Cellulosa
Calabra

(...)

(17) Under the Civil Code and Laws No 559/66 and No
154/78, Poligrafico was not obliged to prepare a
consolidated balance sheet. At
the
Ministry of the Treasury, the undertaking has, however,
prepared consolidated accounts since June 1996 (see
Figure 2).

the request of

marks of the State and all
which safeguard public confidence (2).

items with characteristics

(19)

In 1998 Poligrafico’s consolidated turnover was as
follows:

(cid:151) (cid:145)security paper(cid:146)

(cid:151) normal paper

(cid:151) licence plates

(cid:151) publishing

ITL 260 billion
(EUR 133 million)

ITL 278 billion
(EUR 143 million)

ITL 78 billion
(EUR 40 million)

ITL 140 billion
(EUR 72 million)

(cid:151) coins

and medals

ITL 127 billion
(EUR 65 million)

30 %

31 %

9 %

16 %

14 %.

(2) Article 2 of Law No 559/66, as modified by Article 2 of Legislative

Decree No 166 von 1999.

(18)

its

turnover
to the State,

from
Poligrafico generates most of
as
and services
supplying products
provided for in Law No 559/66. Under this law, it is
required to supply normal paper and security paper to
the public administration, to publish the Official Gazette
and the official collection of all legal acts of the Italian
Republic, to mint coins of the State and to manufacture

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Official Journal of the European Communities

13.5.2002

(20)

Poligrafico’s consolidated profit and loss account
shown in Figure 2.

is

Figure 2

Poligrafico’s consolidated profit and loss account

(ITL billion)

1995

1996

1997

1998

Turnover

1 053

998

977

883

(cid:151) Operating costs (1)

(1 050)

(1 004)

(1 307)

(898)

Operating margin

(cid:151) Financial charges and

earnings

3

13

(cid:151) Extraordinary charges and

(cid:151)

earnings

(cid:151) Income taxes

Net result

(11)

5

(6)

19

(cid:151)

(8)

5

(330)

(15)

2

(8)

(286)

(150)

(cid:151)

(17)

(614)

(190)

(1) Also includes asset write-downs and write-offs (ITL 232 billion in 1997 and

62 billion 1998).

(21)

largest

CMF is Poligrafico’s
subsidiary in terms of
turnover and production. It produces normal paper and
security paper. Its key economic and financial data are
shown in Figure 3 below.

Figure 3

Consolidated profit and loss account of CMF

1993

1994

1995

1996

1997

1998

(ITL billion)

Turnover

284

347

462

404

348

350

(cid:151) Operating costs

(257)

(332)

(414)

(359)

(362)

(349)

Operating margin

27

15

48

45

(14)

(1)

(cid:151) Financial charges
and earnings

(cid:151) Extraordinary
charges and
earnings

(cid:151) Income taxes

Net result

(34)

(36)

(45)

(43)

(37)

(20)

(cid:151)

22

(cid:151)

(1)

(136)

(156)

(cid:151)

(7)

(cid:151)

1

(1)

2

(cid:151)

1

(cid:151)

(3)

(187)

(180)

(22)

In its decision to initiate the procedure, the Commission
referred to various aid measures granted by the State to
subsidiaries. These included two
Poligrafico and its

capital increases of ITL 54 billion (EUR 28 million) and
granted by
ITL 250 billion (EUR 125 million)
Poligrafico to CMF in 1996 and 1998 respectively and
overpayments by the State to Poligrafico for its products
and services.

(23) After

the procedure had been initiated,

the Italian
Government adopted Decree-Law No 116 of 21 April
1999, which required Poligrafico to undertake a broad
restructuring programme aimed at changing it from a
public undertaking (ente pubblico economico) into a joint
stock company (societ(cid:224) per azioni) by 31 December
2001. To that end, Poligrafico was also required to
restructuring plan with the
carry out a three-year
objective of
restoring the group’s profitability and
financial soundness.

(24) As part of

the procedure,

the Italian Government
informed the Commission that Law No 144 of 17 May
1999 gave Poligrafico a yearly grant of ITL 80 billion
(EUR 40 million) over the next twenty years to repay
the principal and the interest on loans taken out by
Poligrafico to finance the restructuring plan.

(25)

The Italian authorities also gave details of the financial
resources granted to CMF by Poligrafico:

(cid:151) 1996: capital
million),

increase of ITL 54 billion (EUR 28

(cid:151) 1998: transfer of debts of ITL 227 billion (EUR 116
million) and capital contribution of ITL 30 billion
(EUR 15 million),

(cid:151) 1999: capital contribution of ITL 89 billion (EUR 46

million).

(26) Of these resources, CMF transferred ITL 272 billion to
ITL 25 billion to NWT and ITL 5

Cellulosa Calabra,
billion to Naco.

(27)

Italian authorities

informed the
In addition,
the
Commission that
in 1998 Poligrafico granted capital
contributions to Editalia for a net amount of ITL 49
billion (EUR 25 million) to reconstitute the share capital
eroded by losses.

(28) All these sums granted by Poligrafico to its subsidiaries
were then recovered by Poligrafico by means of the
yearly grant given to it by the State. For the purposes of
this procedure, the aid measure to be assessed is that
granted to Poligrafico by Law No 144 of 17 May 1999
(ITL 80 billion for twenty years).

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III. COMMENTS FROM THIRD PARTIES

have been sold to private investors, while NWT has
been wound up.

(29)

(30)

to the effect

des monnaies

the
France submitted comments
not
(cid:145)Direction
participated in the calls for tender concerning minting
services
and Algeria mentioned by the
Commission in its decision to initiate the procedure.

et mØdailles(cid:146)

that
had

in India

France also affirmed that Verres’ activities on foreign
markets were rather limited in 1997 and 1998 since it
did not take part in any of the calls for tender in which
the
had
participated.

des monnaies

et mØdailles(cid:146)

(cid:145)Direction

IV. COMMENTS FROM ITALY

(31)

In its reply, the Italian Government argues that:

(cid:151) as

far as

the two capital

increases granted by
Poligrafico to CMF are concerned,
(i) they do not
constitute State aid since they have not provided
any economic benefit to the recipient, (ii) Poligrafico
acted as a private investor in a market economy,
and (iii) in any event, any aid would be compatible
with the common market under Article 87(3)(c),

(cid:151) as far as the alleged commercial advantages granted
to Poligrafico are concerned, they do not constitute
State
the State has never overpaid
Poligrafico for its products and services.

aid since

(32) As regards point (i), the Italian authorities maintain that
the funds granted by Poligrafico to CMF were not
caught by Article 87(1) in that they did not provide an
economic benefit to the recipient. They argue that the
two capital increases were transferred in their entirety
by CMF to its subsidiaries Cellulosa Calabra, Naco and
NWT to finance their restructuring. Since the funds
were transferred to Cellulosa Calabra, Naco and NWT,
CMF has not, according to the Italian authorities,
derived any economic benefit from such funds, having
acted merely as intermediary.

(33)

the resources
The Italian Government maintains that
granted by CMF to Cellulosa Calabra, Naco and NWT
did not constitute State aid since these companies have
never been active on the market and therefore were not
in a position to distort competition and trade between
Member States. In any case, Cellulosa Calabra and Naco

(34) As regards point (ii), the Italian authorities argue that
Poligrafico, in granting the funds in question, acted as a
private investor, in that it provided the funds necessary
to restructure one of its subsidiaries, so as to safeguard
the value of its investment.

(35) As regards point (iii), the Italian authorities argue that,
should the Commission consider these measures as State
aid, they should nevertheless qualify for the derogation
under Article 87(3)(c)
aimed at
since
restructuring a firm in difficulty.

they were

(36) As regards the alleged commercial advantages granted
to Poligrafico in the form of overpayment for products
the Italian authorities dispute the very
and services,
existence of the measures and explain that the price of
products and services sold to the State is fixed by a
commission set up within the government stationery
office (Provveditorato Generale dello Stato), which is
responsible
supplying all public administration
offices.

for

(37) According to the Italian authorities, the price set by the
commission takes into account, on the one hand, the
price of similar products and services on the market
and, on the other hand, the production costs incurred
by Poligrafico. Consequently,
that no
overpayment in favour of Poligrafico is possible.

Italy claims

(38) As regards the funds allocated to Poligrafico by Law No
144 of 17 May 1999, which were not included in the
decision
Italian
Government argues that they are part of an extensive
restructuring plan for Poligrafico as a group and that
they therefore constitute aid which is compatible within
the meaning of Article 87(3)(c).

procedure,

initiate

the

the

to

(39)

(40)

Finally, as regards the funds granted by Poligrafico to
Editalia,
they are
the Italian Government claims that
aimed at restructuring the company and are, therefore,
to be regarded as aid compatible with the common
market within the meaning of Article 87(3)(c) of the EC
Treaty.

The same arguments were adduced by the Italian
authorities with respect
the
procedure.

extension of

to the

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V. ASSESSMENT OF THE AID

(46)

(41)

In the case under assessment, it has to be established
funds granted to Poligrafico and its
whether
subsidiaries and the alleged commercial advantages:

the

twenty years.

In this case, Poligrafico is to receive a loan without
having to repay it since the State will repay it over the
next
the measure in
is clear
question reduces the charges that Poligrafico would
have
commercial
undertaking without any State support.

incurred if

a normal

it were

that

It

(cid:151) are granted by the State or through State resources,

(cid:151) are capable of distorting competition by favouring
certain undertakings or the production of certain
goods, and

(47) Accordingly,

the funds provided by Law No 144 of
1999 to Poligrafico favour the undertaking vis-(cid:224)-vis its
competitors not benefiting from the same measure and
provides an economic benefit within the meaning of
Article 87(1) of the Treaty.

(cid:151) affect trade between Member States and therefore
constitute aid within the meaning of Article 87(1).

(48)

Use of State resources

(42)

The funds granted by Law No 144 of 17 May 1999 to
Poligrafico stem directly from the State budget and, as
such, clearly constitute State resources within the
meaning of Article 87(1).

Favouring of certain undertakings

(43)

(44)

(45)

the view that any financial
The Commission takes
measure granted by the State to an undertaking which,
in various forms, would mitigate the charges normally
included in the accounts of the undertaking has to be
considered as State aid within the meaning of Article
87.

The funds provided by Law No 144 of 1999 to
Poligrafico (ITL 80 billion for twenty years) will allow
the company to repay the principal and the interest due
on loans it has taken out to finance its restructuring. In
practice, Poligrafico is placed in a position in which it
obtains loans for which it will pay back neither the
principal nor the interest. The amount in loans that
Poligrafico can obtain without having to ensure
repayment can be estimated at about ITL 1 100 billion
(EUR 568 million).

extraordinary transactions,

Loans are a necessary form of financing in the life of a
company as they can be used to finance running costs,
such as
investments or
acquisitions. However, the fact that companies have to
repay the principal and a market interest rate on their
loans forces them to require higher returns from their
investments in order to be able to repay the loans and
secure a sufficient return for shareholders.

received to inject capital

The Italian authorities argue that Poligrafico will use
part of the loan to repay the debts it has incurred in
order to provide financial resources to CMF (ITL 370
billion (cid:151) EUR 190 million) and Editalia (ITL 49 billion
(cid:151) EUR 25 million). CMF in turn has used most of the
funds
its
subsidiaries,
i.e. Cellulosa Calabra (ITL 272 billion),
Naco (ITL 5 billion) and NWT (ITL 25 billion).
the
Therefore, according to the Italian authorities,
resources granted to Poligrafico did not constitute State
aid as they were simply transferred to CMF, which in
turn transferred them to Cellulosa Calabra, Naco and
NWT. As these latter companies had a very limited
if any, no distortion of competition can be
turnover,
detected.

into some of

(49)

The Commission cannot concur. Poligrafico operates as
an integrated group that produces directly or through
subsidiaries. As a result, although CMF is a separate
entity from Poligrafico, it forms part of the group and
has to be considered, for the purposes of this procedure,
as part of a single economic group. It operates in fact as
a subholding of Poligrafico with shareholdings in more
than fifteen companies, as well as being an integrated
production company.

(50)

The measures granted to Poligrafico are to be regarded
as being intended for the whole group, regardless of
they benefited certain products or services
whether
provided by Poligrafico directly, by CMF or by any
other subsidiary.

(51)

Consequently, in assessing whether the measures under
examination have provided an economic benefit to the
recipients within the meaning of Article 87 the

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Commission has to apply the market economy investor
test to the funds granted by the State to Poligrafico
since they also comprise those granted by Poligrafico to
its subsidiaries to finance their restructuring.

(52)

In this connection, it is necessary to examine whether
the funds received by Poligrafico have been granted
according to the principle of
the private investor
operating under normal market economy conditions
(market economy investor principle) (3).
If this is not
the case, these measures produce an economic benefit
for the recipient. The recipient may, in fact, use these
and investments
resources
without needing
from financial
to obtain loans
institutions or to provide an adequate return on the
resources received.

expenditure

to finance

(53) According to the market economy investor principle, a
financial
transaction between a State and a public
undertaking involves aid when it would have not been
carried out by a private investor operating under normal
market economy conditions. In particular, State aid can
be presumed where (cid:145)the financial position of
the
company and particularly the [(cid:133)] volume of its debts,
is such that a normal return (in dividends or capital
gains) cannot be expected within a reasonable time
from the capital invested(cid:146) (4).

margin become negative in 1997 and 1998. Over the
same period, it incurred heavy losses which completely
wiped out its share capital. It was only thanks to the
capital contributions received from Poligrafico that the
company was able to remain in operation. It is clear
therefore that, on the basis of the past performance of
the company,
its financial structure and its economic
prospects, Poligrafico could not expect a return on its
investment which would have been acceptable to a
private investor.

(57)

In such circumstances, the State could not reasonably
expect a normal market return from its investment in
the undertaking. Accordingly, the provision of financial
resources to Poligrafico has to be regarded as conferring
an economic benefit on the recipient within the
meaning of Article 87 and could therefore constitute
State aid within the meaning of Article 87 of the EC
Treaty if
trade between Member
States.

they were to affect

Effect on Community trade

from their

(54) As can be seen from Figures 2 and 3, both Poligrafico
and CMF were in a difficult economic situation at the
time they received the funds
respective
shareholders. As regards Poligrafico, Figure 2 shows that
the company had been facing a serious downturn in its
economic
its operating margin became
negative in 1996 and worsened appreciably in 1997.
Even leaving aside the outright write-offs in 1997, the
operating margin (which may be
likened to the
economic performance of
(cid:145)industrial(cid:146) activities) was
negative to the tune of some ITL 100 billion. Despite a
significant
the operational
viability of the company remained negative.

improvement

in 1997,

situation:

(55)

in both 1997 and 1998 Poligrafico had
Furthermore,
negative equity. In normal conditions, companies with
negative equity cannot operate.

(58)

it

is necessary to assess

The third condition to be met for State measures to be
caught by Article 87 is that they have a real or potential
effect on trade between Member States. In the case in
question,
effect on
intra-Community
the Commission
since,
pointed out in its decision to initiate the procedure,
Poligrafico and its
in various
sectors, pulp and paper production, minting and
publishing, which are open to competition and in which
intra-Community trade is significant.

subsidiaries operate

trade

the

as

trade between Member States exists.
referred to the minting service,

(59) Moreover, in initiating the procedure, the Commission
clearly Stated that in the abovementioned sectors actual
In
or potential
particular,
the
it
for administrative use and to
provision of paper
publishing services. As regards the effect on trade, the
Commission reiterates
the State aid
measures granted to Poligrafico or to its subsidiaries
distort or threaten to distort
trade between Member
States.

its view that

(56)

The same reasoning can be applied mutatis mutandis to
CMF. As shown in Figure 3, the company suffered a
sudden downturn in its turnover and saw its operating

(3) Commission communication on the application of Articles 92 and
93 of the EC Treaty and of Article 5 of Commission Directive
80/723/EEC to public undertakings in the manufacturing sector (OJ
C 307, 13.11.1993, p. 3, Section III).

(4) See aforementioned communication, paragraph 16.

(60)

the Commission would point out

In addition,
that,
according to the Court of Justice, for a State measure to
be caught by Article 87, a direct impact on the actual
trade between Member States is not necessary.
is
sufficient that the measures strengthen the position of

It

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Official Journal of the European Communities

13.5.2002

the recipient compared with other undertakings which
are competitors in intra-Community trade (5). This is
the case for Poligrafico’s competitors but also for other
companies operating in the minting, publishing and
printing sectors.

to

moment. According
the
Commission is to approve measures to restructure a
firm in difficulty,
the following conditions must be
satisfied:

guidelines,

those

if

(61)

It can therefore be concluded that the measures under
examination also meet the third criterion spelt out in
paragraph 31, and therefore constitute State aid within
the meaning of Article 87(1).

(i)

the measures must restore the long-term viability of
the firm;

(ii) they must avoid undue distortions of competition;

Compatibility with the common market

(iii) they must be in proportion to the costs and benefits

of restructuring;

(62) Having confirmed that

the measures

in question
constitute State aid within the meaning of Article 87(1),
the Commission has to assess whether they can be
declared compatible with the common market under the
relevant provisions of the EC Treaty.

(iv) the restructuring plan must be fully implemented;

(v) the implementation of the restructuring plan must

be monitored by the Commission.

(63) Article 87(2) can be excluded as the measures do not
have a social character, are not granted to individual
intended to make good the
consumers and are not
damage caused by natural disasters.

(67) Only if all of these criteria are met can the Commission
declare the effects of the aid not to be contrary to the
Community interest and approve
it under Article
87(3)(c).

the development of

the aid does not appear

(64) As for Article 87(3)(a) and the part of Article 87(3)(c)
to be
regarding regions,
specific
intended to promote
regions, given the variety of
in which
Poligrafico as a group is present. Nor is it aimed at
promoting (cid:145)the execution of an important project of
common European interest(cid:146)
serious
disturbance in the economy of a Member State(cid:146) within
the meaning of Article 87(3)(b).

remedying

locations

(cid:145)a

(68)

(65) Given the nature of the measures in question, Article

87(3)(d) does not seem to be applicable either.

(66)

In conclusion, the aid measures in question qualify only
for the derogation in Article 87(3)(c). In such cases, the
Commission assesses the compatibility of aid measures
on the basis of
rescuing and
the guidelines
restructuring firms in difficulty (6) as the procedure was
initiated in 1998 in respect of the aid granted up to that

for

the

end,

Italian authorities

To this
submitted a
comprehensive restructuring plan for Poligrafico as a
group and for CMF in particular that had three main
aspects:

(cid:151) focus on Poligrafico’s (cid:145)core(cid:146) business as product and
service provider for the public administration and
hence termination of its (cid:145)external(cid:146) activities,

(cid:151) privatisation/liquidation of most of Poligrafico’s
subsidiaries, CMF and most of CMF’s subsidiaries,

(cid:151) reduction in costs by increasing internal efficiency

and restructuring.

(5) Case 730/79 Philip Morris v Commission [1980] ECR 2671.
(6) OJ C 368, 23.12.1994.

(69)

Poligrafico reckons
to restore sound profitability in
2002, while satisfactory cash flows are already expected
in 1999 and 2000 (see Figure 4 below).

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Official Journal of the European Communities

L 126/9

Figure 4

Poligrafico’s restructuring plan

(ITL billion)

1998

1999

2000

2001

2002

Refer-
ence
year (1)

Turnover

870

850

800

760

752

752

(73)

(cid:151) Operating costs

(850)

(820)

(740)

(680)

(650)

(640)

Operating margin

20

30

Ordinary result

(30)

(21)

Cash flow

2

12

60

9

35

80

20

55

102

112

40

48

n.a.

n.a.

(1) Excludes minting of euro coins.

(70)

The above results will be obtained by drastically
in particular
reducing the company’s operating costs,
staff costs, by almost 50 %, carrying out a wide range of
internal reorganisation measures and discontinuing the
production of several products and services intended for
the market. For example, the plants producing normal
paper and envelopes are already being dismantled. In
terms of turnover (in 1997), this represents a decline of
some ITL 170 billion (around EUR 87 million) per year.

(71) On completion of the restructuring plan, Poligrafico will
concentrate production on two product categories:

(74)

(75)

(cid:151) products

public

confidence,

non-reproducibility,

and services destined for

the public
administration for which the authorities
impose
specific quality and security requirements in terms
etc.
of
(category (a)). This category includes products such
as passports, personal
identification documents,
lottery tickets, government bonds and the Official
Gazette as well as minting operations on behalf of
the Central Bank. It is estimated that, on completion
of the plan, these products will account for 85 % of
the company’s turnover. It is clear that, because of
their very nature, the competition for these products
is fairly limited,

same

necessitating

(cid:151) products destined for the public administration but
not
security
the
requirements as category (a) above, such as tax
documents, voting cards, etc.
(category (b)). On
completion of the restructuring plan, these products
should provide the remaining 15 % of Poligrafico’s
turnover.

strict

(72) As Poligrafico is to terminate production of all

its
current (cid:145)commercial(cid:146) products, the plan provides for the

closure of all existing plants in order to concentrate
production in a single new plant that will permit greater
efficiency and improved product quality. A separate
plant will be necessary only for minting operations.

for

the plan provides

In addition,
the sale of all
Poligrafico’s subsidiaries except for Verres and Editalia.
Verres will continue to produce the materials necessary
for the minting operations, while Editalia is important
for the publishing side of the business, which may be
useful
for Poligrafico’s core business. The plan also
provides for the possibility of selling these subsidiaries
at a later stage.

The restructuring plan envisages a significant reduction
in the prices paid by the public administration for
Poligrafico’s products and services. It is estimated that,
on the basis of the 1997 production figures, this will
reduce the company’s turnover by some ITL 90 billion
at the end of the plan.

From an organisational point of view, the restructuring
plan aims to bring about a reduction in Poligrafico’s
workforce from 5 302 in 1997 to 2 650 in 2002 and
to 2 550 in the reference year, when production will be
concentrated at a single site. It also seeks to lower staff
the
unit costs by modifying some legal aspects of
employment contract and by replacing older and more
expensive employees with young and less expensive
workers. The combined action on staff numbers and on
unit costs will allow the company to reduce its overall
staff costs from about ITL 475 billion (EUR 244 million)
in 1997 to ITL 228 billion (EUR 117 million) in the
reference year.

(76)

By 30 June 2000 the workforce had already been cut by
about 1 850 to 3 130, i.e. at a faster rate than envisaged
in the plan.

(77)

The plan puts the total cost of the above measures at
around ITL 1 400 billion (EUR 720 million) over the
period 1999 to 2002. Of this figure, ITL 600 billion is
to be used to restructure Poligrafico’s financial situation,
ITL 430 billion to relocate the production facilities to a
single plant and ITL 370 billion to cover the social costs
of redundancies. Poligrafico will contribute some ITL
300 billion to the financing of the plan, including ITL
120 billion from the sale of assets and subsidiaries, ITL

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13.5.2002

100 billion from cash flows for the period and ITL 80
billion from the reduction in working capital.

(cid:151) closure of the carbonless copy paper business,

(78) As explained in recital 44, the remaining ITL 1 100
billion will be in the form of loans on which the State
will repay the principal and the interest.

(79)

(80)

an

implement

Poligrafico will

Lastly,
analytical
accounting system which will make it possible to
separate the costs and revenue relating to products sold
exclusively to the public administration from those
relating to any products sold on the market. This will
prevent any risk of cross-subsidisation between the
business for which Poligrafico operates as a supplier to
the public administration and those for which it decides
to compete on the market.

The main component of Poligrafico’s restructuring will
be the reduction in its operating costs (ITL 200 billion
over the period concerned), which will be achieved by
redundancies, production rationalisation and other
of
organisational measures.
these
measures depends on the will of
company’s
management
favourable market
developments.

Implementation
the

and

not

on

4

in

that

envisaged

the measures

(81) As far as Poligrafico is concerned, it can be seen from
the
Figure
restructuring plan will allow the company to restore
sound viability as from 2001. Already in 2000,
the
company will have a reasonable cash flow which will
enable it to finance some of the remaining restructuring
measures. It is also worth noting that these results will
be achieved entirely by means of internal restructuring
measures, without
on favourable market
assumptions. Condition (i) is therefore met.

relying

(82)

In parallel with the restructuring of Poligrafico, the plan
for a
submitted by the Italian authorities provides
radical restructuring of CMF with a view to privatising it
as soon as possible. As CMF is the largest subsidiary, its
restructuring prior to privatisation should be analysed.

(cid:151) restructuring of
which account
operating costs,

the current power supply plants,
the
for a large percentage of

(cid:151) reorganisation of

the commercial and marketing

areas,

(cid:151) reduction of staff numbers.

(84)

The plan also envisages the sale of most of CMF’s
subsidiaries and of non-strategic assets. With regard to
the companies to be sold, CMF has already completed
the sale of Cellulosa Calabra, a heavily loss-making
subsidiary. As mentioned in recital 48,
the Italian
authorities maintain that aid granted to this company,
as well as to Naco and NWT, should be assessed
separately. The Commission,
the reasons given
above, considers that these companies, each with a very
low turnover and production,
if any, have to be
considered as forming part of CMF’s paper and pulp
production activities.

for

(85) However, CMF’s difficulties are attributable primarily to
In particular,
Cellulosa Calabra, Naco and NWT.
Cellulosa Calabra, which received 90 % of
the funds
given by CMF to its subsidiaries, was to become a site in
Calabria, a disadvantaged region under Objective 1 for
the production of paper using a
special process
requiring the use of fewer trees and capable of reducing
chlorine-based production
the polluting effects of
processes. Despite huge
large
investments
the company never achieved significant
workforce,
production levels,
to production and
Its turnover during the first half of
marketing tests.
1998,
just before privatisation, was only ITL 140
million (EUR 72 000). It was sold by means of an open
and transparent procedure to a group of
investors
which dismantled all
its paper production plants and
used the industrial site to produce electricity. There is,
therefore, no need to examine any restructuring plan for
Cellulosa Calabra.

limiting itself

and a

(83)

CMF’s restructuring plan is based on the following
measures, which are to be carried out within three
years:

(86)

(cid:151) shifting of

the product

range to products with

higher value added, such as banknote paper,

The same reasoning can be applied to Naco and NWT.
Both companies were engaged in developing new
processes for producing paper and paper-like products.
Naco’s turnover in 1997, before privatisation, was only
ITL 170 million (EUR 86 000), while NWT’s turnover in
1998 was a little under
ITL 1 500 million (EUR
770 000). Both subsidiaries have also already been sold
by means of open and transparent procedures to private

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L 126/11

investors. The proceeds, 8 % and 2 % of the funds given
by CMF to its subsidiaries, were used to offset earlier
losses.

(93)

The first condition is that the measures must restore the
the
long-term economic and financial viability of
recipient within a reasonable time scale and on the basis
of realistic market assumptions.

(87) Under CMF’s plan, the sale and closure of most of its
subsidiaries will continue. For example,
in addition to
the abovementioned sales of Cellulosa Calabra, Naco
and NWT, CMF has already sold Polimoore SpA and
FAD SpA, while Cargest SpA and Cogest SpA have been
put into liquidation.

(94)

(88)

Similarly, the Cerreto Castello plant, owned by Fabriano
Soft, has already been sold and CMF’s carbonless copy
paper production line has been shut down.

(89)

In addition, the plan envisages various measures aimed
at repositioning the company in terms of products and
distribution channels, as well as raising efficiency to the
level of that of its competitors. One of these measures is
to reduce the company’s workforce from its current size
of 970 to around 600 (-40 %).

(90)

These measures should turn the company around. CMF
should be able to achieve an operating profit of some
ITL 60 billion (EUR 31 million)
in 2002 (compared
with an ITL 1 billion (EUR 0,5 million) loss in 1998), as
Figure 5 shows.

Figure 5

CMF’s restructuring plan

investment

The Commission also notes that, as far as CMF is
concerned, the restructuring measures are expected to
return the company to sound profitability in 2002, the
reference year, when CMF will have an estimated cash
flow of around ITL 60 billion, sufficient to cover the
company’s
needs.
Restructuring will be made possibly largely as a result of
the measures envisaged by CMF to increase its efficiency
and reduce its operating costs. For example, staff costs
are estimated to fall from ITL 75 billion in 1997 to ITL
45 billion in 2002 (-40 %). These measures are largely
dependent on the company’s management and not on
external market conditions.

operating

and

(95)

In addition, the Commission takes note of the Italian
authorities’ commitment to privatise CMF as soon as
possible as part of Poligrafico’s restructuring plan.
It
the presence of private investors will
considers that
underpin the company’s profitability prospects.

(96)

In this respect, it has to be noted that Poligrafico has
already selected the adviser for the sale of CMF and that
the privatisation procedure is about to start.

(ITL billion)

1997

1998

2000

2001

2002

(97)

Turnover

348

350

(cid:151) Operating costs

(362)

(351)

Operating margin

(14)

(1)

Net result

(187)

(181)

(cid:133)

(cid:133)

(cid:133)

(cid:133)

(cid:133)

(cid:133)

(cid:133)

(cid:133)

418

(358)

60

34

(98)

(91) As part of

the plan, CMF is

to be privatised in
accordance with the restructuring plan of its shareholder
Poligrafico. To this end, the sale procedure has already
started.

to

The Commission takes note of the Italian authorities’
commitment
above
restructuring plan according to the timetable indicated
and to submit half-yearly progress reports starting from
30 June 2001.

implement

full

the

in

The second condition requires the avoidance of undue
distortions of competition. Generally speaking, any aid
granted by a State to a firm causes undue distortions of
competition since it places
firm in a more
situation compared with its
favourable
competitors. This effect therefore has to be offset by
reductions in production capacity.

economic

that

(92) As mentioned in recital 67,

the Commission has to
assess whether the restructuring plan submitted by the
Italian authorities fulfils the five conditions laid down in
the relevant guidelines.

(99)

In the present case, the restructuring plan shows that
its production
significantly reduce
Poligrafico will
it will
In particular, as mentioned above,
capacity.

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Official Journal of the European Communities

13.5.2002

terminate all
its current production destined for the
to products and
commercial market and limit
itself
services for the public administration. This implies, at
1998 values, a loss of production of some ITL 170
billion, out of a total turnover of ITL 977 billion (17 %).

(100) Moreover, Poligrafico will sell most of its subsidiaries,
and in particular CMF, which is by far the largest in
terms of production capacity and turnover. As shown in
Figure 4, Poligrafico’s turnover will
to ITL 752
billion in 2002, from ITL 998 billion in 1996 and, most
importantly, from a consolidated figure of ITL 1 530
billion that same year. This represents a reduction of
about 25 % in terms of Poligrafico itself and of some
50 % in terms of the consolidated group. Even when it
is borne in mind that Verres and Editalia will remain
within the group, the reduction in capacity is still large
and significant.

fall

(101) As mentioned above, Poligrafico will close its three
plants and concentrate production at a single new
facility. This may also result in a significant reduction in
the group’s available production capacity.

(102) The Commission notes

its workforce

and restructure
thereby

significantly
that CMF will
its
(-40 %)
reduce
production facilities,
significantly
resulting
cutting back its production capacity. In particular, the
company will close the new Rocchetta plant, which was
built between 1991 and 1993 with a potential capacity
of 150 000 to 200 000 tonnes. CMF will use the facility
as a logistics terminal and gradually scale down its
actual production: this will further reduce its potential
production capacity.

(103) Consequently, the Commission considers that, on the
basis of the plan submitted by the Italian authorities,
Poligrafico has already reduced and will substantially
reduce its production capacity, both by concentrating
production and selling off most of its subsidiaries,
in
particular CMF. In its view, therefore, the aid granted to
Poligrafico will not unduly distort competition, provided
restructuring plan are
that
implemented as envisaged. Condition (ii)
is therefore
met.

the measures

in the

(104) Condition (iii) requires that aid be in proportion to the
to be declared
it must be limited to the strict minimum

costs and benefits:
compatible,

if State aid is

needed to finance the return to economic and financial
viability and must not therefore be used for aggressive,
market-distorting
extent
necessary to restore the firm to profitability.

activities,

except

the

to

financial costs of

(105) As explained in paragraph 77, the restructuring plan
ITL 1 400 billion.
envisages total
Poligrafico will contribute significantly to the funding of
the plan by means of the cash flow (ITL 100 billion
over the whole period) generated by the rationalisation
measures, by the sale of its assets and subsidiaries (ITL
120 billion) and the reduction in its working capital.

provided

information
it appears

the
Italian
(106) From the
authorities,
received by
that
Poligrafico will be used to reduce the company’s
financial debts, to reconstitute its net equity, to finance
the restructuring of operations and to cover the social
costs of redundancies.

by
the funds

(107) At the end of 1998 Poligrafico had a negative equity of
about ITL 600 billion (EUR 308 million) as a result of
its 1997 and 1998 losses. These losses were due largely
to inventory and assets write-offs and to the need to
allocate financial resources to its subsidiaries, CMF in
particular. The Commission considers that the amount
granted by the State to Poligrafico is limited to the strict
minimum necessary to cover the costs of its financial,
organisational and industrial restructuring.

(108) As mentioned above, Poligrafico will use the resources
granted by the State, together with its own resources, to
cover the social costs of redundancies (ITL 370 billion),
to restructure its production sites (ITL 430 billion - EUR
221 million) and to reconstitute its equity (ITL 600
billion - EUR 308 million). At the end of the plan,
Poligrafico will have a sound financial structure with a
normal level of debt relative to its equity.

is

in

Poligrafico

proportion
and does not provide

(109) The Commission therefore considers that the aid to be
to
its
granted
to
restructuring costs
surplus
resources which could be used to finance aggressive
commercial practices. It also notes in this respect that
Poligrafico will implement a separate accounting system
which will separate the costs and revenues relating to
products sold exclusively to the public administration
from those relating to products sold to private sector
customers. This will subsequently help to ensure that no

13.5.2002

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L 126/13

aid will spill over into the (limited) commercial activities
that will remain once the plan has been implemented.

(110) The Commission takes the view, therefore, that the aid
any
granted did not bring Poligrafico and CMF
additional liquidity which was unrelated to the process
of
restructuring and might have helped to finance
aggressive commercial activities or new investment not
necessary for the restructuring.

(111) With regard to condition (iii), it has been Stated above
that the recipients will make a significant contribution
to the financing of restructuring operations. As far as
Poligrafico is concerned,
it has been shown that the
company will participate fully in its restructuring by
providing some ITL 300 billion (EUR 154 million) of
internal resources from the sale of assets, subsidiaries
and industrial plants, as well as from the cash flow
resulting from the rationalisation of its operations.

(112) As far as CMF is concerned, the Commission notes that
the company is to use for restructuring purposes, about
ITL 150 billion (EUR 77 million) of internal resources
out of an estimated future requirement of
ITL 200
billion (EUR 103 million). CMF will also sell most of its
subsidiaries (as mentioned earlier, several of them have
already been sold or are being sold) and use the
proceeds to finance its own restructuring.

(113) The Commission considers that both companies will
make a significant contribution to the financing of their
respective restructuring plans. Condition (iii) is therefore
met.

(114) Lastly, the Italian Government has undertaken to ensure
that the restructuring plan is fully implemented and to
and
submit half-yearly
financial situation of Poligrafico and on the progress of
the company’s
to
restructuring measures,
enable the Commission to monitor the implementation
of the restructuring plans submitted. Conditions (iv) and
(v) are therefore met.

reports on the

economic

in order

VI. CONCLUSIONS

(115) The Commission finds

that

Italy has unlawfully
in
implemented the aid measures described above,
it
breach of Article 88(3) of
the Treaty. However,
aid granted to Poligrafico is
that
considers
compatible with the common market under Article
87(3)(c) of the Treaty, subject to full implementation of
the restructuring plan submitted to the Commission as
part of this procedure,

the

HAS ADOPTED THIS DECISION:

Article 1

The aid which Italy has granted to Istituto Poligrafico e Zecca
dello Stato, amounting to ITL 80 billion a year for the next
twenty years (equivalent to ITL 1 100 billion at present value),
to the
is compatible with the common market
conditions set out in Article 2.

subject

Article 2

implement

Italy shall
Istituto
Poligrafico e Zecca dello Stato and shall submit half-yearly
reports on the progress of the restructuring plan, starting on 1
July 2001.

restructuring plan of

the

Article 3

Italy shall
inform the Commission, within two months of
notification of this Decision, of the measures taken to comply
with it.

Article 4

This Decision is addressed to the Italian Republic.

Done at Brussels, 25 April 2001.

For the Commission

Mario MONTI

Member of the Commission