2007/200/EC: Commission Decision of 6 December 2006 on State aid for research and development implemented by Belgium for Techspace Aero (notified under document number C(2006) 5799) (Text with EEA relevance )
Date: 2006-12-06
Institutions: European Commission
Subjects: Belgium, State aid, aeronautical industry, control of State aid, engine, research and development

30.3.2007

EN

Official Journal of the European Union

L 90/79

COMMISSION DECISION

of 6 December 2006

on State aid for research and development implemented by Belgium for Techspace Aero

(notified under document number C(2006) 5799)

(Only the French and Dutch versions are authentic)

(Text with EEA relevance)

(2007/200/EC)

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

(3)

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

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

Having regard to Council Regulation (EC) No 659/1999 of 22
March 1999 laying down detailed rules for the application of
the EC Treaty (1), and in particular Article 7
Article 93 of
thereof,

Having regard to the Commission Decision of 22 June 2006 (2)
initiating the procedure laid down in Article 88(2) of the EC
Treaty in respect of aid C 28/2006 (ex NN 23/2004),

Having called on interested parties to submit their comments
pursuant to that Article,

(4)

(5)

(6)

By letter of 22 June 2006, the Commission informed
Belgium that it had decided to initiate the procedure
provided for
the EC Treaty in
respect of the individual aid granted to Techspace Aero.

in Article 88(2) of

By letter dated 11 September 2006, registered as received
on the same date, Belgium submitted its comments to
the Commission.

By letter of 2 October 2006,
the Commission asked
Belgium for additional information, which was provided
by letters of 23 and 24 November 2006, registered as
received on the same dates.

The Commission decision to initiate the procedure was
published in the Official Journal of the European Union (4).
The Commission called on interested parties to submit
their comments.

Whereas:

1. PROCEDURE

(7)

The Commission received no comments from interested
parties.

aid for

By letter of 13 February 2004, registered as received by
the Commission on 18 February, Belgium notified the
Commission of
research and development
(R & D) to Techspace Aero. By letters of 23 December
2004, 1 July 2005 and 8 March 2006, registered as
received by the Commission on 3 January 2005, 5 July
2005 and 13 March 2006 respectively, Belgium provided
the Commission with further information.

(8)

(1)

(2)

that

This notification was sent together with the notification
of an aid scheme for research and development in the
aircraft industry since the aid in question was granted
under
scheme and individual notification was
therefore required under point 4.7 of the Community
framework on State aid for research and development (3)
(R & D framework). This aid scheme has been examined
individually as scheme No C 27/2006 (ex NN 22/2004).

(1) OJ L 83, 27.3.1999, p. 1. Regulation as last amended by Regulation

(EC) No 1791/2006 (OJ L 363, 20.12.2006, p. 1).

(2) OJ C 196, 19.8.2006, p. 16.
(3) OJ C 45, 17.2.1996, p. 5.

2. DESCRIPTION OF THE AID

2.1. Beneficiary

for

subassemblies

Techspace Aero is a Belgian company that specialises in
the manufacture of
and
spacecraft engines. According to the information on its
website, the company is owned by the French group
Safran (51 %), by the Walloon region (28,4 %), by the
US firm Pratt & Whitney (19 %) and by Société Wallonne
d’Investissement (1,6 %). In 2004 it employed 1 230 staff
and had a turnover of EUR 271 million.

aircraft

(9)

Techspace Aero specialises in low-pressure compressors.
It has taken part in numerous developments of major
civil aircraft engines with integrators such as General
Electric, Pratt & Whitney and the company SNECMA.

(4) See footnote 2.

(10)

(11)

L 90/80

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Official Journal of the European Union

30.3.2007

2.2. R & D project for which the aid has been
granted

engine

project. The GP7000 engine

Techspace Aero is participating in the GP7000 civil
aviation
is
produced by a collaboration between General Electric
and Pratt & Whitney. Other European firms, such as
MTU (Germany) and SNECMA (France), are also taking
part in this project.

2.4. Incentive effect of the aid

(17) According to the Belgian authorities, Techspace Aero’s
R & D expenditure increased from […] per annum
the programme to […] per
prior
annum in 2005. Similarly, the ratio of R & D expen-
diture to turnover rose from […] to […].

to the launch of

Techspace Aero is in charge of developing the low-
pressure compressor for the GP7000. The company’s
total eligible costs for the R & D work for this project
amount to […] (*), spread over the period 2002 to 2006.
According to the Belgian authorities, the total cost of the
project breaks down as
industrial
research (IR) activities plus […] for pre-competitive devel-
opment (PCD) activities within the meaning of Annex I
to the R & D framework.

follows:

[…]

for

(12)

The activities classified as IR correspond to the project
phases prior to the first engine tests. The PCD activities
correspond to the engine test phases. Certification costs
are not eligible for aid.

2.3. Aid arrangements

(13)

Techspace Aero requested the aid for the aforementioned
project from the Belgian Government in 2000. It was
granted by the authorities on 1 October 2003.

(14)

The aid is granted in the form of a repayable advance of
a maximum amount of EUR 41 274 000, of which 65 %
is for IR costs and 45 % for PCD costs.

(15)

finished component

The advance is repaid in stages in the form of a contri-
bution per
sold based on the
importance of the component, plus contributions based
on the turnover generated by sales of replacement parts
and by repairs. Under the agreement between the Belgian
Government and Techspace Aero, the company will not
under any circumstances have to pay interest on the
amount advanced. Repayments will cease when the
principal of the advance has been reimbursed.

(16) According to the scenario described by the Belgian
authorities in letters to the Commission and based,
[…]
among other projections, on projected sales of
shipsets by 2018, Techspace Aero is
to repay the
advance in full by 2019.

(18)

(19)

(20)

(21)

(22)

2.5. Grounds for initiating the procedure

In its decision of 22 June 2006 the Commission
examined the aid in the light of the R & D framework
and raised doubts regarding its compatibility with this
framework.

The Commission noted that the aid was granted in the
form of an advance repayable on the basis of sales of the
product resulting from the research activity. Advances of
this kind, repayable in the event of a successful outcome
of research activities, are very common in the aircraft
industry.

the R & D framework makes

Point 5.6 of
specific
provision for this type of advance. It indicates that the
allowable level of aid intensity for such aid instruments
(25 % for PCD and 50 % for IR) may be increased based
repayment
assessment
on a
conditions.

case-by-case

the

of

Since the entry into force of the R & D framework, the
Commission has received notification of numerous cases
of aid in the form of advances repayable in the event of a
successful outcome. It has developed a body of practice
for interpretating point 5.6 of the framework (5).

In the cases analysed by the Commission to date, the
the success of a
beneficiary has,
in the event of
programme, been required to repay,
in addition to the
advance principal,
interest based on the reference and
discount rate set by the Commission for the Member
State concerned at the time the aid was granted. For
particularly successful programmes, the repayment rates
have been even higher.

(23) Under the circumstances, the Commission’s practice has
been to limit the advance to a maximum of 40 % of
eligible costs for PCD activities and 60 % for IR activities.
extra
These basic
percentage points (bonuses) provided for in point 5.10
of the R & D framework.

exceeded by the

rates may be

(*) Business secret.

(5) See the cases cited in footnote 4 of the Commission Decision of 22

June 2006 (OJ C 196, 19.8.2006, p. 16).

30.3.2007

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Official Journal of the European Union

L 90/81

(24)

In the aid scheme in question, however, the Commission
notes that
the Belgian authorities have applied these
maximum levels of 40 % and 60 % (plus a bonus of
5 % in accordance with point 5.10.2 of
the R & D
framework), whereas the arrangements for repayment
the advance do not envisage payment of any
of
interest, even in the event of
the
programme.

the success of

(25) As indicated in the Commission decision of 22 June
the aid are
the arrangements for repaying of

2006,

considerably more favourable for Techspace Aero than
the traditional arrangements for aid beneficiaries in the
cases hitherto examined by the Commission. Since they
the beneficiary
do not have
to pay any interest,
from the aid
companies are guaranteed to benefit
whatever the outcome of
the project, whereas under
traditional repayment arrangements the aid may not be
granted at all in the event of a successful outcome (and
may even be negative in cases of highly successful
projects where the enterprise may enable the government
to earn money, including in real terms).

3. COMMENTS FROM BELGIUM

(26)

The Belgian authorities have modified the arrangements for granting aid to Techspace Aero by means
of an amendment to the contract signed by the parties and sent to the Commission on 24 November
2006. This amendment provides for recovery of part of the aid granted in order to reduce its
intensity level to that stipulated by the R & D framework (50 % maximum for IR activities and
25 % maximum for PCD activities, increased by 5 % if the project is carried out in one of the regions
covered by Article 87(3)(c)). The Belgian authorities will recover the surplus amount of the aid by 31
March 2007 and will charge interest on this amount at the Commission’s reference and discount rate
in force at the time the aid was granted. As provided for in the grant agreement, in the event of the
success of
in addition to this initial recovery, require
repayment, free of interest, of the part of the aid kept by the enterprise.

the Belgian authorities will,

the project

Table

Advance reduced to aid intensity level

Eligible costs (EUR ‘000)

Final intensity

IR

[…]

PCD

[…]

IR

55 %

PCD

30 %

Advance paid
(EUR ‘000)

Recovery with
interest
(EUR ‘000)

Rate

34 800

8 397

3,95 %

Beneficiary

Techspace
Aero

(27)

The advance finally granted to Techspace Aero amounts
to EUR 31 978 850, corresponding to an intensity level
of […], which is the weighted average of the intensities
applicable to the relative costs of IR and PCD activities.

mining the existence of State aid as defined in Article
87(1) of the EC Treaty.

4. ASSESSMENT

4.2. Unlawfulness of State aid

4.1. Existence of State aid

(29)

(28)

The
advance was granted by the Belgian Federal
Government to a single company. It is repaid only in
the event of the success of the product being researched.
This makes the advance more advantageous than a loan
at market rates. Lastly, Techspace Aero is engaged in an
area in which there is significant trade between Member
States. It therefore meets the cumulative criteria for deter-

The aid was granted on 1 October 2003, even before it
was notified to the Commission and therefore necessarily
before it had been approved by the Commission. There is
no suspension clause whereby payment of the advance is
subject to analysis of the scheme by the Commission in
accordance with Community State aid rules. Since the
scheme has already been implemented,
it must be
considered to be unlawful within the meaning of
Article 1(b) and (f) of Regulation (EC) No 659/1999.

L 90/82

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Official Journal of the European Union

30.3.2007

4.3. Compatibility of State aid

(30) Modification of the aid scheme as described in para-
graphs 26 and 27 takes away the advantage initially
conferred on the beneficiary by reducing the
aid
intensity to the level stipulated in the R & D framework
(50 % for
IR activities and 25 % for PCD activities,
increased by 5 % if the project is carried out in one of
the regions covered by Article 87(3)(c)). In addition to
recovery, with interest, of the surplus aid, repayment of
the remaining aid goes beyond the requirements of the
R & D framework. The aid thus modified is therefore
compatible with that framework.

(31)

The Belgian authorities undertake to take away the ad-
ditional advantage temporarily granted to Techspace
Aero relative to the beneficiaries of aid in the form of
repayable advances in the cases hitherto examined by the
Commission.

5. CONCLUSION

(32)

The Commission notes that Belgium has unlawfully
implemented the R & D aid for Techspace Aero in
the EC Treaty. However,
breach of Article 88(3) of

Belgium has adapted State aid granted so as to bring it
into line with the Community framework on State aid
for research and development,

HAS ADOPTED THIS DECISION:

Article 1

The aid for research and development implemented by Belgium
for Techspace Aero for an initial amount of EUR 41 274 000
and modified as described in paragraphs 26 and 27 is
compatible with the common market.

Article 2

This Decision is addressed to the Kingdom of Belgium.

Done at Brussels, 6 December 2006.

For the Commission

Neelie KROES
Member of the Commission