2004/32/EC: Commission Decision of 2 April 2003 on the State aid granted by Spain to Porcelanas del Principado SL (notified under document number C(2003) 907) (Text with EEA relevance)
Date: 2003-04-02
Institutions: European Commission
Subjects: Spain, State aid, ceramics, control of State aid, household article

16.1.2004

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Official Journal of the European Union

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II

(Acts whose publication is not obligatory)

COMMISSION

COMMISSION DECISION

of 2 April 2003

on the State aid granted by Spain to Porcelanas del Principado SL

(notified under document number C(2003) 907)

(Only the Spanish text is authentic)

(Text with EEA relevance)

(2004/32/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,

promotion of the Asturias region (Sociedad Regional de
Promoción del Principado de Asturias — ‘SRPPA'), a
State-controlled entity, granted on 18 January 2001 a
subordinated loan with profit participation to Porcelanas
Principado.

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

(3)

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

On 19 September 2001,
the Commission decided to
initiate the procedure laid down in Article 88(2) of the
EC Treaty with regard to this loan. Having requested a
time extension, Spain submitted its comments by letter
In these comments,
dated 21 November 2001.
it
indicated new measures
in favour of Porcelanas
Principado.

Whereas:

(1)

(2)

I. PROCEDURE

Following allegations made by a competitor that Spain
had granted State aid to Porcelanas del Principado SL
(‘Porcelanas Principado'),
an
information request to Spain by letter dated 14 February
2000.

the Commission sent

letter

dated 5 May 2000,

By
Spain submitted
information. By letter dated 19 July 2000, a new
to Spain. Following a
information request was sent
reminder on 5 March 2001, Spain submitted the
requested information by letter dated 4 May 2001,
in
the regional society for the
which it

indicated that

(4)

(5)

(6)

The Commission decision to initiate the procedure was
published in the Official
the European
Communities (2). The Commission invited interested
parties to submit their comments on the aid measures.

Journal

of

The Commission received comments
from the aid
beneficiary by letter dated 10 January 2002. These
comments were forwarded to Spain by letter dated
16 January 2002. Spain did not submit comments
within the prescribed period.

By letter dated 11 March 2002, registered on 13 March
2002, Spain submitted a revised viability plan. By letter
dated 22 February 2002, the aid beneficiary submitted
evidence of a capital increase.

(1) OJ C 336, 30.11.2001, p. 2; OJ C 239, 4.10.2002, p. 4.

(2) OJ C 336, 30.11.2001, p. 2.

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(7)

(8)

(9)

(10)

(11)

(12)

(13)

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Official Journal of the European Union

On 9 April 2002 the Commission decided to extend the
investigation procedure to the new measures of which it
had only been informed when Spain reacted to the
initiation of the formal investigation procedure.

The reaction from Spain to the extension of the formal
investigation procedure was received by letter dated 16
May 2002, registered on 21 May 2002.

Turnover

Result

TABLE 1

16.1.2004

(EUR million)

1998

4,48

1999

2000

4,36

4,61

0,00

– 0,11

– 0,64

The Commission decision to extend the procedure was
published in the Official
the European
Communities (3). The Commission invited interested
parties to submit their comments on the aid measures.

Journal

of

from the aid
The Commission received comments
beneficiary by letter dated 13 June 2002, registered on
19 June 2002. These comments were forwarded to
Spain by letter dated 22 August 2002.

By letter dated 30 August 2002 the Commission
requested additional
information from Spain. Spain
responded by letter dated 25 October 2002, registered
on 29 October 2002.

The Commission requested additional clarifications by
letter dated 11 December 2002. On 16 December 2002
a meeting was held with representatives of the national
and regional government as well as the aid beneficiary.
Following this meeting Spain submitted the information
requested by letter dated 10 January 2003, registered on
that same date.

II. DESCRIPTION

A. The company

Porcelanas Principado is a limited liability company set
up in 1995 and which employed 150 workers in 2002.
It produces
the
household sector and for professional use, in particular
for hotels and decorators. These products are also
exported.

and porcelain dishes

china

for

(14) According to Spain, following a strike that led to the
suspension of activities over the period November 1999
to January 2000, Porcelanas Principado entered a
financial crisis. The following table as provided by Spain
gives a picture of its performance in 1999 and 2000.

(3) OJ C 239, 4.10.2002, p. 4.

(15)

In 2000, Porvasal SA (‘Porvasal') and other private
investors
took over an 80 % stake of Porcelanas
Principado. Porvasal is itself a limited liability company
employing some 175 people.
It produces china and
porcelain dishes
the household sector and for
professional use, in particular for hotels and decorators.
These products are sold to countries such as France,
Switzerland, United Kingdom, Germany,
Belgium,
Greece, etc. The following table provided by Spain gives
a picture of its performance in 1999 and 2000.

for

TABLE 2

(EUR million)

1998

1999

2000

7,17

0,14

7,67

0,18

8,24

0,20

Turnover

Result

B. Restructuring

(16)

the formal

Following the initiation of
investigation
procedure, Spain explained that a viability plan for
Porcelanas Principado had been drawn up by the end of
2000, when Porvasal,
together with other private
investors agreed to acquire over 80 % of Porcelanas
Principado. Following the extension of
the formal
investigation procedure, Spain submitted an updated
viability plan. The plan had been updated and detailed
after Porvasal had worked some months with Porcelanas
Principado and had gained a better insight
into the
company.

(17)

The plan is to run from 2001 to 2010, although
break-even is expected in 2004. According to Spain, the
last years are actually the consolidation of the results
expected by the restructuring.

(18) As explained in the extension of

the investigation
procedure, the viability plan contemplated a number of
measures intended to ensure the company's long-term
to close down
viability. The

company's

aim is

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Official Journal of the European Union

to the hotelware
loss-making activities and reorient
market. First, measures were intended to provide an
adequate debt-equity ratio. Second,
investments were
foreseen in plant and machinery with a view to
modernising and optimising capacity. In addition, the
plan indicated that Porcelanas Principado had to invest
in moulds for an isostatic press as well as in a kiln to
optimise
the
workforce had to be reduced by 20 % and several
measures had to be undertaken to improve productivity.
the company's
Finally,
financial restructuring to meet payments of some EUR
4,751 million that had accumulated since it first ran
into difficulty.

the plan also provided for

process. Moreover,

production

the

(19)

The overall cost of the restructuring measures is detailed
in the table below

TABLE 3

(EUR million)

(20)

Capital needs

Fresh capital

Economic restructuring

Investments

Kiln

Reduction of workforce

Financial restructuring (debts outstanding)

Tax authorities

Social security

Cost

1,800

0,294

0,661

0,670

0,861

0,947

Financial restructuring (debts outstanding)

Fogasa

Suppliers

Mortgage (Caja Asturias)

Debts with Porcelanas Gijón

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(EUR million)

Cost

0,229

0,593

1,612

0,329

Total

7,998

C. Financial commitment

To finance the costs described above and provide the
company with an adequate
capital basis, various
measures were taken. First, the company increased its
capital, which was subscribed by both the public sector
and private
investments were
financed through loans from private banks and by
different grants from the regional government. Finally,
the financial debts of the company were rescheduled.

investors.

Second,

(21)

It will be noted that several public-sector measures
already agreed have still not been paid for, the reason
following the initiation of
being that,
the formal
regional Government
the
investigation procedure,
suspended payments until the Commission reached a
final decision as to the measures' compatibility.

(22)

the accuracy of which has been
The table below,
confirmed by the Spanish authorities, provides an
overview

TABLE 4

Measures

Capital adjustment

1

2

3

4

Subordinated loan from SRPPA

Capital increase Porvasal

Capital increase SRPPA — pending

Capital increase Porvasal — pending

(EUR million)

Cost

0,601

0,601

0,300

0,300

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Business restructuring

Measures

5

6

7

8

9

10

11

Loan from Bancaja for EUR 0,294 m (investments) — part not covered by measures 6 and 7

Grant from the Asturias region (investments) — granted

Guarantee from Asturgar for loan under measure 5 (investments)

Loan from IDAE for EUR 0,661 m (kiln) — part not covered by measures 9 and 10

Grant from the Asturias region (kiln) — demanded but not granted

Guarantee from Asturgar for loan under measure 8 — envisaged

Grant from the Asturias region (personnel reduction)

Financial restructuring

12

13

14

15

16

17

18

19

Deferral of tax debts (guarantee from Asturgar for the same amount)

Deferral of tax debts (mortgage for the same amount)

Payment of social security debt

Deferral of social security debts (mortgage for the same amount)

Deferral of Fogasa debt (mortgage for EUR 0,502 m)

Deferral of debts to suppliers

Cajastur mortgage

Asturgar guarantee for debts with Porcelanas Gijon — pending

(EUR million)

Cost

0,046

0,101

0,147

0,103

0,229

0,330

0,670

0,485

0,433

0,300

0,647

0,229

0,593

1,612

0,115

Total

7,842

(23) Measure 1. A loan (préstamo participativo) of EUR 0,601
million granted to Porcelanas Principado by SRPPA in
January 2001. The loan bears a fixed interest rate of
5,143 % (4) plus a variable rate depending on profits,
ranging from 0,75 % for profits up to EUR 0,3 million,
4,25 % for profits up to EUR 0,75 million and 9,5 % for
profits higher than EUR 1,2 million. The term of the
loan is seven years. Early repayment is allowed by virtue
of a ‘liquidity agreement' signed between Porcelanas
Principado and SRPPA.

(25) Measures 3 and 4. Two planned capital

injections.
SRPPA plans to inject capital worth EUR 0,3 million
(measure 3). Spain indicated in its reply to the opening
investigation procedure that this capital
of the formal
injection is
investor's
conditional on the private
(Porvasal's) decision to inject the same amount into the
company (measure 4). Spain also confirmed that any
future participation by SRPPA in Porcelanas Principado
will provide the former with priority subscription rights.
SRPPA has not carried out the planned capital injection
pending the Commission's decision in the present case.

(24) Measure 2. Spain has supplied evidence showing that
Porvasal provided new funds amounting to EUR 0,601
million.

(4) 12-month Euribor (15 January 2001) + 0,5 %.

(26) Measures 5 to 7 cover

investments of EUR 0,294
million (including interest). Specifically, measure 5 is a

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L 11/5

loan from Bancaja for EUR 0,294 million, granted on
condition that measures 6 and 7 are also granted.

(27)

Spain confirmed that the Asturias regional authorities
had made a non-refundable grant for EUR 0,101 million
(measure 6). Spain states that this investment subsidy
was granted under an aid scheme approved by the
The
Commission
non-refundable subsidy has not been paid, pending the
implementation of the investment and the Commission's
approval in the present case.

investment

regional

aid (5).

as

(28) As regards measure 7, Spain has indicated that
(Sociedad

the
Asturias Mutual Guarantee Company
de
Garantia Reciproca de Asturias — ‘Asturgar') provided a
guarantee for EUR 0,147 million, to cover the Bancaja
investment loan.

(29) Measures 8 to 10 cover the costs of a kiln, which total
some EUR 0,661 million. Specifically, measure 8
consists in a loan from the National Institute for Energy
Saving and Diversification (Instituto nacional para la
diversificacion y el ahorro de energia — ‘IDAE') for EUR
0,661 million, granted on condition that the Asturias
region make a grant for 40 % of the value of the kiln
(measure 9) and that a guarantee is arranged for 50 %
of the costs (measure 10).

(30) Measure 9. A subsidy from the Asturias region for EUR
0,229 million. An application has been submitted, but
the autonomous community of Asturias has not yet
taken a decision, pending the outcome of the current
investigation by the Commission.

(31) Measure 10. A proposed guarantee from Asturgar for

50 % of the costs of the kiln.

(32) Measure 11. A grant by the Asturias region for EUR
0,67 million (granted). The grant is intended to finance
the retirement plan for 22 workers over the age of 53.
It has not yet been paid, pending the Commission's
decision in the present case.

(34) Measures 12 and 13. In April 2001, the maturity of the
tax debt of EUR 0,861 million (including interest on
arrears) was deferred until 20 July 2005. The deferral
was subject to a double condition: firstly that Asturgar
would provide a guarantee for the payment of EUR
the
0,485 million (measure 12), and secondly that
company would take out a real estate mortgage for
some EUR 0,433 million (measure 13). The guarantee
under measure 12 was provided and the mortgage
under measure 13 was taken out. The deferred debt
bears interest of 6,5 % for the year 2001 and 5,5 % for
2002, as
laid down in Spain's Finance Law (Law
13/2000 of 28 December).

(35) Measures 14 and 15. The debt with the social security
for EUR 0,947 million (including interest on arrears)
was deferred in April 2001 subject to the condition that
the company would pay EUR 0,3 million from its own
resources.
Initially a further guarantee from Asturgar
was foreseen for this amount. This guarantee was never
granted. However the company found sufficient own
resources to pay this amount
to the social security
(measure 14), and in June 2001 the payment of the
remaining
amount EUR 0,647 million (including
interest) was deferred until 30 April 2006 (measure 15).
Following the extension of
investigation
procedure Spain reported that on 19 October 2001 the
(hipoteca
company
mobiliaria) in favour of the social security for an amount
of EUR 0,647 million to ensure repayment of
the
deferred debt. The deferred debt bears interest at 5,5 %,
as laid down in Spain's Finance Law (Law 13/2000 of
28 December).

chattels mortgage

the formal

took out

a

(36) Measure 16. In November 1998, the debt with Fogasa of
EUR 0,229 million (including interest on arrears) was
deferred until November 2006. The deferred debt bears
interest at 5,5 %. As a guarantee,
the company has
provided a chattels mortgage for EUR 0,502 million.

(33) Measures 12 to 19 are the result of an agreement
between the company and its creditors rescheduling and
partly waiving outstanding debts.

(37) Measure 17. The debts with suppliers have been
rescheduled until March/April 2006 through various
agreements. They have been deferred without interest.
[…] (*).

(5) Case N 75/2000. Decision of 3 May 2000 (OJ C 293, 14.10.2000,

p. 7).

(*) Confidential information.

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(38) Measure 18. A mortgage in favour of Cajastur on real
estate from Porcelanas Gijon, a failed company. The real
estate was acquired by Porcelanas Principado in 1997 at
public auction. On 8 March 2001, Porcelanas Principado
assumed responsibility for this mortgage in favour of
Cajastur for EUR 1,612 million. Spain has provided
evidence that Porcelanas Principado is meeting its
payments under the mortgage promptly.

(42)

(39) Measure 19. A new guarantee has been requested from
Asturgar to cover the remaining outstanding debts with
Porcelanas Gijon.

there

is overcapacity.
In the porcelain industry
Production and consumption both registered continuing
growth between 1984 and 1991, but
entered a
contraction phase in 1992 to 1993. The expected
recovery in 1994 did not happen. The trade balance in
recent years has been positive, but the share of imports
has increased markedly, in particular in the household
china segment. Export growth is not sufficient to offset
increasing competition in the sector. On the contrary,
this situation of strong competition and excess capacity
from
is being reinforced by new market entrants
in particular the
south-east Asia and eastern Europe,
Czech Republic
all benefiting from
preferential
trading arrangements with the European
Union (7).

and Hungary,

D. The market

(40)

There is a brisk trade in tableware between Spain and
other Member States. According to data from Eurostat,
between January and October 1995, Spain exported
8 546 tonnes of tableware products worth EUR 32,6
million and imported between January and September
1995 7 844 tons worth EUR 43,3 million. Spain's share
of the overall intra-Community trade in tableware goods
stands at roughly 3 %. Porcelanas Principado, although
not one of
tableware,
the EU's major producers of
participates in this market through exports to Italy and
Belgium.

latter

regional
exist

(United Kingdom)

of
concentrations
in Northern Bavaria

(41) While ornamentalware is produced throughout Europe,
tableware
important
(Germany),
producers
Staffordshire
and the Limousin
(France). Next to a plethora of SMEs, there is also a
number of
include
large undertakings. The
Villeroy & Boch (Germany/Luxembourg), Hutschen-
(Germany) as well as Royal
reuther and Rosenthal
Doulton and Wedgewood (United Kingdom)
and
account for more than a third of total production in the
Community. The special requirements of the hotel and
catering trades have given rise to the ‘hotelware' sector,
with specially designed hard-wearing ceramics. The UK,
the main producing and
Germany and Italy are
final
links with the
consuming
consumer and the need to compete on design have
given special
to this very labour-intensive
industry, with its enormous array of products. Sales to
in value;
third countries exceed European imports
imports exceed exports in tonnage, however, owing
primarily to very low-price imports from China (6).

countries. Close

features

(43) According to Cerame Unie's website (8),

industry recorded total

in 2001 the
European ceramics
sales of
around EUR 25,6 billion (table and ornamental ware
accounting for EUR 2,7 billion), and employed close to
240 000 people. The European industry is estimated to
provide a third of total world production, and has been
able to maintain a positive trade balance with third
countries. While the EU single market has stimulated
further
and
medium-sized companies tend to predominate.

concentration in the

industry,

small

III. REASONS FOR THE INTITIATION AND EXTENSION
OF THE FORMAL INVESTIGATION PROCEDURE

(44)

company.

investigation procedure,

the
In initiating the formal
Commission analysed the financial measures in favour
of Porcelanas Principado in the light of Article 87(1) of
the EC Treaty and Article 61(1) of the EEA Agreement.
The measures derived from State resources and distorted
threatened to distort competition, affecting trade
or
between Member States and conferring advantages on
the
the
In its preliminary
Commission considered that Porcelanas Principado was
a company in difficulty. It doubted, moreover, that the
State had behaved like a private investor making
financial resources available to the firm. In a preliminary
assessment such measures were regarded as State aid.
The measures were provisionally assessed under
the
Community guidelines on rescue and restructuring firms
in difficulty (9) (the rescue and restructuring guidelines).
On the basis of
the
Commission doubted that the aid could be considered
compatible with the common market.

information available,

assessment

the

(7) Panorama of EU Industry 1997, 9-20; NACE (Revision 1). See also
Commission decision in Case C 35/97, Triptis Porzellan GmbH (OJ
C 52, 27.2.1999).

(6) Data extracted from the website of Cerame-Unie

(http://www.cerameunie.org).

(8) http://www.cerameunie.org/industry.htm.
(9) OJ C 288, 9.10.1999.

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L 11/7

(45)

The information submitted in response to the initiation
of the formal investigation procedure provided details of
additional measures of which the Commission had not
been informed before. Consequently, the investigation
procedure was extended to assess them in the light of
Article 87(1) of the EC Treaty and Article 61(1) of the
EEA Agreement.

(51)

IV. COMMENTS FROM SPAIN

the

formal

procedure,

investigation
the State

the
aid character of

In its response to both the initiation and the extension
aid
of
beneficiary denies
the
subordinated loan granted to it by SRPPA (measure 1),
since that loan is concomitant with a capital
increase
for the same
made by a private investor (Porvasal)
amount
aid beneficiary equally
(measure 2). The
confirms that the intended capital increase of EUR 0,3
million by SRPPA (measure 3)
is concomitant with
another capital increase for an equivalent amount to be
provided by Porvasal (measure 4). For this reason, the
aid beneficiary considers
the intended capital
increase,
if it materialises, would not constitute State
aid.

that

(46)

(47)

(48)

(49)

(50)

the formal

Spain submitted

investigation
Following the initiation of
procedure,
restructuring plan
elaborated in late 2000 in the context of the acquisition
of an 80 % stake in Porcelanas Principado by Porvasal
and other
investors. The information submitted by
Spain also provided details of numerous measures of
which the Commission had not been informed before.

a

the formal

Following the extension of
investigation
procedure, Spain provided detailed information on the
measures subject to the extended assessment as well the
updated viability plan submitted by the aid beneficiary
with its
formal
investigation procedure.

initiation of

to the

reply

the

It

aid.

that

constitute

states, moreover,

Spain considers that both the participating loan under
measure 1 and the capital injection under measure 3 do
not
the
guarantees under measures 7, 10, 12 and 19 should not
be regarded as aid. Similarly, Spain considered that the
grant under measures 6 and 9 (the latter not yet
approved by the regional authorities) are covered by an
approved regional aid scheme and should be seen as
existing aid. It explained, moreover, that the ad hoc aid
measures should be regarded as compatible aid under
the rescue and restructuring guidelines.

Finally Spain pointed out that the payment of all public
sector measures in favour of the company had been
formal
suspended following the
investigation procedure.

initiation of

the

V. COMMENTS FROM THE AID BENEFICIARY

aid

confirmed

beneficiary

The
information
submitted by Spain, namely that the participating loan
under measure 1 is part of a series of measures aimed
at restoring Porcelanas Principado's viability. The aid
beneficiary lists the same measures as Spain.

the

(52) As regards the guarantees (measures 7, 10, 12 and 19),
the aid beneficiary indicates that Asturgar granted or
will grant them at normal market rates and that they do
not constitute aid.

(53) As regards the grants under measures 6 and 9, the aid
they constitute existing aid
beneficiary indicates that
since they are covered by an aid scheme approved by
the Commission (regional investment aid scheme) (10).

(54)

2000

in its

that any of

the grant of

the measures

The aid beneficiary also indicates that if the Commission
favour
concludes
constitutes State aid, then such aid would be compatible
with the common market since it complies with the
conditions laid down in the applicable guidelines (11).
Firstly,
Porcelanas
in December
because
in a situation of crisis within the
Principado was
meaning of
the rescue and restructuring guidelines.
Secondly, because a restructuring plan existed at the
time of
the relevant measures. Thirdly,
Porcelanas Principado is claimed to be an SME, hence a
reduction of capacity is not compulsory under
the
guidelines. In any event the beneficiary claims that no
capacity increase is planned, but only an improvement
in efficiency. Fourthly, the aid is claimed to be limited to
the minimum necessary: (i) it has only been used to pay
creditors
and to make
investments; (ii) there is a substantial contribution from
the private investor, which has
taken the risk of
contributing its own funds for the capital increase; (iii)
the costs and
Porcelanas Principado regularly pays
commissions linked to the bank guarantees and is
repaying its loans, including the subordinated loan; (iv)
the revised restructuring plan shows that the company
will be able to maintain a balanced cash-flow situation
and that it will not use the aid to launch an aggressive
price campaign.

(both public

and private)

(10) See footnote 5.
(11) See footnote 9.

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(55)

(56)

The aid beneficiary submitted an updated financial
forecast indicating that breakeven would be achieved in
2004 (see Table 7). The aid beneficiary admits that
although the forecasts in the original restructuring plan
may have been overoptimistic, the revised forecasts are
more accurate and are based on the in-depth knowledge
of Porvasal after working closely with Porcelanas
Principado for some months. The beneficiary pointed
out that the forecasts were actually being achieved.

The aid beneficiary also provided a market analysis
showing the main features of the china and porcelain
sector in Spain. The analysis distinguishes between two
the end-user (home and
sub-sectors on the basis of
hotel/restaurant) and confirms that at least 20 % of the
sales
the
hotel/restaurant segment are imported products. The
remaining 80 % is broken down as follows:

and porcelain for

in Spain of

china

TABLE 5

Company

CIM

Porvasal

GEA

Bidasoa

Capeans

Porcelanas Principado

( %)

Market

19

16

5

24

7

9

(57)

The aid beneficiary indicates that Porcelanas Principado's
share of the Spanish market has fallen to 9 % and also
confirms that the company is in competition with other
EU manufacturers (Costa Alegre and Vista Alegre, both
from Portugal).

(58)

Lastly, Porcelanas Principado refers to the restructuring
measures already mentioned under the original viability
plan and forwards very detailed information and records
on its operations.

VI. ASSESSMENT

A. Aid within the meaning of Article 87(1) of the
EC Treaty

Porcelanas

manufacturers.

conferring advantages on it vis-à-vis its competitors. As
indicated in the decision initiating the procedure, the
products marketed by Porcelanas Principado are traded
between the Member States and there is competition
between
Principado
confirmed in its submission that: (i) at least 20 % of the
sales
the
hotel/restaurant segment are imported products; (ii) it is
in competition with other EU manufacturers (Costa
Alegre and Vista Alegre, both from Portugal). Therefore,
any financial support granted by the state to Porcelanas
Principado is deemed to affect
and distort
competition.

and porcelain for

in Spain of

china

trade

(60)

(61)

In its initiation and extension of the formal investigation
procedure, the Commission concluded that Porcelanas
Principado was a firm in difficulty within the meaning
of the rescue and restructuring guidelines. Spain has
never contested this point.

In its initiation and extension of the formal investigation
procedure,
the Commission provisionally considered
that a number of measures should be regarded as State
aid within the meaning of Article 87(1) EC Treaty. Spain
however contests the State aid character of a number of
measures. These measures will be analysed in turn.

(62) Measure 1. A loan with participation in the profits
(préstamo participativo)
for EUR 0,601 million from
SRPPA. SRPPA is a public institution, which promotes
in the Asturias Region. The
regional development
regional
de
of Asturias
government
Asturias) has a controlling stake in it of 53,12 % (12).
The facts entered in the file show that its actions in the
present case are imputable to the State. Spain has never
contested this point.

(Principado

(63)

(64)

In the event of the insolvency of Porcelanas Principado,
the loan would be repaid after all other creditors have
been satisfied but before shareholders
receive any
payment. Thus,
the loan qualifies as a subordinated
loan.

two without

The loan was granted for a period of seven years, the
first
repaying any instalments. Early
repayment of the loan is allowed by virtue of a ‘liquidity
agreement' signed between Porcelanas Principado and
SRPPA. The loan has a fixed interest rate of 5,143 % and
an additional variable rate depending on profits, ranging
from 0,75 % for profits up to EUR 0,3 million, 4,25 %

(59)

Financial assistance deriving from public resources has
is to be granted to Porcelanas Principado,
been or

(12) The remaining shares are distributed between public and private

institutions.

16.1.2004

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Official Journal of the European Union

L 11/9

for profits up to EUR 0,75 million and 9,5 % for profits
higher than EUR 1,2 million. However, no profits at all
are expected before the year 2004 (see Table 7 below).
Consequently, it can be assumed that the rate of interest
will remain at 5,143 % for at
four years. This
interest rate is below the applicable reference rate of
6,33 % (13) and will remain below this rate for at least
four years. Spain confirmed that there is no collateral
for the loan.

least

the

that,

in the event of
the aid beneficiary indicates
bankruptcy, the loan would be repaid after all creditors
but before
shareholders were paid, which is
precisely the nature of measure 2. The aid beneficiary
thus claims that
this loan has been granted under
circumstances that are more favourable for SRPPA than
increase from Porvasal
those under which the capital
(measure 2)
the aid beneficiary
emphasises the fact that SRPPA took account of the
existence of a viability plan and of Porvasal's stake.

took place. Finally,

(65) According to Spain, the loan was granted when there
were difficulties but the crisis had not yet been made
official, as the annual accounts for 2000 were only
published at the end of 2001. Spain seems to draw a
distinction between a crisis and a difficulty. This seems
to be due to the Spanish version of the rescue and
restructuring guidelines, which uses the term ‘empresa
en crisis'. However, the different language versions of
the guidelines make no distinction at all between the
treatment of firms experiencing serious difficulties and
that of firms in crisis. In fact, the 1999 guidelines were
adopted by the Commission on the basis of texts drafted
in the three working languages: French, English and
German. The precise terms used are ‘entreprise en
‘firm in difficulty' and ‘Unternehmen in
difficulté',
Schwierigkeiten',
same
three with exactly
meaning. The Commission considers that a language
version cannot
for
companies in a particular Member State. The logic of
a uniform approach. Hence
the
Porcelanas Principado was a company in difficulty
within the meaning of the guidelines,
irrespective of
whether a crisis had been declared or not at the relevant
point of time.

imply a difference in treatment

system imposes

the

all

(68) As

aid is

in the

fresh capital

the Commission indicated

document
‘Application of Articles 92 and 93 [now 87 and 88] of
the EEC [EC] Treaty to public authorities' holdings (14),
is
involved where
no State
contributed in circumstances that would be acceptable
to a private investor operating under normal market
economy conditions. This applies in principle where the
to be increased,
public holding in a company is
provided the capital
injected is proportionate to the
number of shares held by the authorities and goes
together with the injection of capital by a private
shareholder and the private investor's holding must have
real economic significance. However, as regards some
it cannot be decided from the outset
acquisitions,
whether they do or do not constitute State aid.
In
certain circumstances, there is a presumption that there
is indeed State aid, for example where the authorities'
intervention takes the form of acquisition of a holding
combined with other types of intervention which need
to be notified pursuant to Article 88(3) or where the
holding is taken in an industry experiencing particular
difficulties. In the present case the Commission notes
that
the subordinated loan is granted together with
other measures which are regarded as State aid within
the meaning of Article 87(1) of the EC Treaty (see the
following recitals) and that Porcelanas Principado was in
difficulty at the time of its award.

(66)

The fact that the company was in difficulty at the time
the loan was granted, as admitted by Spain, is already
sufficient to expect from a diligent lender a particularly
cautious approach. This was not the case here as the
loan, to be repaid after all other creditors had been
satisfied, was granted below the reference rate and
without
the
company were known to the public or not is irrelevant;
it is the lender who must exercise due diligence.

collateral. Whether

the difficulties of

(67)

The aid beneficiary disputes the State aid character of
this loan because it is concomitant with a private capital
increase for the same amount (measure 2). In its view,
the fact that both measures are granted at the same time
and under comparable conditions should allow the
Commission to exclude the presence of aid. Moreover,

(69)

The Commission acknowledges the concomitance of this
subordinated loan with a capital increase from the main
the capital
In the event of bankruptcy,
shareholder.
increase would be reimbursed after the subordinated
loan: however,
in view of the low asset value of the
company, it is doubtful that it would be reimbursed at
all. Moreover,
the
position of Porvasal and that of SRPPA are not
comparable. Whereas Porvasal is the main shareholder
and was forced to increase the capital of Porcelanas
Principado to avoid insolvency, the State did not need to
intervene to secure any investment. It can be inferred
that, in the event of Porcelanas Principado's insolvency,
Porvasal would have to face a number of claims, the
amount of which would be bound to surpass the capital

the Commission considers

that

(13) See http://europa.eu.int/comm/competition/state_aid/others/refer-

ence_rates.html.

(14) Bulletin EC 9-1984.

L 11/10

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Official Journal of the European Union

16.1.2004

injected in the company. Hence, for Porvasal, injecting
fresh capital
into Porcelanas Principado was a more
economically viable solution than allowing the company
to file for insolvency. SRPPA, on the other hand, was
not bound by any such considerations. Consequently,
the behaviour of SRPPA is not comparable to that of
Porvasal.

EC Treaty apply to the proposed capital injection from
SRPPA.

(70)

In view of the above, the Commission concludes that a
market economy investor would not have awarded a
subordinated loan below the reference rate, for which
no compensatory revenues are foreseen until at least
2004 and without demanding substantial guarantees
from a
in difficulty. The Commission
SRPPA is not
the behaviour of
considers
comparable to that of a market economy investor, since
the subordinated loan is concomitant with other aid
measures (see the following paragraphs). Consequently,
the Commission maintains
loan
contains State aid elements within the meaning of
Article 87(1) of the EC Treaty.

company
that

its view that

this

(71) Measure 3 is a capital

injection proposed by SRPPA
conditional on the private investor's (Porvasal's) decision
to inject the same amount into the company (measure
4). Spain also confirmed that any future stake of
SRPPA's in Porcelanas Principado will give it priority
subscription rights. Spain explains, moreover, that the
conditions under which this capital
increase will take
place will be fixed in a re-purchasing contract in which
the price will be established as the higher of
the
following values: the theoretical accounting value, or the
nominal value upgraded by Euribor + 1,5 %. The
this capital
Commission acknowledges the fact
the
injection has not
Commission's decision in the
case. The
Commission also notes
that Porvasal has not yet
increased the capital either, since it too is waiting for
the Commission's decision on the compatibility of the
overall restructuring package.

taken place, pending
current

that

yet

(72)

Spain claims the measure does not constitute State aid,
since the behaviour of SRPPA is comparable to that of
Porvasal. The Commission however considers that the
proposed injection cannot be regarded in isolation, but
in connection with the
subordinated loan under
measure 1. Both support measures form part of the
same
Porcelanas
Principado with an adequate capital basis within its
restructuring. Hence, the Commission considers that the
same arguments that allow for measure 1 to be regarded
as State aid within the meaning of Article 87(1) of the

operation

intended

provide

to

include

conferences

the organisation of

(73) Measure 5: a loan from Bancaja, a non-profit financial
entity jointly set up by various savings banks (80 %),
banks and various service companies (15). Savings banks
are credit institutions constituted as private foundations
which assign part of their profits for social purposes. In
the case of Bancaja, those social purposes are to find
employment for young people, support for voluntary
and
social work,
exhibitions, etc. Savings banks' boards of directors
usually
regional
representatives
the
its general meeting is
authorities.
(28 %),
constituted by
depositors
(28 %),
employees (11 %) and the Royal Economic Society of
Friends of the Valencia Region (Real Sociedad Económica
de Amigos del País, Valenciano) (5 %). However, the fact
influence
that public bodies may have a dominant
directly or indirectly does not automatically imply that
the state exerts control
in this particular case. As a
matter of fact, savings banks are bound to act under
market economy principles and the facts in the file do
not provide any evidence that in the case of the Bancaja
loan the public authorities exerted any influence (16).

the Generalitat Valenciana
corporations

(28 %), municipal

In Bancaja's case,

of

(74)

starting on the

The loan was granted for seven years at a rate of 5,75 %,
reviewable every three months on the basis of Euribor
90 + 1,25 % (17).
It must be reimbursed in monthly
rates
first
disbursement. Moreover, it is noted that this loan was
granted on the condition that a guarantee was presented
for 50 % of its amount (measure 7) and that a grant
would be awarded to cover 40 % of the investments
(measure 6). It is in these measures that advantages in
favour of the company have to be looked for.

same month of

the

(75) Measures 6, 9 and 11. Three non-refundable grants from
the autonomous community of Asturias. As stated in
the extension of
investigation procedure,
these measures are regarded as aid, a fact which is not
contested by Spain. As regards measures 6 and 9 (the
latter not yet approved by the regional authorities),

the formal

(15) ‘Bancaja is a non-profit financial entity that combines the social
spirit of the savings banks with the management criteria of a
commercial bank.'
http://bancaja.es/grupo/queesentidad.asp?menu=15.

(16) See the judgment of the Court of Justice in Case C-82/99 France v

Commission [2002] ECR I-4397, paragraph 55.

(17) The reference rate for the year 2001 was 6,33 %. However this is
based on a five-year interswap bank rate, and is hence a fixed rate.

16.1.2004

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Official Journal of the European Union

L 11/11

Spain considers that they are covered by an approved
aid scheme;
its description as an existing aid will be
analysed in the following section.

(80)

(76) Measure 8. A loan from IDAE. This institution is a
public body attached to the Ministry of Economic and
responsible for promoting
Financial Affairs and is
efficient use of energy and the use of renewable energies
in Spain (18). The loan thus derives from State resources
and grants an advantage to the company which, in view
it would not have obtained from a
of its difficulties,
private sector operator.

(77) Measures 7, 10, 12 and 19. Guarantees from Asturgar.
The Commission notes that measure 19 has not yet
been decided and measure 10 is simply envisaged.

(78)

financial

entity, was

In its extension of the formal investigation procedure,
the Commission could not on the basis of
the
information available disregard the fact that Asturgar, a
private
the
authorities, as the Asturias region seemed to be its
reference shareholder. Moreover, the Commission had
not been informed of the conditions under which the
guarantees had been granted. Hence, in its provisional
assessment the Commission regarded these guarantees
as State aid.

controlled

by

(79)

The capital of Asturgar is broken down as follows (data
from 2001):

TABLE 6

Shareholder

Principado de Asturias

Caja de Ahorros de Asturias

Banco Herrero

More than 800 shareholders, none of whom
holds more than 1 % of the capital

(%)

Voting
capital

45,6

1,27

1,19

51,94

(18) ‘The Institute for Energy Saving and Diversification,

is a
public corporation attached to the Ministry of Economic Affairs
through the State Secretariat for Energy, Industrial Development
and Small and Medium-sized Enterprises',
http://www.idae.es/home/home.asp.

IDAE,

Spain admits that the region of Asturias (Principado de
Asturias) currently holds 43,9 % of
the capital of
Asturgar. The presidency of Asturgar is held by the
Instituto de Fomento Regional, which is linked to the
region of Asturias. The region of Asturias appears as the
reference shareholder. However, following the extension
of the formal investigation procedure, Spain submitted
new data in this respect. Asturgar's statute forbids
to monopolise control. Spain
institutional partners
states
the
does
capital
that
decision-making process of Asturgar. According to the
information submitted, decisions are taken by the board
of counsellors in which each counsellor has only one
vote, irrespective of his/her stake in Asturgar's capital.
Of the 14 counsellors on Asturgar's board, only four are
linked to the regional government in Asturias. Hence,
the regional government only has a small minority of
the voting rights.

influence

not

(81) However,

an

on

agreement

employment
the regional

(Pacto
interinstitucional por el empleo) of
labour
body (Consejeria de Trabajo y Promocion de Empleo) states
that all instruments of regional promotion, namely the
Instituto
de
asesoramiento y promocion empresarial, the SRPPA and
Asturgar (19), are the responsibility of
the regional
Ministers for Industry, Commerce and Tourism. Asturgar
is thus presented as a body linked to the Asturias
regional government.

regional,

fomento

Servicio

the

de

(82) As regards the conditions of the guarantees, following
the extension of
investigation procedure
the formal
Spain informed the Commission that Asturgar required
that Porcelanas Principado pay an annual 1 % premium
plus a commission of 0,50 % on the transaction costs.
In addition,
from
Asturgar, companies should acquire a stake in Asturgar's
capital. The stake depends on the amount of
the
guarantee to be obtained. Thus Porcelanas Principado
bought shares worth EUR 10 217 for the two guarantees
agreed (measures 7 and 12).

to be able to obtain guarantees

(83) However,

that according to
information in its possession, guarantees from guarantee

the Commission notes

regional Ministry

(19) ‘From an operational point of view, the corporate development
Industry,
instruments
for which the
responsible (Instituto de fomento
Commerce and Tourism is
regional, Servicio de asesoramiento y promocion empresarial,
Sociedad regional de promoción del Principado de Asturias, SA,
Asturgar, SGR are functionally integrated under a single directorate
(that of
the Instituto de Fomento
Regional).'
http://www.idepa.es/ifr/documentos.asp?doc=111.

the Director General of

for

L 11/12

EN

Official Journal of the European Union

16.1.2004

societies are charged with a premium ranging between
0,5 % and 1,5 % per quarter plus a commission of
0,5 % (20). This would indicate that the guarantees from
Asturgar to Porcelanas Principado are below market
conditions. A possible explanation for this is to be
found in a statement on the website of the regional
institute for
(Instituto de
technological development
Desarrollo Economico del Principado de Asturias — IDEPA),
according to which the cost of Asturgar's guarantees is
very low on account of the subsidies from the regional
authorities (21).
employment
mentioned above states
to support
technically viable projects, resources shall be allocated to
Asturgar with the aim of reinforcing its position so that
it can assume new risks (22).

agreement
that,

in order

The

for

(84)

expressed in the

In view of the above, the Commission cannot rule out
that the advantage of the subsidies granted to Asturgar
may be passed on to Porcelanas Principado through
guarantees granted at conditions that a market economy
operator could not afford without
subsidies. These
subsidies from the autonomous community are granted
to Asturgar with a view to promoting regional
development. The Commission therefore adheres to the
view,
formal
investigation procedure, that these guarantees contain
an aid element. The aid element may be as much as
100 % of the loans covered by the guarantees, since,
pursuant to the Commission notice on the application
of Articles 87 and 88 of the EC Treaty to State aid in
the form of guarantees,
‘where, at the time the loan is
granted, there is a strong probability that the borrower
will default, e.g. because he is in financial difficulty, the
value of the guarantee may be as high as the amount
effectively covered by that guarantee' (23).

extension of

the

subject

(86) As regards outstanding tax debts, the Commission notes
that the deferral in April 2001 for an amount of EUR
0,861 million (including interest) was
to a
double condition: first that Asturgar would provide a
guarantee for
the payment of EUR 0,485 million
(measure 12) and second, that the company would take
out a mortgage on its real estate for some EUR 0,433
million (measure 13). Both conditions were fulfilled,
hence the guaranteed amount is higher than the debt
itself. The deferred debt bears interest at 6,5 % for the
year 2001 and 5,5 % for 2002. Spain provided evidence
that these debts are being paid back.

(87) As

regards

the outstanding

security debts
social
following the
amounting
to EUR 0,854 million,
payment of EUR 0,3 million by the company,
the
remaining amount of EUR 0,647 million (including
interest) was deferred until 30 April 2006 (measure 15).
the company took out a chattels
For
mortgage set up a mortgage on goods in order to assure
its repayment. The deferred debt bears interest at 5,5 %,
equivalent to the rate last shown in the Finance Law
(Law 13/2000 of 28 December). Spain provided
evidence that these debts are being paid.

this amount

(88)

Lastly,
in November 1998 the outstanding debt with
for an amount of EUR 0,279
Fogasa (measure 16)
million was deferred until November 2006. As security,
the company has provided a chattels mortgage for EUR
0,502 million. The deferred debt bears interest at 5,5 %,
equivalent to the rate laid down in the Finance Law
(Law 13/2000 of 28 December). Spain provided
evidence that these debts are being paid back.

(85)

the Commission must assess whether

Finally,
the
rescheduling of debts with public authorities contains
any aid element.

(89)

(20) See the Commission decision in Case C 95/2001 (OJ C 33,

6.2.2002, p. 9), in particular paragraph 21.

(21) ‘Their cost as a function of the amount of the quarter and its
interest rates (financial, technical, etc.) is very low as a result of the
subsidies from the autonomous community; in many cases, it is
virtually nil.'
http://www.idepa.es/ifr/documentos.asp?doc=111.

(22) ‘To support

these projects that are considered technically and
economically viable, Asturgar's
role as a mutual guarantee
company (SER) will be strengthened and its resources increased so
that
risks.'
assume
http://tematico2.princast.es/trempfor/trabajo/inferior/pacto/
promo.htm.

business

new

can

it

(23) OJ C 71, 11.3.2000, p. 14, point 3.2

due

creditors

exercised

In view of the above, the Commission considers that the
public
diligence when
rescheduling the repayment of their debts. No amounts
were waived, the outstanding amounts have been fully
secured through mortgages and guarantees, and all the
deferred debts vis-à-vis public creditors bear interest at
the statutory rate (24). Rescheduling these debts, which
are currently being repaid, was a more efficient way of
recovering them for the public creditors than enforcing
immediate repayment, which would have probably
resulted in the insolvency of the company. The public
creditors took account, in particular, of the decision of

(24) Judgment of

the Court of

Justice in Case C-342/96 Spain v

Commission [1999] ECR I-2459, paragraph 58.

16.1.2004

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Official Journal of the European Union

L 11/13

Porvasal to invest in the company and to draw up a
sound restructuring plan.

(90)

It is noted that the debts with suppliers (measure 17)
have been rescheduled until March/April 2006 through
various agreements. The debts have been deferred
without interest and no securities have been agreed for
their deferral […].

(91)

In view of the above, the Commission considers that the
deferrals of public-sector debt do not contain any aid
elements.

(96)

(92)

The Commission concludes therefore that measures 1, 3,
6, 8, 9 and 11 constitute State aid within the meaning
of Article 87(1) of
these
measures amount to some EUR 2,2 million. In addition,
the guarantees under measures 7, 10, 12 and 19 are
deemed to contain a State aid element.

the EC Treaty. Together,

(97)

B. Existing aid

(93)

(94)

serious

Part of the aid in favour of Porcelanas Principado was
allegedly awarded under approved aid schemes. Since
the Commission had
the
compliance of these aid measures with the terms of the
schemes under which they had been allegedly awarded,
it
to
issued an information injunction pursuant
Article 10(3) of Council Regulation 659/1999 (25) to
supply
data
documentation,
necessary for their assessment.

information and

doubts

about

all

The measures claimed to be existing aid are measures 6
and 9: two non-refundable grants of EUR 0,101 million
and EUR 0,229 million respectively. It will be noted that
measure 6 has not yet been paid, pending Commission
approval. The regional authorities have not yet decided
on measure 9 for the same reason. Spain indicates that
these investment subsidies were decided under an aid
scheme approved by the Commission as
regional
investment aid (26).

(98)

the

formal

investigation procedure

least December 2000. The data provided in the course
of
show that
Porcelanas Principado would have been unable, either
through its own resources or with funds it is able to
obtain from its owner, to stem losses which, without
outside intervention by the public authorities, will
almost certainly condemn it to go out of business in the
short or medium term.

The Commission decision of 3 May 2000 in case N
75/2000 approved a regional scheme for investment aid
in Asturias, an assisted area. The scheme lays down
conditions for access to public assistance. Amongst
these conditions, the scheme indicates that companies in
difficulty (27) are excluded from the scheme.

Spain states that when measure 6 was granted,
the
regional authorities based their decision to grant the aid
on the consolidated accounts for 1999 which did not
show losses as high as in the accounts for 2000. Spain
also states that the aid was granted on the basis of the
original viability plan and subject to the achievement of
the objectives under
that plan. The Commission,
however, notes that in 1999 Porcelanas Principado had
already incurred losses. Moreover, the fact that the aid
was granted on the basis of a restructuring plan should
have allowed the Spanish regional authorities to deny
the aid as regional investment aid, since it was clearly
aid for
a
restructuring. The existence of a restructuring plan does
not frustrate the description of Porcelanas Principado as
a firm in difficulty, excluded from aid under the scheme
in question.

an investment within the

context of

at

the

the

Consequently,
aid was granted,
time
Porcelanas Principado was a company in difficulty
within the meaning of
the rescue and restructuring
guidelines, as admitted by both Spain and the aid
beneficiary. Hence, any investment aid granted to this
company does not fulfil one of the conditions laid down
in the scheme. Measure 6 will thus be regarded as new
aid.

(95)

In its extension of the formal investigation procedure,
the Commission noted that the qualification as existing
aid could not be sustained in the light of the comments
received from Spain. Both Spain and the aid beneficiary
indicated that Porcelanas Principado has been a firm in
difficulty within the meaning of the guidelines since at

(99) As regards measure 9, the Commission notes that the
same reasons indicate it should be regarded as new aid.
The aid is proposed for the benefit of a company in
difficulty,
to cover an investment, proposed under a
restructuring plan, that is necessary in order to restore

(25) OJ L 83, 27.3.1999, p. 1.
(26) See footnote 5.

(27) ‘Empresas en crisis' in the Spanish version.

L 11/14

EN

Official Journal of the European Union

16.1.2004

the company's viability. It does not qualify as regional
investment aid either,
therefore, and will also be
regarded as new aid.

C. Compatibility with the common market

(100) Article 87(1) of the EC Treaty lays down that, save as
otherwise provided, aid that distorts or threatens to
distort competition by favouring certain undertakings or
in so far as it
the production of certain goods shall,
affects trade between Member States, be incompatible
with the common market.

(101) Article 87(2) and (3) of the EC Treaty does, however,
provide for certain exemptions to the general rule of
incompatibility as stated in paragraph (1).

(102) Article 87(3)(c) provides for the authorisation of State
aid granted to facilitate the development of certain
economic activities, where such aid does not adversely
affect trading conditions to an extent contrary to the
common interest. For
financial
measures
in difficulty the
Commission has issued specific guidelines on rescue and
restructuring aid (28), in the light of which the measures
under scrutiny have to be assessed.

awarded to companies

the assessment of

(103) Point 3.2.2 of the restructuring guidelines lays down the
conditions for the authorisation of restructuring aid.

(104) Firstly,

the firm must qualify as a firm in difficulty
within the meaning of
the guidelines. As stated in
previous sections and admitted by both Spain and the
aid beneficiary, Porcelanas Principado has been a firm in
difficulty within the meaning of the guidelines since at
least December 2000.

(105) Secondly,

the grant of

the aid is conditional on
implementation of the restructuring plan that must be
case of all
endorsed by the Commission in the
individual aid measures. The restructuring plan,
the
duration of which must be as short as possible, must
the firm within a
restore the long-term viability of
reasonable time-scale and on the basis of
realistic
conditions.
future
assumptions
Restructuring aid must therefore be linked to a viable
restructuring
State
to which
concerned commits itself.

the Member

operating

plan

to

as

(106) As indicated above, Spain submitted a restructuring
plan, which was drawn up towards the end of 2000 and
subsequently updated, once Porvasal had a better insight
into the company. The Commission acknowledges that
the amendments simply concern the financial forecast.
The
restructuring remain
unaltered compared with the first draft of the plan. The
viability plan is given firmer shape in the following
financial forecast:

and cost of

stages

the

TABLE 7 (29)

(ESP million)

2001

2002

2003

2004

2005

2006

2007

Turnover

Production costs

Sales costs

Overheads

824

592

70

93

865

622

74

91

909

641

76

93

974

1 043

1 106

1 172

663

688

718

78

96

80

98

81

99

Personnel costs (a)

445

459

472

436

524

527

Depreciation (b)

Operating result

20

8

36

8

36

24

Annual result

–19

–42

–24

(a)
(b)

Included in production and sales costs and overheads (cost allocated by function).
Included in production and sales costs and overheads (cost allocated by function).

36

57

12

36

91

49

33

116

79

(28) See footnote 9.
(29) It will be noted that this forecast is not complete and is simply

intended to provide a general overview of the main items.

745

84

102

546

33

146

107

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(107)

(108)

and

result

operating

It will be noted that the management report for the year
2001 reports a turnover of ESP 966,084 million (EUR
5,806 million)
of
an
ESP 9,264 million (EUR 56,677), slightly surpassing the
initial forecasts. However, Spain states that the forecasts
for the year 2002 have not been achieved. According to
Spain, the reason for this is that, following the initiation
of
the Spanish
authorities suspended payment of all financial support
until the Commission decided on its compatibility. This
financing has had a negative impact on the
lack of
implementation
the
company is now financing by its own means, and on
the company's financial situation.

investigation procedure,

restructuring, which

the formal

the

of

It will also be noted that Spain has provided evidence
that Porcelanas Principado is not incurring any further
debts and is currently paying taxes, social security
contributions,
In
addition, Spain has provided evidence that the company
is meeting the instalments on its deferred debts.

and payrolls

regularly.

suppliers

(109)

In view of the above, the Commission considers that
with the help of Porvasal's experience and support,
together with the aid, Porcelanas Principado will be able
to restore its long-term viability.

(110) Thirdly, measures must be taken to mitigate as far as
possible any adverse effects of the aid on competitors.
Otherwise, the aid would be regarded as ‘contrary to the
common interest' and therefore incompatible with the
common market. This condition usually takes the form
of a limitation on the presence that the company can
enjoy on its market or markets after the end of the
restructuring period. This condition should accordingly
be regarded as not normally applying to small or
medium-sized enterprises,
except where otherwise
provided by rules on State aid in a particular sector.

(111) Moreover,

the Commission recalls

that Porcelanas
Principado is
located in an Article 87(3)(a) area.
Economic and social cohesion is a priority objective of
the Community in accordance with Article 158 of the
EC Treaty and other policies are required to contribute
to this objective in accordance with Article 159. The
Commission must therefore take the needs of regional
development into account when assessing restructuring
aid in assisted areas. That is why the conditions for
authorising aid may be less stringent as regards the
implementation of compensatory measures.

the guidelines are applied less
points 29 to 47 of
strictly: the grant of restructuring aid to SMEs will not
usually be linked to compensatory measures, unless this
is otherwise stipulated in rules on State aid in a
particular sector. The Commission notes that the china
and porcelain sector is not such a sector.

(113) Porcelanas Principado satisfies the requirements of the
recommendation concerning the definition of small and
medium-sized enterprises (30). The Commission would
point out that towards the end of 2000 Porvasal and
other investors acquired an 80 % stake in Porcelanas
Principado; both companies together surpass the ceilings
laid down in the above recommendation, although only
on account of the combined number of employees (375
in total, as opposed to the 250 provided for in the
definition). However, the status of SME is lost only if
this phenomenon is repeated during two consecutive
financial years. The point of reference is the moment
when the aid is granted on the basis of the restructuring
plan. This occurred in November 2001, although part of
the measures have still not been paid. At the end of
2000, Porcelanas Principado lost its status as an SME
because Porvasal acquired an 80 % stake in it. In 1999,
however, Porcelanas Principado is considered to have
been an SME. Thus it had not lost its SME status when
the aid was granted. The Commission considers it
appropriate, therefore, to apply less strict conditions to
Porcelanas Principado as regards capacity reductions.
The Commission also notes that the combined sales of
Porcelanas Principado and Porvasal — EUR 13,3 million
— are an insignificant percentage of European sales in
the
(EUR
2,7 billion according to Cerame-Unie). Lastly, both
companies are situated in an area that is eligible for
regional aid according to Article 87(3)(a) of the Treaty.

tableware/ornamental

ceramics

sector

(114) Moreover, both Spain and the aid beneficiary state that
capacity will not be increased during the restructuring
period. Spain has explained that the company's capacity
is determined by the vitrification kiln, which creates a
bottleneck. This kiln is currently being used at 100 % of
its capacity.
It is not planned to invest in a second
vitrification kiln.

(112) Aid to SMEs tends to affect trading conditions less than
to
that granted to large firms. This also applies
restructuring aid so that the conditions laid down in

(30) Commission Recommendation 96/280/EC of 3 April 1996
concerning the definition of small and medium-sized enterprises,
OJ L 107, 30.4.1996, p. 4.

(115) Given that the beneficiary's market presence is small,
that it is located in an assisted area and that it has

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(116)

(117)

(118)

(119)

to increase

the
undertaken not
restructuring period, the Commission considers that the
distortive effect of the aid of some EUR 2,2 million is
limited.

capacity

during

Fourthly, the amount and intensity of the aid must be
strict minimum needed to enable
limited to the
the
restructuring to be undertaken in the light of
existing
its
company,
resources of
shareholders or the business group to which it belongs.
Aid beneficiaries will be expected to make a significant
contribution to the restructuring plan from their own
resources.

financial

the

In any event,
it must be demonstrated to the
the aid will be used only for the
Commission that
purpose of restoring the firm's viability and that it will
not enable the recipient during the implementation of
the restructuring plan to expand production capacity.

total

In the present case, aid is limited to some EUR 2,2
million plus an additional element
included in the
guarantees. Even if these guarantees are considered to be
at
100 % aid,
EUR
the total
3,277 million,
restructuring costs. The remaining 59 % will be covered
by the beneficiary. The Commission considers that the
aid is limited to the strict minimum and that
the
beneficiary contributes substantially to the restructuring.

aid works out
i.e. approximately 41 % of

State

the

plan must

restructuring

Finally,
fully
implemented. The Commission would remind Spain that
to submit an annual report on the
its commitment
implementation of
the
the restructuring is one of
conditions laid down in the guidelines that apply in this
case.

be

VII. CONCLUSIONS

(120) The Commission finds

that Spain has unlawfully
implemented the aid in question in breach of Article
88(3) of
the Treaty. The Commission takes note of
Spain's decision to suspend all pending payments and
decisions on aid measures following the initiation of the
formal
the
information available, the Commission concludes that
the aid in question can be considered compatible with
the common market,

investigation procedure. On the basis of

HAS ADOPTED THIS DECISION:

Article 1

The State aid which Spain has implemented for the benefit of
Porcelanas Principado is compatible with the common market
in accordance with Article 87(3)(c) of the EC Treaty.

Article 2

This Decision is addressed to the Kingdom of Spain.

Done at Brussels, 2 April 2003.

For the Commission

Mario MONTI

Member of the Commission