2003/107/ECSC: Commission Decision of 17 July 2002 on the State aid which Italy is planning to implement for ILVA SpA (Text with EEA relevance) (notified under document number C(2002) 2595)
Date: 2002-07-17
Institutions: European Commission
Subjects: Italy, State aid, control of State aid, environmental protection, iron and steel industry

19.2.2003

EN

Official Journal of the European Union

L 45/15

II

(Acts whose publication is not obligatory)

COMMISSION

COMMISSION DECISION

of 17 July 2002

on the State aid which Italy is planning to implement for ILVA SpA

(notified under document number C(2002) 2595)

(Only the Italian text is authentic)

(Text with EEA relevance)

(2003/107/ECSC)

(3)

(4)

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

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

Having regard to Commission Decision No 2496/96/ECSC of
18 December 1996 establishing Community rules for State aid
to the steel industry (1), and in particular Article 6(5) thereof,

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

Having called on interested parties to submit their comments
pursuant to the provisions cited above (2) and having regard to
their comments,

The Commission decision to initiate the procedure was
published in the Official Journal of the European Commu-
nities (3). The Commission invited interested parties to
submit their comments on the aid.

By letter dated 12 April 2002, registered as received on
17 April, Italy informed the Commission that, in view of
the deadline of 22 July imposed by the Steel Aid Code
for payment of the aid, ILVA SpA had waived the second
and third instalments of the aid. It also informed the
Commission that the company had decided that five of
the 13 projects included in the original notification
would not be carried out and that
therefore no aid
would be granted for them. The projects were described
in paragraphs 8, 9, 13, 14 and 16 of the Decision to
initiate proceedings. In the same letter, Italy submitted
additional information on the remaining projects.

Whereas:

I. PROCEDURE

(1)

(2)

By letter dated 20 December 2001, registered as received
on 21 December,
Italy notified the Commission of
planned aid for investments to be carried out by ILVA
SpA at its Taranto plant.

By letter dated 18 February 2002,
the Commission
informed Italy that it had decided to initiate the proce-
dure laid down in Article 6(5) of Commission Decision
No 2496/96/ECSC (hereinafter referred to as ‘the Steel
Aid Code’) in respect of the aid.

(5)

By letter dated 18 April 2002, the United Kingdom Steel
Association submitted comments on the aid. The
Commission forwarded them to Italy, which was given
the opportunity to react. Its comments were received by
letter dated 22 May 2002.

II. DETAILED DESCRIPTION OF THE AID

(6)

ILVA SpA is a producer of steel belonging to the Riva
Group.

(1) OJ L 338, 28.12.1996, p. 42.
(2) OJ C 71, 20.3.2002, p. 6.

(3) See footnote 2.

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Official Journal of the European Union

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(7)

(8)

(9)

(10)

The aid is granted by the Ministry of Industry and Trade
under Law No 488/92 for aid in depressed areas
(‘Converting and amending Decree Law No 415 of 22
October 1992 amending Law No 64 of 1 March 1986
containing an organic framework for extraordinary aid
to the Mezzogiorno and rules for subsidising production
activities’). The aid was approved on 9 April 2001,
subject to authorisation by the Commission.

by

the

Italian

amount

authorities

Following the partial withdrawal of
the notification
referred to in recital 4, the costs considered eligible for
aid
to
EUR 20 225 000. The aid granted under Law No 488/
92 is calculated not on the basis of a fixed percentage of
eligible costs but on the basis of a percentage expressed
as the net grant equivalent (nge) within the limits of the
maximum aid approved by the Commission for the aid
scheme in question, according to the size of the firm
and the location of the production unit. In the specific
case of ILVA SpA, the percentage approved by Italy was
12,25 % nge, corresponding to EUR 3 034 000 to be
paid in three
the
company has waived the last two instalments, only one
instalment will be paid. Therefore, the actual aid will
amount to EUR 980 000 and will concern the following
projects.

instalments. However, because

Treatment of by-products in the coking plant; refurbish-
ment of the three existing lines for the absorption of
ammonia and the refrigeration of coking gas: these lines
were completely renovated in 1991. Their remaining
useful life at the time of the investment is more than 15
years. The total cost relates to necessary equipment and
amounts
amount,
EUR 3 100 000. Of
EUR 800 000 has been considered as maintenance
to
costs
costs.
EUR 2 300 000.

therefore

amount

eligible

The

this

to

Replacement of the existing dust filtration system, which
uses cyclones or electrostatic precipitators, by a new
system that uses fabric: the statutory maximum level of
emissions is 100 mg/Nmc. With this system, the level of
dust in the smoke will fall from 50 mg/Nmc to 30 mg/
Nmc, i.e. a reduction of 40 %. The existing system dates
from the early 1970s and its remaining useful life at the
time of the investment is 15 years. The eligible costs
relate
to
to
EUR 1 292 000.

equipment

necessary

amount

and

(12)

(13)

(14)

(15)

Installation of a conveyor belt for the transportation of
mineral to the homogenisation plant: this system will
replace the transportation by lorry currently used. Dust
emissions will be eliminated. The total cost of the project
amounts to EUR 4 700 000. According to the Italian
authorities, this investment will result in cost savings of
EUR 312 000
deducted
EUR 2 500 000 as cost savings over 10 years. Costs
considered eligible by the Italian authorities amount
therefore to EUR 2 200 000.

They

year.

have

per

Installation of a new additional system for the regenera-
tion of hydrochloric acid (Ruthner plant): this system
(closed-circuit) will be added to the existing one which
dates from 1978 and its remaining useful life at the time
of the investment is 10 years. The statutory maximum
level of emissions is 60 mg/Nmc. The concentration of
hydrochloric acid in the smoke will fall from 55 mg/
Nmc to 22 mg/NMC. Moreover, since it is a closed-
circuit system, the pollutants contained in the water will
no longer pass into the sewage. The cost of the equip-
ment amounts to EUR 1 550 000.

Improvement of the dust removal system for secondary
emissions in blast furnace No 1: this installation dates
from 1988 and its remaining useful life at the time of
the investment is 12 years. The statutory maximum level
of emissions is 100 mg/Nmc. The dust concentration
will fall from 50 mg/Nmc to 30 mg/Nmc. The cost of
the equipment amounts to EUR 1 550 000, from which
EUR 500 000 has been deducted for costs not directly
relating to environmental protection. Eligible
costs
amount therefore to EUR 1 050 000.

Extension of landfill for special waste by 300 000 m2:
landfills
the waste is currently transported to special
outside the company's premises. This investment would
eliminate the risks inherent in transporting the waste.
According to the Italian authorities, this investment will
reduce the costs of transporting and discharging the
waste from EUR 70 per tonne/year to EUR 15 per
tonne/year. The capacity of this extension is 60 000
tonnes
to
EUR 1 290 000.

investment

amounts

year.

The

per

(11)

Installation of a system for monitoring the emissions of
the coke ovens and sintering plant: this is required by
the equipment
the regional authorities. The cost of
amounts to EUR 1 033 000.

(16)

Replacement of 350 PCB electric transformers with new
transformers cooled using air or mineral oil: under
Italian law, PCB transformers must be dismantled by
2010. These transformers were installed in the 1960s
and 1970s. Their remaining useful life is over 20 years.
No cost savings are generated by this investment. The
investment amounts to EUR 9 510 000.

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III. COMMENTS BY INTERESTED PARTIES

(17)

the environmental purpose of

The United Kingdom Steel Association expressed doubts
about
the investments
referred to in recitals 11, 13 and 15. With respect to the
investments referred to in recitals 10 and 16, it asked
the Commission to ensure that they were not being
undertaken simply because the existing equipment had
reached the end of its normal life. With respect to the
investments referred to in recitals 9, 12, 14 and 16, it
considered that these are likely to result in cost savings
that should be deducted from the eligible costs.

IV. COMMENTS BY ITALY

(18)

Since the Commission's doubts arose mainly from the
lack of information contained in the notification, the
Italian authorities simply provided the missing informa-
tion.

V. ASSESSMENT OF THE AID

(19)

ILVA SpA manufactures products listed in Annex I to
the ECSC Treaty. It is therefore an undertaking within
the meaning of Article 80 of that Treaty to which the
Steel Aid Code applies.

(20) Article 3 of the Steel Aid Code stipulates that steel
companies may receive aid for environmental
invest-
ments. The criteria for assessing whether such aid is
compatible with the common market are set out in the
Annex to the Steel Aid Code and in the Community
guidelines on State aid for environmental protection (4)
(hereinafter ‘the 1994 environmental guidelines’).

(23) With respect to the replacement investments referred to
in recitals 10, 13, 14 and 16, given in particular that
they will not affect the production installations and that
their
the
remaining useful
Commission considers
they are environmental
investments.

life is more than 25 %,
that

(24) With respect to the investment relating to the treatment
of by-products in the coking line (see recital 9), given
that the gases will be reintegrated within the network
and reused by the company, the Commission considers
that this may be the main purpose of the investment.
The Italian authorities claim that
there are no cost
savings generated by this investment. This contradicts,
however, their statement that emissions will be reduced
in quantity and in quality by 20 % (for which, moreover,
they have not provided evidence). The Commission
cannot
the investment will
significantly improve on environmental protection, as
required by the 1994 environmental guidelines. More-
over, no cost savings have been deducted from the
eligible costs. In these circumstances, the Commission's
doubts as to whether the investment is eligible for envir-
onmental aid have not been allayed.

therefore conclude that

(25) With respect to the investment concerning the installa-
tion of a conveyor belt (see recital 12), given the cost
savings generated and the limited impact in terms of
the Commission considers
environmental protection,
that it has been undertaken for economic reasons and
that it is not, therefore, eligible for aid. In any case, even
deducting the cost savings generated would lead to the
same conclusion, i.e. non-eligibility for aid.

intended

environmental

(21) According to the 1994 environmental guidelines, aid
ostensibly
protection
for
measures but which, in fact, is aid for general investment
is not covered by the guidelines. The eligible costs must
be strictly confined to the extra investment costs neces-
sary to meet environmental objectives (5). Also according
to these guidelines, aid to help firms adapt
to new
mandatory standards plant that has been in operation
for at least two years can be authorised up to the level
of 15 % gross of the eligible costs (point A, first para-
graph) and aid for investment which will allow the firm
to improve on mandatory standards or which is under-
taken in the absence of standards may be authorised up
to 30 % gross of the eligible costs (point B, first para-
graph).

(22) According to the Annex to the Steel Aid Code, the
Commission will analyse the economic and environ-
mental background to a decision to opt for replacement
of existing plant or equipment. In principle, a decision
to undertake new investment which would have been
necessary in any event on economic grounds or on
account of the age of the existing plant or equipment
(remaining useful
life of less than 25 %) will not be
eligible for aid. Furthermore, any advantage in terms of
lower production costs will be deducted.

(4) OJ C 72, 10.3.1994, p. 3.
(5) See point 3.2.1 of the guidelines.

the landfill

for special waste (see recital 15),

(26) With respect to the investment concerning the extension
of
the
Commission notes that it will not lead to a reduction in
pollution but rather to a reduction in the costs of dealing
with the waste. Indeed, the cost reductions will compen-
sate amply for the investment. In these circumstances,
the Commission considers that this investment is under-
taken more for economic reasons and that it is not,
therefore, eligible for aid. In any case, even deducting
the cost savings generated would lead to the same
conclusion, i.e. non-eligibility for aid.

(see recital 11),

(27) With respect to the investment concerning the installa-
tion of a system for monitoring the emissions of the
the
coke ovens and sintering plant
Commission notes that, although it
intended to
imposed by the
comply with the legal obligations
regional authorities,
to
intended not
is equipment
reduce or eliminate pollution and nuisances or to adapt
production methods (as required by point 3.2.1. of the
1994 environmental guidelines) but merely to measure
actual pollution levels. In these circumstances, the invest-
ment is not eligible for environmental aid.

is

it

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Official Journal of the European Union

19.2.2003

(28) With respect to the investment concerning the replacement of electric transformers (see recital 16),
the Commission notes that the new equipment is intended to comply with new legal obligations
and that it will reduce or eliminate pollution. Therefore, according to point 3.2.A of the 1994 envir-
onmental guidelines, the maximum aid for this investment is 15 % gross of the eligible costs, i.e.
EUR 1 426 500.

(29) With respect to the investments described in recitals 10, 13 and 14, the Commission notes that they
will allow for significantly higher levels of environmental protection and that the cost savings gener-
ated by them have been deducted. According to point 3.2.B of the 1994 environmental guidelines,
the maximum aid for these investments is 30 % gross of the eligible costs, i.e. EUR 1 167 600.

(30)

The Table below gives a summary of the eligible costs and of the maximum aid allowed under the
1994 environmental guidelines:

Dust filtration

Ruthner plant

Dust removal

Replacement of transformers

Net eligible costs
(EUR)

Maximum aid inten-
sity
(%)

Maximum aid
(EUR)

1 292 000

1 550 000

1 050 000

9 510 000

30

30

30

15

Total

13 402 000

387 600

465 000

315 000

1 426 500

2 594 100

(31)

In these circumstances, given that the aid will consist only of the first instalment of the approved
aid, i.e. EUR 980 000 (see recital 8), the aid intensity is in conformity with the Steel Aid Code.

VI. CONCLUSION

(32)

In view of the foregoing, the State aid amounting to EUR 980 000 that Italy intends to grant to
ILVA SpA under Law No 488/92 for the projects referred to in recital 30 is compatible with the
common market. With respect to the rest of the notified aid, in view of the withdrawal of the notifi-
cation (see recital 4), the procedure initiated on 18 February 2002 is closed,

HAS ADOPTED THIS DECISION:

Article 1

The State aid amounting to EUR 980 000 which Italy plans to implement under Law No 488/92 for ILVA
SpA in respect of projects to be carried out at its Taranto plant is compatible with the common market.

This Decision is addressed to the Italian Republic.

Article 2

Done at Brussels, 17 July 2002.

For the Commission

Mario MONTI

Member of the Commission