2008/91/EC: Commission Decision of 10 July 2007 on State aid C 19/06 (ex NN 29/06) implemented by Slovenia for Javor Pivka Lesna Industrija d.d. (notified under document number C(2007) 3227) (Text with EEA relevance )
Date: 2007-07-10
Institutions: European Commission
Subjects: Slovenia, State aid, control of State aid, regional aid, wood industry

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Official Journal of the European Union

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COMMISSION DECISION

of 10 July 2007

on State aid C 19/06 (ex NN 29/06) implemented by Slovenia for Javor Pivka Lesna Industrija d.d.

(notified under document number C(2007) 3227)

(Only the Slovenian version is authentic)

(Text with EEA relevance)

(2008/91/EC)

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

(3)

By letter dated 16 May 2006 the Commission informed
Slovenia that it had decided to initiate the procedure laid
down in Article 88(2) EC in respect of the aid.

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),

(4)

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

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

(5)

The Commission received no comments from interested
parties.

Whereas:

(1)

(2)

I. PROCEDURE

On 1 December 2004,
the Commission received a
complaint alleging aid to the Slovenian wood manu-
(hereinafter
facturer
‘Javor Pivka’).

Javor Pivka Lesna Industrija d.d.

to Article 21 of

The complaint concerned financial measures allocated to
Javor Pivka on 27 May 2004 by a resolution of the
Slovenian Government pursuant
the
Slovenian Act Governing Rescue and Restructuring Aid
for Companies in Difficulty. It further emerged that this
measure was not notified to the Commission on the
grounds that
it had been approved by the Slovenian
state aid inter-ministerial expert Commission on 23
April 2004, i.e. prior to accession. However, given that
the relevant criterion for deciding when an aid is granted
the legally binding act by which the competent
is
national authority undertakes to grant state aid,
the
Commission considered the measure to constitute new
aid, which should thus have been notified on the basis of
Article 88 EC and assessed under Article 87 EC (2).

(1) OJ C 194, 18.8.2006, p. 26.
(2) Details of the procedure were described in the decision to open the
procedure (see footnote 1) and remain relevant for the purpose of
the present decision.

(6)

(7)

(8)

Slovenia submitted observations by letter dated 17 July
2006. The Commission requested additional information
by letter of 23 February 2007 (ref. D/50797), to which
In
Slovenia replied by letter dated 23 April 2007.
addition, a meeting was held between Commission
services and the Slovenian authorities on 28 June 2006.

II. DETAILED DESCRIPTION OF THE AID

1. The beneficiary

Javor Pivka manufactures semi-finished wood products
and furniture.
located in the Pivka area in
Slovenia, an assisted area pursuant to Article 87(3)(a)
EC. In 2003 it had about 800 employees. It has four
wholly-owned subsidiaries.

is

It

The ownership of
the company is spread over some
1 264 shareholders of which 9 investment companies
or other legal persons hold 60 % and the remaining
40 % are split between 1 255 shareholders, none of
which holds more than 1 % (4).

(3) Cf. footnote 1.
(4) Figures as at 30 January 2004.

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(9)

In the years leading up to the granting of aid, Javor Pivka experienced financial difficulties. The main
financial and operating indicators are given in the table below:

Table 1

Financial indicators for Javor Pivka

Indicator (in SIT thousands) (*)

2000

2001

2002

2003

Net sales revenue

8 114 374

7 884 954

8 174 323

8 124 711

Inventories finished goods, work in progress

867 609

1 030 323

894 302

1 121 632

Net operating result

Cumulative profit/loss

Cash flow

56 566

56 566

– 137 030

– 303 729

– 578 268

– 80 464

– 384 193

– 962 461

480 468

333 324

104 522

– 162 879

(*) Any conversions of SIT amounts to EUR are purely indicative and based on the rate 1 EUR = SIT 240.

2. Restructuring programme

(10)

To overcome its difficulties, Javor Pivka submitted a restructuring plan for the period 2004-2008 to
the Ministry of Economy in April 2004.

(11)

The company stated that its difficulties were due to a lack of competitiveness in the face of imports
from low-cost producers in developing countries on its traditional export markets (in particular
Germany and USA). In order to meet this competition and return to viability, Javor Pivka identified
a need to increase productivity through technological modernisation and reduction of costs, and to
reposition itself in more high-margin niches and on new geographical markets.

(12)

To this end, the restructuring programme provided for the following measures:

(13)

(14)

(15)

Technological restructuring: This entailed a full modernisation of outdated equipment and production
programmes. The objective was not to increase capacity but to increase productivity and to meet the
demands of customers by introducing new products and adapting to ecological manufacturing
standards. New production facilities would also allow the company to move away from intermediate
products to more highly processed goods with a higher added value (in particular in the plywood
programme). The cost for this part of the restructuring plan were to be met to 50 % by bank credits
backed up by a guarantee provided by the Slovenian state, and for the remaining 50 % by Javor
Pivka's own funds.

Restructuring of the workforce: This part of the plan provided for the reduction of the workforce by
some 100 redundancies (entitled to severance pay) and for training of the remaining 700 to adapt
their skills to the new demands of the restructuring programme.

Review of commercial strategy: Another element of the restructuring plan was to adapt to changes in
demand and competition on the company's old markets by repositioning itself on new, more
lucrative niche markets and by entering new markets (Russia, particularly targeted for furniture,
and South-East Europe). As regards the products, the company intended to shift its focus towards
more finished plywood, special plywood for the building industry and,
in the furniture sector,
specialist chairs for hospitals, retirement homes and other such facilities.

(16)

Re-organisation of company structures: The return to viability will also require some re-organisation of
the company (e.g. merging subsidiaries and improving the supervision of costs by centralizing the
business functions sales, purchasing and finance). Costs for these measures were to be covered
entirely from Javor Pivka's own resources.

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(17)

Financial restructuring: Insufficient liquidity led to mounting liabilities and rising financial charges. The
purpose of the financial restructuring was to adapt the company’s sources of financing and its
repayment schedules to secure its current and long-term payment capability. The activities were to
focus on rescheduling debt, reducing interest rates, extending repayment deadlines and obtaining a
moratorium on repayment of principal.

(18)

The table below gives an overview of the costs of the restructuring and its financing (5):

3. Restructuring costs

Table 2

Restructuring costs and financing

Funds required (in thousand SIT)

Own funds

Subsidies

Guarantee

Total

Financial restructuring

Market restructuring

Technological restructuring

400 000

496 000

999 000

0

0

0

0

0

400 000

496 000

1 100 000

2 099 000

Restructuring of workforce

219 750

382 250

Organisational restructuring

4 900

0

0

0

602 000

4 900

Total

2 119 650

382 250

1 100 000

3 601 900

(19)

The main element of support from state resources is public guarantees covering loans in the amount
of SIT 1 100 000 000 intended to finance Javor Pivka's technological restructuring. As collateral for
the guarantees, the Slovenian authorities received a mortgage on assets belonging to Javor Pivka to a
value corresponding to the amount covered by the guarantees, i.e. SIT 1 100 000 000 (approx. EUR
4 584 000).

(20)

In addition, aid was given in the form of a grant of SIT 382 250 000 (approx. EUR 1 592 000) for
the costs of the restructuring of the workforce. This aid will contribute to both the severance pays for
the redundant workers and for the training costs of those workers who are kept on.

(21)

Slovenia submitted that Javor Pivka would contribute SIT 2 119 650 000 (approx. EUR 8 832 000)
towards the restructuring, corresponding to 53,7 % of the total costs.

(22)

Javor Pivka is producing the following products, for which it has the indicated market shares at EU
level (figures refer to 2003, and the CN numbers refer to the Combined Nomenclature):

4. Market situation

(a) Shuttering panels (CN 4418 40): 3,91 %

(b) Plywood panels (CN 4412): 0,18 %

(c) Veneer (CN 4408): 0,22 %

(d) Wood chairs (CN 9401 61 + 9401 69 + 9401 90 30): 0,08 %

(5) In the course of the procedure, Slovenia declared that the costs of the financial restructuring were ‘outside the
restructuring programme’ and would be met by commercial loans obtained by Javor Pivka without any involvement
of state aid. The corresponding amount, SIT 400 000 000, was not included by Slovenia in the costs of the
restructuring programme. However the Commission takes the view that the financial restructuring is an integral
and necessary part of the restructuring programme and that consequently its costs should be included in the
restructuring cost. Its financing, to the extent that it is secured by loans obtained on market terms and free of aid,
is to be considered as Javor Pivka's own contribution. In this table, as in the rest of the decision, the Commission has
incorporated these amounts in the restructuring costs and in the ‘own funds’.

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(23)

The aggregated Javor Pivka market share in its product
range on the EU-25 market was 0,21 % in 2003.

in which case the ‘one time,
and restructuring aid,
last time’ condition set out in point 48-51 of the
guidelines might bar it from receiving such aid again.

III. REASONS FOR OPENING THE PROCEDURE UNDER
ARTICLE 88(2) EC

IV. COMMENTS FROM SLOVENIA

(24) As indicated above, the Slovenian authorities did not
In its
notify the measures in favour of
letter of 16 May 2006 opening the procedure under
Article 88(2) EC, the Commission explained in detail
why the measures in question would constitute new
aid which should be notified on the basis of Article 88
EC and assessed under Article 87 EC.

Javor Pivka.

(25)

In addition, the Commission expressed doubts on the
aid's compatibility with the common market, and in
particular with the Community Guidelines on aid for
and restructuring of
rescue
in difficulty of
(hereinafter ‘the guidelines’) on the following
1999 (6)
grounds:

firms

(a) The Commission had doubts whether Javor Pivka was
eligible for restructuring aid under the guidelines. In
the Commission, questioned whether it
particular,
‘in difficulty’ within the meaning of
was
the
guidelines as its poor performance in 2003 could
be an exceptional occurrence rather than part of a
the Commission questioned
trend.
whether Javor Pivka belonged to a larger business
group and whether
could not obtain the
necessary funds from its owners.

In addition,

it

(b) It was not clear how the company was to restore its
long term viability since the Commission had not
been provided with sufficient data to assess the
assumptions of future performance under the restruc-
turing plan.

(c) No market analysis was provided to justify the

absence of compensatory measures.

(d) The Commission also had doubts whether the aid
was limited to the minimum necessary because it
was unclear whether Javor Pivka had provided a
significant own contribution to its
restructuring
costs as it was unclear how the own funds were to
be sourced.

(e) Finally, the Commission requested information on all
other aids granted to Javor Pivka in 2004 in order to
ensure that it had not received any previous rescue

(6) Community guidelines on State aid for rescuing and restructuring

firms in difficulty (OJ C 288, 9.10.1999, p. 2).

(26)

In the course of the formal proceedings, Slovenia has
made in substance the following comments.

(27)

(28)

(29)

(30)

1. New aid, or aid granted before accession

to a decision to grant

Slovenia insisted that the favourable opinion of the inter-
ministerial expert commission amounted, for all practical
purposes,
the aid which was
binding on the Slovenian state. Since this decision was
adopted on 6 April 2004, i.e. before Slovenia’s accession
to the European Union, and since the aid no longer
applied after the accession, Slovenia considered that it
was aid granted before accession to which the provisions
of Articles 87 and 88(3) EC do not apply.

2. Eligibility

2.1. The notion of company ‘in difficulty’

in table 1 above,

Slovenia showed, submitting i.a. the performance indi-
cators
Javor Pivka featured
several of the characteristics of a company in difficulty,
and that this was not only an isolated occurrence in
2003 but a trend which could be distinguished over
four years (2000-2003).

that

The

question.

operating

result was

In this respect, Slovenia pointed out that Javor Pivka
failed to increase its net sales revenue over the period
in
negative
throughout the period, except for 2000, and the losses
increased between 2001 and 2003. The current losses in
2003 were close to half the company’s share capital. The
return on sales, equity and assets was negative and dete-
riorated continuously 2001-2003. Free cash flow from
operations fell over the period and was negative in 2003.
This negative trend culminated in Javor Pivka being
under a large threat of bankruptcy in 2003.

2.2. Javor Pivka’s ownership

after

regime.

the
applied

applied by Slovenia

Slovenia clarified the ownership structure of Javor Pivka
with reference to the particularities of the privatisation
the
end of
model
Communist
the peculiar
Slovenia
notion that the capital of companies had no identifiable
owners, neither private nor public, but was ‘social capital’
which belonged to the population at large. The privati-
sation process sought to transform this abstract concept
into clearer ownership structures by means of ownership
certificates which were distributed to the population.
These certificates could be exchanged against shares in
formerly ‘social’ companies.

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(31)

(known under

In this process, an important role was played by so-called
authorised investment companies
the
acronym ‘PID’) and administration companies (‘DZU’)
which were set up to allow private investors to pool
their certificates. These were then transformed by the
in various privatised companies,
PIDs
whereas
in return received
than in the privatised
shares
companies directly (the PID acting somewhat
in the
manner of an investment fund).

the individual

in the PID,

into shares

investors

rather

(32) However, the PIDs had no freely available funds (the
currency of their investments being the certificates) and
lacked the professional skills and experience to take an
active part in corporate governance. As a result, they
have been passive owners who take little or no part in
the management of the companies they own.

(33)

Such passive investors make up a large part of
the
ownership of Javor Pivka (some 44 % of share capital).
They have no fresh capital to invest in the company.
Indeed, when the restructuring programme was estab-
lished, all institutional owners were invited to participate
in the refinancing but none responded. Another 40 % of
is split amongst 1 255 small share-
the share capital
Javor Pivka’s
holders making it
least 80 % of
ownership which is not actively managed.

at

3. Return to viability

(34) On this point, Slovenia explained that the projections on
Javor Pivka's performance under the restructuring plan
and its consequent return to viability had been based
on market analyses incorporated in the restructuring
plan, sales forecasts in the company’s various segments
and market research.

(35)

these forecasts, Slovenia
To show the reliability of
In
information.
submitted complementary additional
particular, Slovenia accounted for the sources of
the
data on which the projections were based and
submitted sales projections for the years 2004-2006
broken down by specific articles within the company's
product range.

4. Compensatory measures

(36) On this point, Slovenia argued that no compensatory
measures were necessary since, in view of Javor Pivka’s
negligible market share, there is no undue distortion of
competition. In addition, Slovenia argued that the need
for compensatory measures must be assessed with due
account to the fact that Javor Pivka is located in an area
eligible for regional aid pursuant to Article 87(3)(a) EC
(see point 54 of the guidelines).

5. Own contribution

(37)

Javor Pivka’s own
Slovenia specified the sources of
contributions as set out in the table in paragraph 18

funds were to be sourced as

follows:
above. This
Divestment of assets (financial and real estate) were to
provide SIT 958 427 170. Another SIT 900 000 000
would come from bank loans obtained on market
the support of aid. The remainder
terms, without
would be provided trough ‘depreciation and amortisation’
of assets
to a total of SIT
1 111 786 000 in 2004-2006).

(expected to amount

6. Other aid

(38)

Finally, on this point, Slovenia advised the Commission
that Javor Pivka had received state aid for energy saving
measures. The aid was given under a scheme to promote
renewable sources of energy, effective use of energy and
co-generation of heat and electricity. The aid was granted
on 1 September 2003 and paid out on 19 February
2004. This information was corrobarated by documents.

V. ASSESSMENT OF THE AID

1. Existence of State aid

(39) According to Article 87 EC, any aid granted by a
Member State or through state resources in any form
whatsoever which distorts or threatens to distort compe-
tition
the
certain
production of certain goods,
insofar as it affects trade
between Member States, constitutes incompatible state
aid unless it can be justified under Article 87(2) or (3)
EC.

undertakings

favouring

by

or

(40)

The Commission notes that the aid is granted through
State resources to an individual company. The criterion
favouring the individual company is also met. As
of
regards the aid given in the form of a grant,
the
advantage for the beneficiary is obvious. In the case of
the guarantee, the advantage may seem less obvious as
Javor Pivka provided collateral in the form of a mortgage
in return for the guarantee. However,
the Slovenian
authorities accepted to provide the guarantee against a
mortgage with the ratio 1:1 (the value of the mortgage
being equal to the amount covered by the guarantee). By
contrast, commercial lenders would not have provided a
loan against less than a 2,5:1 mortgage ratio. At the time,
Javor Pivka would not have been able to provide
sufficient mortgage
credit on
to secure
In fact, the mortgage provided for
commercial terms.
the guarantee represented the full extent of the unen-
cumbered property of Javor Pivka at the time. Conse-
quently, the guarantee provided by the Slovenian autho-
rities favoured Javor Pivka by allowing the company to
secure a larger loan than it would otherwise have been
able to obtain against the collateral it could provide.

same

the

(41) As there is trade in processed wood products and
furniture between Slovenia and other Member States
the measure is liable to improve the position of the
recipient in relation to its competitors in Slovenia and
the EU, so that it may consequently distort competition
and affect trade between Member States.

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(42)

(43)

(44)

the Commission considers

the
Consequently,
guarantee and subsidy in issue constitute state aid
within the meaning of Article 87(1) EC.

that

2. Existence of new aid

that it was indeed a company in difficulty at the time the
state aid in issue was granted. The Commission notes in
particular that Javor Pivka experienced increasing losses,
diminishing turnover and declining cash flow. The
these problems were
Commission further notes that
part of a trend for
the years 2000-2004, and not
simply an exceptional occurrence in 2003.

questioned whether

Slovenian authorities

The
the
Commission was empowered to assess the aid under
Articles 87 and 88 EC, arguing that
it was granted
before accession. As the Commission clarified in the
opening decision, in order to determine whether an aid
has been put into effect before or after accession, the
relevant event is the legally binding act by which the
competent national authorities undertake to grant the
aid (7).
such a decision before
accession, the measure constitutes new aid, even if the
exposure of the state was known before.

In the absence of

(48)

Javor Pivka’s ownership.

The Commission also notes Slovenia’s
explanations
concerning the nature of
In
view of the passive nature and poor capital resources
of Javor Pivka’s institutional owners and the fragmen-
the Commission
tation of
accepts
could not obtain the
necessary funds from its shareholders. For the same
reasons, and taking into account the fact that no single
Javor Pivka’s share
owner holds more than 15 % of
capital, the Commission also takes the view that Javor
Pivka does not belong to a larger business group.

remaining ownership,
the

its
that

company

In the present case the Commission concludes that the
binding act by which the competent national authorities
undertook to grant aid did not come into effect before
accession. The relevant Slovenian provisions state that
the aid shall be awarded by a decision of the government
on the basis of a proposal from the competent ministry.
While prior decisions of
the interdepartmental expert
committee and the Ministry responsible are indeed
necessary for the award, they are not sufficient to grant
the aid. The definitive decision lies with the government.
the Government’s resolution was
In the present case,
issued on 27 May 2004, and Slovenia joined the
European Union on 1 May 2004. Therefore,
the
measures constitute new aid and would have had to be
notified on the basis of Article 88 EC and assessed under
Article 87 EC.

3. Compatibility of the aid

(45) Given that the aid in question is restructuring aid, it is
compatible with the common market if it complies with
the criteria under the guidelines.

(46)

In view of Slovenia’s comments and the information
gathered in the course of its enquiry, the commission
has reached the following conclusions on the points
which caused it to open the formal procedure.

3.1. Eligibility

(47)

In view of the information submitted by Slovenia, the
Pivka’s
Commission
performance as described in section 2.1 above shows

view that

Javor

takes

the

(7) See opening decision (mentioned in footnote 1), points 19 and 20,
and also the Commission decision in case C-3/2005 FSO, OJ C 100,
26.4.2005, p. 2, point 38 et seq.

(49)

The Commission accordingly accepts that
was eligible for restructuring aid.

Javor Pivka

(50)

(51)

3.2. Return to viability

The Commission indicated in the opening decision that it
was unclear how the restructuring plan would enable
Javor Pivka to restore long term viability. This related
mainly to the five year projections indicating how the
company was likely to evolve as a result of the restruc-
turing measures. The Commission's
remarked that
Slovenia had not submitted the information and data
the
necessary to enable the Commission to assess
assumptions on Javor Pivkas's likely performance under
the restructuring plan.

In the course of the procedure, Slovenia has submitted
the complementary information mentioned in section
4.3 above. This information adequately explains the
basis for the assumptions. The Commission notes that
the forecasts for Javor Pivka's sales performance might
today appear rather optimistic given that in 2005 and
2006 the sector faced fierce competition from the Far
East which resulted in excess supply and pressure to
reduce prices. However it is not clear that this infor-
mation was already known in the beginning of 2004.
In addition the Commission itself observed in 2006
‘plywood production and consumption have seen
that:
significant increase in the past few years, with a strong
export market developing for certain grades’ (8). Given
that the Commission has not been provided with any
contradictory information which put
the companies
and its own assumptions into question, the Commission
the
has no grounds
them. Therefore,
Commission considers
the projections made in
2004 do not appear implausible, so that the Commis-
sion's doubts on this point have been allayed.

to dispute
that

(8) http://ec.europa.eu/enterprise/forest_based/tradeflows_en.html

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3.3. Compensatory measures

(52) According to points 35 and 36 of

the guidelines,
measures must be taken to mitigate as far as possible
the state aid on competitors.
any adverse impact of
However, such compensatory measures are not required
where the beneficiary's share of the relevant market is
negligible.
In these cases, compensatory measures are
not a condition for finding the aid compatible with the
common market.

(53)

The Commission notes that according to the information
provided by the Slovenian authorities,
Javor Pivka is
active in several product markets (plywood, shuttering
panels, veneer and furniture, see point 22 above). As
regards plywood the Commission first notes that in a
merger
largely
confirmed that the different type of wood-based boards
such as plywood, hardboard,
raw particleboards and
(HPL/CPL)
coated particleboards, decorative laminates
and wood-based panel components for the furniture
and construction industry belong to separate product
markets’ (9).

investigation

‘market

case

has

a

investigations

(54) As regards the definition of the relevant market, Slovenia
has provided the Commission with a market study which
indicates the market shares for the relevant product
market in the EU-25. In this respect, the Commission
from the presumption in
has little reason to depart
footnote 20 of the guidelines that the relevant market
is the EEA. It recalls that it has previously made some
market
in the European wood-based
products industry (including in particular wood-based
panels made out of particleboard) in a merger case (10),
and concluded that the relevant market was wider than
the national market, and at least cross-border regional.
This was underpinned by the important cross boarder
trade flows. That similar trade flows exist also in the
shown by figures provided by
case of plywood is
Slovenia as confirmed by the Commission's internal
experts (this is further confirmed by the fact that the
for the majority of
intra-Community exports account
‘cross-
Javor Pivka's turnover, with 55 %). Moreover,
border regional’ was found to relate to a distance of
about 1 000 km, the distance varying according to the
value added to the products, i.e. coated products would
than none-coated
trade over even longer distances
a higher-quality
already
products. As plywood is
product and exports concern mainly plywood, transpor-
tation costs are less important than for particleboard (and
even less important for chairs and other furniture made
out of plywood). In view of the above, the Commission
takes the view that the relevant market for the products

(9) Case No COMM/M.4165 — Sonae Industria/Hornitex, Commission

Decision of 28.6.2006, point 11.

(10) Case No COMM/M.4165 — Sonae Industria/Hornitex, Decision of

28.6.2006.

manufactured by Javor Pivka should be, if not the entire
EEA or EU-25, at least a good part of the EU-25.

(55) Given that Javor Pivka's market share of the EU-25 as
indicated in section 2.4 above is 0,21 % (in 2003) for its
product range as a whole, and that this share should in
principle not more than double even if the geographical
market were reduced by half, the Commission considers
that the market share is still well below 1 % which, in
connection with the fact that the market comprises a
large number of small and medium-sized producers,
can be considered negligible (11). Consequently, and
since this decision is based on the 1999 guidelines,
compensatory measures are not necessary to ensure
that the state aid is compatible with the common market.

3.4. Aid limited to the minimum

and beneficiaries

(56) According to point 40 of the guidelines, aid must be
limited to the strict minimum needed to enable restruc-
turing,
a
significant contribution to the restructuring plan from
‘including through the sale of
their own resources
assets that are not essential to the firm's survival, or
from external financing at market conditions’.

expected to make

are

(57)

Javor Pivka's own contribution to the restructuring is set
out in section 4.5 above. It should be said at the outset
that the Commission cannot accept that depreciation of
assets provides a genuine own contribution (12) because it
does not provide resources available to the company and
is also depending on future operations which are the
the State aid provided (13). Any funds from
result of
this source can therefore not be taken into consideration
for the purpose of calculating Javor Pivka's own contri-
bution.

(58) On the other hand, the assets divested by Javor Pivka do
not appear essential to its survival and the proceeds from
this sale therefore constitutes a valid own contribution.
The same is true of the funds raised through loans taken
on market terms from banks and free of aid. Together,
the
SIT
2 119 650 000, which the Commission considers as
Javor Pivka's own contribution towards the restructuring.

from these

amount

sources

funds

to

(11) At least in view of other examples under the 1999 guidelines, see
the Commission Decision in case C-3/2005 FSO, OJ C 100,
26.4.2005, p. 2, point 38 et seq.

(12) Commission Decision in case N 464/05 AB Kauno of 22.2.2006,

point 17.

(13) This was confirmed, as regards cash flow, in Commission Decisions
in case C-19/2000 TGI, OJ L 62 of 5.3.2002, p. 30, point 106 and
case C-30/1998 Wildauer Kurbelwelle, OJ L 287 of 14.11.2000,
p. 51, point 52 and, for the 2004 guidelines,
in the AB Kauno
case (see footnote 12).

2.2.2008

EN

Official Journal of the European Union

L 29/23

(59)

The own contribution corresponds to 45,5 % of the total
restructuring costs which can be considered significant
under the guidelines (14). The aid also appears limited
to the minimum necessary as it is limited to providing
the additional funds needed for the technological restruc-
turing and for the restructuring of the workforce and
does not provide the company with any surplus cash.

3.5. Other aid

(60) Under the ‘one time,

last time’ principle laid, down in
points 48-51 of the guidelines, the Commission cannot
approve restructuring aid to a company which has
previously received restructuring aid. The Commission
to take into
this principle requires it
considers that
account any restructuring aid granted within 10 years
preceding the aid under consideration,
irrespective of
whether
state aid was granted before the
granting Member State's accession to the EU. State aid
other than restructuring aid is not relevant in this respect.

the first

(61)

(62)

(63)

Slovenia has argued that the purpose of this aid was to
promote energy saving for environmental purposes.
Nothing has emerged which would lead the Commission
to question that information. The Commission therefore
accepts that
this aid was not given for restructuring
purposes and that it should not be considered for the
application of the ‘one time, last time’ principle.

4. Additional observation

It emerged in the course of the proceedings that the
the restructuring plan have been
implementation of
delayed and that some parts of the technological restruc-
turing have not been implemented according to schedule.
It does not appear that these problems in the restruc-
turing plan were apparent at the time of the granting of
the aid and they do accordingly not justify calling into
question the plan's ability to return Javor Pivka to
viability. However,
the
approval of the aid is conditional upon full implemen-
tation of the plan (point 43 of the guidelines) and will be
monitored (point 45 of the guidelines).

the Commission recalls

that

The Commission therefore expects Slovenia, pursuant to
point 46 of the guidelines, to provide at least two moni-
the end of
toring reports, one concerning 2007 at
January 2008 and one concerning 2008 at the end of
January 2009, containing detailed information on the
financial performance of the company as well as of its
investments made. The Commission underscores that if
the company fails to make all the investments in the

restructuring plan,
state aid even if it managed to return to viability (15).

it may be liable to pay back some

VI. CONCLUSION

(64)

In view of the above, the Commission finds that the aid
in question is restructuring aid which complies with the
conditions of
the 1999
the applicable guidelines,
rescue and restructuring guidelines. The Commission
therefore finds that although Slovenia has unlawfully
implemented the restructuring aid to Javor Pivka in
breach of Article 88(3) of the Treaty, the state aid is
compatible with the common market,

i.e.

HAS ADOPTED THIS DECISION:

Article 1

The State aid which Slovenia has implemented for Javor Pivka is
compatible with the common market pursuant
to Article
87(3)(c) EC and the Community guidelines on state aid for
rescuing and restructuring firms in difficulty of 1999.

Article 2

1.
The restructuring plan shall be fully implemented. All
necessary measures shall be taken to ensure that the plan is
implemented.

Implementation of the plan shall be monitored on the
2.
reports communicated by Slovenia to the
basis of annual
Commission.
In particular, a report concerning the 2007
activities shall be submitted by the end of January 2008 and
a report concerning the 2008 activities shall be submitted by
the end of January 2009. The reports shall contain detailed
information on the financial performance of the company as
well as of the investments it has made.

Article 3

This Decision is addressed to the Republic of Slovenia.

Done at Brussels, 10 July 2007.

For the Commission

Neelie KROES
Member of the Commission

(14) See Commission Decision in case C-39/2000 Doppstadt, OJ L 108,
30.4.2003, p. 8, point 74 and Commission Decision in case C-
33/1998 Babcock Wilcox (OJ L 67, 9.3.2002, p. 50).

(15) See Commission Decision of 13 September 2006 in Case N 350/06

MSO (OJ C 280 of 18.11.2006).