2002/631/EC: Commission Decision of 7 May 2002 on aid allegedly granted by Germany to RAG AG in connection with the privatisation of Saarbergwerke AG (Text with EEA relevance) (notified under document number C(2002) 1810)
Date: 2002-05-07
Institutions: European Commission
Subjects: Germany, State aid, coal industry, privatisation, sale

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II

(Acts whose publication is not obligatory)

COMMISSION

COMMISSION DECISION

of 7 May 2002

on aid allegedly granted by Germany to RAG AG in connection with the privatisation of
Saarbergwerke AG

(notified under document number C(2002) 1810)

(Only the German text is authentic)

(Text with EEA relevance)

(2002/631/ECSC)

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

the trade unions of the coalmining and electricity sectors
(hereinafter referred to as the ‘coal compromise’).

Having regard to the Treaty establishing the European Coal and
Steel Community, and in particular Article 4(c) thereof,

Having regard to Commission Decision 3632/93/ECSC of 28
December 1993 establishing Community rules for State aid to
the coal industry (1),

(3)

Having given notice to the parties concerned to submit their
comments in accordance with Article 88 of the ECSC Treaty (2)
and having regard to those comments,

Whereas:

(1)

(2)

I. PROCEDURE

By letter of 13 November 1997, RAG AG (hereinafter
referred to as ‘RAG’) notified the Commission under
Article 66(1) of the ECSC Treaty that it intended to
acquire the entire share capital of Saarbergwerke AG and
Preussag Anthrazit AG.

(4)

By letter of 9 March 1998, Germany notified the
Commission under Article 67 of the ECSC Treaty of the
planned privatisation of Saarbergwerke AG through its
sale to RAG for a token price. This letter indicated that
the privatisation was an integral part of an agreement
concluded on 13 March 1997 between the German
Federal Government, the Governments of North Rhine
Westphalia and Saarland, the coalmining industry and

Saarbergwerke AG (hereinafter referred to as ‘Saarberg-
werke’) was a public sector company whose main activ-
ities included coal extraction in Germany, production of
coke, power generation, district heating, environmental
protection, trade and services (in particular trading in
coal, oil transport and oil distribution) and rubber manu-
facturing. Coal extraction has traditionally been referred
to as the company’s ‘black’ area of activity and the other
activities constitute the ‘white’ area of activity. Saarberg-
werke was jointly owned by the Federal Republic of
Germany (74 %) and Saarland (26 %). It operated three
coalmines, with a total production in 1997 of 7,3
million tce (3).

The coal compromise, in which new guidelines were laid
down for coal policy for the period to 2005, provided
for a steady reduction in annual production from 47
million tce in 1997 to 42 million tce in 2000 and 30
million tce in 2005 and a reduction in the number of
production units from 17 to 12. These 1997 data should
be corrected downwards. Coal production in 2000, for
which Germany transmitted estimates when it notified
the Commission of State aid, will total about 35 million
tce and in 2005 production is unlikely to exceed 26
million tce.

(1) OJ L 329, 30.12.1993, p. 12.
(2) OJ C 101, 8.4.2000, p. 3.

(3) tce: tonnes of coal equivalent.

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(5)

(6)

(7)

(8)

(9)

In the coal compromise, the total State aid package for
the period 1997 to 2005 was fixed at DEM 68 billion,
with a declining scale for the level of aid: starting with
DEM 10,5 billion in 1997, the aid ceiling for 2005 was
put at DEM 5,5 billion. The grant of a total sum of
DEM 2,5 billion was made subject to RAG taking over
Saarbergwerke.

On 3 April 1998, the Federal Government, the Govern-
ment of Saarland and the RAG concluded an agreement
under which RAG took over Saarbergwerke’s entire
share capital by acquiring the shares held by the Federal
Government and the Saarland Government. The selling
price was fixed at DEM 2, namely DEM 1 for the
Federal Government’s shares and DEM 1 for those held
by Saarland. It was further agreed to merge the compa-
nies’ coalmining activities within a single company,
Deutsche Steinkohle AG, which is wholly controlled by
RAG.

and

Preussag Anthrazit

By decision of 29 July 1998, the Commission authorised,
under Article 66 of the ECSC Treaty, the acquisition of
Saarbergwerke
by RAG,
following a commitment by RAG to divest the coal
import business of Saarbergwerke and to separate the
sale of coal produced in Germany from the sale of
imported coal (4). The Commission specifically indicated
that
the aforementioned decision only concerns the
‘application of Article 66 of the ECSC Treaty and in no
way prejudices any decision the Commission may take
in application of other articles of the EC or ECSC Trea-
ties and in particular any decision relating to State aids’.

The merger of RAG and Saarbergwerke took effect on 1
October 1998. For accounting reasons, however, provi-
sion was made for retrospective effect from 1 January
1998.

On 29 September 1998,
the United Kingdom RJB
Mining company (now known as ‘UK coal’) applied to
the Court of First Instance of the European Communities,
asking it to annul the Commission’s decision of 29 July
1998 authorising the merger of RAG, Saarbergwerke
and Preussag Anthrazit on the grounds that
in its
analysis of the merger the Commission had not verified
whether the selling price included State aid. RJB Mining
took the view that it can be concluded from the informa-
tion which Germany transmitted to the Commission that
State aid of the order of DEM 1 billion to RAG was
inherent in the sale of Saarbergwerke.

(4) Case IV/ECSC.1252 — RAG/Saarbergwerke/Preussag Anthrazit.

(10)

By judgment of 31 January 2001 in Case T-156/98, RJB
Mining v Commission, the Court of First Instance annulled
the Commission’s decision of 29 July 1998 (5). According
to Court, the Commission had failed to verify the selling
price and in particular to examine the extent to which
that may be connected with a
the financial support
purely symbolic selling price might have strengthened
RAG’s financial power and thereby also its economic
power. On 12 and 19 April 2001, Germany and RAG
appealed against the judgment (6).

(11)

The Commission asked a firm of […] (*) consultants for
a study examining what effects the merger might have
on RAG’s financial power. In its study, […] focused in
particular on the way in which Saarbergwerke’s accounts
had been consolidated with those of RAG.

II. DESCRIPTION

II.1. Selling price

(12)

In its letter of 9 March 1998 notifying the Commission
of the planned privatisation of Saarbergwerke, Germany
argued that the risks connected with the takeover of the
Saarbergwerke’s mining sector
justified selling the
company for a token price. According to Germany, the
Government had made a commitment
in the coal
compromise only to subsidise coal production up to
2005. The expiry of the ECSC Treaty and of the provi-
sions on State aid to coalmining under Decision 3632/
93/ECSC of 23 July 2002 allegedly created considerable
uncertainty for
the future of coalmining. Germany
argued that the selling price therefore largely ensued
from the imponderabilities of
future national and
Community decisions on the future of German coal-
mining.

(13) Germany also stressed the significant risks connected
with fluctuations in the price of coal on the world
market, in particular as these prices served as the refer-
ence for calculating subsidies per tonne of coal. Any
reduction in coal prices on international markets that
was not offset by a rise in productivity would lead to an
increase in subsidy per tonne of coal. However, as a
ceiling had been imposed on the level of aid that
Germany could grant each year, a drop in world coal
prices would inevitably oblige the company to reduce its
production as it would otherwise be unable to continue
to cover its operating losses from State aid. Apart from
the fact that it would be difficult to adapt production in
the short term, a decline in coal production would also
lead to an increase in production costs.

(5) [2001] ECR II-337.
(6) Cases C-157/01 P and C-169/01 P.
(*) Confidential information.

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already applicable prior

(14) Germany also pointed to various obligations that had
been imposed on RAG when it took over Saarbergwerke.
For instance, RAG had to cover losses in the coal sector
up to 2000 and between 2001 and 2005 transfer
DEM 200 million each year from the ‘white’
to the
laid down in the coal
‘black’ sector. This obligation,
compromise, was
to the
compromise in respect of RAG’s existing coal and non-
coal activities, and consequently it was not connected
with the merger, nor was it dependent on it. For
instance, German coal companies were until 1997
obliged to use 75 % of their profits from the ‘white’
sector to cover losses from mining activities. Moreover,
RAG was subject to additional obligations — in parti-
cular to retain activities in Saarbergwerke’s ‘white’ sector
and include its own environmental activities in Saarberg-
werke, which according
arguments
constrained the company’s economic freedom to act.

to Germany’s

(15)

In view of all these facts, it would have been difficult to
find a buyer for Saarbergwerke.
In this connection,
Germany stresses, in particular in its letter of 15 April
1998, that attempts had been made since 1991 to find a
buyer for the company.

(16)

(17)

(18)

II.2. Letter of 4 February 2000 inviting comments

The information which Germany sent to the Commis-
sion by letter of 30 June 1998 in connection with the
merger includes parts of a report on the consolidation
plan for Saarbergwerke. The report had been compiled
in January 1996 by Roland Berger & Partners at the
German Government’s request in its capacity of main
shareholder (majority partner) in Saarbergwerke.

By letter of 10 July 1998, Germany transmitted to the
Commission parts of an evaluation of March 1996 by
Roland Berger & Partners containing comprehensive
solutions for the German coal industry and a brief report
of 9 July 1998 on updating valuations for Saarberg-
werke. This report had been compiled for the German
Government by […], following a Commission request
for further information to enable it to investigate the
merger.

Instance

The information which Germany transmitted to the
Commission did not include any figures on the value of
the ‘white’ sector. However, VASA Energy GmbH & Co.
KG, when it instituted proceedings before the Court of
European Communities (7),
First
submitted pages from the January 1996 report by
Roland Berger & Partners which Germany had not
submitted to the Commission. In this part of the report,
Roland Berger & Partners valued the ‘white’ sector at
about DEM 1 billion.

the

of

(7) Case T-29/99, Vasa Energy v Commission (ruling not published).

(19)

(20)

(21)

In the report of 9 July 1998 updating valuations for
Saarbergwerke, […] described the value of mining sector
as unquantifiably negative on account of the uncompeti-
tiveness of mining activities. The report also referred to
unquantifiable political risks from 2002 in connection
with the expiry of the ECSC Treaty and from 2005
because of
for
Germany with regard to the level and duration of sub-
sidies after that date.

the absence of political obligations

In the light of all the information at its disposal, the
Commission believed that various elements led to the
the privatisation of Saarbergwerke
conclusion that
involved non-notified State aid of DEM 1 billion. Under
Article 88 of the ECSC Treaty, the Commission invited
Germany by letter of 4 February 2000 to submit
comprehensive information,
in particular a detailed
economic, business and financial valuation of Saarberg-
werke and an assessment of
the risks involved in
acquiring the company. The Commission’s letter was
published in the Official Journal of the European Commu-
nities. At the same time, the Commission also invited
interested parties to submit their views (8).

In its letter, the Commission pointed out that if it consid-
ered that the sale of Saarbergwerke included non-notified
aid to the coal sector, it would examine the aid in the
context of Article 4(c) ECSC and in the light of Decisions
98/687/ECSC (9), 1999/270/ECSC (10) and 1999/299/
ECSC (11) taken in accordance with Decision 3632/93/
ECSC, and of the notification received for the year 2000.
The Commission further announced that:
‘Should the
Commission find, following receipt and examination of
the reply from the Federal Republic of Germany, that the
sale of Saarbergwerke AG included non-notified aid to
the non-coal activities, then this will be examined in
conformity with the State aid rules laid down in the
Treaty establishing the European Community.’

III. GERMANY’S COMMENTS

(22)

In response to the Commission’s letter, Germany trans-
mitted the information requested and stated its position
on the token price paid by RAG for acquiring Saarberg-
werke. With its letter, dated 8 May 2000, Germany
enclosed various documents: an expert report by […] of
2 May 2000 including a valuation of Saarbergwerke on
the basis of discounted cash flows and several scenarios
for the sale and winding-up of Saarbergwerke’s activities
(the winding-up scenario concerns in particular Saar-
bergwerke’s coal activities which reportedly involved
very high risks and might have to be discontinued); an
expert opinion from […] of 29 February 2000 which

(8) See footnote 2.
(9) OJ L 324, 2.12.1998, p. 30.
(10) OJ L 109, 27.4.1999, p. 14.
(11) OJ L 117, 5.5.1999, p. 44.

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included a valuation of Saarbergwerke in accordance
with the gross rental method; an expert opinion of 29
April 2000 on the procedure adopted to determine the
company value of Saarbergwerke; and a letter from
Roland Berger & Partners dated 14 April 2000 once
again sketching the background and views expressed in
their statement of January 1996, in particular the irrele-
vance of the sum of DEM 1 billion mentioned there.

conditions for the RAG/Saarbergwerke merger are not
transparent, in particular with regard to fixing the selling
price. Breaking up the company and selling off the indi-
vidual
separately, moreover,
would have made it possible through a tendering proce-
dure to attain a higher price than the token sum paid by
RAG.

company components

the public authorities the sale of

(23) According to Germany, the privatisation of Saarberg-
werke through its sale to RAG for the sum of DEM 2
did not include an aid component. Rather, from the
viewpoint of
this
company ‘as is’, i.e. without any prior financial consoli-
dation, — a company burdened with substantial business
risks — constitutes an optimum economic result. The
proprietors of Saarbergwerke,
i.e. the German Federal
Government and the Government of Saarland, are said
to have behaved like sellers acting in accordance with
free-market conditions and seeking to optimise revenue
from the sale.

(24)

The expert reports which […] compiled for Germany
confirm that at the time of privatisation Saarbergwerke
had a negative value overall. On account of the fact that
the mining sector was structurally in deficit, […] calcu-
lated a negative value of DEM […] million for the
company as a whole. Winding up the mining sector was
not a plausible alternative as the liquidation costs, which
[…] estimated to represent a negative overall value of
DEM […] billion, would have greatly exceeded the
expected revenue from a sell-off of the ‘white’ sector.
Nor would a break-up of Saarbergwerke through the sale
of the various company components on balance have led
to a positive value as the coal sector as such would have
been unsellable and hiving off the energy sector would
in particular have led ‘to the destruction of the economic
values’ of this sector. Germany’s argumentation is based
on the close economic linkage between the various
components of the company, in particular that between
the power generation sector and the coal sector.

(25) Germany’s position is that by selling Saarbergwerke to
RAG in one package at the price of DEM 2 it had
chosen the economically most sensible formula.

IV. OPINIONS OF THIRD PARTIES

the European Communities,

(26) After the Commission’s letter to Germany inviting it to
submit comments had been published in the Official
the Commission
Journal of
received two opinions from third parties. The Permanent
Representation of the United Kingdom to the European
Union sent a letter dated 5 May 2000 in which the
United Kingdom gave its support on all points of the
forth in its
analysis which the Commission had set
published letter.

(27)

RJB Mining (now UK Coal) also submitted an opinion, in
a letter of 5 May 2000. According to RJB Mining, the

V. EVALUATION

(28)

In order to ascertain whether the RAG/Saarbergwerke
merger involved State aid, the Commission first of all
examined how a private company acting in accordance
with free-market conditions would have behaved. On the
it can be assessed whether the
basis of this criterion,
German Federal Government and the Saarland Govern-
ment when selling Saarbergwerke for the sum of DEM 2
waived part of the revenue they could have obtained if
Saarbergwerke had been sold in its entirety. Next, the
Commission examined whether, as indicated in recitals
55 to 59, the sale of the ‘white’ and ‘black’ sectors, irre-
spective of the valuation of the company as a whole, was
tantamount to aid flowing from the former (whose value
was positive) to the latter (whose value was negative).

V.1. Value of the ‘black’ sector

(29) Germany, mainly basing its argument on […]’s report,
arrives at a negative continuation value of DEM […]
million for this sector and a negative liquidation value of
DEM […] billion. Germany takes the view that the sale
of the entire company to RAG for DEM 2 was thus an
economically highly sensible measure. […] have calcu-
lated a negative value of DEM […] million for all the
activities of Saarbergwerke taken together, in which the
coal sector accounts for this negative result (– DEM […]
million for the ‘black’ sector and + DEM […] million for
the ‘white’ sector).

(30)

(31)

for

coal

sites

In 1997 Saarbergwerke’s mining activities comprised
three
extraction (Ensdoft, Warndt/
Luisenthal and Göttelborn/Reden) and a coking plant
(Fürstenhausen)
in Völklingen which, however, ceased
operating in June 1997 when Saarbergwerke and RAG
merged. In 1997 the output of the Ensdorf, Warndt/
Luisenthal and Göttelborn/Reden mines was 2,8 million
tce, 2,4 million tce and 2,1 million tce respectively. In
this
sector worked 12 697 of a total of 18 000
employees of Saarbergwerke.

the restructuring of

In Decision 1999/270/ECSC on German aid to the coal
industry under the coal compromise, the Commission
the Saarbergwerke
declared that
production units would lead to a further reduction in
production and in particular to the closure of the Göttel-
born/Reden mine in 2000 on account of the consider-
able geological difficulties at this mine, making it impos-
sible to continue mining there.

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(32) According to information supplied by Germany in its
statements on State aid to coalmining, production costs
at the Warndt/Luisenthal mine were DEM […]/tce in
1998 compared with an average selling price of coal of
DEM […]/tce in the same year as estimated by Germany
(i.e. production costs amounted to […] times the selling
price of coal). The Ensdorf mine was considered to have
the lowest deficit in Germany, with production costs of
DEM […]/tce in 1998 which was still more than […]
times the selling price of coal.

(36) Given the geological difficulties inherent in coal deposits
in Germany and the production costs connected with
it is clear that the coal produced by these
extraction,
units cannot compete with coal
imported from third
countries and will not be competitive in the future.
Despite drastic restructuring, modernisation and rationa-
lisation in the coal industry intended to enhance compe-
titiveness, German coal production is and remains
uncompetitive compared with imports from third coun-
tries, even if there is a discernible rise in productivity,
progressive closure of
the least profitable units and
drastic cuts in employment in the sector.

(33) At the time Saarbergwerke was privatised, the Ensdorf
and Warndt/Luisenthal mines were receiving operating
aid authorised by the Commission in particular through
Decision 98/687/ECSC. On the basis of
information
the Commission assumed that
supplied by Germany,
both mines were able to further improve its economic
viability by reducing production costs and thereby meet
the criteria laid down in Article 3 of Decision 3632/93/
ECSC.

(34) According to the judgment of 9 September 1999 of the
Court of First Instance of the European Communities in
Case T-110/98 RJB Mining v Commission (12), the provi-
sions of Article 3 of Decision 3632/93/ECSC do not
require that the undertaking in receipt of aid achieve
viability by the end of a fixed period. They require only
that economic viability ‘improve’. According to the
Court, the reason for that ‘open-ended formulation is the
economic reality on which the scheme of State aid to the
Community’s coal industry is based, namely the struc-
tural uncompetitiveness faced by that industry because
most of its undertakings remain uncompetitive in rela-
tion to imports from third countries … It follows that
improvement in the economic viability of a given under-
taking necessarily means no more than a reduction in
the level of its non-profitability and its non-competitive-
ness.’

(35)

Even if these mines improved their economic viability
and came closer to meeting the criteria for the grant of
operating aid within the meaning of Article 3 of Deci-
sion 3632/93/ECSC, the fact would remain that their
prospects for attaining the viability threshold would still
be slight. Decision 1999/270/ECSC provides that ‘… it
can be concluded that a substantial reduction in aid can
largely be achieved by means of measures to reduce
mining activity.’ The text goes on to point out that ‘Even
if
the average production costs in the German coal
industry have fallen slightly, taking account of Article
3(3) of Decision 3632/93/ECSC, the production costs,
expressed at 1992 constant prices, are still too high as
they should be DEM […] per tce in 2002 as compared
with DEM […] per tce in 1992.’

(37)

This analysis is confirmed by the way the coal sector
developed in the years following the RAG/Saarbergwerke
merger. While the coal compromise envisaged coal
production of 37 million tce in 2002, the output-redu-
cing measures connected with the chronic uncompeti-
tiveness of the sector will probably mean that output in
Germany in 2002 will be less than 29 million tce. The
figure of 35 million tce estimated for 2000 is less than
that envisaged for 2002 in the coal compromise.

it

stated that

industry for 2002,

(38) When on 22 November 2000 Germany notified aid to
the coal
further
measures for reducing mining activity would be required,
involving additional closures. In Commission Decision
2001/361/ECSC (13), the Commission took note that this
reduction in capacity marked the continuation of the
rationalisation,
extensive measures
modernisation and reduction of mining activity that had
been taken since the coal compromise of 1997.

restructuring,

for

(39)

coal

sector. This

The study which […] carried out for the Commission
confirms that there was a high risk involved for RAG in
risk
taking over Saarbergwerke’s
concerns in particular the steady diminution of aid, the
amounts of which are laid down in the coal compromise,
the uncertainties about the period after 2005, as the coal
compromise expires at the end of 2005, the fact that
State aid to the coal industry has to be authorised by the
Commission, the uncertainty about
the level of coal
prices on the world market, and the difficulty of
adjusting production so as to optimise the use of State
aid. The […] study reaches the conclusion that these
risks, although difficult to quantify, will most probably
have a negative impact for RAG as it assumed consider-
able risks in buying Saarbergwerke without a clear quid
pro quo. At the time of the merger, the expiry of the
ECSC Treaty and of the rules on State aid to the coal
industry laid down in Decision 3632/93/ECSC on 23
July 2002 were to be considered additional risks for
RAG.

(12) [1999] ECR II-2585.

(13) OJ L 127, 9.5.2001, p. 55.

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(40)

In this connection, the Commission refers to the fact that
the valuation of the coal sector by […] is based on the
assumption that after 2005, that is, after the expiry of
the coal compromise, no more coal will be produced in
Germany. Consequently, there is considerable doubt with
regard to the future of the sector in Germany after 2005.

(41) Notwithstanding all the difficulties to accurately deter-
mine the value of the coal sector, it is concluded from
the above observations that this sector has a negative
value, in spite of the subsidies which Germany has paid
from year to year to cover operating losses. The absence
of any prospect for competitiveness at the time of the
it can
merger has been confirmed since. Accordingly,
safely be assumed that […]’s estimation that there is a
negative continuation value of DEM […] million is
realistic.

there is no evidence that activities in the ‘white’ sector of
Saarbergwerke would have given RAG an added value.
Apparently, the sale of particular areas of activity after
the merger incurred losses totalling DEM […] million.

(46)

In light of these observations, the overall value of the
‘white’ sector can be evaluated as mildly positive. The
[…] analysis shows that the value estimated by […] is
realistic. This value is assessed to lie between DEM […]
million and DEM […] million in light of the hypothesis
concerning the future of the coal industry after 2005
and its impact on the value of the power generation
sector.

V.2. Value of the ‘white’ sector

(47)

(42) According to […], the electricity generation sector has a
negative value of DEM […] million. This value has been
determined on the basis of two hypotheses: on the one
hand, the sector is closely linked with the Saarland coal
industry and, on the other hand, coal production will be
abandoned after 2005. Because of this close link between
the mining sector and electricity generation, the value of
the electricity sector is strongly dependent on the avail-
ability of coal produced in Saarland. At the time when
Saarbergwerke was sold, Germany gave a commitment
only to cover operating losses in the coal industry up to
2005. As there is no guarantee of aid being granted after
industry suffers from
that and as the German coal
chronic uncompetitiveness, […] believe that it cannot be
excluded that after 2005 the coal industry will simply
disappear. Disappearance of the German coal
industry
would oblige power stations to use imported coal, which
according to data supplied by Germany would entail
significant additional costs, in particular for transporting
coal from transshipment ports.

(43)

(44)

(45)

The hypothetical disappearance of the coal industry after
2005 would therefore completely neutralise the value of
electricity generation. If coal continues to be produced in
Germany after 2005, however, […] estimate the value of
electricity generation positively at DEM […] million.

[…] have valued the activities in the ‘white’ sector other
than electricity generation as follows: (a) district heating:
DEM […] million; (b) environment: DEM […] million; (c)
trade and services: DEM […] million; (d) rubber: DEM
[…] million.

[…] have analysed performance in the ‘white’ sector on
the one hand and the proceeds from the sale of parti-
cular segments of this sector after the merger, on the
other. It found that the profitability of these activities
between 1992 and 1996 was very low […]. Accordingly,

V.3. Sale of the company

The arguments adduced by Germany in its letter of 8
May 2000 are based on the hypothesis that the only
option was to sell Saarbergwerke in its entirety and that
this package had a negative value. The positive value of
particular components of the company’s ‘white’ sector
could not have offset the substantially negative value of
the ‘black’ sector, whether the sector were continued or
wound up. Given the chronic deficit of Saarbergwerke’s
coal sector, Germany’s best option was to sell
the
company ‘as is’ for the sum of DEM 2.

(48) Germany points out that a break-up of Saarbergwerke by
selling the various components of the company sepa-
rately would not have led to a positive value.

(49) An additional factor is that the various areas of activity
within the Saarbergwerke group were not structurally
separated. This means that if one or more loss-making
sectors — in particular the coal sector — with a negative
residual value had been wound up, it would have had to
be offset by the positive value accruing from the sale of
other parts of the company. The wind-up of the coal-
mining sector, whose negative value […] have estimated
to amount to DEM […] billion, would thus have largely
absorbed the proceeds
from the sale of profitable
company sectors.

(50) An analysis of RAG’s accounts confirms that the take-
over of Saarbergwerke has not led to a positive value. At
the end of the operation, rather, there was a negative
result of DEM […] million. This negative sum results in
particular from accounting adjustments made after the
merger. In accordance with general accounting princi-
ples, many of these adjustments should have been made
by Saarbergwerke prior to the merger. Other adjustments
were justified by the fact that Saarbergwerke applied
different accounting principles from RAG. According to
[…], some of
too high,
though only by DEM […] million. […] concludes that
no positive value could have accrued for RAG from the
sale of Saarbergwerke in 1998.

these adjustments were set

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V.4. The alleged DEM 1 billion value

(51) According to Roland Berger & Partners’ report of March
1996, the value of the ‘white’ sector could be estimated
at about DEM 1 billion. However, this report was not
compiled as a valuation in view of the privatisation of
Saarbergwerke. Germany, in its letter of 8 May 2000,
indicates that this amount is based on the hypothesis
the requisite restructuring measures are actually
that
taken, which was not the case when the company was
privatised. The DEM 1 billion value was therefore not
based on a valuation of the company ‘as is’ but antici-
pated the restructuring measures which Roland Berger &
the value
Partners considered necessary. Accordingly,
specified was a ‘restructuring value’.

(52)

(53)

the ‘white’ sector estimated by Roland
The value of
Berger & Partners in their report of March 1996 has in
fact not been confirmed by any other report, neither by
[…] or […] nor by the […] study carried out for the
Commission.

The letter of 4 February 2000 in which the Commission
asked Germany to submit comprehensive information
and according to which the privatisation of Saarberg-
werke might have involved DEM 1 billion in State aid
was first and foremost based on the fact that all of the
measures provided for in the coal compromise, in parti-
cular the merging of the coalmining sectors of Saarberg-
and Preussag Anthrazit within RAG, were
werke
intended to ensure supra-regional rationalisation on the
one hand and to cover the adaptation process by an
industrial agreement on the other hand with a view to
enhancing the efficiency of the coal industry ensuring its
survival beyond 2005.

(54) Unfortunately, the restructuring of coalmining after the
privatisation of Saarbergwerke in 1998 did not lead to a
discernible improvement of the economic viability of this
sector. The restructuring efforts, which have led to far
more extensive mine closures and production cuts than
envisaged in the coal compromise, have failed to
these
improve
circumstances, the long-term survival of Saarland’s coal
industry is highly questionable.

competitiveness. Under

sector’s

the

V.5. Examination of the sale in the light of Commis-

sion practice vis-à-vis cluster sales

(55) As expounded in recitals 20 and 21, the Commission
was of the opinion that the sale for the sum of DEM 2
might be tantamount to State aid as it included assets
with a potentially highly positive value. Even if the low
price, viewed in the light of all the business sectors sold,
was justified, the Commission normally assumes in cases
in which authorities demand that separate business
components be sold together that the sale is not effected
accordingly, may
without

conditions

specific

and,

include State aid. In particular where a business sector
with a negative value and another one with a positive
value are to be sold off together, it might be assumed
that the sale involves State aid for the former, and the
same applies to a separate sale of the business sector at a
negative price.

(56) An example of this strategy is the Commission’s letter to
Germany of 8 December 1992 (SG(92)D/17613),
in
which the Commission notes that ‘in cases where such
companies have not historically grown together,
the
Commission cannot
take the view that an artificial
the
merger of companies meets its requirement
offers must not be subject to conditions.’ This argument
was adduced in particular in the sale of the Lintra group
(aid N 49/95) (14). This view can be justified in particular
by referring to the likely behaviour of an investor who
acts in accordance with free-market conditions and is
otherwise in the same situation, who would dissolve a
company with negative value rather than waive the
proceeds from the sale of a company with positive value.

that

(57)

The Commission has verified whether these arguments
apply to Saarbergwerke’s case. It has found (see recital
49) that an investor acting in accordance with free-
market conditions who was in the same position as the
owners of Saarbergwerke would have had no way of
preventing the positive value of the ‘white’ sector from
being drained by the negative value of the ‘black’ sector
as Saarbergwerke’s coal sector was not constituted as a
separate legal person. The company’s structure shows
that the coal sector formed part of the Saarbergwerke
AG holding company.

(58) Nevertheless, the Commission is of the opinion that this
is not a wholly convincing analysis. Given the lack of
profitability and the substantial potential debts of the
‘black’ sector, whose survival fully depends on State aid,
it seems questionable whether an investor acting in
accordance with free-market conditions would have
allowed assets with a strongly positive value to go
unprotected. Such an investor can therefore not be
simply referred to as a yardstick for comparison.

(59) On the other hand, Germany has also indicated that
there are historical and commercial links between Saar-
bergwerke’s various business components, in particular
between the coal and electricity generation sectors, even
though in electricity generation German coal has been
steadily replaced by imported coal (from 1992 to 1998,
German coal dropped from 72 million tce to 47 million
tce and this trend still continues, with less than 35
million tce in 2000). In the 1998 merger there was at
least a certain link between Saarbergwerke’s areas of
activity, and if German coal had in the short term been
replaced by imported coal this link could have led to

(14) OJ C 168, 12.10.1996, p. 10.

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difficulties. In view of all these facts, the Commission has
reached the conclusion that the arguments on cluster
sales have no relevance for the Saarbergwerke case.
However, it wishes to point out that for such sales in
clear-cut cases (in particular if there are no commercial
or historical links between business sectors and if they
belong to separate companies),
the Commission will
continue to use these arguments in the manner set down
in recitals 55 and 56.

VI. CONCLUSION

(60)

(61)

The privatisation of Saarbergwerke through its sale to
RAG at the price of DEM 2 included no aid component.
Account being taken of the considerable business risks
involved, the sale of the company ‘as is’, i.e. without any
prior financial consolidation measures, was an operation
in which the public authorities behaved like a seller
acting in accordance with free-market conditions and
seeking to optimise proceeds from the sale.

Saarbergwerke’s lack of positive value is connected with
the coal sector which suffers from a chronic deficit and
has a very uncertain future. The lack of positive value is
confirmed by three reports, one of which was compiled
by an audit company at the Commission’s request.

(62) According to the report compiled by […], the continua-
tion value of Saarbergwerke must be estimated at a nega-
tive value of DEM […] million, i.e. a negative value of
DEM […] million for the ‘black’ sector and a positive
value of DEM […] million for the ‘white’ sector,

HAS DECIDED AS FOLLOWS:

Article 1

The privatisation of the Saarbergwerke AG company through
its sale to the RAG AG company at the price of DEM 2
involves no State aid.

This Decision is addressed to the Federal Republic of Germany.

Article 2

Done at Brussels, 7 May 2002.

For the Commission

Loyola DE PALACIO

Vice-President