2008/142/EC: Commission Decision of 25 September 2007 on State aid C 32/2006 (ex N 179/2006) implemented by Poland for Huta Cynku Miasteczko Śląskie SA (notified under document number C(2007) 4310) (Text with EEA relevance)
Date: 2007-09-25
Institutions: European Commission
Subjects: Poland, State aid, aid for restructuring, aid to undertakings, control of State aid, metallurgical industry, non-ferrous metal

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Official Journal of the European Union

20.2.2008

COMMISSION DECISION

of 25 September 2007

on State aid C 32/2006 (ex N 179/2006) implemented by Poland for Huta Cynku Miasteczko
Śląskie SA
(notified under document number C(2007) 4310)

(Only the Polish version is authentic)

(Text with EEA relevance)

(2008/142/EC)

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

letter dated 23 May 2007, Poland informed the
Commission that it was withdrawing the notification.

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

Whereas:

(1)

(2)

I. PROCEDURE

On 17 March 2006, Poland notified restructuring aid for
Huta Cynku Miasteczko Śląskie SA (hereinafter ‘HCM’).
This notification took place following a Commission
decision raising no objections regarding rescue aid to
HCM in the form of a guarantee for a loan of PLN
11,8 million (EUR 3,12 million (2)).

On 19 July 2006, the Commission decided to initiate a
procedure under Article 88(2) of the EC Treaty in respect
of the notified aid because of doubts about its compa-
tibility with the common market. The Commission
decision to initiate the procedure was published in the
Official
the European Union on 30 August
2006 (3). The Commission invited interested parties to
submit comments on the measures. No such third
party comments were submitted.

Journal of

(3)

On 18 September 2006, Poland submitted an incomplete
response concerning the initiation of the procedure. By

(4)

(5)

(6)

II. DETAILED DESCRIPTION OF THE AID

1. Beneficiary of the aid

HCM is a state-owned company created in 1966. It is
active in the market for the production and metallurgical
processing of non-ferrous metals (production of zinc and
lead). In 2004 the company had a 51 % share of the
Polish refined zinc market and a 3 % share of
the
European market. It has about 1 100 employees and is
based in a region eligible for regional aid under Article
87(3)(a) of the EC Treaty.

2. Aid measures

The Polish authorities notified the Commission that
Agencja Rozwoju Przemysłu SA (Industrial Development
Agency SA, hereinafter ‘ARP’) intended to provide a loan
of PLN 21,8 million (EUR 5,76 million) for a period of
five years. Reimbursement was to start one year after the
date on which the loan was granted. The loan was to be
based on a
to the
interest
Commission’s reference rate. PLN 10 million (EUR 2,64
million) was to be spent on investment related to tech-
nological restructuring. The remaining PLN 11,8 million
(EUR 3,11 million) was to be used to finance reimbur-
sement of the rescue loan, i.e. the loan for which ARP
had provided a guarantee.

variable

equal

rate

Poland also informed the Commission of a planned
composition agreement
to be signed with creditors
enabling the company to regain solvency. To this end,
the creditors, who had claims on HCM worth PLN 65,3
million (EUR 15,9 million), were divided according to the
size of
the amounts due and the security held. The
composition agreement essentially provides for deferral
for
the repayment of private and public debts
of
several years. To this end, different groups were formed
according to the security held. The debt was deferred for
a specific period for each group.

(1) OJ C 207, 30.8.2006, p. 5.
(2) All amounts provided by the Polish authorities in Polish zloty (PLN)
have been converted into Euro (EUR) by using the exchange rate of
22 June 2007 of EUR 1 = PLN 3,7865.

(3) See footnote 1.

3. Grounds for initiating the procedure

(7)

The loan was notified by the Polish authorities as state
aid within the meaning of Article 87(1) of the EC Treaty.

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(8)

The Commission decided to initiate the procedure under
Article 88(2) of the EC Treaty because it had doubts as to
whether all the conditions for approving restructuring aid
laid down in the Community Guidelines on state aid for
rescuing and restructuring firms in difficulty (4)
(here-
‘the Guidelines’) applicable at
inafter
the time were
fulfilled, and in particular whether:

IV. ASSESSMENT

(12) Under Article 8 of Council Regulation (EC) No 659/1999
of 22 March 1999 laying down detailed rules for the
application of Article 93 of the EC Treaty (5), Member
States may withdraw a notification after the initiation of
a formal investigation procedure in due time before the
Commission has taken a decision on the aid. In such
cases,
take a decision closing
that procedure without carrying out an assessment.

the Commission must

(a)

long-term viability being restored, as

in the benefi-
the restructuring plan would result
ciary's
the
restructuring was mainly financial and was based
primarily on a composition agreement which had
not been signed at
the date on which the
procedure was initiated. Moreover the problem of
the major impact of exchange rate variations on
the company’s financial results had not been suffi-
ciently addressed;

(b) the own contribution of

the beneficiary to the

coverage of restructuring costs was significant;

(13)

(14)

(c)

the compensatory measures were sufficient, as they
consisted in a decrease of production capacity of
only 0,7 %.

(9)

In addition, the Commission raised doubts about whether
the composition agreement in fact included elements of
state aid.

III. POLAND’S COMMENTS

(10)

The Polish authorities have informed the Commission
that HCM successfully
composition
agreement after the procedure was initiated.

concluded the

Poland withdrew the notification of the state aid measure
described in recital 6 above. However, in order to be able
to terminate the procedure under Article 88(2) of the EC
Treaty,
the Commission needs to assess whether the
composition agreement mentioned in recital 6 involves
state aid elements.

the

that

exists where

The Commission recognises
composition
agreement does not constitute state aid, as it fulfils the
private creditor test and because it consists in a debt
deferral which is more advantageous for the creditors
than the liquidation of HCM. It is settled case law that
a public creditor will balance the advantage to be derived
from receiving the sum offered under the restructuring
plan against the sum which it would be able to recover if
the firm was liquidated. No advantage, and thus no state
aid,
restructuring would yield better
proceeds than liquidation (6). Poland provided a study
showing that even if one assumes the deferral to result
in a loss of funds if calculated in net present value, such
a loss would still put the public creditors in a better
position than the company's liquidation would do. As
the
a
creditors will be able to recover 75,7 % of their claims
on average and those in a less favourable position will
obtain 72,9 %, which is still higher than the potential
study
proceeds
estimates to be 64,8 %. Moreover, the Commission sees
no grounds for finding that the public creditors received
less
than the private ones, as
creditors of the same ranking were treated alike.

composition agreement,

favourable treatment

liquidation, which

consequence of

from the

the

the

(11) Moreover,

the Polish authorities have informed the
Commission that the company has now become pro-
fitable (it had a net profit of PLN 10,3 million (about
EUR 2,72 million) for the first half of 2006); its liquidity
has improved and it is able to secure financing on the
market. Thus, as the guaranteed loan was no longer an
advantage for the company, Poland withdrew the notifi-
referred to in recital 6.
cation of
Furthermore, the company has reimbursed the loan for
which a state guarantee was provided as rescue aid and
so this guarantee no longer serves any purpose.

the measure

(4) OJ C 244, 1.10.2004, p. 2.

(15)

The notification of the restructuring plan meant that the
rescue aid could be extended beyond the six-month
deadline. However, Poland later withdrew this notifi-
cation. Point 26 of the Guidelines states clearly that the
notification of a restructuring plan is a condition sine qua
non for an extension of the rescue aid. Therefore,
if a
the
later withdrawn,
notified restructuring plan is
extension allowed for
to be
aid has
the
terminated (7). This condition was respected here as the
loan which the state guarantee was securing was repaid.

rescue

(5) OJ L 83, 27.3.1999, p. 1.
(6) See Case C-342/96 Spain v Commission, paragraph 46; Case
C-256/97 DMT, paragraph 24; Case T-152/99 Hamsa, paragraph
168.

(7) C(2007) 1405 (final). Available

at http://ec.europa.eu/comm/

competition/state_aid/register/ii/by_case_nr_c2005_0030.html#32

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V. CONCLUSION

Article 2

(16)

The Commission had decided to close the formal inves-
tigation procedure under Article 88(2) of the EC Treaty
in respect of the notified aid measure, noting that Poland
has withdrawn the notification and has not granted any
unlawful state aid,

HAS ADOPTED THIS DECISION:

Article 1

The aid measure which Poland was planning to implement for
HCM in the form of a loan of PLN 21,8 million (about EUR
5,76 million), has been withdrawn since the Commission
opened the formal investigation procedure. The formal investi-
gation procedure is therefore now redundant.

Regarding
the
concludes that
meaning of Article 87(1) of the EC Treaty.

composition agreement,
the Commission
it does not constitute state aid within the

Article 3

This Decision is addressed to the Republic of Poland.

Done at Brussels, 25 September 2007.

For the Commission

Neelie KROES
Member of the Commission