2001/803/EC: Commission Decision of 25 April 2001 on the State aid implemented by Finland for Ojala-Yhtymä Oy (Text with EEA relevance) (notified under document number C(2001) 1139)
Date: 2001-04-25
Institutions: European Commission
Subjects: Finland, State aid, aid to industry, aluminium, iron and steel industry, regional aid

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COMMISSION

COMMISSION DECISION

of 25 April 2001

on the State aid implemented by Finland for Ojala-Yhtymä Oy

(notified under document number C(2001) 1139)

(Only the Finnish and Swedish texts are authentic)

(Text with EEA relevance)

(2001/803/EC)

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

mentary information was provided by letters dated 22
December 2000 and 20 March 2001.

Having regard to the Treaty establishing the European
Community, and in particular the first subparagraph of Article
88(2) thereof,

Having regard to the Agreement on the European Economic
Area, and in particular Article 62(1)(a) thereof,

(4)

The Commission decision to initiate the procedure was
published in the Official Journal of the European Communi-
ties (2) The Commission invited interested parties to
submit their comments on the aid.

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

(5)

The Commission received no comments from interested
parties.

Whereas:

I. PROCEDURE

(6)

(1)

(2)

(3)

Finland notified the Commission of the abovementioned
aid pursuant to Article 88(3) of the EC Treaty by letter
dated 23 September 1999. The Commission requested
additional information from Finland by letters dated 11
October 1999 and 8 December 1999. Finland replied by
letters dated 12 November 1999 and 12 January 2000.

According to the information received from Finland,
part of the planned aid had already been granted to the
company at the time of the notification. Therefore, the
case was registered as non-notified aid.

the Commission
By letter dated 17 April 2000,
it had decided to initiate the
informed Finland that
procedure laid down in Article 88(2) of the EC Treaty in
respect of the aid. Finland submitted its comments by
letters dated 17 May 2000 and 19 May 2000. Supple-

II. DETAILED DESCRIPTION OF THE AID

The assisted project
in question is to locate a new
aluminium pressure foundry in Haapajärvi to be built by
Ojala-Yhtymä Oy. Haapajärvi is classified as area 2 for
2000 to 2006 for regional aid. The production facility is
to have the latest state-of-the-art technology, which is
not in use anywhere else in the Nordic countries. The
facility will produce various components using the
aluminium pressure-casting method. It will have total
capacity of […] (*) and should be operational by the end
of 2001 at the latest. Ojala-Yhtymä Oy is to employ 80
people by the end of 2001 and 100 people by the end
of 2003. The investment started in 1999 and should be
complete by the end of 2003.

(7)

In 1998/1999 Ojala-Yhtymä Oy had a turnover of
FIM 212 million (EUR 36 million) and made a profit of
FIM 17 million (EUR 2,8 million). Finland accounts for
around 95 % of the turnover. The company employed
260 people in 1999.

(1) OJ C 162, 10.6.2000, p. 9.

(2) See footnote 1.
(*) Confidential

information.

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(8)

(9)

Ojala-Yhtymä Oy belongs to the Ojala Group. The Ojala
Group produces metal components made of thin plate.
The companies belonging to the Ojala Group also
design, manufacture and assemble electrical, electronic
and telecommunications components that incorporate
the thin metal components for specific customers in the
electronics and telecommunications industries. The Ojala
Group operates in four locations in Finland and new
production facilities are to be built in two other loca-
tions (Haapajärvi and Piippola). The Group has 620
employees and the budgeted turnover for 1999 was
FIM 500 million. The Group's most important clients
are [...] and its most
important markets other than
Finland are [...].

Total
investment in the assisted project is FIM 101,5
million (EUR 16,9 million). It is made up of investment
in machinery and equipment and investment in build-
ings. The machinery and equipment investment is FIM
[...] million, while the buildings investment is FIM […]
million.

(10)

The aid as notified by Finland is as follows:

(15)

(16)

(17)

assessment of the case came to light on the basis of the
decision taken by the Finnish authorities on the pending
application.

In its decision initiating the procedure, the Commission
also noted that Haapajärvi had sold the company 14
hectares of
land for FIM 140 000 (FIM 10 000/ha,
FIM 1/m2) for the production facility.

In this connection, the Commission noted that sales of
land by the authorities should comply with the Commis-
sion communication on state aid elements in sales of
land and buildings by public authorities (3). In accord-
ance with this communication,
the sale should be
carried out through an open bidding procedure or the
market price should be established by an independent
expert valuer.

In its decision initiating the procedure, the Commission
noted that the sale had not been carried out through an
open bidding procedure. This being the case, the market
price should have been established by an asset valuer
fulfilling the conditions laid down in point 2(a) of the
communication. In the absence of such an evaluation,
the Commission was unable to be sure that the sale of
land by Haapajärvi to Ojala-Yhtymä had not included
any state aid elements.

Haapajärvi (loan to be converted
to a grant)

FIM 15 million

(18)

Haapajärvi (grant)

FIM 10 million

Total

FIM 25 million
(EUR 4,15 million)

(11)

The FIM 15 million is a loan which will not be paid off
during the five-year loan period. If the company carries
out the investment as planned, it does not have to pay
the loan back. As security for the loan, Haapajärvi has a
mortgage on the land and the buildings to be built on it
by the company.

(12)

FIM 10 million of the aid is a grant paid directly to the
company by Haapajärvi. It is channelled through the
Elinkeinoelämän kehittämisrahasto, an industrial devel-
opment fund.

(13)

By the end of 1999 the company had been paid the
whole amount of the FIM 25 million aid.

(14)

the Commission noted that

In its decision initiating the formal investigation proce-
dure,
the company had
applied for FIM 21 million of investment aid (investoin-
tituki) from the state and that the application was still
pending. Therefore, the Commission stated that it would
not take the existence of this application into account
for the purposes of the procedure, unless, in the course
for the
of

the procedure, new information relevant

aid (4)

regional

The Commission noted that the aid was ad hoc aid.
According to the third paragraph of point 2 of the
guidelines on national
(hereinafter
referred to as ‘the regional aid guidelines’), ad hoc aid
does not as a rule fulfil the requirements of the regional
aid guidelines and the derogations under Article 87(3)(a)
and (c) will normally be allowed only for aid granted
under approved schemes. For this reason, there needed
to be a separate examination of whether the aid was
compatible with the regional aid rules.

(19)

(20)

In its decision initiating the procedure, the Commission
noted that the information on the market and region
concerned did not allow it to conclude that the balance
stipulated in the regional aid guidelines between the
resulting distortions of competition and the advantages
of the aid in terms of the development of a less-favoured
region could be guaranteed.

for

the reasons explained above,

Consequently,
the
Commission questioned whether the aid was compatible
with the regional aid guidelines and whether the sale of
the land by the municipality of Haapajärvi to Ojala-
Yhtymä Oy might contain an element of state aid.

III. COMMENTS FROM FINLAND

(21) According to Finland, the aid should be considered justi-
fied on the basis of Article 87(3) of the EC Treaty. The
aid complies with the principles of the regional aid
guidelines. The question of whether the aid was granted
on the basis of an approved scheme or as ad hoc aid is
irrelevant from the point of view of its actual impact.
What is relevant is the fact that, regardless of its source,
the aid complies with the standard principles applicable
for regional aid in the Community.

(3) OJ C 209, 10.7.1997, p. 3.
(4) OJ C 74, 10.3.1998, p. 9.

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(22)

(23)

(24)

(25)

(26)

Finland notes that the regional ceiling for large compa-
nies in Haapajärvi for 2000 to 2006, as approved by the
Commission, is 20 % NGE. This is 25 %-26 % GGE. The
aid intensity of the notified aid, i.e. the grant and the
loan, is less than 25 % GGE and, therefore, below the
regional ceiling.

Regarding the market situation, Finland notes that more
than 60 % of Ojala-Yhtymä's exports go to countries
outside the EEA,
(47,74 %),
Australia (8,12 %) and China (2,76 %). The aluminium
components to be produced in Haapajärvi will replace
imports of these products from third countries, particu-
larly from China.

the United States

i.e.

(28)

(29)

Finland explains that, logistically speaking, Ojala-Yhty-
mä's location in Haapajärvi makes it 10 %-15 % weaker
than its competitors owing to the higher transport costs
for its products. Therefore, the production costs need to
be correspondingly lower in order for the company to
remain internationally competitive. This
to be
achieved by increasing productivity and rationalising
production. The production facility to be built in Haapa-
järvi uses the latest state-of-the-art technology available
and is particularly
friendly. The
aluminium used in production will be recycled and the
air-conditioning and watering systems are closed, which
means that no pollutants are discharged into the envir-
onment. According to Finland, the aid will help the
company keep up with its competitors, but does not
distort competition in the relevant market.

environmentally

is

region and help diversify its industrial structure. The
project will help reduce the unemployment rate and
improve job prospects for the young and the long-term
unemployed. It will also bring tax revenue of FIM 3
million to the town, thereby easing Haapajärvi's financial
straits. The project will also bring new know-how to the
region and promote the creation of new service activi-
ties.

Finland also sent the Commission an asset valuer's evalu-
ation (5) of the sales price of the land, together with a
map showing the land sold. According to the evaluation,
the land is forestry land, of which 11 hectares are forest
and 3 hectares abandoned arable land. The land is not
situated in a zoning area and has no infrastructure.

The soil is mainly forest soil and the arable land is peat
soil. The land has 830 m2 of tree stand, which is mainly
pulpwood. The tree stand was evaluated on the basis of
the stumpage prices for Haapajärvi as announced by the
Nivala-Haapajärvi Forestry Management Association.
The evaluation concerns the following tree stand: pine
timber (30 m2), spruce timber (60 m2), pine pulpwood
(150 m2), spruce pulpwood (490 m2) and birch pulp-
wood (100 m2). The value of 3 hectares of sapling stand
and the value of the soil were also assessed. The evalu-
land is
the
ation concludes
FIM 133 500. The accuracy of the evaluation is 5 %
either way.

value of

that

the

Finland points out that Haapajärvi
is classified as an
objective No 2 aid area for 2000 to 2006. The region is
clearly worse off than the average for the regions and,
therefore, the granting of regional aid is justified. Haapa-
järvi has been in a weak financial position for the past
three years. The accounting period deficit was FIM 9,1
million in 1997, FIM 8,3 million in 1998 and FIM 0,5
million in 1999.

Finland points out that Haapajärvi is a small town with a
population of 8 232 at 1 January 2001. The population
of Haapajärvi is falling as educated young people move
away from the area owing to poor job prospects (129
people left in 1999). Unemployment is well above the
national average (17,3 % at 31 December 2000). Of the
unemployed total, 18 % are young people under the age
of 25, while 19 % are long-term unemployed.

(27) According to Finland, the assisted project contributes to
the development of the region by creating a new kind of
economic activity and new jobs. It will create 100 new
jobs for the area directly and 200 new jobs indirectly. It
will alleviate the impact of structural change in the

IV. ASSESSMENT OF THE AID

threatens

(30) Under Article 87(1) of the EC Treaty, any aid granted by
a Member State or through state resources in any form
to distort
whatsoever which distorts or
competition by favouring certain undertakings or the
production of certain goods is,
in so far as it affects
trade between Member States, deemed incompatible
with the common market. In accordance with the estab-
lished case-law of the Court of Justice and the Court of
First Instance, the criterion of trade between Member
States being affected is met
firm is
engaged in a line of business that involves trade between
Member States.

the recipient

if

(31)

The Commission notes that the aid is being granted
through state resources to a single company, conferring
an advantage on it by reducing the costs it would other-
wise have to bear in order to be able to carry out the
investment project. Moreover, the recipient of the aid,
Ojala-Yhtymä Oy,
is a company producing metal
components for the electricity and electronics industry,
which is a line of business involving trade between
Member States. Therefore,
the aid in question falls
within the scope of Article 87(1) of the EC Treaty.

(5) Kalajokilaakson Kiinteistöpiste Ky LKV, Tuomo Junttila, notary

public, qualified real estate broker.

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(32)

(33)

The aid consists of direct grants from the municipality
of Haapajärvi for an investment in the area. Haapajärvi is
an assisted area within the meaning of Article 87(3)(c) of
the EC Treaty. However, in 1999 when the aid contrary
to the rules was granted and paid to the company,
Haapajärvi was an assisted area within the meaning of
Article 87(3)(a) of the EC Treaty (6).

(40)

in its decision
The Commission further notes that
initiating the formal investigation procedure, it suspected
that the sale of land by Haapajärvi to Ojala-Yhtymä
included state aid elements since the sales price was not
established by an independent expert evaluation in
accordance with the Commission communication on
state aid elements in sales of land and buildings by
public authorities (7).

Point 2 of the regional aid guidelines states that they
apply to regional aid granted in every sector of the
economy, apart from the sectors for which specific rules
apply. Since manufacturing of metal components is not
covered by any specific rules, the aid is to be assessed
according to the provisions of the regional aid guide-
lines.

(41) According to the Commission's information, the land is
forestry land not situated in a zoning area. The land has
no infrastructure. The infrastructure requires investment
of FIM 1,3 million, which is to be financed by the
company. Therefore, if there is any additional aid to the
company, it can only be in the sales price of the land.

(34)

The Commission notes that the aid has already been
paid to the beneficiary Ojala-Yhtymä Oy and that it was
not granted under any approved regional scheme. There-
fore, the aid is deemed to be non-notified ad hoc aid.

(35) According to the second paragraph of point 2 of the
regional aid guidelines, a derogation for regional aid
under Article 87(3)(a) or Article 87(3)(c) may be granted
only if the balance between the resulting distortions of
competition and the advantages of the aid in terms of
the development of a less-favoured region can be guar-
anteed.

(36) According to the third paragraph of point 2 of the
regional aid guidelines, ad hoc aid does not, unless
shown otherwise, count as fulfilling the requirements of
the guidelines and derogations under Article 87(3)(a)
and Article 87(3)(c) will normally be applied only to aid
granted under approved schemes.

(37)

For this reason, there needs to be a separate examination
of whether the aid is compatible with the regional aid
rules.

(42)

the proceedings, Finland sent

the
In the course of
Commission an evaluation of the land price by a private
company dealing in real estate sales and evaluations in
the region. The evaluation was carried out by a notary
public working in the company.

(43) According to the evaluation, the land is forestry land, of
which 11 hectares is forest and 3 hectares abandoned
arable land. The land is situated outside the municipal
zoning area and has no infrastructure. The soil is mainly
forest soil and the arable land is peat soil. The land has
830 m2 of tree stand, which is mainly pulpwood. The
tree stand was evaluated on the basis of the stumpage
prices for Haapajarvi as announced by the Nivala-Haapa-
järvi Forestry Management Association.

(44)

The total value of tree stand, sapling stand and soil was
given as FIM 118 650. In order to assess the market
price, the aggregate sum of the valued items needs to be
corrected. The correction factor generally used is 25 %
and this is also being applied in the present case. This
corrected value of 118 650 x 0,75 =
gives
FIM 89 000. Since the land is outside the zoning area,
but is classified as a reserve area A in the master plan, a
value weighting of 1,5 is used to determine the final
market value. This gives 89 000 x 1,5 = FIM 133 500.
The accuracy of the evaluation is 5 % either way.

the

Aid intensity

(38)

(39)

The Commission notes that in its decision initiating the
formal
investigation procedure it observed that Ojala-
Yhtymä had applied for FIM 21 million of investment
aid and that the application was still pending.

By letter of 22 December 2000, Finland informed the
Commission that the company's application for invest-
ment aid had been rejected. Therefore, the Commission
notes that there is no additional aid arising from the
application that would need to be taken into account in
the present decision.

(6) At the time of the aid notification Haapajärvi was classified as an
objective No 1 assisted area. For 2000 to 2006 it has been classi-
fied as an objective No 2 assisted area.

(45) According to the information available, the value of a
plot of forest land in Finland depends mainly on the
value of the trees growing in the area in question. In
general, forest land without trees has virtually no value.
The value of the trees growing in a certain area depends
on the quality of the land and the trees.

(46)

The Commission notes that the evaluation was carried
out by a private company using the public stumpage
prices for tree stands as announced by the area Forestry
Management Association. The Commission, therefore,
has no reason to doubt the impartiality and accuracy of
the evaluation in question.

(7) See footnote 3.

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(47)

(48)

(49)

(50)

The Commission further notes that the value of the trees
growing in the area, namely FIM 118 650, is lower than
the sales price of FIM 140 000 FIM paid by Ojala-
Yhtymä Oy. The market value of the land, however, was
determined as FIM 133 500 with an accuracy margin of
5 %.

The Commission notes that even if the estimated value
were increased by 5 % (to FIM 140 175), the sales price
of FIM 140 000 paid by Ojala-Yhtymä still corresponds
to the market value of the land and, therefore, does not
contain additional aid to the company that would have
to be taken into account in the present decision.

For the reasons explained above under points 35 to 48
the aid to be assessed in the present decision is the
FIM 25 million paid to the company by Haapajärvi. The
intensity of this aid is 24,6 %.

The Commission notes that Haapajärvi
is an assisted
area within the meaning of Article 87(3)(c) of the EC
Treaty. It is classified as an objective 2 area for 2000 to
2006 with the regional ceiling of 20 % NGE, which
corresponds to 26 % GGE. The Commission further
notes that in 1999 when the aid contrary to the rules
was granted and paid to the company, Haapajärvi was
classified as an objective No 1 area with a regional
ceiling of 35 % GGE, making it an assisted area within
the meaning of Article 87(3)(a) of the EC Treaty.

(51)

The Commission notes that the aid intensity of 24,6 %
in the case in hand is below the regional ceiling.

(52) However, since the aid in question is ad hoc aid, sepa-
rate consideration needs to be given to whether the
balance between the resulting distortions of competition
and the advantages of the aid in terms of the develop-
ment of a less-favoured region can be guaranteed, as
stipulated in the second paragraph of point 2 of the
regional guidelines.

Balance between the distortions of competition and
the advantages of the aid for the development of a
less-favoured region

(55)

(56)

(57)

(58)

(59)

(53) On the question of the distortion of competition, the
produces
Commission
aluminium components for the electrical and electronics
industry,
including telecommunications equipment. Its
biggest clients are [...].

that Ojala-Yhtymä

notes

(54) According to the Commission's information, the elec-
trical machinery and electronics manufacturing industry
has experienced strong growth over the past decade.
Between 1993 and 1998 production grew by almost
30 % in real terms to 361 billion. This corresponds to

an annual growth rate in excess of 5,3 %. Exports to
non-EU countries almost
the ten-year
period to 1998, reaching EUR 107 billion in that year.
The trade balance remained negative, as imports from
non-EU countries reached EUR 131 billion (8).

trebled over

The two most important subsectors for assessment of
the present case are electronic components and compo-
nents for telecommunications equipment.

Electronic components are used in virtually all equip-
ment and the portion of the cost of the electronic equip-
ment they account for has risen continuously over the
past decade. According to the European Electronic
Component Manufacturers Association (EECA),
it has
increased from less than 18 % in 1988 to more than
24 % in 1998. This trend is expected to continue
because of the ever-increasing complexity of electronic
components.
In 1998 EU production of electronic
components was worth EUR 25 billion. Growth in the
industry is driven mainly by the market
for active
components and, in particular, semiconductors. In the
telecommunications has
area of passive components,
always been a large consumer, a situation that has been
further
explosion in mobile
telephony.

reinforced with the

In 2000 EU production of telecommunications equip-
ment was worth EUR 75 billion. This is a sector that
has enjoyed vigorous growth in recent years, with
output rising by 9,7 % in 1999 and 2000. The European
Information Technology Observatory (EITO) has forecast
annual growth in the region of 30 % over the period
1997 to 2002 and that the number of mobile phone
connections would reach nearly 200 million in western
Europe (9). This is one of the few high-tech industries in
Europe with a trade surplus. In 2000 the surplus was
EUR 17 billion. The surplus rose at the rate of 23 % per
annum between 1994 and 1998.

The Commission notes that, according to the informa-
tion at its disposal, growth in the industries in question
is strong (10) and heavily focused on exports to countries
outside the Community. Since the industries have regis-
tered growth averaging more than 5 % over the last five
years and the growth prospects remain positive, it can
be concluded that they are not suffering from structural
overcapacity.

The Commission further notes that Ojala-Yhtymä's turn-
over in 1998 was FIM 212 million (EUR 36 million),
while the turnover of the Ojala Group in 1999 was
FIM 500 million (EUR 84 million). Although the
company's turnover figures are based on sales and the
market information in the possession of the Commis-
sion is expressed in production values, the turnover
figures for both the company and the group indicate
the relevant
that
markets referred to above.

for less than 1 % of

they account

(8) Eurostat: Panorama of European industry 1999.
(9) Eurostat: Panorama of European industry 1999.
(10) Average growth in industrial production between 1995 and 2000

was 2,54 % (Eurostat).

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(60) On the issue of the state of the region concerned, the
Commission notes that Haapajärvi was in a weak finan-
cial position over the period 1998 to 2000 with the
balance sheet showing a deficit. The unemployment rate
was 17,3 % at 31 December 2000. The population of
Haapajärvi fell by 129 in 1999 because of educated
young people moving away from the area owing to
poor job prospects. The population currently stands at
8 232. For these reasons the Commission considers that
the region can be considered a less-favoured region
within the meaning of the regional aid guidelines.

(63)

ered equivalent to the effects of the aid granted under an
approved scheme and, as such, are guaranteed in the
manner intended in the regional aid guidelines.

Considering the above, and the moderate share of both
Ojala-Yhtymä and the Ojala Group in the relevant
market segments, which are not suffering from struc-
tural overcapacity, but are, on the contrary, experiencing
strong growth,
the
advantages of the aid to the region concerned outweigh
any distortion of competition resulting from it. For this
reason the aid is deemed to be compatible with the
regional aid guidelines.

the Commission considers

that

the lack of

(61) On the matter of the advantages of the aid in terms of
less-favoured region development,
the Commission
notes that the assisted project will be the only major
industrial establishment in this region which is sparsely
populated and suffers from high unemployment. The
project will create 100 jobs directly and may indirectly
contribute to creating a significant number of other jobs
in the region, thereby helping to reverse the trend of
population loss in the region, which appears to be
continuing because of
job opportunities
there. The assisted project, which will be the only signifi-
cant company in the area, will, therefore, have a vital
effect on improving the social and economic situation of
the region within the meaning of the regional aid guide-
lines.
In addition,
the project
the Commission notes that
concerned is also in principle eligible for regional invest-
ment aid under an approved investment aid scheme.
Without the ad hoc aid granted by the municipality of
Haapajärvi,
the aid to the project could have been
granted through this approved scheme. Therefore, the
positive effect of the aid on the region concerned is
equivalent to the effect aid granted under the approved
scheme would have had, regardless of whom the aid was
granted by (the municipality of Haapajärvi in the case of
ad hoc aid and the state in the case of aid under an
approved scheme). The fact that, in the absence of the ad
hoc aid granted by the municipality of Haapajärvi, the
aid for investment would have been granted under the
approved scheme means that the advantages of the aid
in terms of less-favoured region development are consid-

(62)

V. CONCLUSION

(64)

The Commission regrets that Finland unlawfully granted
the aid in question in breach of Article 88(3) of the EC
Treaty. However, since the aid complies with the guide-
lines on national regional aid, it is considered compat-
ible with Article 87(3) of the Treaty,

HAS ADOPTED THIS DECISION:

Article 1

The state aid which Finland has implemented for Ojala-Yhtymä
Oy, amounting to EUR 4,15 million, is compatible with the
common market within the meaning of Article 87(3) of the
Treaty.

This Decision is addressed to the Republic of Finland.

Article 2

Done at Brussels, 25 April 2001.

For the Commission

Mario MONTI

Member of the Commission